EXHIBIT 10.42

                    HEALTH CARE EXCESS RISK INSURANCE POLICY

                                    SECTION I

                          COMMENCEMENT AND TERMINATION

A.       This POLICY replaces all prior insurance  policies  between the Company
         and the Named Insured, shall take effect on the EFFECTIVE DATE at 12:01
         A.M.,  E.S.T.  at the  address  of the Named  Insured,  and shall be in
         continuous  force and  effect  until  terminated.  Named  Insureds  are
         Pennsylvania HRM, Inc. and Health Risk Management, Inc., its parent.

B.       1. If payment for any premium is not  received by the Company  from the
         Named   Insured  as   specified   in  SECTION  IV,  this  POLICY  shall
         automatically  terminate  effective  at the end of the  last day of the
         last month for which the premium was due and fully paid. If the Company
         receives  the  premium  by the due date or before  the end of the GRACE
         PERIOD, coverage under this POLICY shall be continuous.

         2. The  Named  Insured  and the  Company  shall  each have the right to
         terminate this POLICY with or without cause,  on any anniversary of the
         EFFECTIVE DATE of the POLICY,  by giving the other party written notice
         of such intention to terminate at least thirty (30) days in the case of
         the Insured or ninety (90) days in the case of the Company prior to the
         anniversary date.

         3.  Subject to the United  States  Bankruptcy  Code,  this POLICY shall
         automatically  terminate on the date of the Named Insured's INSOLVENCY,
         as defined in SECTION III, or upon cessation of operations, if earlier.
         The Named  Insured  shall give the Company  written  notice of any such
         event as soon as the Named  Insured is aware that such event will occur
         or has occurred.

         4. The Company shall have the right to terminate  this POLICY by giving
         thirty (30) days written notice if the Named Insured:

                  a. is acquired by, comes under  control of, or is merged with,
                  any other company, corporation, or foundation; or

                  b. undergoes a material change in existing  senior  management
                  or service  contracts  relevant  to the covered  business,  as
                  determined by the Company.

                  c.  Termination  of this POLICY shall not terminate the rights
                  or  liabilities  of either the Named  Insured  or the  Company
                  arising  during any period when this  insurance  policy was in
                  force  and  effect,  provided  that  nothing  herein  shall be
                  construed to extend the Company's liability for reimbursements
                  under this POLICY for any LOSS  incurred by the Named  Insured
                  on or after the date of termination of this POLICY.


<PAGE>

                                   SECTION II

                               INSURANCE COVERAGE

A.       The  insurance  coverage  to be  provided  under this  POLICY  shall be
         defined as follows:

         For aggregate of claims during a POLICY YEAR exceeding 100% of EXPECTED
         CLAIMS, the Company agrees to pay 100% of the difference between actual
         LOSS covered by this POLICY and EXPECTED CLAIMS.

B.       The business  covered by this POLICY is limited to HRM's  contract with
         OXFORD covering its Pennsylvania Medicaid contract.

                                   SECTION III

                                   DEFINITIONS

A.       POLICY YEAR shall mean the period  beginning on the EFFECTIVE  DATE and
         ending  January 1, 1999,  and each year  thereafter  from  January  1st
         through  January 1st of each year,  except  that it shall not  continue
         past the termination date of this POLICY.

B.       COVERED  CHARGES  shall mean the amounts paid by the Named  Insured for
         COVERED  SERVICES,  but not to exceed any amount(s) due under contracts
         with providers by OXFORD HEALTH PLANS (PA), INC.  (OXFORD) or the Named
         Insured.

C.       EXPECTED  CLAIMS  is  defined  as an  amount  equal to 85% of the total
         OXFORD  DIRECT  WRITTEN  PREMIUM  received  by OXFORD  pursuant  to its
         HealthChoices  Physical  Health  Agreement  with  the  Commonwealth  of
         Pennsylvania, attached as Exhibit 1, and as amended from time to time.

D.       COVERED  SERVICES are defined as those  health care  services for which
         the   INSURED  is   obligated   to  pay  under   OXFORD'S   above-named
         HealthChoices Physical Health Agreement.

E.       EFFECTIVE  DATE  shall  be  April  13,  1998  and  January  1st  of any
         subsequent POLICY YEAR.

F.       INSOLVENT or INSOLVENCY shall mean:

         1.       The  entry by a court of  competent  jurisdiction  of an order
                  approving  a petition  seeking  reorganization,  readjustment,
                  arrangement, composition, or similar relief as to either party
                  under the  applicable  bankruptcy  laws or any other  similar,
                  applicable  law or statute of the United  States of America or
                  any state thereof; or
<PAGE>

         2.       The appointment by such a court having competent  jurisdiction
                  of a  receiver  or  receivers,  or  trustee  or  trustees,  or
                  liquidator  or  liquidators  of either  party or of all or any
                  substantial  part of its property upon the  application of any
                  creditor or other party entitled to so apply in any insolvency
                  or bankruptcy proceeding or other creditor's suit; or

         3.       The  adjudication,   not  stayed,  discharged,   rescinded  or
                  reversed,  of either party within sixty (60) days of the order
                  adjudicating  either party as bankrupt by a court of competent
                  jurisdiction.

         4.       The date of insolvency  shall be the date the court enters the
                  order  of  such  reorganization,   readjustment,   arrangement
                  composition, or similar relief.

G.       LOSS shall mean only  amount(s)  that are incurred while this POLICY is
         in effect  and paid by the Named  Insured  within  the  POLICY  YEAR or
         within  eighteen  (18) months  following  the end of the POLICY YEAR in
         which they are incurred,  for treatment and services afforded under the
         HealthChoices  Physical Health Agreement covered by this POLICY, net of
         any  coordination  of benefits,  savings,  or  recoveries  from a third
         party. A LOSS shall be deemed  incurred on the date on which the Member
         receives the service or treatment.  Date of payment is evidenced by the
         date of the check issued in payment of such service or treatment.

H.       POLICY means this complete insurance document  consisting of the policy
         forms, declarations page, all endorsements and/or attachments.

I.       OXFORD DIRECT WRITTEN PREMIUM means direct written premium  received by
         OXFORD from the  Commonwealth of Pennsylvania  under the  HealthChoices
         Physical Health  Agreement for its Pennsylvania  Medicaid  business for
         coverage on and after the EFFECTIVE DATE.

J.       GRACE PERIOD shall be that period of time which begins on the fifteenth
         (15th) day of each month and extends  through the last day of that same
         month.

                                   SECTION IV

                            PREMIUMS AND REMITTANCES

A.       The premium for the  insurance  coverage  provided by the Company under
         this POLICY shall be:

         1.       an amount equal to 1.62% of the OXFORD DIRECT WRITTEN PREMIUM,

         2.       a  contingent  premium  of an  amount  equal to 100% of LOSSES
                  between  100% and 106% of EXPECTED  CLAIMS,  and 10% of LOSSES
                  above 106% of EXPECTED CLAIMS.
<PAGE>

B.       Premiums shall be payable monthly and shall be based on 1) 1.62% of the
         capitated premium received in that month which includes  reconciliation
         of the prior months' premium,  2) 1.62% of an estimate of the maternity
         payments  for the month,  and 3) 1.62% of the  difference  between  the
         prior  month  estimated  maternity  payments  and the  actual  payments
         received in the prior month.

C.       Premiums shall be payable to the Company by the fifteenth (15th) day of
         the month for which they are due.

D.       The Insured shall have the GRACE PERIOD for paying the premium, without
         interest, if:

         1.       Insured  fails to pay the premium when due; and

         2.       Insured has not given written notice to end the POLICY.

         If the  insured  fails to pay the  premium by the last day of the GRACE
         PERIOD,  the POLICY  shall  terminate at the end of the last day of the
         last month for which the premium was paid.

E.       If a written  request is received by the Company from the Named Insured
         in advance of the last day of the GRACE PERIOD, the Company may, at its
         sole option, choose to extend the date due.

F.       The  premium  payment  by the Named  Insured  to the  Company  shall be
         accompanied  by a statement,  signed by an  authorized  official of the
         Named Insured, in which the number of enrolled and eligible Members for
         the current month and prior month  reconciliations  or  adjustments  is
         given.

G.       The  Company  shall have the right to change the  premium at the end of
         the first POLICY YEAR of this insurance  POLICY, or at the beginning of
         any POLICY YEAR  thereafter,  provided  that at least  ninety days (90)
         prior  written  notice  has been  given  by the  Company  to the  Named
         Insured.

H.       Upon  receiving  notice,  in compliance  with and as defined in SECTION
         VII.  C., of a material  change in the  HealthChoices  Physical  Health
         Agreement  between OXFORD and the  Commonwealth  of  Pennsylvania,  the
         Company  may elect to exclude  the  modification  of the  HealthChoices
         Physical  Health  Agreement  between  OXFORD  and the  Commonwealth  of
         Pennsylvania from insurance coverage or charge an additional premium to
         include  the  modification.  The  Company  shall not be liable  for any
         modification of coverage of the HealthChoices Physical Health Agreement
         between OXFORD and the  Commonwealth  of  Pennsylvania in the event the
         Named Insured fails to properly notify the Company  pursuant to SECTION
         VII. C.
<PAGE>

I.       The  Company or the Named  Insured may offset any  balance,  whether on
         account of premium,  commission,  claims or losses, adjustment expense,
         salvage,  or  otherwise,  due from one  party to the other  under  this
         Agreement or under any other agreement  heretofore or hereafter entered
         into between the Company and the Named Insured.

                                    SECTION V

                                 PROFIT SHARING

A.       The Named Insured and the Company shall  determine 24 months  following
         the end of each  POLICY  YEAR,  the  profit  arising  from the  covered
         business contract during the POLICY YEAR.

B.       The Company will receive as profit sharing,  20% of the amount by which
         actual claims incurred,  including insurance costs, for the POLICY YEAR
         reviewed are below 80% of OXFORD DIRECT WRITTEN PREMIUM.

                                   SECTION VI

                                NOTICE OF CLAIMS

The Named  Insured  shall  notify the Company  immediately  when actual  claims,
including incurred but not reported reserves, exceed the EXPECTED CLAIMS.

                                   SECTION VII

                           REPORTS, RECORDS AND AUDITS

A.       Within thirty (30) days following the end of each calendar month during
         the term of the POLICY,  the Named Insured shall prepare and forward to
         the  Company  the  following  reports  in a  format  acceptable  to the
         Company:

         1.       These reports shall include:

                  a.       Current month's  premium  adjusted for any changes to
                           previous periods;

                  b.       Number of covered members under each member category;

                  c.       Paid Claims during the month.

                  d.       Expenses  (itemized  and  including   Manager's  fee,
                           commissions,    incentives    and    the    Company's
                           compensation);

                  e.       Claims  and claim  adjustment  expenses  paid (net of
                           subrogation  and cash  calls  received);

                  f.       Current claims under subrogation
<PAGE>

         2.       A monthly  reporting  of claims  in  excess of  $125,000  in a
                  format acceptable to the Company.

         3.       The  recommended  outstanding  claims  reserves and applicable
                  incurred but not reported  claim reserves as of the end of the
                  calendar month.

B.       Annually,  the Named Insured shall furnish the Company such information
         as the Company may require to complete its Annual Statement.

C.       The Named Insured  shall report to the Company  within five days (5) of
         receipt of  notification  to the Named Insured any material  changes or
         modifications in any covered benefits under the HealthChoices  Physical
         Health  Agreement  so that the  Company can  evaluate  the need for any
         changes in this POLICY. No coverage change shall be made to this POLICY
         and/or  required  until  actual  notice is  received by the Company and
         approved  by the Company as provided  in this  POLICY,  which  approval
         shall not be unreasonably withheld.

D.       The Named Insured's books and records,  to the extent permitted by law,
         shall be made  available to the Company for inspection and audit at any
         time during normal  business hours during the time this insurance is in
         effect.  The Named  Insured's books and records shall be maintained and
         preserved for a period of six (6) years by the Named Insured.

E.       All  information  disclosed to the Company by the Named Insured,  or to
         the Named  Insured by the Company,  either in the course of  conducting
         negotiations  or  as  the  result  of  complying  with  the  terms  and
         conditions of this POLICY,  shall be  considered  to be privileged  and
         confidential  information by both the Named Insured and the Company and
         shall not be disclosed  without  written consent of the other and which
         consent will not be unreasonably withheld.

F.       The submission of this POLICY or other  information  related thereto to
         any  Department  of Insurance of any state,  federal  agency,  or court
         having  jurisdiction  over the matter  and having a legal  right to the
         information shall not be a violation of this SECTION. The Named Insured
         and the  Company  shall make every  effort to advise the other party in
         advance of such submission.

G.       The  Named  Insured  warrants  and  represents  that to the best of its
         knowledge all reports,  books,  records,  and other  financial or other
         information  furnished  to the  Company  are  true and  correct  in all
         material respects.

H.       In no event, however,  shall the Company be liable to the Named Insured
         for any claims or losses  reinsured  hereunder if such claims or losses
         are not reported to the Company by the end of the eighteen  months (18)
         following  the end of the POLICY  YEAR in which  such  claims or losses
         were incurred.
<PAGE>

                                  SECTION VIII

                                   ARBITRATION

A.       Either  party may request  arbitrator  to resolve  disputes  under this
         POLICY. Each party shall choose an arbitrator.  Those arbitrators shall
         choose a third.  If either  party  refuses  or  neglects  to appoint an
         arbitrator  within sixty (60) days after the receipt of written  notice
         from the other party  requesting it to do so, the requesting  party may
         nominate two arbitrators  who shall choose the third.  Each party shall
         submit  its  case to the  arbitrators  within  sixty  (60)  days of the
         appointment of the arbitrators.

B.       The arbitrators shall consider this POLICY a legal obligation, and they
         are relieved of all judicial formalities and may abstain from following
         the strict rules of law. The decision of a majority of the  arbitrators
         shall be final and binding on both the Named  Insured and the  Company.
         Each party shall bear the cost of their chosen  arbitrator  separately,
         and the cost associated with the arbitration proceeding itself shall be
         borne equally by both parties, unless the arbitrators decide otherwise.
         Any such arbitration shall take place in the State of Minnesota, unless
         some other  location is mutually  agreed upon by the Named  Insured and
         the Company.

C.       If any dispute  shall arise  between the Named  Insured and the Company
         with  reference  to the  interpretation  of  this  POLICY,  the  breach
         thereof, or their rights with respect to any transaction involved,  the
         dispute shall be referred in conformance with Section VIII to three (3)
         arbitrators, one to be chosen by each party and the third by the two so
         chosen.  Any disputes relating to SECTION I. C. shall not be subject to
         arbitration as described in this section.

                                   SECTION IX

                                   INSOLVENCY

In the event of  termination  of this POLICY due to the  Insolvency of the Named
Insured,  the following rule shall apply to each claim or LOSS incurred prior to
the date of termination.

A.       The liquidator,  receiver,  conservator,  or statutory successor of the
         Named Insured shall give written  notice to the Company of the pendency
         of each claim or LOSS under the POLICY which may involve the  insurance
         covered by this POLICY,  within a  reasonable  time after such claim or
         LOSS is filed in the  conservation or liquidation  proceeding or in the
         receivership.  The Company shall have the right to investigate any such
         claim or LOSS during its pendency and to  interpose,  at the  Company's
         own  expense,  in the  proceeding  where  that  claim  or LOSS is to be

<PAGE>

         adjudicated, any defense(s) it may deem available to the Named Insured,
         or  to  the  Named  Insured's  liquidator,  receiver,  conservator,  or
         statutory successor.  Any such expense incurred by the Company shall be
         chargeable,  subject to court  approval,  against the Named  Insured as
         part of the expense of conservation or liquidation,  to the extent of a
         pro rata share of the benefit  which may accrue to the Named Insured as
         a result of the defense undertaken by the Company.

         Where two (2) or more  companies  are  involved in the same claim and a
         majority in interest elect to interpose  defense(s) to that claim,  the
         expense  shall be  apportioned  in  accordance  with  the  terms of the
         insurance  POLICY as though that expense had been incurred by the Named
         Insured.

         The  provisions  of this  section  shall not  preclude the Company from
         asserting any excuse or defense to payment of this insurance other than
         the excuses or defenses of the  insolvency of the Named Insured and the
         failure of the Named Insured's liquidator,  receiver,  conservator,  or
         statutory successor to pay all or a portion of any claim.

B.       Notice of the Named Insured's date of INSOLVENCY,  or date of cessation
         of  operations,  shall be  communicated  to the  Company  by the  Named
         Insured at the earliest possible time.

C.       The Named  Insured  shall  notify the  Company of the  pendency  of any
         action which may lead to INSOLVENCY or any intentions the  organization
         may have of ceasing  operation.  Any time after this  notification  and
         prior to the court having named a successor  organization,  the Company
         shall have the first  option of entering  into an agreement to conserve
         the  Named  Insured.  Such  agreement  may  include  purchase,  sale or
         management of the Named Insured.


                                    SECTION X

                            LIMITATIONS OF INSURANCE

A.       The Company's liability to provide reimbursement of claims to the Named
         Insured  pursuant to this POLICY  shall not exceed,  in any event,  the
         limits of coverage stated in SECTION II.

B.       The Named  Insured is solely  responsible  for paying for all  services
         pursuant to the HealthChoices Physical Health Agreement.

C.       This  POLICY  does not  provide  reimbursement  for claim  expenses  or
         salaries paid to employees of the Named Insured.

D.       The Company shall not have any  responsibility or obligation to provide
         any direct services or expenses to the Named Insured.

E.       This is a POLICY of insurance  solely between the Company and the Named
         Insured.  Nothing in this POLICY  shall create any other right or legal

<PAGE>

         contractual relationship between the Company and any Additional Insured
         under this POLICY.  This POLICY may not be assigned without the written
         consent  of  the  Company,  which  consent  will  not  be  unreasonably
         withheld.

F.       The  Company  shall not be liable to the Named  Insured,  and the Named
         Insured shall hold  harmless and indemnify the Company,  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 persons by the Named Insured, or any
                  group,  entity,  or person  employed by or under contract with
                  the Named Insured;

         2.       Liability  assumed  by the  Named  Insured  in  excess  of the
                  HealthChoices Physical Health Agreement between OXFORD and the
                  Commonwealth of  Pennsylvania,  including  liability under any
                  contract  other  than  the   HealthChoices   Physical   Health
                  Agreement between OXFORD and the Commonwealth of Pennsylvania;

         3.       Expenses  or  LOSSES  which  the  Named  Insured  has  paid as
                  settlement,  whereby  the Named  Insured  is  released  by any
                  person or  entity  from the Named  Insured's  legal  liability
                  except for COVERED  CHARGES under the  HealthChoices  Physical
                  Health Agreement;

         4.       Any liability,  claim,  or expense caused or contributed to by
                  war,  hostilities  (whether war is declared or not), invasion,
                  or civil war;

         5.       Any  liability,  claim  or  expense  caused  by  any  unlawful
                  participation or actions by the Named Insured in riot or civil
                  disturbance;

         6.       Liability  as a result of  sickness or  accidental  injury not
                  specifically  covered  by the  HealthChoices  Physical  Health
                  Agreement,  unless notice has been provided in accordance with
                  SECTION  II. C. and the  Company  has  specifically  agreed in
                  writing to provide coverage for such LOSS; or

         7.       Damages,  actions,  or claims  made  against  the  Company and
                  caused by the Named Insured's acts or omissions.

G.       The Company shall not be held liable for the Named  Insured's  expenses
         and LOSSES which are due to any noncompliance  with or violation or any
         federal or state statue, rule, or regulation.

H.       The  Company  shall not be held liable for any amount paid by the Named
         Insured  for  punitive  or  exemplary  damages,   or  any  other  extra

<PAGE>

         contractual damages awarded to or against the Named Insured arising out
         of  the  conduct  of  the  Named  Insured's  investigation,  trial,  or
         settlement  of any claim,  or failure to pay or delay in payment of any
         benefits under its policy(ies),  or any statutory  penalty imposed upon
         the Named Insured on account of any unfair trade practice or any unfair
         claim practice.

J.       The insurance coverage to be provided by this POLICY does not cover any
         LOSS for which the Named Insured is not fully at risk  according to the
         attached agreement between the Named Insured and OXFORD.

                                   SECTION XI

                               GENERAL PROVISIONS

A.       This POLICY shall not be  assignable  without the express prior written
         consent of the other  party  which  consent  shall not be  unreasonably
         withheld.

B.       The Named Insured is solely  responsible for the  administration of all
         COVERED  SERVICES and for payment of all COVERED  CHARGES.  The Company
         shall not have any  responsibility or obligation to provide any service
         or payment  directly or  indirectly of COVERED  CHARGES.  The insurance
         coverage provided herein is payable solely to the Named Insured, except
         as amended by endorsement.

C.       If any payment is made by the Company  under this  POLICY,  the Company
         shall be subrogated to the Named  Insured's legal right to recover such
         payment against any person or organization, and the Named Insured shall
         execute  and  deliver  instruments  and do  whatever  is  necessary  to
         preserve  and secure such legal right.  Any recovery  made by the Named
         Insured  shall be  reimbursed  to the  Company  to the extent the Named
         Insured has included payments to be considered under this POLICY.

D.       This  POLICY,   including   endorsements  and   attachments,   if  any,
         constitutes the entire contract of insurance.  No change in this POLICY
         shall  be  valid   until   approved   in  writing   by  an   authorized
         representative  of the  Company  and unless  such  written  approval is
         endorsed hereon or attached hereto.

In witness  whereof,  the  Kentucky  Medical  Insurance  Company has caused this
policy  to  be  signed  by  its  President  and  Authorized   Representative  at
Louisville, Kentucky.




/s/ Richard F. Kench                                /s/ Paul R. Stuhmer
President                                           Authorized Representative