MID ATLANTIC MEDICAL SERVICES, INC.
                STOCK OPTION AGREEMENT FOR NON-EMPLOYEE DIRECTORS


         AGREEMENT  ("Agreement") dated this 3rd day of May, 1999 by and between
Mid Atlantic Medical Services, Inc., a Delaware corporation ("Corporation"), and
the person indicated on the attached Face Sheet, a non-employee  director of the
Corporation and/or Physicians Health Plan of Maryland, Inc. ("Optionee").

         WHEREAS,  the Corporation desires to have Optionee continue to serve on
its Board of Directors  and to provide  Optionee with an incentive by sharing in
the success of the Corporation;

     WHEREAS,  in order to provide such an incentive  to its key  employees  and
non-employee  directors,  the Corporation  has adopted the Mid Atlantic  Medical
Services, Inc. 1999 Non-Qualified Stock Option Plan ("Plan");

         WHEREAS,  the option  granted  hereby is not  intended to qualify as an
"incentive  stock  option"  within the meaning of Section  422 or any  successor
provision of the Internal Revenue Code of 1986, as amended; and

         WHEREAS,  unless otherwise  provided herein,  capitalized terms used in
this Agreement shall have the meaning given them in the Plan;

         NOW,   THEREFORE,   in   consideration  of  the  mutual  covenants  and
representations  herein contained and intending to be legally bound, the parties
hereto agree as follows:

         1. Number of Shares and Price.  The  Corporation  hereby  grants to the
Optionee an option  ("Option")  to purchase the number of shares of Common Stock
set forth on the attached Face Sheet of this  Agreement.  The exercise price per
share of Common  Stock of the  Option  shall be as is set forth on the  attached
Face Sheet of this  Agreement,  such price being the Fair Market Value per share
of Common  Stock on the Date of Grant of the Option.  The Option is not intended
to qualify as an "incentive stock option" under Section 422 of the Code.

         2. Term and  Exercise.  The Option shall expire five (5) years from the
date  hereof.  The Option is  exercisable  in full on the Date of Grant.  If the
Optionee's  service  with the  Corporation  terminates  for any reason or if the
Optionee ceases to be a Non-Employee Director, the Option may be exercised until
the Option  expires in  accordance  with the first  sentence of this  Section 2.
Accordingly,  if the  Optionee  ceases  to serve for any  reason,  he or she may
continue to exercise the Option until the Option expires in accordance  with the
first  sentence  of this  Section  2,  but  only to the  extent  that it was not
previously exercised.

         Notwithstanding  anything  to the  contrary  in this  Section 2, in the
event one of the events specified in Section 8.05(d)(i),  (ii), (iii) or (iv) of
the Plan occurs, the provisions of such Section 8.05(d) shall determine when the
Option becomes exercisable, when it may be exercised and when it expires.

         3.  Exercise  Procedures.  The Option shall be  exercisable  by written
notice to the  Corporation,  which  must be  received  by the  Secretary  of the
Corporation  not later  than 5:00 P.M.  local  time at the  principal  executive
office of the  Corporation  on the expiration  date of the Option.  Such written
notice shall set forth (a) the number of shares of Common Stock being purchased,
(b) the total exercise price for the shares of Common Stock being purchased, (c)
the exact name as it should appear on the stock  certificate(s) to be issued for
the shares of Common  Stock  being  purchased,  and (d) the address to which the
stock  certificate(s)  should be sent.  The  exercise  price of shares of Common
Stock  purchased  upon exercise of the Option shall be paid in full (a) in cash,
(b) by delivery to the  Corporation  of shares of Common Stock (which  shares of
Common  Stock  must  have  been  held  for  at  least  six  months),  (c) in any
combination of cash and shares of Common Stock, or (d) by delivery of such other
consideration  as  the  Committee  deems  appropriate  and  in  compliance  with
applicable law (including payment in accordance with a cashless exercise program
approved by the  Committee).  In the event that any shares of Common Stock shall
be  transferred  to the  Corporation  to satisfy all or any part of the exercise
price,  the part of the  exercise  price  deemed to have been  satisfied by such
transfer  of shares of Common  Stock  shall be equal to the  product  derived by
multiplying the Fair Market Value as of the date of exercise times the number of
shares of Common  Stock  transferred  to the  Corporation.  Any shares of Common
Stock  tendered in payment  shall be duly  endorsed in blank or  accompanied  by
stock  powers  duly  endorsed in blank.  The  Optionee  may not  transfer to the
Corporation  in  satisfaction  of the exercise  price any fraction of a share of
Common Stock,  and any portion of the exercise  price that would  represent less
than a full share of Common Stock must be paid in cash by the Optionee.  Subject
to Section 7 hereof,  certificates for the purchased shares of Common Stock will
be issued and delivered to the Optionee as soon as practicable after the receipt
of such payment of the exercise price;  provided,  however, that delivery of any
such shares of Common Stock shall be deemed  effected  for all  purposes  when a
stock transfer agent of the Corporation  shall have deposited such  certificates
in the United  States mail,  addressed to Optionee,  at the address set forth on
the last page of this  Agreement  or to such other  address as Optionee may from
time to time  designate  in a written  notice to the  Corporation.  The Optionee
shall not be deemed for any purpose to be a shareholder  of the  Corporation  in
respect of any shares of Common Stock as to which the Option shall not have been
exercised,  as herein  provided,  until  such  shares of Common  Stock have been
issued to Optionee by the Corporation hereunder.

         4. Plan Provisions Control Option Terms;  Modifications.  The Option is
granted  pursuant  and  subject  to the terms and  conditions  of the Plan,  the
provisions  of which  are  incorporated  herein by  reference.  In the event any
provision of this Agreement  shall conflict with any of the terms in the Plan as
constituted  on the Date of Grant,  the terms of the Plan as  constituted on the
Date of Grant shall control. Except as provided in Section 8.05 of the Plan, the
Option shall not be modified  after the Date of Grant except by express  written
agreement between the Corporation and the Optionee;  provided, however, that any
such  modification (a) shall not be inconsistent with the terms of the Plan, and
(b) shall be approved by the Committee.

         5.  Limitations  on  Transfer.  The  Option  may  not  be  assigned  or
transferred  other than by will,  by the laws of descent  and  distribution,  or
pursuant to a qualified domestic relations order as defined by the Code, Title I
of ERISA or the rules thereunder.

         6. Taxes.  The  Corporation  shall be  entitled to withhold  (or secure
payment from the Optionee in lieu of withholding)  the amount of any withholding
or other tax  required  by law to be withheld  or paid by the  Corporation  with
respect to any shares of Common Stock  issuable  under this  Agreement,  and the
Corporation  may defer  issuance of shares of Common  Stock upon the exercise of
the Option unless the Corporation is 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 be payable by the
Optionee at such time as the Committee determines.  The Optionee may satisfy his
or her  tax  withholding  obligation  by  (a)  having  cash  withheld  from  the
Optionee's  salary  or  other  compensation  payable  by  the  Corporation  or a
Subsidiary,  (b) the  payment  of cash to the  Corporation,  (c) the  payment in
shares of Common  Stock  already  owned by the  Optionee  valued at Fair  Market
Value, and/or (d) 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 shares of Common Stock, to satisfy such tax withholding  requirements.  The
Committee shall be authorized, in its sole and absolute discretion, to establish
such rules and procedures  relating to any such withholding  methods as it deems
necessary or appropriate,  including,  without limitation,  rules and procedures
relating to elections to have shares of Common Stock  withheld  upon exercise of
the Option to meet such withholding obligations.

         7.  No  Exercise  in  Violation  of  Law.  Notwithstanding  any  of the
provisions of this Agreement, the Optionee hereby agrees that he or she will not
exercise  the  Option  granted  hereby,  and  that the  Corporation  will not be
obligated to issue any shares of Common Stock to the Optionee hereunder,  if the
exercise thereof or the issuance of such shares of Common Stock shall constitute
a violation by the Optionee or the  Corporation  of any  provision of any law or
regulation of any governmental  authority.  Any determination in this connection
by the Committee shall be final, binding and conclusive.

         8. Securities Law Compliance. The Optionee agrees, for the Optionee and
his or her  Beneficiaries,  with respect to all shares of Common Stock  acquired
pursuant  to the terms and  conditions  of the Plan and the Option (or any other
shares of Common  Stock  issued  pursuant  to a stock  dividend  or stock  split
thereon or any securities  issued in lieu thereof or in substitution or exchange
therefor),  that  the  Optionee  and his or her  Beneficiaries  will not sell or
otherwise  dispose of these shares except pursuant to an effective  registration
statement under the Securities Act of 1933, as amended (the "Act"), or except in
a  transaction  that, in the opinion of counsel for the  Corporation,  is exempt
from registration under the Act. Further,  the Corporation shall not be required
to sell or  issue  any  shares  under  the  Option  if,  in the  opinion  of the
Corporation, (a) the issuance of such shares would constitute a violation by the
Optionee  or  the  Corporation  of  any  applicable  law  or  regulation  of any
government  authority or (b) the consent or approval of any governmental body is
necessary or desirable as condition of, or in connection  with,  the issuance of
such shares.

         9. Adjustments. The existence of the Option shall not affect in any way
the right or power of the  Corporation or its directors or  shareholders to make
or authorize  any or all  adjustments,  recapitalizations,  reorganizations,  or
other changes in the  Corporation's  capital  structure or its business,  or any
merger  or  consolidation  of  the  Corporation,   or  any  issuance  of  bonds,
debentures,  preferred stock or prior preference stock ahead of or affecting the
Common  Stock or the  rights  thereof,  or  dissolution  or  liquidation  of the
Corporation,  or any  sale  or  transfer  of all or any  part of its  assets  or
business,  or any  other  corporate  act or  proceeding,  whether  of a  similar
character or otherwise.

         10.  Dispute  Resolution.  As a condition of granting  the Option,  the
Optionee agrees, for the Optionee and his or her Beneficiaries, that any dispute
or  disagreement  that may arise under or as a result of or pursuant to the Plan
and the Option  shall be  determined  by the  Committee in its sole and absolute
discretion, and any interpretation by the Committee of the terms of the Plan and
Option shall be final, binding and conclusive.



<PAGE>


         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the day and year first above written.

ATTEST:                             MID ATLANTIC MEDICAL SERVICES, INC.


__________________________       By:___________________________________
                                    Thomas P. Barbera
                                    President and Chief Executive Officer


                                 By:____________________________________
                                     Member of the Stock Option Committee

WITNESS:                            OPTIONEE

__________________________


<PAGE>




                                   FACE SHEET

Notice Addresses:

         Optionee:

                  -----------------------
                  4 Taft Court
                  Rockville, Maryland 20850

         Corporation:

                  Mid Atlantic Medical Services, Inc.
                  4 Taft Court
                  Rockville, Maryland 20850
                  Attention:  Secretary

Grant Date:                                 _________________

Total Options Granted:                      _________________

Exercise Price per share of Common Stock:   $________________

Expiration Date:                            _________________

         Optioned  shares must be  purchased  within five years from the date of
grant,  which is May 3, 1999.  That is, all options  must be exercised by May 3,
2004.