<PAGE>


   <PAGE>  1

                       MID ATLANTIC MEDICAL SERVICES, INC.
                      1996 NON-QUALIFIED STOCK OPTION PLAN

     Article I.  PURPOSE, ADOPTION AND TERM OF THE PLAN

          1.01  PURPOSE.   The purpose of the  Mid Atlantic Medical  Services,
     Inc. 1996  Non-Qualified Stock  Option Plan (hereinafter  referred to  as
     the  "Plan") is to  advance the interests of  the Company (as hereinafter
     defined)  and its  Subsidiaries (as  hereinafter defined)  by encouraging
     and providing  for the acquisition of  an equity interest  in the Company
     by  non-employee directors and key employees through the grant of options
     to purchase Common Stock (as hereinafter defined).   The Plan will enable
     the  Company to  retain the  services of  non-employee directors  and key
     employees  upon   whose  judgment,  interest,  and   special  effort  the
     successful  conduct of its operations is largely dependent and to compete
     effectively  with  other enterprises  for  the  services of  non-employee
     directors   and  key  employees  as  may  be  needed  for  the  continued
     improvement of its business.

          1.02   ADOPTION AND TERM.  The Plan shall become effective on May 1,
     1996, subject to  the prior approval of a simple  majority of the holders
     of Common  Stock represented, by person or by proxy, and entitled to vote
     at an  annual or special  meeting of  the holders of  Common Stock.   The
     Plan shall terminate on April 30, 2001, or such  earlier date as shall be
     determined by the Board (as hereinafter defined).

     Article II.  DEFINITIONS

          For  purposes  of  the  Plan,  capitalized  terms  shall  have   the
     following meanings:

          2.01  BENEFICIARY means an  individual, trust or estate who or that,
     by will or  the laws of descent and distribution,  succeeds to the rights
     and  obligations  of  the  Participant  under  the  Plan  and  an  Option
     Agreement upon the Participant's death.

          2.02  BOARD means the Board of Directors of the Company.

          2.03   CAUSE  means, with  respect to  a Participant  who is  a Non-
     Employee  Director, removal as a director by  the holders of Common Stock
     or by  the Board for  cause; provided, however,  that, if a  Non-Employee
     Director is not a director of  the Company, removal as a director  by the
     holders of  common stock of any Subsidiary on whose Board of Directors he
     or she serves or by such Board of Directors for cause.

          2.04   CODE means the Internal Revenue Code of 1986, as amended from
     time to time, or any  successor thereto.  References to a  section of the
     Code  shall include that section  and any comparable  section or sections
     of any  future legislation that  amends, supplements, or  supersedes said
     section.

          2.05   COMMITTEE means a committee of the Board as may be appointed,
     from time  to time,  by the  Board.  The  Board may,  from time  to time,
     appoint  members of the Committee  in substitution for  those members who
     were  previously appointed and may fill vacancies, however caused, in the
     Committee.  The Committee shall be  composed of at least three  directors
     of the  Company, each of whom  is a "disinterested person"  as defined in
     Rule 16b-3,  as promulgated by  the SEC  under the Exchange  Act, and  an<PAGE>


     "outside director" within  the meaning of Section 162(m)  of the Code and
     the  regulations  thereunder.   The Committee  shall  have the  power and
     authority to administer the Plan in accordance with Article III.

          2.06   COMMON  STOCK means  the Common  Stock,  par value  $.01  per
     share, of the Company.

          2.07    COMPANY  means  Mid  Atlantic  Medical  Services,   Inc.,  a
     corporation organized  under the laws of  the State of Delaware,  and its
     successors.

          2.08  DATE OF GRANT  means the date designated by the  Committee (or
     its designee pursuant to Section 3.01) as the date  as of which it grants
     an  Option,  which shall  not  be  earlier than  the  date  on which  the
     Committee (or such designee) approves the granting of such Option.

          2.09   DISABILITY has the  meaning specified in  Section 22(e)(3) of
     the Code.  

          2.10    DISABILITY DATE  means  the date  as  of  which an  Employee
     Participant is determined by the Committee to have a Disability.<PAGE>


     <PAGE>  2

          2.11   EMPLOYEE PARTICIPANT means  a Participant who  is not  a Non-
     Employee Director.

          2.12  ERISA  means the  Employee Retirement Income  Security Act  of
     1974, as amended.

          2.13  EXCHANGE  ACT means the  Securities Exchange Act  of 1934,  as
     amended.

          2.14  FAIR MARKET  VALUE of a share of Common Stock means, as of any
     given  date, the closing sales price  of a share of  Common Stock on such
     date  on the principal national  securities exchange on  which the Common
     Stock  is then traded  or, if the  Common Stock is  not then traded  on a
     national  securities exchange, the closing  sales price or,  if none, the
     average of the bid and asked  prices of the Common Stock on such  date as
     reported  on the  National  Association of  Securities Dealers  Automated
     Quotation System ("Nasdaq");  provided, however, that,  if there were  no
     sales reported  as of such date,  Fair Market Value shall  be computed as
     of  the  last date  preceding such  date  on which  a sale  was reported;
     provided,  further, that,  if any  such exchange  or quotation  system is
     closed on any day  on which Fair Market  Value is to be  determined, Fair
     Market  Value  shall  be determined  as  of  the  first date  immediately
     preceding such date on which such  exchange or quotation system was  open
     for trading.  In the event the  Common Stock is not admitted to trade  on
     a  securities exchange or  quoted on Nasdaq,  the Fair Market  Value of a
     share of  Common Stock  as of any  given date  shall be as  determined in
     good faith by  the Committee, which determination may  be based on, among
     other  things, the  opinion  of one  or  more independent  and  reputable
     appraisers  qualified  to  value  companies  in  the  Company's  line  of
     business.   Notwithstanding  the foregoing,  the Fair  Market Value  of a
     share of Common Stock shall never be less than par value per share.

          2.15  NON-EMPLOYEE  DIRECTOR means each  member of  the Board or  of
     the Board  of Directors  of a  Subsidiary, in  each case  who is  not  an
     employee of the Company or of any of its Subsidiaries.

          2.16   NON-EMPLOYEE  DIRECTOR  OPTION means  an  Option  granted  in
     accordance with Article VII.

          2.17    OPTION  AGREEMENT  means  a written  agreement  between  the
     Company  and  a  Participant specifically  setting  forth  the  terms and
     conditions of an Option granted to a Participant under the Plan.

          2.18  OPTION  means any option to  purchase Common Stock  granted to
     an  Employee Participant  pursuant  to Article  V  or to  a  Non-Employee
     Director  pursuant to Article  VII.  All  Options granted under  the Plan
     shall  be Options  that do not  qualify as incentive  stock options under
     Section 422 of the Code.

          2.19   PARTICIPANT means any employee  of the Company or  any of its
     Subsidiaries selected by  the Committee  to receive an  Option under  the
     Plan in accordance with Article  V and, solely to the extent  provided in
     Article VII, any Non-Employee Director.

          2.20  PLAN means  the Mid Atlantic Medical Services,  Inc. 1996 Non-
     Qualified Stock Option Plan  as set forth herein, and as the  same may be
     amended from time to time.<PAGE>


          2.21  SEC means the Securities and Exchange Commission.

          2.22   SUBSIDIARY  means  a company  more  than  50% of  the  equity
     interests  of which  are beneficially owned,  directly or  indirectly, by
     the Company. 

          2.23  TERMINATION OF  EMPLOYMENT means, with respect to  an Employee
     Participant, the voluntary or  involuntary termination of a Participant's
     employment with  the Company or any  of its Subsidiaries for  any reason,
     including death, Disability,  retirement or as the result of  the sale or
     other  divestiture   of  the   Participant's  employer  or   any  similar
     transaction  in which the Participant's employer ceases to be the Company
     or  one  of  its  Subsidiaries.    Whether  entering  military  or  other
     government  service  shall  constitute  Termination  of  Employment,  and
     whether a  Termination of Employment is a result  of Disability, shall be
     determined in each case by the Committee.<PAGE>


     <PAGE>  3

     Article III.  ADMINISTRATION

          3.01  COMMITTEE.   The Plan shall be administered by  the Committee,
     which shall  have exclusive  and final  authority in  each determination,
     interpretation, or other action affecting the  Plan and its Participants.
     The  Committee shall have the  sole and absolute  discretion to interpret
     the  Plan, to establish and modify administrative  rules for the Plan, to
     select  the  officers and  other key  employees  to whom  Options  may be
     granted, to determine the  terms and provisions of the  respective Option
     Agreements (which need  not be  identical), to determine  all claims  for
     benefits  under the Plan, to  impose such conditions  and restrictions on
     Options  as it  determines appropriate,  to determine whether  the shares
     delivered  on exercise  of  Options will  be treasury  shares or  will be
     authorized  but previously  unissued shares,  and to  take such  steps in
     connection with the  Plan and  Options granted hereunder  as it may  deem
     necessary or  advisable.  No action of the Committee will be effective if
     it contravenes or  amends the Plan  in any respect.   The Committee  may,
     with respect  to Participants who  are not subject  to Section 16  of the
     Exchange  Act or "covered employees" within the meaning of Section 162(m)
     of the Code and the  regulations thereunder, delegate such of its  powers
     and authority  under the Plan  as it  deems appropriate to  the Company's
     President or any  member of  the Committee, provided  that the  Committee
     shall regularly review all  actions taken pursuant to such  delegation of
     authority.

          3.02    ACTIONS  OF  THE  COMMITTEE.    All  determinations  of  the
     Committee shall be made by a majority vote of its members.   Any decision
     or  determination reduced to  writing and  signed by  all of  the members
     shall be fully as effective as if it  had been made by a majority vote at
     a meeting  duly called and held.   The Committee shall  also have express
     authorization  to hold  Committee  meetings by  conference telephone,  or
     similar   communication  equipment   by  means   of  which   all  persons
     participating in the meeting can hear each other. 

     Article IV.  SHARES OF COMMON STOCK

          4.01    NUMBER  OF SHARES  OF  COMMON  STOCK ISSUABLE.    Subject to
     adjustments  as  provided in  Section  8.05, 3,000,000  shares  of Common
     Stock shall  be available  for Options under  the Plan.   Any and  all of
     such  shares  may  be issued  pursuant  to  Options  granted to  Employee
     Participants  or to  Non-Employee  Directors.   The  Common Stock  to  be
     offered under  the Plan shall be authorized and unissued Common Stock, or
     issued Common  Stock that shall have  been reacquired by  the Company and
     held in its treasury.

          4.02   NUMBER OF SHARES OF COMMON STOCK  AWARDED TO ANY PARTICIPANT.
     In  the event the purchase price of an  Option is paid, or related tax or
     withholding  payments  are satisfied,  in whole  or  in part  through the
     delivery  of shares  of  Common Stock  issuable  in connection  with  the
     exercise of the Option, a Participant will be deemed to  have received an
     Option with respect to those shares of Common Stock.

          4.03   SHARES OF  COMMON STOCK SUBJECT  TO TERMINATED OPTIONS.   The
     Common Stock  covered by any  unexercised portions of  terminated Options
     may again be subject to new Options under the Plan.

     Article V.  PARTICIPATION<PAGE>


          5.01   ELIGIBLE  PARTICIPANTS.   Employee  Participants in  the Plan
     shall be  such officers  and other  key employees of  the Company  or its
     Subsidiaries,  whether or not directors of the Company, as the Committee,
     in its sole  discretion, may designate from time to time.  In making such
     designation,  the Committee  may  take into  account  the nature  of  the
     services  rendered by the officers  and key employees,  their present and
     potential contributions to  the success  of the Company,  and such  other
     factors  as the Committee,  in its  discretion, may  deem relevant.   The
     Committee's  designation of an Employee Participant in any year shall not
     require the Committee to designate such person to receive Options in  any
     other  year.   The  Committee shall  consider such  factors  as it  deems
     pertinent in selecting Employee Participants and in  determining the type
     and amount of their respective Options.

          Non-Employee  Directors shall receive  Non-Employee Director Options
     in accordance with  Article VII,  the provisions of  which are  automatic
     and non-discretionary in operation.  Non-Employee Directors shall  not be
     eligible to receive any other  Options under the Plan unless they  are no
     longer Non-Employee Directors on the Date of Grant of such Options.<PAGE>


     <PAGE>  4

          A Participant may hold more than one Option granted under the Plan.

     Article VI.  STOCK OPTIONS

          6.01   GRANT  OF OPTION.   Any Option  granted under  the Plan shall
     have such  terms as the  Committee may, from  time to time,  approve, and
     the terms  and conditions of Options need not be the same with respect to
     each  Participant.  No Employee Participant may receive more than 200,000
     Options under the Plan during the term of the Plan.

          6.02  TERMS  OF OPTIONS.   Options granted under  the Plan shall  be
     subject to the  following terms and conditions and shall  be in such form
     and contain such  additional terms and conditions,  not inconsistent with
     the terms of the Plan, as the Committee shall deem desirable:

               (a)   OPTION PRICE.  The option price per share of Common Stock
     purchasable under an Option shall  be determined by the Committee  at the
     time of grant  but shall not be  less than 100% of the  Fair Market Value
     of a share of Common Stock on the Date of Grant.

               (b)  OPTION TERM.   The term of  each Option shall be  fixed by
     the Committee, but  no Option shall be  exercisable more than  five years
     after the Date of Grant.

               (c)   EXERCISABILITY.   An  Option  Agreement with  respect  to
     Options may  contain such performance targets,  waiting periods, exercise
     dates  and restrictions  on exercise  (including, but  not limited  to, a
     requirement that an Option is  exercisable in periodic installments),  if
     any, as may be determined by the Committee  at the time of grant.  To the
     extent not  exercised, installments shall cumulate and be exercisable, in
     whole or  in part, at any time after becoming exercisable, subject to the
     limitations set forth in Sections 6.02(b) and (g).

               (d)   METHOD  OF EXERCISE.    Subject to  whatever  installment
     exercise and waiting  period provisions that  apply under subsection  (c)
     above,  Options may be exercised  in whole or in  part at any time during
     the  term of  the Option,  by giving  written notice  of exercise  to the
     Company specifying the number of  shares of Common Stock to be purchased.
     Such  notice shall  be accompanied  by payment  in full  of the  purchase
     price  in such  form as the  Committee may  accept (including  payment in
     accordance with a cashless  exercise program approved by  the Committee).
     A Participant  shall also have  the right to  pay the exercise  price, in
     full  or  in  part,  in the  form  of  Common  Stock  duly owned  by  the
     Participant  (and  for which  the Participant  has  good title,  free and
     clear  of any liens and  encumbrances).  Any already  issued Common Stock
     used for  payment must have been held by the Participant for at least six
     months.  No Common Stock  shall be issued on exercise of  an Option until
     payment,  as  provided herein,  therefor has  been  made.   A Participant
     shall  generally  have the  right  to  dividends  or  other rights  of  a
     stockholder with respect to Common Stock subject  to the Option only when
     certificates for shares of Common Stock are issued to the Participant.

               (e)   NON-TRANSFERABILITY  OF  OPTIONS.   No  Option  shall  be
     transferable by  the Participant otherwise than  by will, by  the laws of
     descent and distribution, or pursuant  at a qualified domestic  relations
     order as defined by the Code, Title I of ERISA or the rules thereunder.  
               (f)     ACCELERATION  OR  EXTENSION  OF  EXERCISE  TIME.    The
     Committee, in  its sole discretion,  shall have the right  (but shall not<PAGE>


     in  any case be obligated) to permit  purchase of Common Stock subject to
     any Option granted  to an  Employee Participant  prior to  the time  such
     Option would otherwise become  exercisable under the terms of  the Option
     Agreement.  In  addition, the  Committee, in its  sole discretion,  shall
     have  the right (but  shall not in  any case be  obligated) to permit any
     Option  granted  to an  Employee Participant  to  be exercised  after its
     expiration  date, subject, however to the limitation set forth in Section
     6.02(b).

               (g)  EXERCISE OF OPTIONS UPON TERMINATION OF EMPLOYMENT.

                    (i)    EXERCISE  OF  VESTED OPTIONS  UPON  TERMINATION  OF
     EMPLOYMENT.<PAGE>


     <PAGE>  5

                         (A)  TERMINATION.  Unless the Committee,  in its sole
     discretion,  provides for  a shorter  or  longer period  of  time in  the
     Option Agreement  or a longer  period of time in  accordance with Section
     6.02(f), upon  an Employee Participant's Termination  of Employment other
     than  by reason  of death  or Disability,  the Employee  Participant may,
     within  three months  from the  date of  such Termination  of Employment,
     exercise  all or any  part of his or  her Options as  were exercisable at
     the date of  Termination of Employment.   In no  event, however, may  any
     Option  be exercised later than  the date determined  pursuant to Section
     6.02(b).

                         (B)  DISABILITY.   Unless the Committee, in its  sole
     discretion,  provides for  a shorter  or  longer period  of  time in  the
     Option Agreement  or a longer  period of time in  accordance with Section
     6.02(f),  upon an  Employee Participant's  Disability Date,  the Employee
     Participant  may, within one year after the Disability Date, exercise all
     or a  part  of  his  or her  Options,  whether  or not  such  Option  was
     exercisable   on  the  Disability  Date,  but  only  to  the  extent  not
     previously exercised.  In no event, however, may any Option be  exercised
     later than the date determined pursuant to Section 6.02(b).

                         (C)    DEATH.   Unless  the  Committee,  in its  sole
     discretion,  provides for  a  shorter or  longer  period of  time  in the
     Option Agreement or  a longer period of  time in accordance with  Section
     6.02(f),  in the  event of  the  death of  an Employee  Participant while
     employed  by  the  Company,  the  right  of  the  Employee  Participant's
     Beneficiary to  exercise the Option  in full (whether  or not all  or any
     part of  the  Option was  exercisable  as of  the date  of  death of  the
     Employee Participant, but  only to the  extent not previously  exercised)
     shall  expire upon  the  expiration of  one  year from  the  date of  the
     Employee Participant's death or on  the date of expiration of the  Option
     determined pursuant to Section 6.02(b), whichever is earlier.

                    (ii)   EXPIRATION OF UNVESTED OPTIONS  UPON TERMINATION OF
     EMPLOYMENT.   Subject  to  Sections  6.02(f) and  6.02(g)(i)(C),  to  the
     extent all  or any part of  an Option granted to  an Employee Participant
     was not exercisable  as of  the date of  Termination of Employment,  such
     right  shall  expire  at the  date  of  such  Termination of  Employment.
     Notwithstanding the  foregoing, the Committee, in its sole discretion and
     under  such terms  as  it  deems  appropriate,  may  permit  an  Employee
     Participant  who  will continue  to  render significant  services  to the
     Company after  his or her Termination of Employment to continue to accrue
     service with respect to the  right to exercise his or her  Options during
     the period in which the individual continues to render such services.

     Article VII.  NON-EMPLOYEE DIRECTOR OPTIONS

          7.01   GRANT OF NON-EMPLOYEE DIRECTOR OPTIONS; EXERCISE PRICE; TERM.
     On May  1, 1996, each person who is  a Non-Employee Director on such date
     shall  be granted a Non-Employee  Director Option to  purchase the number
     of shares of Common Stock determined  in accordance with Section 7.02.  A
     Non-Employee  Director  shall  only  receive  one  Non-Employee  Director
     Option  on May  1, 1996,  even  if he  or she  serves  as a  Non-Employee
     Director of the Company and/or of one or more of its Subsidiaries.

          The  exercise  price per  share  for  Non-Employee Director  Options
     shall be the Fair Market Value of a share of Common Stock on  the Date of
     Grant.  All Non-Employee Director Options shall have a five year term.<PAGE>


          7.02  NUMBER  OF SHARES.   Each Non-Employee  Director Option  shall
     entitle  the holder to purchase  3,000 shares of  Common Stock; provided,
     however,  that, if a Non-Employee Director is not a Non-Employee Director
     of  the Company  on the  Date of  Grant of  the Option,  his or  her Non-
     Employee  Director Option shall only entitle him or her to purchase 2,400
     shares of Common Stock.

          Such  number of  shares is,  however, subject  to increase  (but not
     decrease) based  on the application of  both of the factors  described in
     Sections  7.02 (a) and  (b) below; provided, however,  that the number of
     shares  of Common Stock covered  by a Non-Employee  Director Option shall
     be increased by one or two shares  of Common Stock so that the number  of
     covered  shares is divisible by three and provided further, however, that
     a Non-Employee Director Option  shall not entitle the holder  to purchase
     more than  6,000 shares (4,800 shares if a Non-Employee Director is not a
     Non-Employee Director of the Company on the Date of Grant  of the Option)
     of Common Stock.<PAGE>


     <PAGE>  6

               (a)   NUMBER OF YEARS  OF SERVICE.   Each Non-Employee Director
     Option  shall entitle  the holder  to purchase  an additional  150 shares
     (120  shares if a Non-Employee Director is not a Non-Employee Director of
     the Company on the Date of Grant  of the Option) of Common Stock for each
     calendar year the  Non-Employee Director has served as  a director of the
     Company or  of one of  its Subsidiaries, but  only if such  calendar year
     has  been  completed prior  to  the Date  of  Grant  of the  Non-Employee
     Director  Option.  The following  rules shall apply  in calculating years
     of service as a director:

                    (i)    PARTIAL SERVICE.    If  a person  has  served  as a
     director of  the Company or as  a director of any of  its Subsidiaries at
     any time  during a calendar year,  that calendar year shall  count as one
     year of  service even  if the person  did not  serve as  such for a  full
     year;

                    (ii)   MULTIPLE SERVICE.   Notwithstanding the  foregoing,
     service as a director of the Company  and/or as a director of one or more
     of  its Subsidiaries  during  any  calendar  year  shall  not  be  double
     counted.   Accordingly,  if a  person has  served as  a  director of  the
     Company and as  a director of  one or more  of its Subsidiaries during  a
     calendar  year,  that calendar  year  shall  count as  only  one  year of
     service; and

                    (iii)    SERVICE  AS  AN EMPLOYEE.    Notwithstanding  the
     foregoing,  if a  Non-Employee  Director served  as  an employee  of  the
     Company  or of  one of  its Subsidiaries  at any  time during  a calendar
     year, that calendar year shall not count as a year of service.

               (b)   INCREASE  IN EARNINGS  PER SHARE.   The number  of shares
     covered  by a Non-Employee Director  Option shall also  be increased (but
     not decreased)  by (i) the percentage  increase in earnings  per share of
     Common  Stock during the previous two  completed fiscal years, multiplied
     by (ii)  3,000 shares (2,400 shares  if a Non-Employee Director  is not a
     Non-Employee  Director  of the  Company  on  the  Date of  Grant  of  the
     Option).   Earnings  per share  of  Common Stock  shall be  determined by
     reference  to  the  audited  consolidated  financial  statements  of  the
     Company, as adjusted to reflect  any stock dividends or stock splits that
     occur during such fiscal years.

          The  increase in  earnings  per share  shall  be determined  by  the
     following calculation:

                    (A)  earnings per share (expressed  as a dollar amount) in
     fiscal  1995 minus earnings per  share (expressed as a  dollar amount) in
     fiscal 1994, divided by

                    (B) earnings per share  (expressed as a dollar amount)  in
     fiscal 1994;

     provided,  however, that the number  of shares covered  by a Non-Employee
     Director Option shall  not be adjusted under this Section  7.02(b) if the
     Company suffers a loss per share in fiscal 1995 or if  earnings per share
     in 1995 is not greater than earnings per share in 1994.

          For  example, if earnings per  share of Common Stock  in fiscal 1995
     increased  by 25% over fiscal 1994, each Non-Employee Director Option (1)
     granted to a person who is a Non-Employee Director of  the Company on May<PAGE>


     1, 1996  would entitle the holder  thereof to purchase  an additional 750
     shares of Common  Stock (25% of 3,000  shares) (assuming the  6,000 share
     limitation  is not otherwise exceeded  as a result of  the application of
     Section 7.02(a)) and  (2) granted to a  Non-Employee Director who is  not
     Non-Employee  Director of  the Company on  May 1, 1996  would entitle the
     holder thereof to  purchase an additional 600 shares of Common Stock (25%
     of  2,400 shares) (assuming the  4,800 share limitation  is not otherwise
     exceeded as a result of the application of Section 7.02(a)).

          7.03    EXERCISABILITY.   Each  Non-Employee  Director Option  shall
     become exercisable  cumulatively in three  equal installments on  June 1,
     1997, June  1, 1998 and June 1, 1999;  provided, however, that, if a Non-
     Employee Director is  removed for  Cause, any  Option held  by such  Non-
     Employee Director shall  cease to  continue to become  exercisable on  or
     after the date of such removal.<PAGE>


     <PAGE>  7

          7.04   TERMINATION.  If  a Non-Employee Director's  service with the
     Company  terminates for any reason or if  such person ceases to be a Non-
     Employee Director,  such Option shall  continue to become  exercisable in
     accordance  with Section 7.03 and  may be exercised  until the expiration
     of  the stated  term  of  the Option.    Accordingly,  if a  Non-Employee
     Director is removed for Cause, he or she may continue  to exercise his or
     her  Non-Employee Director Option until the expiration of the stated term
     of  such  Option,  but  only  to  the  extent  that  such  Option  became
     exercisable prior to  the date of such removal and  it was not previously
     exercised.

          7.05  OTHER PLAN PROVISIONS.  All applicable  provisions of the Plan
     (other  than Sections 6.02(f) and (g)) not inconsistent with this Article
     VII shall apply to Options granted to Non-Employee Directors.

     Article VIII.  TERMS APPLICABLE TO ALL OPTIONS GRANTED UNDER THE PLAN

          8.01  PLAN  PROVISIONS CONTROL OPTION TERMS.  The  terms of the Plan
     shall govern  all Options granted under  the Plan, and in  no event shall
     the  Committee have the power to grant  to a Participant any Option under
     the  Plan that is contrary  to any provisions of the  Plan.  In the event
     any provision of  any Option granted under  the Plan shall  conflict with
     any of the terms in the Plan as  constituted on the Date of Grant of such
     Option, the  terms in the  Plan as  constituted on the  Date of  Grant of
     such Option  shall control.  Except as provided in Section 8.03 or unless
     otherwise  provided  by the  Committee, in  its  sole discretion,  in the
     Option Agreement, the terms of any  Option granted under the Plan may not
     be changed  after the Date  of Grant of such  Option so as  to materially
     decrease the value of the Option without the express  written approval of
     the holder.

          8.02   OPTION AGREEMENT.  No person  shall have any rights under any
     Option  granted  under the  Plan  unless and  until  the Company  and the
     Participant  to whom  such  Option shall  have  been granted  shall  have
     executed and delivered  an Option Agreement  authorized by the  Committee
     expressly granting  the Option to  such person and  containing provisions
     setting forth the terms of the Option.  If  there is any conflict between
     the  provisions of  an Option Agreement  and the  terms of  the Plan, the
     terms of the Plan shall control.

          8.03   MODIFICATION OF OPTION  AFTER GRANT.   Except as provided  by
     the  Committee, in  its sole  discretion, in  the Option Agreement  or as
     provided  in  Section  8.05,  no  Option  granted under  the  Plan  to  a
     Participant  may   be  modified   (unless  such  modification   does  not
     materially decrease  the value of  the Option)  after the  Date of  Grant
     except  by  express  written  agreement  between  the   Company  and  the
     Participant,  provided that any such change (a) shall not be inconsistent
     with the terms of the Plan, and (b) shall be approved by the Committee.

          8.04  TAXES.  The Company shall be entitled, if  the Committee deems
     it  necessary or  desirable,  to withhold  (or  secure payment  from  the
     Participant  in lieu  of withholding)  the amount  of any  withholding or
     other  tax required by  law to be  withheld or  paid by the  Company with
     respect to  any Common  Stock issuable  under such  Participant's Option,
     and the  Company may defer  issuance of  Common Stock upon  the grant  or
     exercise  of an Option unless indemnified to its satisfaction against any
     liability  for any  such tax.    The amount  of such  withholding  or tax
     payment shall  be determined by  the Committee or its  delegate and shall<PAGE>


     be payable by  the Participant at such time  as the Committee determines.
     A  Participant  shall  be  permitted  to   satisfy  his  or  her  tax  or
     withholding   obligation   by  (a)   having   cash   withheld  from   the
     Participant's  salary  or  other  compensation payable  by  the  Company,
     (b) the  payment of  cash by the  Participant to the  Company, and/or (c)
     with  the approval of the Committee,  the withholding from the Option, at
     the appropriate time,  of a number of shares  of Common Stock sufficient,
     based upon  the Fair Market Value  of such Common Stock,  to satisfy such
     tax  or  withholding  requirements.   A  Participant's  election to  have
     withheld shares of Common  Stock that are otherwise issuable  on exercise
     of an Option  shall be in writing, shall be  irrevocable upon approval by
     the  Committee, shall be  delivered to the  Company prior to  the date on
     which  the  amount  of  tax  to  be  withheld is  determined,  and  shall
     otherwise be made in conformity with SEC Rule 16b-3(e).<PAGE>


     <PAGE>  8

          8.05  ADJUSTMENTS TO REFLECT CAPITAL CHANGES; CHANGE IN CONTROL.

               (a)  RECAPITALIZATION.   The number and kind of  shares subject
     to  outstanding Options,  the purchase  price or  exercise price  of such
     Options, the amount  of Non-Employee  Director Options to  be granted  on
     any date under Section 7.02, and  the number and kind of shares available
     for  Options subsequently granted  under the Plan  shall be appropriately
     adjusted  to  reflect any  stock  dividend, stock  split,  combination or
     exchange   of  shares,   merger,   consolidation  or   other  change   in
     capitalization with a  similar substantive  effect upon the  Plan or  the
     Options  granted under the Plan.  The  Committee shall have the power and
     sole discretion to determine the nature  and amount of the adjustment  to
     be made in each case. 

               (b)    SALE  OR  REORGANIZATION.    After  any  reorganization,
     merger,  or consolidation in which  the Company is  the surviving entity,
     each  Participant  shall, at  no additional  cost,  be entitled  upon the
     exercise  of an  Option  outstanding  prior  to  such  event  to  receive
     (subject to any  required action by stockholders), in lieu  of the number
     of  shares  of  Common Stock  receivable  on  exercise  pursuant to  such
     Option, the  number and class of  shares of stock or  other securities to
     which such Participant would have been  entitled pursuant to the terms of
     the  reorganization, merger,  or consolidation  if, at  the time  of such
     reorganization, merger,  or consolidation, such Participant  had been the
     holder  of record  of a  number of  shares of Common  Stock equal  to the
     number of shares  of Common Stock receivable on exercise pursuant to such
     Option.  Comparable rights shall  accrue to each Participant in the event
     of  successive  reorganizations,  mergers,   or  consolidations  of   the
     character described above.

               (c)   OPTIONS TO PURCHASE  STOCK OF ACQUIRED  COMPANIES.  After
     any reorganization, merger, or  consolidation in which the  Company shall
     be  a surviving entity, the Committee may grant substituted Options under
     the  provisions of the Plan,  replacing old options granted  under a plan
     of another party  to the reorganization,  merger, or consolidation  whose
     stock subject to  the old options may no longer  be issued following such
     reorganization, merger, or consolidation.   The foregoing adjustments and
     manner  of application of the foregoing provisions shall be determined by
     the Committee in its sole  discretion.  Any such adjustments  may provide
     for  the elimination of any fractional shares  of Common Stock that might
     otherwise become subject to any Options.

               (d)    CHANGES  IN  CONTROL.    (i)  Upon  the  dissolution  or
     liquidation of  the  Company,  (ii)  upon a  reorganization,  merger,  or
     consolidation  in which  the Company  is not  the  surviving corporation,
     (iii)  upon the sale  of substantially all  of the property  or assets of
     the Company to another  corporation, or (iv) if  at least 50% or  more of
     the voting stock of the Company is sold either through a tender  offer or
     otherwise  to a party  or an affiliated  group of parties,  then the Plan
     and the Options issued thereunder shall  terminate, unless provisions are
     made  in connection with such  transaction for the  assumption of Options
     theretofore  granted, or  for the  substitution for  such Options  of new
     options of the successor  corporation or a parent or  subsidiary thereof,
     with appropriate adjustment as to the  number and kinds of shares and the
     per  share  exercise  prices.    In  the  event  such  Options  shall  be
     terminated, all outstanding Options  shall be exercisable in full  for at
     least 30 days prior to such termination date, whether or  not exercisable
     during  such period,  subject, however,  to the  limitation set  forth in<PAGE>


     Sections 6.02(b)  and 7.01.   For purposes  of this Section  8.05(d), the
     Company  refers to  Mid  Atlantic Medical  Services, Inc.,  MD-Individual
     Practice  Association,  Inc.,  Optimum  Choice,  Inc., and/or  Physicians
     Health  Plan of  Maryland, Inc.,  jointly or  separately.   The Committee
     shall  determine  the  date  on  which  Options  may  become  exercisable
     pursuant to this Section 8.05(d).

          8.06   SURRENDER OF  OPTIONS.  Any  Option granted  to a Participant
     under  the Plan  may be surrendered  to the  Company for  cancellation on
     such terms as the Committee and holder approve.

          8.07   NO  RIGHT TO  OPTION;  NO RIGHT  TO  EMPLOYMENT.   Except  as
     provided  in Article  VII, no  director, employee  or other  person shall
     have any  claim or right to be  granted an Option.   Neither the Plan nor
     any action taken hereunder shall be construed as giving any  employee any
     right  to  be  retained in  the  employ  of the  Company  or  any of  its
     Subsidiaries.<PAGE>


     <PAGE>  9

          8.08    OPTIONS  NOT  INCLUDABLE  FOR  BENEFIT   PURPOSES.    Income
     recognized by a Participant pursuant to the provisions of the  Plan shall
     not  be  included in  the determination  of  benefits under  any employee
     pension benefit plan (as such  term is defined in Section 3(2)  of ERISA)
     or group insurance or  other benefit plans applicable to  the Participant
     that are maintained by the Company  or any of its Subsidiaries, except as
     may  be  provided  under  the  terms  of  such  plans  or  determined  by
     resolution of the Board.

          8.09   GOVERNING  LAW.   The Plan  and all  determinations  made and
     actions taken pursuant to the Plan shall  be governed by the laws of  the
     State of  Delaware other than  the conflict  of laws  provisions of  such
     laws, and shall be construed in accordance therewith.

          8.10  NO  STRICT CONSTRUCTION.  No rule of strict construction shall
     be implied  against the Company,  the Committee,  or any other  person in
     the interpretation  of any of the  terms of the Plan,  any Option granted
     under the Plan or any rule or procedure established by the Committee.

          8.11   COMPLIANCE  WITH SEC RULE  16b-3 AND  SECTION 162(m).   It is
     intended that the  Plan be  applied and administered  in compliance  with
     SEC Rule  16b-3 and with Section  162(m) of the Code  and the regulations
     thereunder  (Section  162(m)  of  the  Code   and  such  regulations  are
     collectively  hereinafter referred  to  as  "Section 162(m)").    If  any
     provision of  the Plan would  be in  violation of Rule  16b-3 or  Section
     162(m) if applied  as written,  such provision shall  not have effect  as
     written  and shall be  given effect so  as to  comply with Rule  16b-3 or
     Section 162(m), as  the case may be, as determined by the Committee.  The
     Board is authorized to amend the Plan and to make  any such modifications
     to Option  Agreements to comply  with Rule 16b-3  and Section 162(m),  as
     they  may be  amended from  time  to time,  and  to make  any other  such
     amendments  or modifications  deemed necessary  or appropriate  to better
     accomplish the  purposes of the Plan  in light of any  amendments made to
     Rule 16b-3 and Section 162(m).

          8.12  CAPTIONS.   The captions (i.e., all Section headings)  used in
     the Plan are for convenience only, do not constitute  a part of the Plan,
     and  shall not be deemed to limit, characterize, or affect in any way any
     provisions  of  the  Plan,  and  all  provisions  of  the Plan  shall  be
     construed as if no captions have been used in the Plan.

          8.13  SEVERABILITY.   Whenever possible, each provision in  the Plan
     and every  Option at any time granted under the Plan shall be interpreted
     in such manner as to be  effective and valid under applicable law, but if
     any provision of  the Plan or  any Option at  any time granted  under the
     Plan shall be held to  be prohibited by or invalid under  applicable law,
     then  (a)  such  provision shall  be  deemed  amended  to accomplish  the
     objectives of the provision  as originally written to the  fullest extent
     permitted by  law, and (b)  all other  provisions of the  Plan and  every
     other  Option at  any time granted  under the  Plan shall  remain in full
     force and effect.

          8.14   LEGENDS.  All  certificates for Common  Stock delivered under
     the Plan shall be subject to  such transfer restrictions set forth in the
     Plan  and such  other restrictions  as the  Committee may  deem advisable
     under  the rules,  regulations, and  other requirements  of the  SEC, any
     stock  exchange upon  which the  Common  Stock is  then  listed, and  any
     applicable federal  or state securities  law.  The Committee  may cause a<PAGE>


     legend or legends to be put on any such certificates  to make appropriate
     references to such restrictions.

          8.15    INVESTMENT  REPRESENTATION.    The  Committee  may,  in  its
     discretion,  demand that any Participant awarded an Option deliver to the
     Committee   at  the   time  of   exercise  of   such  Option   a  written
     representation  that the  shares  of Common  Stock  to be  acquired  upon
     exercise  are to be acquired for investment and  not for resale or with a
     view to the  distribution thereof.   Upon such demand,  delivery of  such
     written  representation by the Participant  prior to the  delivery of any
     shares of  Common Stock  pursuant to  the exercise of  his or  her Option
     shall be a condition precedent  to the Participant's right to purchase or
     otherwise acquire such  shares of  Common Stock  by such  exercise.   The
     Company  is  not  legally   obliged  hereunder  if  fulfillment  of   its
     obligations  under the  Plan would  violate federal  or  state securities
     laws.<PAGE>


     <PAGE>  10

          8.16  AMENDMENT AND TERMINATION.

               (a)   AMENDMENT.    The Board  shall  have complete  power  and
     authority to  amend  the Plan  at  any time  it  is deemed  necessary  or
     appropriate; provided, however,  that the  Board shall  not, without  the
     affirmative  approval of  a  simple majority  of  the holders  of  Common
     Stock,  represented, by person  or by proxy,  and entitled to  vote at an
     annual  or  special meeting  of the  holders  of Common  Stock,  make any
     amendment  that  requires  stockholder  approval under  SEC  Rule  16b-3,
     Section  162(m) or  under  any other  applicable  law, unless  the  Board
     determines that compliance  with Rule 16b-3,  Section 162(m) and/or  such
     law is no longer desired.   No termination or amendment of the  Plan may,
     without  the  consent  of  the  Participant  to  whom  any  Option  shall
     theretofore  have been granted under the Plan, adversely affect the right
     of  such  individual  under  such  Option;  provided,  however,  that the
     Committee  may, in  its  sole discretion,  make  provision in  an  Option
     Agreement  for such  amendments that,  in its  sole discretion,  it deems
     appropriate.    Article  VII  shall  not  be  amended  or  modified  more
     frequently than once  in any period of six consecutive  months other than
     to  comport with  changes  in  the  ERISA,  the Code  or  the  rules  and
     regulations promulgated thereunder.

               (b)    TERMINATION.   The Board  shall have  the right  and the
     power to  terminate the Plan  at any  time.  No  Option shall  be granted
     under the  Plan after the termination of the Plan, but the termination of
     the Plan  shall not have any  other effect and any  Option outstanding at
     the  time  of  the  termination  of  the  Plan  may  be  exercised  after
     termination of the  Plan at any time prior to the expiration date of such
     Option to the  same extent such  Option would have  been exercisable  had
     the Plan not terminated.

          8.17   COSTS  AND  EXPENSES.   All  costs and  expenses incurred  in
     administering the Plan shall be borne by the Company.

          8.18  UNFUNDED PLAN. The Plan shall be unfunded.   The Company shall
     not be  required to establish  any special or  separate fund or  make any
     other segregation  of assets to assure the payment of any award under the
     Plan.<PAGE>