Exhibit 10.12

                                 PREFERRED LIFE
                          Insurance Company of New York
                        152 West 57th Street, 18TH Floor
                            New York, New York, 10019

                              REINSURANCE AGREEMENT

                                     between

                  PREFERRED LIFE INSURANCE COMPANY OF NEW YORK

                               New York, New York

                  (hereinafter referred to as "Preferred Life")

                                       and

                              MDLI HEALTHCARE, INC.

                         FOR POINT OF SERVICE ENROLLEES

                               Melville, New York

                       (hereinafter referred to as "Plan")

                             January 1, 1999 RENEWAL

                       REINSURANCE POLICY NUMBER 17055-037

                                                    Tax I.D.  #_________________

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                                TABLE OF CONTENTS

TITLE                                                       ARTICLE

Reinsurance Coverage

Definitions                                                    I

Schedule of Reinsurance                                        II

Premium Payment                                               III

Notice of Claims and Reimbursement                             IV

Reports, Records and Audits                                    V

Arbitration                                                    VI

Insolvency/Cessation of Operations                            VII

Limitations of Reinsurance Coverage                           VIII

Effective Date, Duration and Termination                       IX

General Provisions                                             X

Document Execution

Endorsements:

Continuation of Benefits                                       1

Out of Area Conversion Provision                               2

<PAGE>

                              Reinsurance Coverage

It is hereby agreed that in consideration of the promises, terms, and conditions
contained in this Reinsurance Agreement,  Plan shall cede to, and Preferred Life
shall  reinsure,   the  portion  specified  herein  of  the  Membership  Service
Agreements issued by the Plan.

                                   ARTICLE I

                                   Definitions

      A.    "Acute Care Services"  shall mean those services which are necessary
            to the care and treatment of an unstable medical condition caused by
            the onset of an illness or injury which places the patient's  health
            in severe jeopardy and requires immediate medical attention.

            Acute Care  Services  do not include  health care or other  services
            which are for  custodial  care or  services  which  assist in or are
            intended to improve the usual activities of daily living.

      B.    "Approved Fixed  Procedural Fee Hospital" shall mean a hospital with
            fixed per diems or fixed case rates  which  have been  reviewed  and
            approved by Allianz Life prior to any service being  rendered.  This
            does not include any discounted  fee-for-service  arrangements,  nor
            does it include per diems or case rates  which  revert to a discount
            off actual charges for fee-for-service  once an outlier or stop-loss
            threshold has been reached.

      C.    "Contract Year" shall mean the twelve (12) month period which begins
            on  the  Effective  Date  of  this  Reinsurance  Agreement,  or  any
            anniversary of the Effective Date.

      D.    "Deductible"  shall mean the deductible amount shown in the Schedule
            of  Reinsurance.  The  Deductible  will be applied to any Loss of as
            follows:

            1.    If the Loss consists of Eligible Hospital Services or Eligible
                  Medical  Services  incurred  during  a period  of  continuous,
                  uninterrupted  confinement at one or more facilities,  charges
                  from each  facility  will be applied to the  Deductible  in an
                  amount equal to the proportion of that facility's  Services to
                  total Eligible Hospital Services or Eligible Medical Services.

      E.    "Eligible  Hospital  Services"  shall mean those Acute Care Services
            for Members who require  Acute Care while  registered  bed patients,
            which  are  generally  and   customarily   provided  by  the  Plan's
            participating hospitals or other specialized institutions within the
            Service  Area of the Plan and which  are  prescribed,  directed,  or
            authorized by or on behalf of the Plan.  Eligible  Hospital Services
            shall mean the lesser of:

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            1.    The amount of the Plan's fee schedule; or

            2.    The amount of the Reasonable and Customary charges;

            but in any event,  Eligible Hospital Services shall be limited to an
            average  of $2,000  per day of each  period of  continuous  hospital
            confinement.  Operating room charges are Eligible Hospital Services,
            but are excluded  from the  calculation  of the average daily limit.
            Eligible  Hospital Services shall also include Referral Services and
            outpatient facility charges."

      F.    "Eligible Medical  Services" shall mean those services  performed by
            health  care  professional  and  paramedical   personnel   including
            medical, surgical, diagnostic,  therapeutic, and preventive services
            which  are  generally  and  customarily  performed,  prescribed,  or
            directed  by or on  behalf of the Plan.  Eligible  Medical  Services
            shall mean the lesser of:

            1.    The amount of the Plan's fee schedule; or

            2.    The amount of the Reasonable and Customary charges;

                  Eligible Medical Services shall also include Referral Services

      G.    "Loss" shall mean only such eligible  amounts as are incurred during
            the Contract  Year,  or under the previous  year's  "carry  forward"
            provision for treatment and services rendered to a Member while this
            Reinsurance  Agreement is in effect and provided such  treatment and
            services are covered by the Membership Service  Agreement.  The word
            "Loss" shall not include:

            1.    Compensation  paid to salaried  officers or  employees  of the
                  Plan or any other overhead expenses;

            2.    Any amount paid by the Plan for punitive or exemplary damages,
                  or  compensatory  damages awarded to any Member arising out of
                  the  conduct  of the  Plan  in the  investigation,  trial,  or
                  settlement of any claims or failure to pay or delay in payment
                  of benefits under its Membership Service Agreement; or

            3.    Any Statutory  penalty imposed upon the Plan on account of any
                  unfair trade practice or any unfair claims practice.

      H.    "Member"  shall mean any  person or family  dependent  enrolled  and
            eligible to receive services under a Membership Service Agreement.

      I.    "Membership   Service   Agreements"  shall  mean  those  contractual
            agreements  to  provide  services  to  Members of the Plan which are
            approved by the State of New York and are for those  Members for who
            Plan has requested  reinsurance  coverage from Preferred Life. Under
            those  Membership  Service  Agreements  only the following  products
            serviced by the Plan will be reinsured under this Agreement:


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            1.    Point of Service

            Applicable  Membership  Service  Agreements shall be incorporated by
            reference.

      J.    "Prior  Approved  Transplant  Reimbursement  Schedule"  shall mean a
            reimbursement  schedule for a specific transplant  procedure that is
            approved,  in writing,  by  Preferred  Life prior to the  transplant
            admission.  Instructions  for obtaining prior approval are available
            from Preferred Life upon request."

      K.    "Reasonable and Customary"  shall mean the cost of services that are
            generally  incurred for cases of  comparable  nature and severity in
            the geographical area involved.

      L.    "Referral Services" shall mean those Acute Care Services provided to
            a  Member  by  a  non-participating   hospital  which,  due  to  the
            specialized  nature of the service or facility  required,  cannot be
            provided by the Plan's  participating  hospitals.  Referral Services
            shall be considered  Eligible  Hospital Services or Eligible Medical
            Services if such services are  specifically  authorized by the Plan.
            Referral Services shall mean the lesser of:

            1.    The amount of the negotiated charges; or

            2.    The amount of the Reasonable and Customary charges;

            but in any event Referral Services,  to the extent they are Eligible
            Hospital Services,  shall be limited to an average of $2,000 per day
            of each period of continuous  hospital  confinement.  Operating room
            charges are  excluded  from the  calculation  of the  average  daily
            limit.

      M.    "Service Area" shall mean the service area defined in the Membership
            Service Agreements."


                                      -3-
<PAGE>

                                   ARTICLE II

                             Schedule of Reinsurance

A.    The Effective Date for this Reinsurance Agreement shall be January 1,1999.

B.    The monthly premium for the Reinsurance  Coverage  defined in paragraph C.
      below shall be $2.01 per Member.

C.    The Reinsurance  Coverage to be provided under this Reinsurance  Agreement
      shall be defined as follows:

      1.    For  Eligible  Hospital  Services,  the  Deductible  amount for such
            Reinsurance  Coverage  shall be $100,000 of the Loss for each Member
            for  each  Contract  Year.  For  Eligible  Medical   Services,   the
            Deductible amount for such Reinsurance  Coverage shall be $20,000 of
            the Loss for each Member for each Contract Year. Once the Deductible
            has been satisfied, Preferred Life shall indemnify the Plan for:

            a.    The  excess  Loss  for  Eligible  Hospital  Services  in  that
                  Contract  Year for any  Member who is under one year of age at
                  the start of the Contract Year shall be reimbursed as follows:

                  1)    90%  if  services  are  performed  in a  "per  diem"  or
                        approved fixed procedural fee hospital.

                  2)    85% if services are performed on an outpatient basis.

                  3)    70% if services are performed in any other hospital.

            b.    The  excess  Loss  for  Eligible  Hospital  Services  in  that
                  Contract Year for any Member who is one year of age or over at
                  the start of the Contract Year shall be reimbursed as follows:

                  1)    90%  if  services  are  performed  in a  "per  diem"  or
                        approved fixed procedural fee hospital.

                  2)    80% if services are performed on an outpatient basis.

                  3)    80% if services are performed in any other hospital.

            c.    The  excess  Loss  for  Eligible  Hospital  Services  in  that
                  Contract  Year for  expenses  related to organ and bone marrow
                  transplant therapy shall be reimbursed as follows:

                  1)    90% if services  are  performed  in a LifeTrac  facility
                        with a Prior Approved Transplant  Reimbursement Schedule
                        for that confinement.


                                      -4-
<PAGE>

                  2)    80% if services are performed in a hospital with a Prior
                        Approved  Transplant  Reimbursement  Schedule  for  that
                        confinement.

                  3)    50% if services are performed in any other hospital."

                  4)    50% for organ and bone marrow Retransplantation Services
                        performed in any  hospital.  Retransplantation  Services
                        shall  mean  retransplantation  of the  same  organ/bone
                        tissue type performed within one year of the date of the
                        initial transplant procedure.

                  The acquisition  cost of the "live" organ is not included as a
                  benefit in this Reinsurance Agreement for any organ transplant
                  procedure.

            d.    90% of the excess Loss for Eligible  Medical  Services in that
                  Contract Year paid by the Plan to a provider.

            e.    In the event an excess  Loss could be  indemnified  under more
                  than one of the above  subsections,  the subsection  providing
                  the least indemnity shall apply.

            f.    Except  for  the  hospitals  listed  in  Exhibit  I,  expenses
                  incurred at hospitals having "per diem"  arrangements with the
                  Plan  shall  be  reimbursed  on the  basis  of the  contracted
                  hospital's  actual  charges to the  Member or Plan,  but in an
                  amount  which does not exceed  the "per  diem"  rate.  For the
                  hospitals  listed in  Exhibit  I,  eligible  charges  shall be
                  limited  to the  amounts  stated,  including  any  outlier  or
                  stoploss provisions, if specifically listed.

                  Hospitals  with outlier or stoploss  provisions  in which "per
                  diem"  revert to a  discount  off  actual  charges  or fee-for
                  services  charges shall not be considered "per diem" hospitals
                  once the outlier or stoploss threshold is reached.

            h.    Notwithstanding the above, the maximum  reinsurance  indemnity
                  payable under this Reinsurance Agreement for Eligible Hospital
                  Services and Eligible  Medical  Services for each Member shall
                  be $2,000,000.

D.    Loss  incurred  by the Plan  during  the last  thirty-one  (31)  days of a
      Contract Year for which no benefits  were payable  under this  Reinsurance
      Agreement  because  such  Loss  was  applied  to the  Deductible  for that
      Contract Year shall be applied  toward the  Deductible  for the succeeding
      Contract Year.  Benefits for carry-forward  Losses shall be subject to the
      maximums established in Article I, Sections E and L.


                                      -5-
<PAGE>

E.    The preceding  Schedule of  Reinsurance  is subject to the  Limitations as
      defined in Article VIII.


                                      -6-
<PAGE>

                                  ARTICLE III

                                 Premium Payment

A.    The  amount  of  premiums  to be paid by the  Plan to  Preferred  Life for
      Reinsurance  Coverage  under this  Reinsurance  Agreement  is set forth in
      Article II herein.

B.    Premiums  shall be  payable  monthly  and shall be based on the  number of
      Members  enrolled and eligible to receive Eligible  Hospital  Services and
      Eligible Medical Services during the month.

C.    Premiums shall be due on the first day of the month for which  Reinsurance
      Coverage is provided  and are payable to  Preferred  Life at its office in
      New York, New York.

D.    A grace  period not to exceed  one month  shall be granted to the Plan for
      the payment of every premium due.

E.    If any premium is not paid before the expiration of the grace period, this
      Reinsurance  Agreement shall automatically  terminate as of the expiration
      of the period for which premium has been paid.

F.    The premium  payment by the Plan to Preferred Life shall be accompanied by
      a statement  signed by an authorized  Plan official in which the number of
      enrolled and eligible Members for that month is given.

G.    Preferred  Life shall  have the right to change the  premium at the end of
      the first  Contract  Year of this  Reinsurance  Agreement  and at any time
      thereafter,  provided this  Reinsurance  Agreement has not had the premium
      changed within the preceding  twelve (12) months and further provided that
      at least  thirty-one  (31) days written notice has been given by Preferred
      Life to the Plan. The Plan must give Preferred Life  thirty-one  (31) days
      advance  written  notice of any change in  coverage.  Upon  notice of such
      change of coverage.  Preferred Life may elect to exclude the  modification
      of  coverage  from  Reinsurance  Coverage  or  charge  additional  premium
      therefore.  Preferred  Life  shall not be liable for any  modification  of
      coverage  of the  Reinsured  Policy  in the event  that the Plan  fails to
      properly  notify  Preferred Life. Any change in premium that is solely the
      result of a change in coverage shall not be considered a change in premium
      requiring  the twelve (12) month period of time before  another  change in
      premium can be made.


                                      -7-
<PAGE>

                                   ARTICLE IV

                       Notice of Claims and Reimbursement

A.    The Plan shall give  Preferred  Life timely written notice of any claim or
      potential  claim.  The Plan shall use its best  efforts to give  Preferred
      Life notice of claim or potential  claim within  thirty-one (31) days from
      the date on which the claim or potential claim is incurred.

B.    Preferred  Life shall  furnish the Plan with a supply of claim forms to be
      used in filing a claim.

C.    The Plan shall file  completed  proof of Loss by sending to Preferred Life
      the  information  requested  on the claim  form,  along with copies of the
      various bills and itemized expenses involved.

D.    In accordance with the terms and conditions of this Reinsurance Agreement,
      Preferred  Life shall make payment to the Plan within  thirty (30) days of
      Preferred Life's receipt of complete  written proof of such Loss,  subject
      to E. below.

E.    Preferred  Life shall not be liable  with  regard to any Loss for which it
      has not received  written  notice  within the twelve (12) months after the
      end of the Contract  Year in which the Loss was  incurred.,  except in the
      case of insolvency, as defined in Article VII.


                                      -8-
<PAGE>

                                   ARTICLE V

                           Reports, Records and Audits

A.    The Plan shall submit a monthly report to Preferred Life listing the names
      and amounts for those Members who have received Eligible Hospital Services
      and  Eligible  Medical  Services  during the  Contract  Year which  exceed
      seventy-five  (75)  percent of the per Member  Deductible  as set forth in
      Article II.

B.    The Plan shall report to Preferred  Life any changes of a material  nature
      in its  Membership  Service  Agreements.  Such  report  shall  be  sent to
      Preferred Life at least  thirty-one (31) days before the Effective Date of
      the change so that Preferred Life may evaluate the need for any changes in
      this Reinsurance Agreement.

C.    The Plan shall report to Preferred Life any  investigation  or request for
      information of a material nature by a State Insurance Department regarding
      the  conduct of the Plan.  Such  report must be provided in writing by the
      Plan to Preferred Life within  thirty-one (31) days following the date the
      Plan receives  notice,  written or  otherwise,  of such  investigation  or
      request from the State Insurance Department.

D.    The Plan shall keep a record of the monthly  enrollment of Members covered
      by its Membership  Service  Agreements and the Eligible  Hospital Services
      and Eligible Medical Services  received by each Member while covered under
      this Reinsurance Agreement. Such record shall be kept during the time this
      Reinsurance Agreement is in effect and for a one (1) year period after its
      termination date.

E.    The Plan's books and  records,  to the extent  permitted by law,  shall be
      made  available to  Preferred  Life for  inspection  and audit at any time
      during normal business hours during the time this Reinsurance Agreement is
      in effect and for a one (1) year period after its termination date.

F.    All information  disclosed to Preferred Life by the Plan or to the Plan by
      Preferred Life, either in the course of conducting  negotiations or as the
      result of  complying  with the terms and  conditions  of this  Reinsurance
      Agreement,   shall  be  considered  to  be  privileged  and   confidential
      information by both the Plan and Preferred Life.

G.    The  submission  of  this  Reinsurance  Agreement  to  any  Department  of
      Insurance  or any  State or  Federal  agency  shall  not be  considered  a
      violation of F above."


                                      -9-
<PAGE>

                                   ARTICLE VI

                                   Arbitration

A.    In the event of any dispute or difference  of opinion  arising out of this
      Agreement  which  cannot be amicably  resolved  by the Plan and  Preferred
      Life, the Plan and Preferred Life agree that such dispute or difference of
      opinion shall be submitted to and settled by arbitration.

B.    Except as otherwise provided herein, the arbitration shall be conducted in
      accordance  with  the  Commercial   Arbitration   Rules  of  the  American
      Arbitration  Association  (the "AAA" and the "AAA's Rules") which shall be
      in effect on the date of delivery of demand for arbitration.  In the event
      that the AAA's Rules  conflict with any  provisions of this Article,  this
      Article shall govern.

C.    The party that determines that a dispute should be resolved by arbitration
      (the "Initiating Party") shall give written notice to the other party (the
      "Responding  Party") of its  desire to compel  arbitration,  which  notice
      shall  contain a statement  setting  forth the nature of the dispute,  the
      amount involved, if any, and the remedy sought.

D.    The  arbitration  tribunal shall consist of three  arbitrators who must be
      disinterested  parties,  unaffiliated with the Plan or Preferred Life. The
      Plan shall appoint one  arbitrator,  and Preferred  Life shall appoint one
      arbitrator.  The third  arbitrator  shall be appointed by the previous two
      (2) arbitrators.  If the two previous  arbitrators cannot agree on a third
      arbitrator, then the third arbitrator shall be appointed by AAA.

E.    If either party refuses or neglects to appoint an arbitrator  within sixty
      (60) days after receipt of written notice from the other party  requesting
      it to do so, the requesting  party shall instruct AAA to appoint a neutral
      second  arbitrator.  The two  appointed  arbitrators  can then appoint the
      third.

F.    For the  purposes of  arbitration,  this  Reinsurance  Agreement  shall be
      considered an honorable  engagement  rather than a mere legal  obligation,
      and the arbitrators  are not bound by judicial  formalities or strict rule
      of law in interpreting this Reinsurance Agreement.

G.    The decision of a majority of the  arbitrators  shall be final and binding
      on both the Plan and Preferred Life.

H.    The expense of arbitration shall be divided between the Plan and Preferred
      Life based on a decision made by the arbitrators.

I.    Any such  arbitration  shall  take  place in New York,  unless  some other
      location is mutually agreed upon.

                                      -10-
<PAGE>

J.    The laws of New York  shall  govern the  arbitration  process in the event
      they conflict with A through I above."


                                      -11-
<PAGE>

                                  ARTICLE VII

                       Insolvency/Cessation of Operations

A.    In the event that Preferred Life should become insolvent, this Reinsurance
      Agreement shall  automatically  terminate on the date of Preferred  Life's
      insolvency.

B.    In the  event  that the Plan  shall  become  insolvent,  this  Reinsurance
      Agreement  shall  automatically  terminate  on  the  date  of  the  Plan's
      insolvency.  All Reinsurance  shall be payable directly to the liquidator,
      receiver,  or statutory  successor of the Plan,  without diminution due to
      the insolvency of the Plan.

C.    For purposes of this  Reinsurance  Agreement,  "insolvent" or "insolvency"
      shall mean that both of the following conditions occur:

      1.    A final  determination is made by a court of competent  jurisdiction
            that the Plan or Preferred Life is insolvent; and

      2.    All operations of the Plan or Preferred Life cease.

            The date of  insolvency  shall be  determined  as the date which the
            court  declares the Plan or Preferred  Life insolvent or the date on
            which the Plan or Preferred  Life has ceased  operations,  whichever
            date is later in time.

            Operations of the Plan will not be considered  ceased so long as the
            Plan is in control of a Receiver (which, as used herein,  includes a
            court or state appointed  supervisor,  receiver,  or  rehabilitator)
            until  the date the  Receiver  stops  paying  for  future  services,
            publicly  declares  its  intention  to not make  payment  for future
            services,  and orders Plan providers to stop  rendering  services on
            behalf of the Plan other than those  services for the remaining term
            for which providers have previously been paid.

D.    In the event the Plan should cease  operations  and become  insolvent,  as
      defined  above,  during  the  term of this  Reinsurance  Agreement,  it is
      further agreed the following would apply:

      1.    The liquidator,  receiver,  or statutory successor of the Plan shall
            give written  notice to Preferred  Life of the pendency of any claim
            affecting this Reinsurance  Agreement within a reasonable time after
            such a claim is filed. During the pendency of such claim,  Preferred
            Life may  investigate at its own expense such claim and interpose in
            the proceeding  where such claim is to be adjudicated,  any defenses
            which  it may  deem  available  to the  Plan  or to its  liquidator,
            receiver, or statutory successor; and

      2.    The expense  thus  incurred by Preferred  Life shall be  chargeable,
            subject to court  approval,  against the Plan or its  successors  as
            part of the expense of liquidation to the extent of a  proportionate
            share of the benefit which


                                      -12-
<PAGE>

            may accrue to the Plan solely as a result of the defense  undertaken
            by Preferred Life.

E.    Notice of the Plan's or  Preferred  Life's date of  insolvency  or date of
      cessation of operations  shall be  communicated  to the other party at the
      earliest possible point in time.


                                      -13-
<PAGE>

                                  ARTICLE VIII

                       Limitations of Reinsurance Coverage

A.    Preferred Life's  reimbursement of claims to the Plan shall not exceed, in
      any event, the limits of coverage stated in Article II.

B.    The Plan is solely  responsible for providing all services to its Members,
      for  compensation of all liability to its Members,  and for payment of all
      expenses to its Members.

C.    Preferred Life shall have no  responsibility  or obligation to provide any
      services or payment to any Member of the Plan, directly or indirectly.

D.    To the extent the Plan  receives or will receive any payment or receives a
      reduction  in its  liability  by  reason  of a  Coordination  of  Benefits
      provision in the Plan's  Membership  Service  Agreement or by any right of
      subrogation,  Preferred  Life shall only  indemnify the Plan in respect of
      any excess  beyond the amount of COB or  subrogation  amounts  received or
      applied currently or in the future as reductions in its liability.

E.    Preferred  Life shall not  reimburse  the Plan for  amounts  incurred  for
      skilled nursing or rehabilitative services (including,  but not limited to
      treatments   for  motor   function  or  mobility,   physical   therapy  or
      psychotherapies),  unless such services are provided  concurrent  with and
      incidental to Acute Care Services.

F.    Preferred  Life  shall not be liable to the Plan,  and the Plan shall hold
      harmless and indemnify Preferred Life, for any of the following:

      1.    Professional  liability  or  liability  for  any  act  or  omission,
            tortious or otherwise,  in connection with any services  rendered to
            any person or group of persons by the Plan or any group,  entity, or
            person employed by or affiliated in any manner with the Plan;

      2.    Liability assumed by the Plan in excess of Plan's Membership Service
            Agreements as identified in Article I of this Reinsurance Agreement,
            including  liability under any contract other than Plan's Membership
            Service Agreements;

      3.    Expenses  or losses to which the Plan has  released  any  persons or
            entity from its legal liability;

      4.    Liabilities which are non-pecuniary in nature (not having a monetary
            value);

      5.    Liabilities,   expenses,   or  losses   which  are  based  upon  any
            noncompliance or violation of any Federal or State statute, rule, or
            regulation by the Plan;


                                      -14-
<PAGE>

      6.    Additional  expenses or losses  resulting  from those services which
            are  billed in excess of the  usual and  customary  charges  for the
            locality where same were administered;

      7.    Losses which are paid or payable to Plan Members who are enrolled in
            Part A and/or  Part B of Title XVIII of the Social  Security  Act of
            1965 and any Amendments to it;

      8.    Any expenses to the extent the Plan  receives a reduction in charges
            because  of a  Coordination  of  Benefits  provision  in the  Plan's
            Membership Service Agreements or any right of subrogation;

      9.    Any liability due to war or act of war;

      10.   Any liability for replacement of equipment,  furniture,  or supplies
            which  are  not  Eligible  Hospital  Services  or  Eligible  Medical
            Services.

      11.   Any  liability  for any  property  damage  expenses  resulting  from
            negligence by any party which causes a failure of any equipment used
            in the treatment of a Member.


                                      -15-
<PAGE>

                                   ARTICLE IX

                    Effective Date, Duration and Termination

A.    This Reinsurance Agreement shall become effective on the date set forth in
      Article II.

B.    This  Reinsurance  Agreement  shall  continue in effect from the Effective
      Date until it is terminated.

C.    This Reinsurance  Agreement shall automatically  terminate for non-payment
      of premium by the Plan as set forth in Article III.

D.    This Reinsurance  Agreement shall  automatically  terminate on the date of
      Preferred  Life's  insolvency or cessation of operations or on the date of
      the Plan's insolvency or cessation of operations.

E.    This Reinsurance  Agreement can be terminated in accordance with paragraph
      A. of Article X.

F.    Termination of this  Reinsurance  Agreement shall not terminate the rights
      or  liabilities  of either the Plan or Preferred  Life arising  during any
      period when this Reinsurance Agreement was in force, provided that nothing
      herein  shall be  construed  to  extend  Preferred  Life's  liability  for
      reimbursements  under this Reinsurance  Agreement for any Loss paid by the
      Plan  which  was  incurred  on or after  the date of  termination  of this
      Reinsurance Agreement.

G.    The Plan and  Preferred  Life shall each have the right to terminate  this
      Reinsurance Agreement by giving the other party, and the State of New York
      Health and  Insurance  Departments,  written  notice of such  intention to
      terminate at least  thirty-one  (31) days prior to the end of any Contract
      Year.


                                      -16-
<PAGE>

                                ENDORSEMENT NO. 2

Endorsement  between  Preferred Life Insurance  Company of New York (hereinafter
referred to as "Preferred Life") and MDNY Healthcare, Inc. (hereinafter referred
to as "Plan") Policy No. 170555-036.

The  following  provision  is hereby  made a part of the  Reinsurance  Agreement
between Preferred Life and Plan.

                   Out of Area Conversion Provision

         In the event that a Plan  Member  moves  outside the
         Service  Area  of the  Plan,  such  Member,  without
         evidence  of  insurability,  shall have the right of
         conversion for a period of thirty-one (31) days. The
         Conversion   Coverage   will   be  that   which   is
         customarily  issued  by  Preferred  Life at the then
         current   rates  and  of  the  type   available  for
         conversion.

Except as herein stated,  all terms and conditions of the Reinsurance  Agreement
remain unchanged.

The Effective Date of this Endorsement is January 1, 1999.

                                   MDNY HEALTHCARE, INC.

Dated:      4/8/99                 By: /s/
      -------------------             -----------------------------------------
                                   Title:    Chief Financial Officer

                                   PREFERRED LIFE INSURANCE COMPANY OF NEW YORK

Dated:                             By:
      -------------------             -----------------------------------------

                                   Title:
                                         --------------------------------------