MID ATLANTIC MEDICAL SERVICES, INC.
                            KEY MANAGEMENT BONUS PLAN

     1. Purpose.  The Mid Atlantic Medical  Services,  Inc. Key Management Bonus
Plan is intended to increase  incentives  for  eligible  employees to attain and
maintain  the  highest  standards  of  performance,  to  attract  and retain key
employees  of  outstanding  competence  and  ability,  to  stimulate  the active
interest  of key  employees  in the  development  and  financial  success of the
Company,  to further the identity of  interests  of employees  with those of the
Company's  stockholders  generally  and  to  reward  employees  for  outstanding
performance when certain objectives are achieved.

     2.  Definitions.  As used herein,  the terms set forth below shall have the
following respective meanings:

     (a) "Board" means the Board of Directors of the Company.

     (b) "Bonus" means an award payable under this Plan.

     (c)  "Bonus  Period"  means the  calendar  year  beginning  on or after the
Effective Date with respect to which the Bonus is to be paid.

     (d) "Business  Criteria" means the business criteria listed in Section 6 of
this Plan.

     (e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.

     (f)  "Committee"  means the Committee  appointed by the Board to administer
the Plan.

     (g) "Company" means Mid Atlantic Medical Services, Inc. and
its  subsidiaries.

     (h) "Effective Date" means January 1, 2000.

     (i) "Eligible  Employees"  means all full-time  non-sales  employees of the
Company classified in Level 10 to Level 17 or any successor designation.

     (j) "Participant" means, with respect to a Bonus Period, the Eligible
Employees  selected by the  Committee to be eligible to receive a Bonus for such
Bonus Period as provided in Section 4 of this Plan.

     (k) "Performance  Objective" means the performance  objective or objectives
established pursuant to Section 4 of the Plan.

     (l) "Plan" means the Mid Atlantic  Medical  Services,  Inc. Key  Management
Bonus Plan.

     3.  Administration.  The Committee  shall  interpret  the Plan,  prescribe,
amend, and rescind rules relating to it, select eligible Participants,  and take
all other actions necessary for its administration, which actions shall be final
and binding upon all Participants.

     4. Selection of Participants and Performance Objective. Prior to or as soon
as practicable after the commencement of each Bonus Period,  the Committee shall
determine  in writing  (i) the  Participants  who shall be eligible to receive a
Bonus for such Bonus Period,  (ii) the Performance  Objective,  which shall be a
relative or absolute  measure of any one or more of the Business  Criteria,  and
(iii) the formula for computing the amount of Bonus payable to each  Participant
if the Performance Objective is achieved.

     5. Business Criteria.  The Business Criteria may include,  but shall not be
limited to, specified levels of one or more of the following:

     Operating Income                           Net Income
     Pre-Tax Income1                            Earnings Per Share
     Cash Flow                                  Return on Investment
     Return on Capital                          Revenue
     Return on Equity                           Total Shareholder Return
     Return on Assets                           Membership in Company Products
     Membership in HMO Product                  Membership in ASO Product
     Membership in Medicare Product             Membership in Medicaid Product
     Membership in Indemnity Product            Membership in PPO Product

The above  terms  shall  have the same  meaning  as in the  Company's  financial
statements,  or if the terms are not used in the Company's financial statements,
as applied pursuant to generally accepted accounting  principles,  or as used in
the industry, as applicable.  As determined by the Committee, the Business shall
be applied (i) in absolute  terms or relative to one or more other  companies or
indices and (ii) to a business unit,  geographic  region, one or more separately
incorporated entities, or the Company as a whole).

     6. Bonus  Certification.  The  Committee  shall certify in writing prior to
payment of the Bonus that the  Performance  Objective  has been attained and the
Bonus is payable. With respect to Committee  certification,  approved minutes of
the  meeting  in which the  certification  is made  shall be  treated as written
certification.

     7.  Discretion to Change Awards.  The  Committee,  in its sole and absolute
discretion,  may increase or decrease the amount of any award otherwise  payable
to a Participant.

         8. Active  Employment  Requirement.  Except as provided  below, a Bonus
shall be paid for a Bonus Period only to a Participant who is actively  employed
by the  Company (or on approved  vacation  or other  approved  leave of absence)
throughout  the Bonus  Period and who is employed by the Company on the date the
Bonus is paid.  The Committee may in its sole  discretion  grant a Bonus for the
Bonus  Period to a  Participant  who is first  employed  or who is promoted to a
position  eligible  to become a  Participant  under  this Plan  during the Bonus
Period, or whose employment is terminated during the Bonus Period because of the
Participant's  retirement with  entitlement to immediate  pension benefits under
the Company's  retirement  plan,  death,  or because of disability as defined in
Section  22(e)(3) of the Code. In such cases of active  employment for part of a
Bonus Period, a pro rata Bonus may be paid for the Bonus Period.

         9. Payment of Bonus. A Bonus shall be paid to the  Participant  for the
Bonus  Period as provided in this Plan.  The Company  shall pay the Bonus to the
Participant  in a single cash  payment as soon as  administratively  practicable
after the Bonus  Period  and after  the  Committee  certifies  that the Bonus is
payable  as  provided   in  Section  6.  In  the  event  of  the   Participant's
incompetency,  the  Company  in its  sole  discretion  may pay any  Bonus to the
Participant's  guardian  or  directly  to the  Participant.  In the event of the
Participant's  death, any Bonus shall be paid to the Participant's spouse or, if
there is no surviving  spouse,  the  Participant's  estate.  Payments under this
Section shall operate as a complete  discharge of the Committee and the Company.
The  Company  shall  deduct from any Bonus paid under the Plan the amount of any
taxes required to be withheld by the federal or any state or local government.

         10.  Limitation  of Rights.  Nothing in this Plan shall be construed to
(a) give any  employee  of the  Company  any right to be awarded any Bonus other
than  that  set  forth  herein,  as  determined  by the  Committee;  (b)  give a
Participant any rights  whatsoever with respect to shares of common stock of the
Company;  (c)  limit  in any  way the  right  of the  Company  to  terminate  an
employee's  employment  with the Company at any time;  (d) give a Participant or
any other person any interest in any fund or in any specific  asset or assets of
the Company;  or (e) be evidence of any agreement or  understanding,  express or
implied,  that the Company will employ an employee in any particular position or
at any particular rate of remuneration.

     11.  Nonassignment.  The right of a Participant to the payment of any Bonus
under the Plan may not be assigned,  transferred,  pledged,  or encumbered,  nor
shall such right or other  interests  be  subject  to  attachment,  garnishment,
execution, or other legal process.

     12. Amendment or Termination of the Plan. The Committee may amend or
terminate the Plan at any time, except that no amendment or termination shall be
made that would  impair the rights of any  Participant  to a Bonus that would be
payable were the  Participant  to terminate  employment on the effective date of
such amendment or termination, unless the Participant consents to such amendment
or termination. The Plan shall automatically terminate on January 1, 2005 unless
sooner terminated by action of the Committee.

     13.  Governing  Law. The Plan shall be governed by the laws of the State of
Delaware other than the conflict of laws provisions thereof.


1 Defined as pre-tax income before  expansion or acquisition  costs,  charges or
credits  not  related  to  current  year  operations  and  prior  to  return  of
physicians' withhold and physicians' bonuses.