1
                                                                    EXHIBIT 10.5

                               FIRST AMENDMENT TO
                      SENIOR EXECUTIVE EMPLOYMENT AGREEMENT

         This First Amendment to Senior Executive Employment Agreement, dated as
of July 17, 2000 (the "Amendment"), hereby amends the Senior Executive
Employment Agreement, dated as of July 17, 2000 (the "Agreement") between
PacifiCare Health Systems, Inc., a Delaware Corporation, and Bary G. Bailey, an
individual ("Executive"), as follows:

         1. Amendments to the Agreement.

            1.1 The Agreement is amended by adding a new Section 7.7 as follows:

                7.7 Membership on Other Boards. Executive, with the permission
                and knowledge of the Company's Chief Executive Officer, may
                serve on the Board of Directors of other companies and
                institutions, during the course of his Contract with the
                Company, as long as such service does not interrupt Executive in
                the performance of his duties as the full-time Executive Vice
                President, Chief Strategic Officer of the Company.

            1.2 The Agreement is amended by adding subdivision f to Section 3.11
                as follows:

                f. If Executive is terminated due to disability or incapacity
                (pursuant to Section 2.2(b) of this Agreement) or dies while
                employed by the Company but prior to the third anniversary of
                the commencement of his employment under this Agreement, then
                any outstanding principal and any accrued interest thereon will
                be forgiven by the Company as of the date of Executive's
                termination or death.

         2. Limitation of Amendments. Except as expressly provided herein, no
terms or provisions of any agreement or instrument are modified or changed by
this Amendment and the terms and provisions of the Agreement, as amended by this
Amendment, shall continue in full force and effect, and are incorporated herein
by this reference.

         3. Governing Law. This Amendment shall be construed, interpreted and
enforced in accordance with, and governed by California law.

         4. Capitalized Terms. Capitalized terms not defined herein shall have
the meanings ascribed to them in the Agreement.

         5. Duplicate Originals; Execution in Counterparts. This Amendment may
be executed in two or more counterparts, each of which shall be an original but
all of which together shall constitute one and the same instrument.

         6. Waivers and Amendments. Neither this Amendment nor any term hereof
may be changed, waived, discharged or terminated orally, or by any action or
inaction, but only by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.


                                      -1-


   2

         7. Section Headings. The titles of the sections hereof appear as a
matter of convenience only, and do not constitute a part of this Agreement and
shall not affect the construction hereof.

         8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.


The Company:                                PACIFICARE HEALTH SYSTEMS, INC.,
                                            A Delaware corporation


                                            /s/ ROBERT W. O'LEARY
                                            ------------------------------------
                                            By: Robert W. O'Leary
                                            Title: President and Chief Executive
                                                   Officer


Executive:                                  /s/ BARY G. BAILEY
                                            ------------------------------------
                                            Bary G. Bailey


                                      -2-