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HEALTHMARKETS CONTINUES ENHANCING COMPLIANCE AND CUSTOMER SERVICE

Examiners’ Report Notes HealthMarkets’ Significant Changes and Improvements

North Richland Hills, Texas – January 4, 2008 – A multi-state examination report examining the HealthMarkets (http://www.healthmarkets.com) insurance subsidiaries underscores significant changes and improvements begun in 2003, the Company said today.

“Beginning in early 2003, almost two years before the multi-state exam was announced, our Company began an intensive and exhaustive program to address the majority of the issues that were later identified in the exam,” said HealthMarkets President and Chief Executive Officer William J. Gedwed. “The changes we have made over the last five years have been meaningful and extensive and have resulted in improvements across all of the Company’s operations.”

“Unfortunately, the implementation and completion of many of the changes we determined were necessary occurred after the scope of the examination. We appreciate the fact that a full reading of the exam report displays clearly the meaningful and extensive changes we have made,” said Gedwed.

The most significant of these changes was the 2005 implementation of Benefit Confirmation Calls, an industry-leading step to help ensure customers understand the policies they purchase. Under the Benefit Confirmation Program, every customer who purchases health insurance from a HealthMarkets insurance subsidiary is called to review details of health plan coverage levels, limitations and costs.

Customers we are unable to reach by telephone after three attempts are sent a letter outlining the information regarding their health plan, which would have been communicated to them had we made contact. Since the implementation of this program, nearly 99 percent of the people we contact retain their policies with our Company.

Another key measure of the effectiveness of the Company’s many improvements is found in our steadily declining complaint rate. Since implementing the changes, complaints to regulators have declined more than 50 percent across HealthMarkets’ three insurance subsidiaries.

“The examination, and the Company’s response, illustrate that the HealthMarkets companies have actively addressed each issue or concern noted by the examiners,” Gedwed said. “We’re pleased to say many have been resolved completely. Of those that remain, our Company is taking steps to reach a timely and full resolution.”

Additional information regarding the report’s findings:

Time period covered by the examination

It is important to remember an examination is a review of practices during a specific period of time -- in this case, January 1, 2000 through December 31, 2005. The results of the testing portion of the exam were very favorable and showed compliance. Specifically, the results showed compliance in 46 of the 50 tests under the standards prescribed by the National Association of Insurance Commissioners (NAIC).

Required Actions and Company Initiated Changes

In 2003, two years before the exam began, many, if not all, of the issues that have been raised by the multi-state examiners had already been identified by the Company. HealthMarkets was actively addressing these issues, or developing the plans that would resolve the issues. To date, the Company has made extensive changes to its processes and practices and the results of these changes are illustrated in the significant reduction in complaints to regulators.

Customer understanding of the products they purchase

The Company’s standard practice is to assure that customers understand that the health product they have purchased from our Companies is not a comprehensive major medical plan. At the point of sale, we use detailed product brochures that thoroughly describe the products we sell. At the end of the sales call, agents are required to leave behind a product brochure that lists the benefits and limitations of the product the customer has purchased. After the sale is completed and the policy is issued, we make several telephone calls under our Benefit Confirmation Program (BCP) to our new customer to go over their plan with them. During those calls, we review the benefits and limitations of the policy they have purchased, and inform them that our plans are not major medical or comprehensive health insurance policies. Since the implementation of this program, nearly 99 percent of the people we contact retain their policies with our Company.

If we do not connect via the telephone on the third BCP call, we send a letter to the new insured. This letter goes over the information the customer would have received had telephone contact been made and contains a statement that our coverage "is not a comprehensive major medical plan."

Agent training and oversight

HealthMarkets has implemented significant agent training and oversight programs that have resulted in a thorough and comprehensive program called “Training, Testing, Auditing, Complaints, and Compliance” or “TTACC,” which began in 2003 and is mandatory, on an annual basis, for all licensed insurance agents who sell our products. TTACC focuses on training agents on a variety of topics including product-related information, compliance guidelines, sales and marketing procedures. We do not tolerate any agent behavior that is intended to mislead customers or that violates marketing guidelines.

Claims handling practices and procedures

While the report states that many deficiencies were noted in the Companies’ claims handling practices, the report also shows that the claims samples that were tested were processed within the error tolerance level under the NAIC guidelines except in three instances for one of our companies.

Relationship between the Company and the Associations

In 2004, the Companies began to provide written disclosures at the point of sale that clearly delineate the relationship between the Companies and the associations. The Association Disclosure form was developed and approved by a Federal Court as a fair and accurate depiction of the relationship between the Companies and the associations. In its current form, the Disclosure Form goes beyond any regulatory requirement or industry practice.

Complaint handling procedures

While the report noted deficiencies in the handling of complaints and grievances, we respectfully point out that the Companies complaint handling practices were within the NAIC Market Regulation Handbook’s (the NAIC Handbook) stated error tolerance levels for every aspect of the attribute test standards listed in the report except in one instance for one of our companies.

Compliance Efforts

The report notes that the Company established a formal corporate compliance plan in November, 2004. In the three years since this plan was implemented, the Company has improved and expanded our compliance efforts.

In 2005, the Company began to expand and reorganize its legal and compliance operations under the direction of HealthMarkets General Counsel. Shortly thereafter, the Company hired a Chief Compliance Officer. Prior to joining the Company, our Compliance Officer provided market conduct and compliance audit and consulting services to regulators and insurers across the country as an independent consultant and as part of the Insurance Consulting practice at an international accounting firm. She also served as the Commissioner of Insurance of the Commonwealth of Massachusetts, and as the Public Insurance Counsel of the State of Texas. Some of our other changes include establishment of an Executive Compliance Committee, centralizing the Company’s compliance program, establishing a Compliance Audit group, creating an Operational Compliance Department and establishing an independent Regulatory Advisory Panel that reports directly to the Company’s Board of Directors.

Next Steps

The Companies have cooperated with this examination and remain committed to continuous improvement. There will be a settlement agreement closing out the exam led by the lead states.

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About HealthMarkets

HealthMarkets, headquartered in North Richland Hills, Texas, is a provider of health and life insurance products to individuals, families, the self-employed and small businesses. HealthMarkets offers products and services through its licensed insurance subsidiaries The MEGA Life and Health Insurance Company (https://www.megainsurance.com/) Mid-West National Life Insurance Company of Tennessee (https://www.midwestlife.com/) and The Chesapeake Life Insurance Company (https://www.chesapeakeins.com/). The Company’s offerings include individual and self-employed health insurance, small employer group health insurance, life insurance and reinsurance. Through its Consumer Guided Health Insurance plans, HealthMarkets seeks to provide affordable and accessible health coverage to individuals and small businesses. The Company is owned by a group of private equity investors, including affiliates of The Blackstone Group, Goldman Sachs Capital Partners and DLJ Merchant Banking Partners, members of management and the Company’s independent, licensed agents through the Company’s agent stock accumulation plans. For more information, visit http://www.healthmarkets.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:

Some of the matters discussed in this news release may contain forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "believe," "estimate," "expect," "intend," "objective," "plan," "possible," "potential" and similar expressions. Actual results may vary materially from those included in the forward-looking statements. Factors that could cause actual results to differ materially from those included in the forward-looking statements include, but are not limited to, general economic conditions; the continued ability of the Company to compete for customers and insureds in an industry where many of its competitors may have greater market share and/or greater financial resources; the Company’s ability to accurately estimate medical claims and control costs; changes in government regulation that could increase the costs of compliance or cause the Company to discontinue marketing its products in certain states; the Company’s failure to comply with new or existing government regulations that could subject it to significant fines and penalties and/or result in restrictions on its operations; changes in the relationship between the Company and the membership associations that make available to their members the health insurance and other insurance products issued by the Company’s insurance subsidiaries; changes in the laws and regulations governing so-called “association group” insurance (particularly changes that would subject the issuance of policies to prior premium rate approval and/or require the issuance of policies on a “guaranteed issue” basis); significant liabilities and costs associated with litigation; failure of the Company’s information systems to provide timely and accurate information; negative publicity regarding the Company’s business practices and/or regarding the health insurance industry in general; the Company’s inability to enter into or maintain satisfactory relationships with networks of hospitals, physicians, dentists, pharmacies and other health care providers; failure of the Company’s regulated insurance company subsidiaries to maintain their current ratings by A.M. Best Company, Fitch and/or Standard & Poor’s; and the other risk factors set forth in the reports filed by the Company from time to time with the Securities and Exchange Commission.

Media Contacts:

Donna Ledbetter
HealthMarkets Corporate Communications
(817) 255-5405
Donna.Ledbetter@healthmarkets.com
www.HealthMarkets.com

Doug Holt
For HealthMarkets
(312) 596-3487
Doug.Holt@bm.com