Sierra Health Services, Sierra Health Services, Inc.Inc.A Managed Care CompanyA Managed Care Company

Updated 3/12/07

Cautionary StatementCautionary StatementStatements in this presentation and verbal statements made by representatives of Sierra that are not historical facts are forward-looking and based on management’s projections, assumptions and estimates; actual results may vary materially. Forward-looking statements are subject to certain risks and uncertainties, which include but are not limited to:

1) potential adverse changes in government regulations, contracts and programs, including the Medicare Advantage program, the Medicare Prescription Drug Plan and any potential reconciliation issues, Medicaid and legislative proposals to eliminate or reduce ERISA pre-emption of state laws that would increase potential managed care litigation exposure;

2) competitive forces that may affect pricing, enrollment, renewals and benefit levels; 3) unpredictable medical costs, malpractice exposure, reinsurance costs, changes in provider

contracts and inflation; 4) impact of economic conditions; 5) changes in healthcare reserves; 6) the effects of the termination of the HCA contract;7) variations from actuarial assumptions that can lead to higher than expected medical costs;8) costs and losses from our enhanced Medicare Part D Prescription Drug Program product offering

that we cannot yet project and9) the amount of actual proceeds to be realized from the note receivable related to the sale of the

workers’ compensation insurance operation. Further factors concerning financial risks and results may be found in documents filed with the Securities and Exchange Commission and which are incorporated herein by reference. Consequently, all of the forward-looking statements made in this presentation or verbally by representatives of Sierra are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Sierra will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Sierra or its business or operations. Sierra assumes no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events or otherwise.

Disclosure StatementDisclosure Statement

This presentation includes the following non-This presentation includes the following non-Generally Accepted Accounting Principle Generally Accepted Accounting Principle (GAAP) measures (GAAP) measures Medical care ratio excluding PDP Medical care ratio excluding PDP Days in claims payable excluding PDPDays in claims payable excluding PDP

which under SEC Regulation G we are required which under SEC Regulation G we are required to reconcile with GAAP. to reconcile with GAAP.

Recent Merger Recent Merger AnnouncementAnnouncement

Sierra signed a definitive agreement to be Sierra signed a definitive agreement to be acquired by United Health Groupacquired by United Health Group

$43.50 per share in cash$43.50 per share in cash Total equity value of $2.6 billionTotal equity value of $2.6 billion

Other Private (includes self-insured and

PPO) (1)

36%

HMO (2)

19%

Medicaid (1)

8%

Medicare (1)

14%

Military (1)

6%

Uninsured (1)

17%

Nevada Health Insurance Nevada Health Insurance DemographicsDemographics

(1) U.S. Census Bureau (2005) -Total Nevada Population = 2,448,000

(2) Nevada State Health Division, HMO Industry Profile 9/30/06

HMO Membership HMO Membership

(in thousands)

187 202 226 254 279

4851

5356

57

3739

5155

60

0

50

100

150

200

250

300

350

400

450

12/ 31/ 02 12/ 31/ 03 12/ 31/ 04 12/ 31/ 05 12/ 31/ 06

Commercial Medicare Medicaid

272292

330365

9.9% CAGR

396

Commercial HMO Sales Commercial HMO Sales GrowthGrowth

Commercial HMO Members: 279,100 Commercial HMO Members: 279,100 9.8% Net Commercial Growth in 9.8% Net Commercial Growth in

20062006

Expect 3-5% Net Commercial Growth Expect 3-5% Net Commercial Growth in 2007in 2007

Only 19% HMO Penetration Only 19% HMO Penetration StatewideStatewide(1)(1)

(1) Nevada State Health Division, HMO Industry Profile 9/30/06

December 31, 2006

501+ (large)62%

51-500 (mid-size)31%

1-50 (small)7%

Health Plan of NevadaHealth Plan of NevadaMembership Membership CharacteristicsCharacteristics(1)(1)

All Others40% School

Districts9%

Gaming19%

Government11%Unions

12% National Accounts

9%

Commercial Employer Group Size Commercial Employer Type Mix

(1) Based on number of subscribers in each category

December 31, 2006

Commercial CostsCommercial Costs

2007 Projected Cost Trends2007 Projected Cost Trends Contracted HospitalsContracted Hospitals 3 - 6% 3 - 6% (1)(1)

PhysicianPhysician 4 - 5%4 - 5% Pharmacy Pharmacy 5 - 9%5 - 9%

OverallOverall 5 - 7% 5 - 7% (1)(1)

(1) Does not include any impact from increased costs related to non-contracted hospitals

Commercial PricingCommercial Pricing

2007 Projected Rate Increases2007 Projected Rate Increases HMOHMO 3 – 5%3 – 5% POSPOS 5 – 7%5 – 7% PPOPPO 7 – 9% 7 – 9%

OverallOverall 5 – 6%5 – 6%(1)(1)

(1) Includes benefit reductions (buydowns) which increase the expected yield by approximately 1%

Medicare Sales GrowthMedicare Sales Growth

December 31, 2006December 31, 2006Medicare Advantage Medicare Advantage (1) (1) Members: 58,600 Members: 58,600 3.9% Net Medicare Growth for 20063.9% Net Medicare Growth for 2006 Expect 3-5% Net Medicare Growth for 2007Expect 3-5% Net Medicare Growth for 2007 Minimal yield increase for 2007Minimal yield increase for 2007 Only 32% Medicare HMO Penetration Only 32% Medicare HMO Penetration

Statewide Statewide (2)(2)

(1) Medicare Advantage includes both HMO and PPO Members

(2) Nevada State Health Division, HMO Industry Profile 9/30/06

Medicare CostsMedicare Costs

2007 Projected Cost Trends2007 Projected Cost Trends ContractedContracted Hospitals Hospitals 3 - 6% 3 - 6% (1)(1)

PhysicianPhysician 3 - 4%3 - 4% Pharmacy Pharmacy 6 - 8%6 - 8%

OverallOverall 3 - 5% 3 - 5% (1)(1)

(1) Does not include any impact from increased costs related to non-contracted hospitals

Prescription Drug Plan – Part DPrescription Drug Plan – Part DDecember 31, 2006

Stand-alone PDP members: 184,900 Stand-alone PDP 2007

30 states and the District of Columbia

Auto-enrollment provider in AZ, CA(1), CO, ID, NV(1), OR, UT, WA

Limited marketing effort Projected approximately 85% MCR on basic

plan Expect pre-tax income of $11-14 million(2)

(1) Will not receive new auto-enrollees for 2007

(2) Earnings from basic plan only

Prescription Drug Plan – Part DPrescription Drug Plan – Part D

January 2007

Enhanced Benefits Plan: 37,000 members 30 states and the District of Columbia $93 average member contribution; $170 per

member average premium Plan includes generic and brand prescription

coverage in the “donut hole” Expect to incur loss on product in 2007 based

on January claims data Expect to be able to develop a range of the

projected loss within 45 to 60 days

MedicaidMedicaidDecember 31, 2006December 31, 2006

Medicaid Members: 60,500Medicaid Members: 60,500 Mandatory 2 Plan Market in NevadaMandatory 2 Plan Market in Nevada Currently Serving CHiPS, TANF, CHAPCurrently Serving CHiPS, TANF, CHAP +50% Medicaid HMO Market Share in Nevada +50% Medicaid HMO Market Share in Nevada (1)(1)

Expect Medicaid membership to remain flat in Expect Medicaid membership to remain flat in 20072007

Expected 2007 rate increase flat for the first half Expected 2007 rate increase flat for the first half of 2007; 1% increase in the second half of 2007of 2007; 1% increase in the second half of 2007

New contract effective 11/1/06 through 6/30/09 New contract effective 11/1/06 through 6/30/09 with DHCFP option to extend the contract for an with DHCFP option to extend the contract for an additional two yearsadditional two years

(1) Nevada State Health Division, HMO Industry Profile 9/30/06

Nevada Nevada Medicaid Market Share (HMO)Medicaid Market Share (HMO)(1)(1)

Q3-04 Q3-05 Q3-06 Q3-04 Q3-05 Q3-06

Health Plan of Nevada 46.3% 50.3% 53.2% 44.8% 48.8% 52.0%

Nevada Care 53.7% 49.7% 46.8% 55.2% 51.2% 48.0%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Market Penetration 50.6% 46.9% 47.6% 59.6% 55.7% 56.8%

Statewide Clark County

(1) Nevada State Health Division, HMO Industry Profile September 30, 2004, 2005 and 2006

$51.2$64.1

$88.0$98.1

$108.9

$0.0

$25.0

$50.0

$75.0

$100.0

$125.0

2002 2003 2004 2005 2006

HPN Medicaid Revenue HPN Medicaid Revenue GrowthGrowth

20.8% CAGR

(in millions)

Medical SubsidiariesMedical Subsidiaries

Clinical OverviewClinical Overview

Medical Subsidiaries

Family Healthcare Services

(FHS)

Family HomeHospice(FHH)

Total HomeCare of Nevada

(THC)

BehavioralHealthcare Options

(BHO)

Southwest Medical Associates

(SMA)

• Multi-specialty physician group

• 250 Providers

• Provides care services in patient’s home

• Medicare certified home health agency

• Hospice servicing terminally ill patients

• Medicare certified

• Home care products, infusion therapy services, and specialty drugs

• DME

• Specialized mental health/substance abuse services.

• URAC accredited

Hospital UpdateHospital Update Extended two of three largest hospital Extended two of three largest hospital

provider contracts, one through the middle provider contracts, one through the middle of 2008 and the other through the end of of 2008 and the other through the end of 20092009

Contracts are evergreen thereafter and Contracts are evergreen thereafter and require 180 days written notice for require 180 days written notice for termination termination

HCA contract ended 12/31/06HCA contract ended 12/31/06 Within coverage constraints, we are not Within coverage constraints, we are not

authorizing non-emergency procedures at HCA authorizing non-emergency procedures at HCA facilities.facilities.

Preliminary results have been positivePreliminary results have been positive

$1,131.2

$1,291.3

$1,623.5

$962.2$862.4

$0.0

$500.0

$1,000.0

$1,500.0

2002 2003 2004 2005 2006

Medical Premium Revenue Medical Premium Revenue TrendsTrends

17.1% CAGR($ in millions)

(1) Includes $197.1 million in PDP revenue

(1)

Consolidated MCRConsolidated MCR78.7%

76.1% 75.3% 76.5% 77.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2002 2003 2004 2005 2006

Consolidated MCRConsolidated MCRExcluding PDPExcluding PDP

78.7% 76.1% 75.3% 76.5% 76.8%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2002 2003 2004 2005 2006

Consolidated Medical Consolidated Medical ExpensesExpenses

Physician38%

Pharmacy24%

Other16%

Hospital22%

Twelve Months Ended 12/31/06Twelve Months Ended 12/31/06

Hospital26%

Pharmacy13%

Other18%

Physician43%

Consolidated Medical Consolidated Medical Expenses Excluding PDP Expenses Excluding PDP (1)(1)

Twelve Months Ended 12/31/06Twelve Months Ended 12/31/06

(1) Excludes PDP medical expenses of $160.3 million

$63.5

$119.0

$175.0

$141.9

$217.5

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

2002 2003 2004 2005 2006

36.0% CAGR

Managed Care and Corporate Operations Segment ($ in millions)

Operating IncomeOperating Income

Consolidated Pretax MarginConsolidated Pretax Margin

6.8%

11.4% 11.4%12.2% 12.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2002 2003 2004 2005 2006

Managed Care and Corporate Operations Segment

$59.7$106.1 $117.3

$89.4$62.9

$190.3

$231.7

$365.5$299.2$265.2

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$350.0

$400.0

$450.0

12/ 31/ 02 12/ 31/ 03 12/ 31/ 04 12/ 31/ 05 12/ 31/ 06

Non-Regulated Regulated

Cash and InvestmentsCash and Investments

From Continuing Operations ($ in millions)

$382.5

$337.8

$250.0

$388.6

$428.4

Total External DebtTotal External DebtFrom Continuing Operations ($ in millions)

$76

$117

$193

$125

$52

$119

$0

$50

$100

$150

$200

$250

Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06

(1)

(1) $75 million outstanding on line of credit and converted $21.7 million in debentures on January 18,2007

Senior Convertible DebenturesSenior Convertible Debentures $115 MM original issue on March 15, 2003$115 MM original issue on March 15, 2003 2.25% coupon rate2.25% coupon rate $21.8 million outstanding as of January 31, 2007$21.8 million outstanding as of January 31, 2007 Issued 10.2 million shares upon conversionIssued 10.2 million shares upon conversion Expensed approximately $1.5 million in prepaid interest Expensed approximately $1.5 million in prepaid interest

for for conversion in 2005, $176,000 in 2006 and $601,000 in conversion in 2005, $176,000 in 2006 and $601,000 in 20072007

Expensed deferred financing costs of $1.2 million in Expensed deferred financing costs of $1.2 million in 2005, $91,000 in 2006 and $176,000 in 20072005, $91,000 in 2006 and $176,000 in 2007

52.4 57.7 55.5

12.6 5.7

3.0 0.71.9

4.8

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Q4 2004 Q4 2005 Q4 2006

Dilutive Impact of Conversion of Sierra DebenturesDilutive Options and Restrictive Shares OutstandingWeighted Average Common Shares Outstanding

Managing DilutionManaging Dilution(1)(1)

(shares in millions)

68.065.3

61.0

(1) Adjusted to reflect 2-for-1 stock split effective December 30, 2005

-5.3% CAGR

Share Repurchases from 1/1/03 Share Repurchases from 1/1/03 (1)(1)

Repurchased 29.1 million shares as of 1/30/07

$22.24 average repurchase cost as of 1/30/07

Current bank agreement allows for unlimited share repurchases Based on meeting the required leverage ratio

$57.1 million available for repurchases as of 1/30/07 Includes $50 million approved by Board of

Directors on 1/25/07

(1) Adjusted to reflect 2-for-1 stock split effective December 30, 2005

Strategic ObjectivesStrategic Objectives

Achieve Commercial Premium Yields of 4 to 5% before benefit buydowns

Achieve Commercial Unit Growth of 3 to 5%

Manage appropriately out of network hospital costs

Implement Medicare Advantage Expansion, including Private Fee-For-Service plan.

Manage an expected increase in consolidated MCR of 150 to 200 bps(1)(1)

Achieve EPS of $2.30 to $2.40 excluding the impact of the expected potential loss on the enhanced PDP offering

(1) Excludes PDP

Reconciliation of non GAAP measuresReconciliation of non GAAP measuresMedical care ratio (excluding PDP)Medical care ratio (excluding PDP)(1)(1)

GAAPOther Medical PDP Reporting

Medical premiums 360,641$ 42,148$ 402,789$ Professional Fees 13,169 - 13,169 Total medical premiums and professional fees 373,810 42,148 415,958

Medical expenses 289,439 24,781 314,220 Medical care ratio (medical expenses/premiums and professional fees) 77.4% 58.8% 75.5%

GAAPOther Medical PDP Reporting

Medical premiums 1,426,387$ 197,128$ 1,623,515$ Professional Fees 52,266 - 52,266 Total medical premiums and professional fees 1,478,653 197,128 1,675,781

Medical expenses 1,135,699 160,279 1,295,978 Medical care ratio (medical expenses/premiums and professional fees) 76.8% 81.3% 77.3%

Non-GAAP Items

Non-GAAP ItemsThree Months Ended December 31, 2006

Twelve Months Ended December 31, 2006

(1) The Company believes that reflecting the ratio excluding the effects of the PDP provides a more comparable measure of our medical care ratio to our historical results.

Reconciliation of non GAAP measuresReconciliation of non GAAP measuresDays in claims payable (excluding PDP)Days in claims payable (excluding PDP)

GAAPOther Medical PDP Reporting

Medical claims payable 150,374$ 6,889$ 157,263$ Medical expenses 290,329$ 33,365$ 323,694$ Days in Qtr 92 92 92Medical exp per day 3,156 363 3,518Days in claims payable 48 19 45

GAAPOther Medical PDP Reporting

Medical claims payable 160,588$ 62,307$ 222,895$ Medical expenses 284,044$ 30,177$ 314,221$ Days in Qtr 92 92 92Medical exp per day 3,087 328 3,415Days in claims payable 52 190 65

Non-GAAP Items

Non-GAAP ItemsThree Months Ended September 30, 2006

Three Months Ended December 31, 2006

(1) The Company believes that reflecting days in claims payable excluding the effects of the PDP provides a more comparable measure to our historical results.

Sierra Health Services, Sierra Health Services, Inc.Inc.A Managed Care CompanyA Managed Care Company

Updated 3/12/07