UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _________________

COMMISSION FILE NUMBER 1-16477

COVENTRY HEALTH CARE, INC.

(Exact name of registrant as specified in its charter)

6705 Rockledge Drive, Suite 900, Bethesda, Maryland 20817

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (301) 581-0600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

COVENTRY HEALTH CARE, INC.

FORM 10-Q

TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION

ITEM 1: Financial Statements

COVENTRY HEALTH CARE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

See accompanying notes to the condensed consolidated financial statements.

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COVENTRY HEALTH CARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

See accompanying notes to the condensed consolidated financial statements.

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COVENTRY HEALTH CARE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

See accompanying notes to the condensed consolidated financial statements.

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COVENTRY HEALTH CARE, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The condensed consolidated financial statements of Coventry Health Care, Inc. and its subsidiaries (“Coventry” or the “Company”) contained in this report are unaudited but reflect all normal recurring adjustments which, in the opinion of management, are necessary for the fair presentation of the results of the interim periods reflected. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission. The results of operations for the interim periods reported herein are not necessarily indicative of results to be expected for the full year. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the year ended December 31, 2007.

On February 13, 2008, the Company completed its acquisition of Mental Health Network Institutional Services, Inc. (“MHNet”) in an all-cash transaction for approximately $103.3 million, including working capital. MHNet, previously privately owned, is a mental-behavioral health company based in Austin, Texas. MHNet has served as a multi-year vendor to certain of the Company’s subsidiaries. The acquisition was accounted for using the purchase method of accounting and accordingly MHNet’s operating results have been included in the Company’s consolidated financial statements since the date of acquisition.

The Company’s outstanding debt as of March 31, 2008, and December 31, 2007, consisted of the following (in thousands):

The Company’s senior notes and credit facility contain certain covenants and restrictions regarding additional debt, dividends or other restricted payments, transactions with affiliates, asset dispositions, and consolidations or mergers. Additionally, the Company’s credit facility requires compliance with a leverage ratio. As of March 31, 2008, the Company was in compliance with all applicable covenants under its senior notes and credit facility.

As described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, the Company was a defendant in the provider track of the In Re: Managed Care Litigation filed in the United States District Court for the Southern District of Florida, Miami Division, Multi-District Litigation (“MDL”), No. 1334, in the action captioned, Charles B. Shane., et al., vs. Humana, Inc., et al. The trial court granted summary judgment in favor of the Company on all claims asserted in the litigation. The Eleventh Circuit Court of Appeals affirmed the trial court’s order granting summary judgment. The Shane lawsuit has triggered the filing of copycat class action complaints by other health care providers such as chiropractors, podiatrists, acupuncturists and other licensed health care professionals. Each of these actions has been transferred to the MDL and has been designated as “tag-along” actions. The trial court has entered an order which has stayed all proceedings in the tag-along actions. However, the trial court has recently requested the parties in the tag-along actions to refile all motions pending at the time of the stay and to file any new motions. The trial court also entered a briefing schedule for those motions. Although the Company can not predict the outcome, the Company believes that the tag-along actions will not have a material adverse effect on the financial position or the results of operations. The Company also believes that the claims asserted in these lawsuits are without merit and the Company intends to defend its position.

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The Company has received a subpoena from the U.S. Attorney for the District of Maryland, Northern Division requesting information regarding the operational process for confirming Medicare eligibility for the Workers Compensation set-aside product. The Company is fully cooperating and is providing the requested information. The Company can not predict what, if any, actions may be taken by the U.S. Attorney. However, based on the information known to date, the Company does not believe that the outcome of this inquiry will have a material adverse effect on the Company’s financial position or results of operations.

Under the Company’s Board of Directors approved share repurchase program the Company purchased 3.2 million shares of the Company’s common stock during the quarter ended March 31, 2008, at an aggregate cost of $170.6 million. As of March 31, 2008, the total remaining number of common shares the Company is authorized to repurchase under this program is 3.3 million.

Comprehensive income was as follows (in thousands):

The increase in the unrealized holding gain on the Company’s investment portfolio during the quarter ended March 31, 2008 was primarily the result of a decrease in interest rates.

Earnings Per Share - Basic earnings per share is calculated using the weighted average number of common shares outstanding during the period. Diluted earnings per share assume the exercise of all options and the vesting of all restricted stock using the treasury stock method. The Company excluded potential common stock equivalents to purchase 4.6 million and 2.7 million shares for the quarters ended March 31, 2008 and 2007, respectively, from its computation of diluted earnings per share as these potential common stock equivalents were anti-dilutive.

Other Income - Other income includes interest income of $29.7 million and $32.8 million for the quarters ended March 31, 2008 and 2007, respectively.

The Company has three reportable segments: Commercial, Individual Consumer & Government, and Specialty. Each of these segments is separately managed and separate operating results are available that are evaluated by the chief operating decision maker. The Company evaluates performance and allocates resources based on gross margin. Beginning in 2008, in order to reflect a change in the manner in which the Company manages its operations, the Company’s network rental business operations were reclassified from its Commercial Division to its Specialty Division. The network rental business results for the 2007 period have been reclassified to conform to the 2008 presentation. The Commercial Division is comprised of all of the Company’s commercial employer-focused businesses, including the traditional health plan group risk and ASO products as well as the National Accounts and Federal Employees Health Benefit Plans (“FEHBP”). The Individual Consumer & Government Division contains the Company’s individual consumer products and all Medicare and Medicaid products. The Specialty Division includes the Company’s workers’ compensation services businesses, network rental business and the newly acquired mental-behavioral health benefits business of MHNet.

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The table below summarizes operating results of the Company’s reportable segments (in thousands) through gross margin and includes a medical loss ratio (“MLR”). The “other” column represents the elimination of premium and management service fees charged among segments. Total assets by reportable segment are not disclosed as these assets are not reported on a segment basis internally by the Company and are not reviewed separately by the Company’s chief operating decision maker.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No.157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles accepted in the United States and expands disclosures about fair value measurements. The Company adopted the provisions of SFAS No. 157 as of January 1, 2008, for its financial instruments. The adoption of SFAS No. 157 did not have a material effect on the Company’s consolidated financial position or results of operations.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1 - defined as observable inputs such as quoted prices in active markets; Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following table presents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis at March 31, 2008 (in thousands):

The Company’s Level 1 securities primarily consist of US Treasury securities and cash. The Company determines the estimated fair value for its Level 1 securities using quoted (unadjusted) prices for identical assets or liabilities in active markets.

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The Company’s Level 2 securities primarily consist of government-sponsored enterprise securities, state and municipal bonds, mortgage-backed securities, asset-backed securities, corporate debt, and money market funds. The Company determines the estimated fair value for its Level 2 securities using the following methods: quoted prices for similar assets/liabilities in active markets, quoted prices for identical or similar assets in non-active markets (few transactions, limited information, non-current prices, high variability over time), inputs other than quoted prices that are observable for the asset/liability (e.g. interest rates, yield curves volatilities, default rates, etc.), and inputs that are derived principally from or corroborated by other observable market data.

The Company’s Level 3 securities consist of three asset backed securities and one corporate bond. The Company determines the estimated fair value for its Level 3 securities using unobservable inputs that cannot be corroborated by observable market data, such as broker quotes.

The following table provides a summary of changes in the fair value of the Company’s Level 3 financial assets at March 31, 2008, (in thousands):

Realized gains and losses are recorded in the other income line in the accompanying consolidated statement of operations.

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ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Quarters Ended March 31, 2008 and 2007

This Form 10–Q contains forward-looking statements which are subject to risks and uncertainties in accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements typically include assumptions, estimates or descriptions of our future plans, strategies and expectations, and are generally identifiable by the use of the words “anticipate,” “will,” “believe,” “estimate,” “expect,” “intend,” “seek,” or other similar expressions. Examples of these include discussions regarding our operating and growth strategy, projections of revenue, income or loss and future operations. Unless this Form 10–Q indicates otherwise or the context otherwise requires, the terms “we,” “our,” “our Company,” “the Company” or “us” as used in this Form 10-Q refer to Coventry Health Care, Inc. and its subsidiaries.

These forward–looking statements may be affected by a number of factors, including, but not limited to, the “Risk Factors” contained in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10–K for the year ended December 31, 2007. Actual operations and results may differ materially from those forward-looking statements expressed in this Form 10–Q.

The following discussion and analysis relates to our financial condition and results of operations for the quarters ended March 31, 2008 and 2007. This discussion should be read in conjunction with the condensed consolidated financial statements and other information presented herein as well as in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10–K for the year ended December 31, 2007, including the critical accounting policies discussed therein.

Summary of First Quarter 2008 Performance  

Acquisition

On February 13, 2008, we completed our acquisition of Mental Health Network Institutional Services, Inc. (“MHNet”) in an all-cash transaction for approximately $103.3 million, including working capital. MHNet, previously privately owned, is a mental-behavioral health company based in Austin, Texas. MHNet has served as a multi-year vendor to certain of our subsidiaries. The acquisition was accounted for using the purchase method of accounting and accordingly MHNet’s operating results have been included in our consolidated financial statements since the date of acquisition.

Membership

The following table presents our membership as of March 31, 2008 and 2007 (amounts in thousands).

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Commercial group risk membership increased 118,000 from the prior year quarter, primarily due to the members acquired through the acquisitions of Vista and of certain group health businesses from Mutual, which together added 166,000 members. Health plan ASO membership increased 113,000 due to acquisitions, which contributed 99,000 members, and due to new sales and certain groups changing from a risk product to a non-risk product. Other ASO membership declined due to losses in our National Accounts business, partially offset by Federal Employees Health Benefit Plans (“FEHBP”) members obtained through the group health business acquired from Mutual.

Individual Consumer & Government Division membership increased 450,000 from the prior year quarter primarily due to strong organic growth in all products and expansion into new areas. Membership also increased from the prior year quarter due to the acquisition of Vista, which contributed 142,000 members.

Results of Operations

Consolidated Financial Results

The following table is provided to facilitate a more meaningful discussion regarding the comparison of our operations for the quarters ended March 31, 2008 and 2007 (dollars in thousands, except diluted earnings per share amounts).

Managed care premium revenue increased in both our Individual Consumer & Government and Commercial Divisions. The increase is a result of growth in existing products as well as from the acquisitions described above. Partially offsetting the increase was a decline in same store Commercial risk membership over the prior year quarter.

Management services revenue increased compared to the prior year quarter primarily as a result of the acquisition of Concentra, Inc. (“Concentra”) in the second quarter of 2007 and Mutual, described above, and continued organic growth in our workers’ compensation services business. This increase was partially offset by the Other ASO membership decline described above.

Medical costs increased almost exclusively as a result of new business in both our Individual Consumer & Government Division and Commercial Division discussed above. Total medical costs as a percentage of premium revenue (“medical loss ratio”) increased 0.6% from the prior year quarter as a result of a higher medical loss ratio in the current quarter for our Commercial and Medicare Part D businesses. The Commercial medical loss ratio increase is a result of the mix of business from the inclusion of Vista and Mutual as well as the effect of influenza-related expense in the quarter. The Medicare Part D medical loss ratio increase was driven by a widening of the risk corridors and growth in our low-income auto-assign population in 2008.

Selling, general and administrative expense increased primarily due to operating costs associated with our recent acquisitions of Concentra, Mutual and Vista, as well as costs related to growth of our Medicare business.

Depreciation and amortization expense increased as a result of the expense associated with the fixed assets and identifiable intangible assets acquired with the recent acquisitions, as well as a result of an increase in property and equipment over the past twelve months. This increase is partially offset by a decline in depreciation expense for certain assets acquired with the First Health acquisition in 2005 that have become fully depreciated in the current year quarter.

Interest expense increased primarily as a result of the issuance of debt during the prior year. The increase is partially offset by the redemption during the first quarter of 2007 of our $170.5 million of outstanding 8.125% senior notes due February 15, 2012. Associated with this redemption, we recognized $9.1 million of interest expense in the prior year quarter for both the premium paid on redemption as well as the write off of associated deferred financing costs.

Other income decreased primarily as a result of lower interest rates.

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The income tax provision increased due to an increase in our effective tax rate and an increase in earnings. The effective tax rate increased to 37.8% as compared to 36.9% for the prior year quarter, primarily as a result of a change in the proportion of earnings in states with higher tax rates.

Business Segments

We have three reportable segments: Commercial, Individual Consumer & Government, and Specialty. Each of these segments is separately managed and separate operating results are available that are evaluated by the chief operating decision maker. Beginning in 2008, in order to reflect a change in the manner in which we manage our operations, our network rental business operations were reclassified from our Commercial Division to our Specialty Division. Our network rental business results for the 2007 period have been reclassified to conform to the 2008 presentation. The Commercial Division is comprised of all of our commercial employer-focused businesses, including the traditional health plan group risk and ASO products as well as the National Accounts and FEHBP. The Individual Consumer & Government Division contains our individual consumer products and all Medicare and Medicaid products. The Specialty Division includes our workers’ compensation services businesses, network rental business and the newly acquired mental-behavioral health benefits business of MHNet.

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Commercial Division

Commercial group risk premium revenue increased from the prior year quarter as a result of the acquisitions of Mutual and Vista, which accounted for $150.4 million in revenue. The increase was also a result of an increase in average realized premium yields per member per month in our commercial group risk business, resulting from renewal rate increases, benefit buydowns on renewing groups, and the mix of new group business net of terminated groups. This increase in revenue was partially offset by membership declines in our same store commercial group risk business. However, a portion of those members changed from our risk products to our non-risk products.

Commercial management services revenue declined from the prior year quarter due to membership losses in our national accounts non-risk business as well as due to fee negotiations related to the long-term renewal of our contract as plan administrator to the Mail Handler’s Benefit Plan. These declines are partially offset by an increase in our commercial health plan ASO membership.

Gross margin increased as a result of the acquisitions discussed above. The increase is partially offset by the decline in commercial management services revenue discussed above and the increase in the Commercial health plan medical loss ratio in the first quarter of 2008 compared to same quarter of 2007.

Individual Consumer & Government Division

Individual Consumer & Government Division revenue increased from the prior year quarter as a result of membership growth from our Medicare Advantage business, as well as increased Medicare Part D, Medicaid and Individual membership, both organic and acquired.

Medicare Advantage risk premium yields, excluding the impact of revenue ceded to external parties, per member per month increased as a result of the rate increases from the annual competitive bid filings for our Medicare Advantage products. With the effect of the ceded revenue being included in the premium yield, the Medicare Advantage risk premium yields per member per month decreased to $753.55 in 2008 from $810.08 in 2007. The decrease is a result of a larger portion of our Medicare Private-Fee-For-Service (“PFFS”) business in 2008 being ceded to external parties through quota share arrangements. This average premium yield decrease was partially offset by the annual competitive bid filings noted above.

Part D premium yields, excluding the impact of CMS risk sharing premium adjustments and revenue ceded to external parties, have declined in the first quarter of 2008 compared to same quarter of 2007 primarily due to the annual competitive bid filings for our Part D products as well as the mix of products sold. Including the effect of the CMS risk sharing premium adjustments as well as the ceded revenue, the yields were $110.73 in 2008 compared to $119.84 in 2007.

When reviewing the premium yield for Medicare Advantage and Part D business, adjusting for the ceded revenue is useful for comparisons to competitors that may not have similar ceding arrangements. When reviewing the Medicare Part D business, adjusting for the risk share amounts is useful to understand the results of the Part D business because of our expectation that the risk sharing revenue will eventually be insignificant on a full year basis.

Medicaid premium yields increased as a result of a rate increase in Missouri, our largest Medicaid market, effective July 1, 2007, as well as the inclusion in our results of Vista, which has a higher Medicaid premium yield.

The increase in gross margin was driven by the membership growth, both organic and acquired, as discussed above, partially offset by the increased medical costs associated with this membership growth. Medicare Part D medical costs as a percentage of premium revenue have increased over the prior year quarter as a result of a widening of the risk corridors and growth in our low-income auto-assign population in 2008. Medicaid medical costs as a percentage of premium revenue decreased over the prior year quarter as a result of the premium yield increases discussed above.

Specialty Division

Specialty revenue and operating expenses increased primarily as a result of the acquisition of Concentra during the second quarter of 2007. The increase is also a result of the acquisition of MHNet in the current quarter as well as continued organic growth in our workers’ compensation services business.

Liquidity and Capital Resources

Liquidity

Our investment guidelines require our fixed income securities to be investment grade in order to provide liquidity to meet future payment obligations and minimize the risk to the principal. The fixed income portfolio includes government and corporate securities with an average quality rating of “AA+” and an average contractual duration of 3.7 years as of March 31, 2008. Typically, the amount and duration of our short-term assets are more than sufficient to pay for our short-term liabilities and we do not anticipate that sales of our long-term investment portfolio will be necessary to fund our claims liabilities.

Our cash and investments, consisting of cash and cash equivalents and short-term and long-term investments, but excluding deposits of $66.4 million at March 31, 2008, and $64.4 million at December 31, 2007, that are restricted under state regulations, decreased $73.8 million to $2.7 billion at March 31, 2008, from $2.8 billion at December 31, 2007.

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We have classified all of our investments as available–for–sale. Our investments at March 31, 2008, mature according to their contractual terms, as follows, in thousands (actual maturities may differ because of call or prepayment rights):

The demand for our products and services is subject to many economic fluctuations, risks and uncertainties that could materially affect the way we do business. Please refer to the section entitled “Risk Factors” in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10–K for the year ended December 31, 2007, for more information. Management believes that the combination of our ability to generate cash flows from operations, cash and investments on hand and the excess funds held in certain of our regulated subsidiaries will be sufficient to fund continuing operations, capital expenditures, debt interest costs, debt principal repayments and any other reasonably likely future cash requirements.

Cash Flows

Net cash from operating activities for the quarter ended March 31, 2008, was the result of net earnings and by an increase in medical liabilities and deferred revenue, partially offset by an increase in other receivables. The increase in medical liabilities is primarily due to an increase in membership and the position of the Medicare Part D members on the claims slope at the beginning of a new benefit year, which also led to an increase in other receivables related to the CMS risk sharing payments. Deferred revenue increased mainly due to strong collections in the quarter. The higher cash flow for the quarter ended March 31, 2007 compared to the same period in 2008 is driven by an additional monthly payment received from CMS in the 2007 period. We received four monthly CMS payments in the 2007 period instead of the normal three payments. The additional CMS receipt in 2007 totaled $268.0 million

Net cash flow from investing activities for the quarter ended March 31, 2008, was an outflow primarily due to cash paid for the MHNet acquisition in February 2008.

Projected capital expenditures in 2008 of approximately $65 - $75 million consist primarily of computer hardware, software and other equipment.

Under our share repurchase program we purchased 3.2 million shares of our common stock during the quarter ended March 31, 2008, at an aggregate cost of $170.6 million. As of March 31, 2008 the total remaining number of common shares that we are authorized to repurchase under this program is 3.3 million.

Health Plans

Our regulated Health Maintenance Organization (“HMO”) and insurance company subsidiaries are required by state regulatory agencies to maintain minimum surplus balances, thereby limiting the dividends our parent Company may receive from our regulated subsidiaries. During the quarter ended March 31, 2008, we did not receive dividends from our regulated subsidiaries, nor did we make capital contributions to them.

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The majority of states in which we operate health plans have adopted a risk-based capital (“RBC”) policy that recommends the health plans maintain statutory reserves at or above the “Company Action Level,” which is currently equal to 200% of their RBC. The State of Florida does not currently use RBC methodology in its regulation of HMOs. Some states in which our regulated subsidiaries operate require deposits to be maintained with the respective states’ departments of insurance. The table below summarizes our statutory reserve information, as of March 31, 2008 and December 31, 2007 (in millions, except percentage data):

The increase in capital and surplus for our regulated subsidiaries is primarily a result of income earned during the quarter.

We believe that all of our subsidiaries that incur medical claims maintain more than adequate liquidity and capital resources to meet these short-term obligations as a matter of both Company policy and state insurance regulations.

Excluding funds held by entities subject to regulation and excluding our equity method investments, we had cash and investments of approximately $246.2 million and $436.2 million at March 31, 2008, and December 31, 2007, respectively. The decrease was primarily due to the purchase of MHNet and share repurchases during the first quarter of 2008.

Outlook

We are forecasting growth in diluted earnings per share of 10% to 13% in 2008. With respect to our business divisions:

Commercial Division – After our membership loss in the first quarter, we expect to grow commercial risk membership for the remaining three quarters of 2008 and remain relatively flat compared to December 31, 2007. The commercial group risk medical loss ratio is expected to be in the mid to high 78%’s, including the effect of acquisitions.

Individual Consumer & Government Division – This division is expected to have another year of strong growth. We expect continued growth in Medicare Advantage in 2008 and we are expecting 100,000 new members in 2008, including a large group effective May 1, 2008. Medicare Part D increased approximately 150,000 members in the first quarter of 2008. We expect the Medicare Part D membership to be level for the remainder of the year. With respect to Medicaid, as previously disclosed, we were notified of the termination of our Pennsylvania Medicaid behavioral health contract representing approximately 107,000 members, effective July 1, 2008. Given the nature of this globally capitated contract, we earn a low single digit operating margin. Our core Medicaid risk business performed well in the first quarter of 2008 and we expect that to continue throughout 2008.

Specialty Division – Our workers’ compensation services continue to experience meaningful year over year growth and we expect this to continue throughout 2008. We continue to seek additional strategically related businesses for this division, most recently acquiring MHNet, a mental-behavioral health company, as discussed above.

Legal Proceedings

Refer to Part II “Other Information”, Item 1, “Legal Proceedings” herein.

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ITEM 3: Quantitative and Qualitative Disclosures About Market Risk

These disclosures should be read in conjunction with the condensed consolidated financial statements, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other information presented herein as well as in the “Quantitative and Qualitative Disclosures About Market Risk” section contained in our Annual Report on Form 10–K for the year ended December 31, 2007.

No material changes have occurred in our exposure to market risk since the date of our Annual Report on Form 10–K for the year ended December 31, 2007.

ITEM 4: Controls and Procedures

We have performed an evaluation as of the end of the period covered by this report of the effectiveness of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934), under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no significant changes in our internal control over financial reporting (as defined in Rule 13a–15(f) promulgated under the Securities and Exchange Act of 1934) during the quarter ended March 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1: Legal Proceedings

As described in our Annual Report or Form 10-K for the year ended December 31, 2007, we were a defendant in the provider track of the In Re: Managed Care Litigation filed in the United States District Court for the Southern District of Florida, Miami Division, Multi-District Litigation (“MDL”), No. 1334, in the action captioned, Charles B. Shane., et al., vs. Humana, Inc., et al. The trial court granted summary judgment in favor of the Company on all claims asserted in the litigation. The Eleventh Circuit Court of Appeals affirmed the trial court’s order granting summary judgment. The Shane lawsuit has triggered the filing of copycat class action complaints by other health care providers such as chiropractors, podiatrists, acupuncturists and other licensed health care professionals. Each of these actions has been transferred to the MDL and have been designated as “tag-along” actions. The trial court has entered an order which has stayed all proceedings in the tag-along actions. However, the trial court has recently requested the parties in the tag-along actions to refile all motions pending at the time of the stay and to file any new motions. The trial court also entered a briefing schedule for those motions. Although we can not predict the outcome, we believe that the tag-along actions will not have a material adverse effect on our financial position or our results of operations. Management also believes that the claims asserted in these lawsuits are without merit and we intend to defend our position.

We have received a subpoena from the U.S. Attorney for the District of Maryland, Northern Division requesting information regarding the operational process for confirming Medicare eligibility for the Workers Compensation set-aside product. We are fully cooperating and are providing the requested information. We can not predict what, if any, actions may be taken by the U.S. Attorney. However, based on the information known to date, we do not believe that the outcome of this inquiry will have a material adverse effect on our financial position or results of operations.

ITEM 1A: Risk Factors

There have been no material changes with respect to the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

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ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information about our purchases of our common stock during the quarter ended March 31, 2008 (in thousands, except per share information).

ITEM 3: Not Applicable

ITEM 4: Not Applicable

ITEM 5: Not Applicable

ITEM 6: Exhibits

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SIGNATURES

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INDEX TO EXHIBITS

Reg. S-K: Item 601

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CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dale B. Wolf, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coventry Health Care, Inc.;
   
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
   
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
   
   1. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
      
      
   2. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
      
      
   3. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
      
      
   4. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
      
      
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
   
   
   1. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
      
      
   2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
      
      

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Shawn M. Guertin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Coventry Health Care, Inc.;
   
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
   
3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
   
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
   
   
   1. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
      
      
   2. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
      
      
   3. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
      
      
   4. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
      
      
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
   
   
   1. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
      
      
   2. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Coventry Health Care, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

Date: May 12, 2008