Exhibit 10.1

SEPARATION, CONSULTING AND RELEASE AGREEMENT

THIS AGREEMENT IS SUBJECT TO ARBITRATION

     THIS SEPARATION, CONSULTING AND RELEASE AGREEMENT (this “Agreement”) is made and entered into as of September 19, 2008, by and between HealthMarkets, Inc., a Delaware corporation (“HealthMarkets”) and The MEGA Life and Health Insurance Company (“MEGA”), a wholly owned subsidiary of HealthMarkets, (HealthMarkets and MEGA are hereinafter referred to collectively as the “Company”) and David W. Fields (the “Executive”). Unless otherwise defined herein, capitalized terms shall have the meaning specified in the Employment Agreement (as defined below).

     WHEREAS, HealthMarkets and the Executive are parties to an Employment Agreement, dated October 29, 2007 (the “Employment Agreement”);

     WHEREAS, the Executive serves as the President and Chief Operating Officer of HealthMarkets;

     WHEREAS, the Executive’s employment with the Company will terminate pursuant to Section 9(b) of the Employment Agreement on September 19, 2008 (the “Separation Date”);

     WHEREAS, subject to (i) the terms of Section 14 of the Employment Agreement, (ii) the Executive’s continued compliance with the covenants of Section 12 of the Employment Agreement, and (iii) the Executive’s execution of this Agreement, within 21 days after the Separation Date, and non-revocation of the Release (as defined herein) of claims against the Company, set forth in Section 4 of this Agreement, the Executive shall be entitled to receive the payments to be made and the benefits to be received by the Executive pursuant to Section 2 hereof; and

     WHEREAS, pursuant to Section 23 of the Employment Agreement, the Company and the Executive wish to amend the Employment Agreement, effective as of the date first written above, as set forth herein.

     NOW, THEREFORE, in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Company and the Executive agree as follows:

     1.  Resignation .

1.1. The Executive’s employment with the Company will terminate voluntarily pursuant to Section 9(b) of the Employment Agreement, and the Executive will incur a “separation from service” within the meaning of Section 409A of the Code, on the Separation Date. Effective as of the Separation Date, the Executive hereby resigns from the position of President and Chief Operating Officer of HealthMarkets and from any and all other positions, roles, offices, or titles held by the Executive with, at the direction of, or for the benefit of the Company in accordance with Section 9(e) of the Employment Agreement, and the Company hereby accepts such resignation.

1.2. Except as otherwise provided in the Employment Agreement or as otherwise provided herein, the Employment Agreement, the Employment Term and the Executive’s employment shall terminate as of the Separation Date.

1.3. The Executive shall be entitled to receive the Executive’s Base Salary through September 30, 2008, and on September 30, 2008 shall be entitled to payment equal to such earned but unpaid Base Salary and any accrued and unused vacation time existing on and as such date. Except as otherwise provided pursuant to this Section 1.3, Section 2 hereof, Section 11 of the Employment Agreement, as applicable, and any benefit continuation requirements of applicable laws, the compensation and benefits

obligations of the Company under Sections 4, 5 and 10 of the Employment Agreement shall cease as of September 30, 2008.

1.4. In accordance with Section 12(b) of the Employment Agreement, on or before the Separation Date, the Executive will return to the Company all papers, files, notes, memoranda, keys, access cards, customer lists, records, reports, mobile or cell phones, pagers, mobile electronic mail devices, computers, other tangible and intangible property, computer programs, computer files, data and all other documents and materials, and all copies thereof whether prepared by the Executive or others, which contain Company or HealthMarkets Affiliates (as defined below) information or relate or belong to the Company or any HealthMarkets Affiliate which are in the possession, custody or control of the Executive, other than agreements between the Executive and the Company and documentation pertaining to the Executive’s employee benefits.

1.5. The Executive covenants and agrees that, notwithstanding any other provision of this Agreement, he remains subject to the provisions of Section 12 of the Employment Agreement. The Company and the Executive hereby agree that the parties’ respective rights and obligations under Sections 6, 8, 9, 11, 12, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23 and 24 of the Employment Agreement, as may be modified by this Agreement, will survive the termination of the Employment Agreement and the Executive’s employment; but for avoidance of doubt, the remainder of the Employment Agreement will not survive the termination of the Executive’s employment.

1.6. Pursuant to Section 23 of the Employment Agreement, the Executive and the Company agree to amend the Employment Agreement as provided herein.

1.7. The Employment Agreement is hereby amended to add the following at the end of Section 6:

     Any such reimbursement shall be for payments incurred by the Executive prior to the Separation Date and such reimbursement shall be made not later than December 31 ^st of the year following the year in which the Executive incurs the expense. In no event will the amount of expenses so reimbursed by the Company in one year affect the amount of expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year. Each provision of reimbursement pursuant to this Section 6 shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

     2.  Severance .

2.1 Subject to Section 16 of the Employment Agreement and the Executive’s execution of this Agreement within 21 days after the Separation Date (which for the avoidance of doubt, shall include the 21 ^st day) and non-revocation of the Release of claims against the Company, the Executive will receive the payments and benefits specified in Section 2 of this Agreement; provided , however , to the extent the Executive has not signed the Release with all periods for revocation expired as provided in Section 9.6 of this Agreement, such determination to be made at the conclusion of the period prescribed above in this Section 2, the Executive will forfeit any right to receive the payments and benefits specified in Section 2.

2.2 Salary Continuation . The Company agrees to pay the Executive an amount equal to $800,000.00 (the “Termination Payments”), such amount to be payable in equal installments payable over the twelve (12) months following the Separation Date (the “Payment Period”). Each payment shall be a separate payment and not one of a series of payments for purposes of Section 409A of the Code. Commencing on the first payroll date following the Effective Date (as defined in Section 9.6 of this Agreement), but in no event later than the period permitted under Treasury Regulations Section 1.409A-3(d), the Termination Payments shall be paid to the Executive in biweekly installments for the duration of the Payment Period, subject to the terms and conditions of Section 2 of this Agreement.

2.3 Bonus Entitlement . The Company agrees to pay the Executive an amount equal to $540,000 (the “Bonus Entitlement Payments”). The Bonus Entitlement Payments will be paid as follows: $124,615.38, payable in bi-weekly installments commencing on the first payroll date following the Effective Date, and $415,384.62 shall be paid in a Lump Sum payment on January 4, 2009. Each payment shall be a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

2.4 Equity Compensation .

     (i) As of the Separation Date, the Executive is not vested in any options granted pursuant to Nonqualified Stock Option Agreement between the Executive and HealthMarkets dated November 26, 2007 and all unvested options shall be immediately cancelled and forfeited.

     (ii) The Company will repurchase the Executive’s shares of HealthMarkets common stock at $24.00 per share on September 30, 2008.

2.5 Welfare Benefits .

     (i) The Executive shall be entitled to continued participation in the Company’s group health plans at the level of participation and coverage in effect at the Executive’s termination of employment (including spousal and eligible dependent coverage) for the number of months equal to the period of continuation coverage the Executive would be entitled to pursuant to Section 4980B of the Code, in accordance with Section 409A of the Code. The Company will charge the Executive a monthly amount equal to the monthly premium payment required to maintain such coverage and, for the first twelve months, will pay the Executive an additional amount on the first payroll date of each calendar month equal to the excess of such monthly premium payment over the amount that the Executive was required to pay for such coverage immediately before the Separation Date, plus an additional amount to gross up such payments to Employee to avoid tax consequences to be determined in accordance with standard Company practice. The Company shall adjust each payment payable to the Executive pursuant to Section 2.2 of this Agreement, to reflect the charge and payment to the Executive described in this paragraph. Each payment shall be a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

     (ii) The Executive shall be entitled to continued participation in the Company’s group health plans at the level of participation and coverage in effect at the Executive’s termination of employment (including spousal and eligible dependent coverage) for the number of months equal to the Payment Period in the Company’s group health plans, in accordance with Section 409A of the Code. The Company will charge the Executive a monthly amount equal to the monthly premium payment required to maintain such coverage. The Company shall charge the Executive a monthly amount that Executive will pay within fifteen (15) days of the invoice.

     (iii) The Executive shall be entitled to continued participation in the Company’s group life and other life insurance plans at the level of participation and coverage in effect at the Executive’s termination of employment (including any employee contribution requirements) for the Payment Period, and the Company shall deduct from each payment payable to the Executive pursuant to Section 2.2 of this Agreement, the amount of any employee contributions necessary to maintain such coverage for the Payment Period, based on any such contributions which were in effect immediately prior to such termination, in accordance with Section 409A of the Code.

Each provision of a benefit pursuant to this Section 2.5 (iii) shall be considered a separate payment and not one of a series of payments for purposes of Section 409A of the Code.

     (iv) The Executive understands that he is not eligible to participate in the Company’s long term disability plan after the Separation Date and agrees to waive and relinquish any entitlement to such participation or any claim to a monetary payment in lieu of such participation.

     (v) Except as otherwise provided by applicable law, notwithstanding anything in this Section 2.5 to the contrary, the Executive’s coverage under the Company’s group health plans will terminate when the Executive becomes covered under any group health plan made available by another employer and covering the same type of benefits. The Executive shall notify the Company within thirty (30) days after becoming covered for any such benefits.

2.6 In the event that the Executive dies while any Termination Payments or any Bonus Entitlement Payments are still payable to the Executive hereunder, unless otherwise provided herein, all such unpaid amounts shall be paid, not later than the tenth (10th) business day following the Executive’s death, to the Executive’s beneficiary as named on the Executive’s beneficiary forms under the Company’s 401(k) Savings and Retirement Plan, or, if no such beneficiary is so named, then to the Executive’s estate, in the form of a lump sum cash payment equal to the sum of the remaining installments of the Termination Payments and the Bonus Entitlement Payments.

     3.  Certain Additional Payments by the Company . Section 11 of the Employment Agreement is modified by adding the following at the end of Section 11:

     Notwithstanding any other provision of this Section 11 or Exhibit C to the contrary, all taxes described in this Section 11 and Exhibit C shall be paid or reimbursed no later than the end of the year following the year in which the applicable taxes are remitted or, in the case of reimbursement of expenses incurred due to a tax audit or litigation to which there is no remittance of taxes, no later than the end of the year following the year in which the audit is completed or there is a final and nonappealable settlement or other resolution of the litigation in accordance with Treasury Regulation Section 1.409A-3(i)(v). Any expenses, incl