<PAGE>
                                                                   Exhibit 10.21

                                                     TDH Doc. 7526032317* 01-02A

                                 AMENDMENT NO. 1
                                     TO THE
                           2000 CONTRACT FOR SERVICES
                                     BETWEEN
                     THE TEXAS DEPARTMENT OF HEALTH AND HMO

This Amendment No. 1 is entered into between the Texas Department of Health
(TDH) and AMERICAID Texas, Inc., dba Americaid Community Care (HMO), to amend
the 2000 Contract for Services between the Texas Department of Health and HMO in
the Dallas Service Area. The effective date of this Amendment is the date TDH
signs this Amendment. All other contract provisions remain in full force and
effect.

1.       ARTICLE II & IV is amended by adding the new BOLD AND ITALICIZED
         language and deleting the stricken language as follows:

         2.0               DEFINITION

                           CLEAN CLAIM MEANS A CLAIM SUBMITTED BY A PHYSICIAN OR
                           PROVIDER FOR MEDICAL CARE OR HEALTH CARE SERVICES
                           RENDERED TO AN ENROLLEE, WITH DOCUMENTATION
                           REASONABLY NECESSARY FOR THE HMO OR SUBCONTRACTED
                           CLAIMS PROCESSOR TO PROCESS THE CLAIM, AS SET FORTH
                           IN 28 TAC SECTION 21.2802(4) AND TO THE EXTENT THAT
                           IT IS NOT IN CONFLICT WITH THE PROVISIONS OF THIS
                           CONTRACT.

         4.10              CLAIMS PROCESSING REQUIREMENTS

         4.10.1            HMO AND CLAIMS PROCESSING SUBCONTRACTORS MUST COMPLY
                           WITH 28 TAC SECTIONS 21.2801 THROUGH 21.2816
                           "SUBMISSION OF CLEAN CLAIMS" WITH THE EXCEPTION OF 28
                           TAC SECTIONS 21.2802 (25) AND 21.2807 (b) (3) & (4),
                           AND TO THE EXTENT THEY ARE NOT IN CONFLICT WITH
                           PROVISIONS OF THIS CONTRACT.

         4.10.2            HMO MUST USE A TDH APPROVED OR IDENTIFIED CLAIM
                           FORMAT THAT CONTAINS ALL DATA FIELDS FOR FINAL
                           ADJUDICATION OF THE CLAIM. THE REQUIRED DATA FIELDS
                           MUST BE COMPLETE AND ACCURATE. THE TDH REQUIRED DATA
                           FIELDS ARE IDENTIFIED IN TDH'S "HMO ENCOUNTER DATA
                           CLAIMS SUBMISSION MANUAL."

4.10.3            HMO and claims processing subcontractors must comply with
                  TDH's Texas MEDICAID Managed Care Claims Manual (Claims
                  Manual), which contains TDH's claims processing requirements.
                  HMO must comply with any changes to the Claims Manual with
                  appropriate notice of changes from TDH.

4.10.4            HMO must forward claims submitted to HMO in error to either:
                  1) the correct HMO, if the correct HMO can be determined from
                  the claim or is otherwise known to HMO; 2) the State's claims
                  administrator; or 3) the provider who submitted the claim in
                  error, along with an explanation of why the claim is being
                  returned.

4.10.5            HMO must not pay any claim submitted by a provider who has
                  been excluded or suspended from the Medicare or Medicaid
                  programs for fraud and abuse when HMO has knowledge of the
                  exclusion or suspension.

4.10.6            All provider clean claims must be adjudicated (finalized as
                  paid or denied adjudicated) within 30 days from the date the
                  claim is received by HMO. HMO must pay providers interest on
                  a clean claim which is not adjudicated within 30 days from
                  the date the claim is received by HMO or becomes clean at a
                  rate of 1.5% per month (18% annual) for each month the clean
                  claim remains unadjudicated. HMO will be held to a minimum
                  performance level of 90% of all clean claims paid or denied
                  within 30 days of receipt and 99% of all clean claims paid or
                  denied within 90 days of receipt. Failure to meet these
                  performance levels is a default under this contract and could
                  lead to damages or sanctions as outlined in Article XVII. The
                  performance levels are subject to changes if required to
                  comply with federal and state laws or regulations.

4.10.6.1          All claims and appeals submitted to HMO and claims processing
                  subcontractors must be paid-adjudicated (clean claims),
                  denied-adjudicated (clean claims), or denied for additional
                  information (unclean claims) to providers within 30 days from
                  the date the claim is received by HMO. Providers must be sent
                  a written notice for each claim that is denied for additional
                  information (unclean claims) identifying the claim, all
                  reasons why the claim is being denied, the date the claim was
                  received by HMO, all information required from the provider in
                  order for HMO to adjudicate the claim, and the date by which
                  the requested information must be received from the provider.

4.10.6.2          Claims that are suspended (pended internally) must be
                  subsequently paid-adjudicated, denied-adjudicated, or denied
                  for additional information (pended externally) within 30 days
                  from date of receipt. No claim can be suspended for a period
                  exceeding 30 days from date of receipt of the claim.
4.10.6.3          HMO must identify each data field of each claim form that is
                  required from the provider in order for HMO to adjudicate the
                  claim. HMO must inform all network providers about the
                  required fields no later than 30 days prior to the effective
                  date of the contract or as a provision within HMO/provider
                  contract. Out-of-network providers must be informed of all
                  required fields if the claim is denied for additional
                  information. The required fields must include those required
                  by HMO and TDH.

4.10.7            HMO is subject to Article XVI, Default and Remedies, for
                  claims that are not processed on a timely basis as required by
                  this contract and the Claims Manual. Notwithstanding the
                  provisions of Articles 4.10.4, 4.10.4.1 and 4.10.4.2, HMO's
                  failure to adjudicate (paid, denied, or external pended) at
                  least ninety percent (90%) of all claims within thirty (30)
                  days of receipt and ninety-nine percent (99%) within ninety
                  (90) days of receipt for the contract year to date is a
                  default under Article XVI of this contract.

4.10.8            HMO must comply with the standards adopted by the U.S.
                  Department of Health and Human Services under the Health
                  Insurance Portability and Accountability Act of 1996
                  submitting and receiving claims information through electronic
                  data interchange (EDI) that allows for automated processing
                  and adjudication of claims within two or three years, as
                  applicable, from the date the rules promulgated under HIPAA
                  are adopted.

4.10.9            For claims requirements regarding retroactive PCP changes for
                  mandatory Members, see Article 7.8.12.2.

AGREED AND SIGNED by an authorized representative of the parties on April 2
2001.

TEXAS DEPARTMENT OF HEALTH                     AMERICAID Texas, Inc., dba
                                               Americaid Community Care

By: /s/ Charles E. Bell, M.D.                  By: /s/ James D. Donovan
    ---------------------------------              -----------------------------
    Charles E. Bell, M.D.                          James D. Donovan, Jr.
    Executive Deputy Commissioner of Health        President and CEO

Approved as to Form:                           TDH DOC. NO. 7526032317* 01-02A

/s/ Mary Ann Salvin
-------------------------------.
Office of General Counsel
<PAGE>
\
                                 AMENDMENT NO. 2
                                     TO THE
                           2000 CONTRACT FOR SERVICES
                                    BETWEEN
                     THE TEXAS DEPARTMENT OF HEALTH AND HMO

This Amendment No. 2 is entered into between the Texas Department of Health
(TDH) and AMERICAID Texas, Inc. (HMO) in the Dallas Service Area, to amend the
2000 Contract for Services between the Texas Department of Health and HMO. The
effective date of this Amendment is the date TDH Signs this Amendment. All other
contract provisions remain in full force and effect. The Parties agree to amend
the Contract as follows:

Article XII is amended to read as follows:

12.8.1   In addition, data files are due to TDH or its designee no later than
         the fifth working day following the end of each month. See Utilization
         Data Transfer Encounter Submission Manual for submission instructions.
         The BH utilization report and data file submission instructions may
         periodically be updated by TDH to facilitate clear communication to the
         health plans.

12.9.1   In addition, data files are due to TDH or its designee no later than
         the fifth working day following the end of each month. See Utilization
         Data Transfer Encounter Submission Manual for submission instructions.
         The PH utilization report and data file submission instructions may
         periodically be updated by TDH to facilitate clear communication to the
         health plan.

AGREED AND SIGNED by an authorized representative of the parties on August 23,
2001.

Texas Department of Health                         AMERICAID Texas Inc.

By: /s/ Charles E. Bell M.D.                       By: /s/ James D. Donovan, Jr.
    ---------------------------------------        -------------------------
    Charles E. Bell M.D.                           James D. Donovan, Jr.
    Executive Deputy Commissioner of Health        President and CEO

Approved as to Form:

Sda 8/20/01
Office of General Counsel
<PAGE>

                                 AMENDMENT NO. 3
                                     TO THE
                           2000 CONTRACT FOR SERVICES
                                     BETWEEN
                  HEALTH AND HUMAN SERVICES COMMISSION AND HMO

This Amendment No. 3 is entered into between the Health and Human Services
Commission (HHSC) and AMERIGROUP Texas, Inc. (HMO), to amend the Contract for
Services between the Health and Human Services Commission and HMO in the Dallas
Service Area. The effective date of this amendment is September 1, 2001. The
Parties agree to amend the Contract as follows:

1.       HHSC and HMO acknowledge the transfer of responsibility and the
         assignment of the original Contract for Services from TDH to HHSC on
         September 1, 2001. Where the original Contract for Services and any
         Amendment to the original Contract for Services assigns a right, duty,
         or responsibility to TDH, that right, duty, or responsibility may be
         exercised by HHSC or its designee.

2.       The 2000 Contract for Services entered into between the Health and
         Human Services Commission and AMERICAID Texas, Inc. in the Dallas
         Service Area is hereby amended to reflect the name change of AMERICAID
         Texas, Inc. to AMERIGROUP Texas, Inc. (HMO). All requisite documents
         have been filed with the Texas Department of Insurance, the Texas
         Secretary of State, and the State Comptroller's Office.

         This Amendment No. 3 hereby substitutes AMERIGROUP Texas, Inc. in the
         place of AMERICAID Texas, Inc. in the 2000 Contract for Services
         referenced above. All terms and conditions of the contracts and the
         duly executed amendments thereto remain in full force and effect.

3.       Articles II, III, VI, VII, VIII, IX, X, XII, XIII, XV, XVI, XVIII and
         XIX are amended as follows:

2.0               DEFINITIONS

                  Chemical Dependency Treatment Facility means a facility
                  licensed by the Texas Commission on Alcohol and Drug Abuse
                  (TCADA) under Sec. 464.002 of the Health and Safety Code to
                  provide chemical dependency treatment.

                  Chemical Dependency Treatment means treatment provided for a
                  chemical dependency condition by a Chemical Dependency
                  Treatment Facility, Chemical Dependency Counselor or Hospital.

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                  Chemical Dependency Condition means a condition which meets at
                  least three of the diagnostic criteria for psychoactive
                  substance dependence in the American Psychiatric Association's
                  Diagnostic and Statistical Manual of Mental Disorders (DSM
                  IV).

                  Chemical Dependency Counselor means an individual licensed by
                  TCADA under Sec. 504 of the Occupations Code to provide
                  chemical dependency treatment or a master's level therapist
                  (LMSW-ACP, LMFT or LPC) or a master's level therapist
                  (LMSW-ACP, LMFT or LPC) with a minimum of two years of post
                  licensure experience in chemical dependency treatment.

                  Experience rebate means the portion of the HMO's net income
                  before taxes (financial Statistical Report, Part 1, Line 7)
                  that is returned to the state in accordance with Article
                  13.2.1.

                  Joint Interface Plan (JIP) means a document used to
                  communicate basic system interface information of the Texas
                  Medicaid Administrative System (TMAS) among and across State
                  TMAS Contractors and Partners so that all entities are aware
                  of the interfaces that affect their business. This information
                  includes: file structure, data elements, frequency, media,
                  type of file, receiver and sender of the file, and file I.D.
                  The JIP must include each of the HMO's interfaces required to
                  conduct State TMAS business. The JIP must address the
                  coordination with each of the Contractor's interface partners
                  to ensure the development and maintenance of the interface;
                  and the timely transfer of required data elements between
                  contractors and partners.

3.5               RECORDS REQUIREMENTS AND RECORDS RETENTION

3.5.8             The use of Medicaid funds for abortion is prohibited unless
                  the pregnancy is the result of a rape, incest, or continuation
                  of the pregnancy endangers the life of the woman. A physician
                  must certify in writing that based on his/her professional
                  judgment, the life of the mother would be endangered if the
                  fetus were carried to term. HMO must maintain a copy of the
                  certification for at least three years.

6.6               BEHAVIORAL HEALTH CARE SERVICES - SPECIFIC REQUIREMENTS

6.6.9             Chemical dependency treatment must conform to the standards
                  set forth in the Texas Administrative Code, Title 28, Part
                  1,Chapter 3, Subchapter HH.

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6.8               TEXAS HEALTH STEPS (EPSDT)

6.8.3             Provider Education and Training. HMO must provide appropriate
                  training to all network providers and provider staff in the
                  providers' area of practice regarding the scope of benefits
                  available and the THSteps program. Training must include
                  THSteps benefits, the periodicity schedule for THSteps
                  checkups and immunizations, the required elements of a THSteps
                  medical screen, providing or arranging for all required lab
                  screening tests (including lead screening), and Comprehensive
                  Care Program (CCP) services available under the THSteps
                  program to Members under age 21 years. Providers must also be
                  educated and trained regarding the requirements imposed upon
                  the department and contracting HMOs under the Consent Decree
                  entered in Frew vs. McKinney, et al., Civil Action No.
                  3:93CV65, in the United States District Court for the Eastern
                  District of Texas, Paris Division. Providers should be
                  educated and trained to treat each THSteps visit as an
                  opportunity for a comprehensive assessment of the Member. HMO
                  must report provider education and training regarding THSteps
                  in accordance with Article 7.4.4.

7.2               PROVIDER CONTRACTS

7.2.5             HHSC reserves the right and retains the authority to make
                  reasonable inquiry and conduct investigations into provider
                  and Member complaints against HMO or any intermediary entity
                  with whom HMO contracts to deliver health care services under
                  this contract. HHSC may impose appropriate sanctions and
                  contract remedies to ensure HMO compliance with the provisions
                  of this contract.

7.5               MEMBER PANEL REPORTS

7.5               HMO must furnish each PCP with a current list of enrolled
                  Members enrolled or assigned to that Provider no later than 5
                  working days after HMO receives the Enrollment File from the
                  Enrollment Broker each month.

7.7               PROVIDER QUALIFICATIONS - GENERAL

                  The providers in HMO network must meet the following
                  qualifications:

FQHC              A Federally Qualified Health Center meets the standards
                  established by federal rules and procedures. The FQHC must
                  also be an eligible provider enrolled in the Medicaid.

Physician         An individual who is licensed to practice medicine as an MD or
                  a DO in the State of Texas either as a primary care provider
                  or in the area of specialization under which they will provide
                  medical services under

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                  contract with HMO; who is a provider enrolled in the Medicaid;
                  who has a valid Drug Enforcement Agency registration number,
                  and a Texas Controlled Substance Certificate, if either is
                  required in their practice.

Hospital          An institution licensed as a general or special hospital by
                  the State of Texas under Chapter 241 of the Health and Safety
                  Code which is enrolled as a provider in the Texas Medicaid
                  Program. HMO will require that all facilities in the network
                  used for acute inpatient specialty care for people under age
                  21 with disabilities or chronic or complex conditions will
                  have a designated pediatric unit; 24 hour laboratory and blood
                  bank availability; pediatric radiological capability; meet
                  JCAHO standards; and have discharge planning and social
                  service units.

Non-Physician     An individual holding a license issued by the applicable
Practitioner      licensing agency of the State of Texas who is enrolled in the
Provider          Texas Medicaid Program.

Clinical          An entity having a current certificate issued under the
Laboratory        Federal Clinical Laboratory Improvement Act (CLIA), and is
                  enrolled in the Texas Medicaid Program.

Rural Health      An institution which meets all of the criteria for designation
Clinic (RHC)      as a rural health clinic and is enrolled in the Texas Medicaid
                  Program.

Local Health      A local health department established pursuant to Health and
Department        Safety Code, Title 2, Local Public Health Reorganization Act
                  Section 121.031 ff.

Non-Hospital      A provider of health care services which is licensed and
Facility Provider credentialed to provide services and is enrolled in the Texas
                  Medicaid Program.

School Based      Clinics located at school campuses that provide on site
Health Clinic     primary and preventive care to children and adolescents.
(SBHC)

Chemical          A facility licensed by the Texas Commission on Alcohol and
Dependency        Drug Abuse (TCADA) under Sec. 464.002 of the Health and Safety
Treatment         Code to provide chemical dependency treatment.
Facility

Chemical          An individual licensed by TCADA under Sec. 504 of the
Dependency        Occupations Code to provide  chemical dependency treatment or
Counselor         a master's level therapist (LMSW-ACP, LMFT or LPC) with a
                  minimum of two years of post-licensure experience in chemical
                  dependency treatment.

7.10              SPECIALTY CARE PROVIDERS

7.10.1            HMO must maintain specialty providers,- actively serving
                  within that specialty, including pediatric specialty providers
                  and chemical dependency specialty providers, within the
                  network in sufficient numbers and areas of practice to meet
                  the needs of all Members requiring specialty care services.

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7.11              SPECIAL HOSPITALS AND SPECIALTY CARE FACILITIES

7.11.1            HMO must include all medically necessary specialty services
                  through its network specialists, sub-specialists and specialty
                  care facilities (e.g., children's hospitals, licensed chemical
                  dependency treatment facilities and tertiary care hospitals).

8.2               MEMBER HANDBOOK

8.2.1             HMO must mail each newly enrolled Member a Member Handbook no
                  later than 5 working days after HMO receives the Enrollment
                  File. The Member Handbook must be written at a 4th - 6th grade
                  reading comprehension level. The Member Handbook must contain
                  all critical elements specified by TDH. See Appendix D,
                  Required Critical Elements, for specific details regarding
                  content requirements. HMO must submit a Member Handbook to TDH
                  for approval prior to the effective date of the contract
                  unless previously approved (see Article 3.4.1 regarding the
                  process for plan materials review).

8.4               MEMBER ID CARDS

8.4.2             HMO must issue a Member Identification Card (ID) to the Member
                  within 5 working days from the date the HMO receives the
                  monthly Enrollment File from the Enrollment Broker. The ID
                  Card must include, at a minimum, the following: Member's name;
                  Member's Medicaid number; either the issue date of the card or
                  effective date of the PCP assignment; PCP's name, address, and
                  telephone number; name of HMO; name of IPA to which the
                  Member's PCP belongs, if applicable; the 24-hour, seven (7)
                  day a week toll-free telephone number operated by HMO; the
                  toll-free number for behavioral health care services; and
                  directions for what to do in an emergency. The ID Card must be
                  reissued if the Member reports a lost card, there is a Member
                  name change, if Member requests a new PCP, or for any other
                  reason which results in a change to the information disclosed
                  on the ID Card.

9.2               MARKETING ORIENTATION AND TRAINING

9.2.1             HMO must require that all HMO staff having direct marketing
                  contact with Members as part of their job duties and their
                  supervisors satisfactorily complete HHSC's marketing
                  orientation and training program, conducted by HHSC or health
                  plan staff trained by HHSC, prior to engaging in marketing
                  activities on behalf of HMO. HHSC will notify HMO of scheduled
                  orientations.

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<PAGE>

9.2.2             Marketing Policies and Procedures. HMO must adhere to the
                  Marketing Policies and Procedures as set forth by the Health
                  and Human Services Commission.

10.1              MODEL MIS REQUIREMENTS

10.1.3            HMO must have a system that can be adapted to the change in
                  Business Practices/Policies within the timeframe negotiated
                  between HHSC and the HMO.

10.1.3.1          HMO must notify and advise BIR of major systems changes and
                  implementations. HMO is required to provide an implementation
                  plan and schedule of proposed system change at the time of
                  this notification.

10.1.3.2          BIR conducts a Systems Readiness test to validate the
                  contractor's ability to meet the MMIS requirements. This is
                  done through systems demonstration and performance of specific
                  MMIS and subsystem functions. The System Readiness test may
                  include a desk review and/or an onsite review and is conducted
                  for the following events:

                  -    A new plan is brought into the program

                  -    An existing plan begins business in a new SDA

                  -    An existing plan changes location

                  -    An existing plan changes their processing system

10.1.3.3          Desk Review. HMO must complete and pass systems desk review
                  prior to onsite systems testing conducted by HHSC.

10.1.3.4          Onsite Review. HMO is required to provide a detailed and
                  comprehensive Disaster and Recovery Plan, and complete and
                  pass an onsite Systems Facility Review during the State's
                  onsite systems testing.

10.1.3.5          HMO is required to provide a Corrective Action Plan in
                  response to HHSC Systems Readiness Testing Deficiencies no
                  later than 10 working days after notification of deficiencies
                  by HHSC.

10.1.3.6          HMO is required to provide representation to attend and
                  participate in the HHSC Systems Workgroup as a part of the
                  weekly Systems Scan Call.

10.1.9            HMO must submit a joint interface plan (JIP) in a format
                  specified by HHSC. The JIP will include required information
                  on all contractor interfaces that support the Medicaid
                  Information Systems. The submission of the JIP will be in

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<PAGE>

                  coordination with plan's initial Readiness Review and any
                  major systems change thereafter.

10.3              ENROLLMENT ELIGIBILITY SUBSYSTEM

(11)              Send PCP assignment updates to HHSC or its designee, in the
                  format specified by HHSC or its designee. Updates can be sent
                  as often as daily but must be sent at least weekly.

12.1              FINANCIAL REPORTS

12.1.1            MCFS Report. HMO must submit the Managed Care Financial
                  Statistical Report (MCFS) included in Appendix I. The report
                  must be submitted to HHSC no later than 30 days after the end
                  of each state fiscal year quarter (i.e., Dec. 30, March 30,
                  June 30, Sept. 30) and must include complete and updated
                  financial and statistical information for each month of the
                  state fiscal year-to-date reporting period. The MCFS Report
                  must be submitted for each claims processing subcontractor in
                  accordance with this Article. HMO must incorporate financial
                  and statistical data received by its delegated networks (IPAs,
                  ANHCs, Limited Provider Networks) in its MCFS Report.

12.1.4            Final MCFS Reports. HMO must file two Final Managed Care
                  Financial- Statistical Reports after the end of FY2001 and
                  again after the end of FY2002. The first final report must
                  reflect expenses incurred through the 90lh day after the end
                  of FY2001 for FY2001 and again after the end of FY2002 for
                  FY2002. The first final report must be filed on or before the
                  120th day after the end of each state fiscal year. The second
                  final report must reflect data completed through the 334th day
                  after the end of each state fiscal year and must be filed on
                  or before the 365th day following the end of each state fiscal
                  year

12.5              PROVIDER NETWORK REPORTS

12.5.2            Provider Termination Report. HMO must submit a monthly report
                  which identifies any providers who cease to participate in
                  HMO's provider network, either voluntarily or involuntarily.
                  The report must be submitted to TDH in the format specified by
                  TDH. HMO will submit the report no later than thirty (30) days
                  after the end of the reporting month. The information must
                  include the

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<PAGE>

                  provider's name, Medicaid number, the reason for the
                  provider's termination, and whether the termination was
                  voluntary or involuntary.

12.5.3            PCP Error Report. HMO must submit to the Enrollment Broker an
                  electronic file summarizing changes in PCP assignments. The
                  file must be submitted in a format specified by HHSC and can
                  be submitted as often as daily but must be submitted at least
                  weekly. When HMO receives a PCP assignment Error Report /File,
                  HMO must send corrections to HHSC or its designee within five
                  working days.

12.13             EXPEDITED PRENATAL OUTREACH REPORT

12.13             HMO must submit the Expedited Prenatal Outreach Report for
                  each monthly reporting period in accordance with a format
                  developed by HHSC in consultation with the HMOs. The report
                  must include elements that demonstrate the level of effort and
                  the outcomes of the HMO in outreaching to pregnant women for
                  the purpose of scheduling and/or completing the initial
                  obstetrical examination prior to 14 days after the receipt of
                  the daily enrollment file by the HMO. Each monthly report is
                  due by the last day of the month following each monthly
                  reporting period.

13.1              CAPITATION AMOUNTS

13.1.2            Delivery Supplemental Payment (DSP). The monthly capitation
                  amounts and the DSP amount are listed below.

<TABLE>
<CAPTION>
----------------------------------------------------------------------
            Risk Group                      Monthly Capitation Amounts
----------------------------------------------------------------------
<S>                                         <C>
TANF Adults                                       $   195.59
----------------------------------------------------------------------
TANF Children > 12 Months of Age                  $    78.72
----------------------------------------------------------------------
Expansion Children > 12 Months of Age             $    77.18
----------------------------------------------------------------------
Newborns < or = 12 Months of Age                  $   353.41
----------------------------------------------------------------------
TANF Children < or = 12 Months of Age             $   353.41
----------------------------------------------------------------------
Expansion Children < or = 12 Months of Age        $   353.41
----------------------------------------------------------------------
Federal Mandate Children                          $    56.61
----------------------------------------------------------------------
CHIP Phase I                                      $    75.19
----------------------------------------------------------------------
Pregnant Women                                    $   226.93
----------------------------------------------------------------------
Disabled/Blind Administration                     $    14.00
----------------------------------------------------------------------
</TABLE>

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<PAGE>

                  Delivery Supplemental Payment: A one-time per pregnancy
                  supplemental payment for each delivery shall be paid to HMO as
                  provided below in the following amount: $3,076.23.

13.1.3            HHSC will re-examine the capitation rates paid to HMO under
                  this contract during the first year of the contract period and
                  will provide HMO with capitation rates for the second year of
                  the contract period no later than 30 days before the date of
                  the one-year anniversary of the contract's effective date.
                  Capitation rates for state fiscal year 2001 will be
                  re-examined based on the most recent available traditional
                  Medicaid cost data for the contracted risk groups in the
                  service area, trended forward and discounted.

13.1.3.1          Once HMO has received its proposed capitation rates from HHSC
                  for the second year of this contract, HMO may terminate this
                  contract as provided in Article 18.1.6.

13.1.4            The monthly premium payment to HMO is based on monthly
                  enrollments adjusted to reflect money damages set out in
                  Article 18.8 and adjustments to premiums in Article 13.5.

13.1.5            The monthly premium payments will be made to HMO no later than
                  the 10th working day of the month for which premiums are paid.
                  HMO must accept payment for premiums by direct deposit into an
                  HMO account.

13.1.6            Payment of monthly capitation amounts is subject to
                  availability of appropriations. If appropriations are not
                  available to pay the full monthly capitation amounts, HHSC
                  will equitably adjust capitation amounts for all participating
                  HMOs, and reduce scope of service requirements as appropriate.

13.1.7            HMO renewal rates reflect program increases appropriated by
                  the 77th legislature for physician (to include THSteps
                  providers) and outpatient facility services. HMO must report
                  to TDH any change in rates for participating physicians (to
                  include THSteps providers) and outpatient facilities resulting
                  from this increase. The report must be submitted to HHSC at
                  the end of the first quarter of the FY2002 contract years
                  according to the deliverables matrix schedule set for HMO.

13.2              EXPERIENCE REBATE TO THE STATE

13.2.1            For the .contract Period. HMO must pay to TDH an experience
                  rebate calculated in accordance with the tiered rebate method
                  listed below based on the excess of allowable HMO STAR
                  revenues over allowable HMO STAR expenses

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                  as measured by any positive amount on Line 7 of "Part 1:
                  Financial Summary, All Coverage Groups Combined" of the Final
                  Managed Care Financial Statistical Report set forth in
                  Appendix I, as reviewed and confirmed by TDH. TDH reserves the
                  right to have an independent audit performed to verify the
                  information provided by HMO.

<TABLE>
<CAPTION>
                          Graduated Rebate
-----------------------------------------------------------------------
Net Income Before Taxes as
a Percentage of Revenues               HMO Share            State Share
-----------------------------------------------------------------------
<S>                                    <C>                  <C>
         0% -  3%                        100%                    0%
-----------------------------------------------------------------------
   Over  3% -  7%                         75%                   25%
-----------------------------------------------------------------------
   Over 7%  - 10%                         50%                   50%
-----------------------------------------------------------------------
   Over 10% - 15%                         25%                   75%
-----------------------------------------------------------------------
   Over 15%                                0%                  100%
-----------------------------------------------------------------------
</TABLE>

13.2.2.1          The experience rebate for the HMO shall be calculated by
                  applying the experience rebate formula in Article 13.2.1 to
                  the sum of the net income before taxes (Financial Statistical
                  Report, Part 1, Line 7) for all STAR Medicaid service areas
                  contracted between the State and HMO.

13.2.4            Population-Based Initiatives (PBIs) and Experience Rebates:
                  HMO may subtract from an experience rebate owed to the State,
                  expenses for population-based health initiatives that have
                  been approved by HHSCp. A population-based initiative (PBI) is
                  a project or program designed to improve some aspect of
                  quality of care, quality of life, or health care knowledge for
                  the Medicaid population that may also benefit the community as
                  a whole. Value-added service does not constitute a PBI.
                  Contractually required services and activities do not
                  constitute a PBI.

13.2.5            There will be two settlements for payment(s) of the experience
                  rebate for FY 2000-2001 and two settlements for payment(s) for
                  the experience rebate for FY 2002. The first settlement for
                  the specified time period shall equal 100 percent of the
                  experience rebate as derived from Line 7 of Part 1 (Net Income
                  Before Taxes) of the first final Managed Care Financial
                  Statistical (MCFS) Report and shall be paid on the same day
                  the first final MCFS Repot is submitted to HHSC for the
                  specified tune period. The second settlement shall be an
                  adjustment to the first settlement and shall be paid to HHSC
                  on the same day that the second final MCFS Report is submitted
                  to HHSC for that specified time period

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<PAGE>

                  if the adjustment is a payment from HMO to HHSC. If the
                  adjustment is a payment from HHSC to HMO, HHSC shall pay such
                  adjustment to HMO within thirty (30) days of receipt of the
                  second final MCFS Report. HHSC or its agent may audit or
                  review the MCFS report. If HHSC determines that corrections to
                  the MCFS reports are required, based on a HHSC audit/review of
                  other documentation acceptable to HHSC, to determine an
                  adjustment to the amount of the second settlement, then final
                  adjustment shall be made within two years from the date that
                  HMO submits the second final MCFS report. HMO must pay the
                  first and second settlements on the due dates for the first
                  and second final MCFS reports respectively as identified in
                  Article 12.1.4. HHSC may adjust the experience rebate if HHSC
                  determines HMO has paid affiliates amounts for goods or
                  services that are higher than the fair market value of the
                  goods and services in the service area. Fair market value may
                  be based on the amount HMO pays a non-affiliate(s) or the
                  amount another HMO pays for the same or similar service in the
                  service area. HHSC has final authority in auditing and
                  determining the amount of the experience rebate.

13.3              PERFORMANCE OBJECTIVES\INCENTIVES

13.3.1            Preventive Health Performance Objectives. Preventive Health
                  Performance Objectives are contained in this contract at
                  Appendix K. HMO must accomplish the performance objectives or
                  a designated percentage in order to be eligible for payment of
                  financial incentives. Performance objectives are subject to
                  change. TDH will consult with HMO prior to revising
                  performance objectives.

13.3.6            Payment of performance objective bonus is contingent upon
                  availability of appropriations. If appropriations are not
                  available to pay performance objective bonuses as set out
                  below, TDH will equitably distribute all available funds to
                  each HMO that has accomplished performance objectives.

13.3.7            In addition to the capitation amounts set forth in Article
                  13.1.2, a performance premium of two dollars ($2.00) per
                  Member month will be allocated by TDH for the accomplishment
                  of performance objectives.

13.3.8            The HMO must submit the Performance Objectives Report and the
                  Detailed Data Element Report as referenced in Article 13.3.2,
                  within 150 days from the end of each State fiscal year.
                  Performance premiums will be paid to HMO within 120 days after
                  the State receives and validates the data contained in each
                  required Performance Objectives Report.

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<PAGE>

13.3.9            The performance objective allocation for HMO shall be assigned
                  to each performance objective, described in Appendix K, in
                  accordance with the following percentages;

<TABLE>
<CAPTION>
                                     Percent of Performance Objective
     EPSDT SCREENS                         Incentive Fund
---------------------------------------------------------------------
<S>                                  <C>
1. < 12 months                                  12%
---------------------------------------------------------------------
2. 12 to 24 months                              12%
---------------------------------------------------------------------
3. 25 months - 20 years                         20%
---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                     Percent of Performance Objective
  IMMUNIZATIONS                             Incentive Fund
---------------------------------------------------------------------
<S>                                  <C>
4. < 12 months                                    7%
---------------------------------------------------------------------
5. 12 to 24 months                                5%
---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                     Percent of Performance Objective
  ADULT ANNUAL VISITS                       Incentive Fund
---------------------------------------------------------------------
<S>                                  <C>
6. Adult Annual Visits                            3%
---------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                     Percent of Performance Objective
    PREGNANCY VISITS                        Incentive Fund
---------------------------------------------------------------------
<S>                                  <C>
7. Initial prenatal exam                          15%
---------------------------------------------------------------------
8. Visits by Gestational Age                      14%
---------------------------------------------------------------------
9. Postpartum visit                               12%
---------------------------------------------------------------------
</TABLE>

13.3.10           Compass 21 Encounter Data Conversion Performance Incentive. A
                  Compass 21 encounter data conversion performance incentive
                  payment will be paid by the State to each HMO that achieves
                  the identified conversion performance standard for at least
                  one month in the first quarter of SFY 2002 as demonstration of
                  successful conversion to the C21 system. The encounter data
                  conversion performance standard is as follows:

<TABLE>
<CAPTION>
                                                  Encounter Data Conversion
         Performance Objective                      Performance Incentive
---------------------------------------------------------------------------
<S>                                               <C>
Percentage of encounters submitted that are                 65%
successfully accepted into C21
---------------------------------------------------------------------------
</TABLE>

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<PAGE>

13.3.10.1         The amount of the incentive will be based on the total amount
                  identified by the state for the encounter data conversion
                  performance incentive pool ("Pool"). The pool will be equally
                  distributed between all the HMOs that achieve the performance
                  objective within the first quarter of SPY 2002. HMOs with
                  multiple contracts with HHSC are eligible to receive only one
                  allocation from the Pool. Required HMO performance for the
                  identified objectives will be verified by HHSC for accuracy
                  and completeness. The incentive will be paid only after HHSC
                  has verified that HMO performance has met the required
                  performance standard. Payments will be made in the second
                  quarter of the fiscal year.

13.5.4            NEWBORN AND PREGNANT WOMAN PAYMENT PROVISIONS

13.5.4            Newborns who appear on the MAXIMUS daily enrollment file but
                  do not appear on the MAXIMUS monthly enrollment or adjustment
                  file before the end of the sixth month following the date of
                  birth will not be retroactively enrolled into the HMO. HHSC
                  will manually reconcile payment to the HMO for services
                  provided from the date of birth for TP45 and all other
                  eligibility categories of newborns. Payment will cover
                  services rendered from the effective date of the proxy ID
                  number when first issued by the HMO regardless of plan
                  assignment at the time the State-issued Medicaid ID number is
                  received.

15.6              ASSIGNMENT

15.6              This contract was awarded to HMO based on HMO's qualifications
                  to perform personal and professional services. HMO cannot
                  assign this contract without the written consent of HHSC. This
                  provision does not prevent HMO from subcontracting duties and
                  responsibilities to qualified subcontractors. If HHSC consents
                  to an assignment of this contract, a transition period of 90
                  days will run from the date the assignment is approved by HHSC
                  so that Members' services are not interrupted and, if
                  necessary, the notice provided for in Article 15.7 can be sent
                  to Members. The assigning HMO must also submit a transition
                  plan, as set out in Article 18.2.1, subject to HHSC's
                  approval.

16.3              DEFAULT BY HMO

16.3.14.1         REMEDIES AVAILABLE TO HHSC FOR THIS HMO DEFAULT

                  All of the listed remedies are in addition to all other
                  remedies available to HHSC by law or in equity, are joint and
                  several, and may be exercised concurrently or consecutively.
                  Exercise of any remedy in whole or in part does not limit HHSC
                  in exercising all or part of any remaining remedies.

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<PAGE>

                  For HMO's failure to meet any benchmark established by HHSC
                  under this contract, or for failure to meet improvement
                  targets, as identified by HHSC, HHSC may:

-    Remove all or part of the THSteps component from the capitation paid to
     HMO;

-    Terminate the contract if the applicable conditions set out in Article
     18.1.1 are met;

-    Suspend new enrollment as set out in Article 18.3;

-    Assess liquidated money damages as set out in Article 18.4; and/or

-    Require forfeiture of all or part of the TDI performance bond as set out in
     Article 18.9.

16.3.15           FAILURE TO PERFORM A MATERIAL DUTY OR RESPONSIBILITY

                  Failure of HMO to perform a material duty or responsibility as
                  set out in this contract is a default under this contract and
                  HHSC may impose one or more of the remedies contained within
                  its provisions and all other remedies available to HHSC by law
                  or in equity.

16.3.15.1         REMEDIES AVAILABLE TO HHSC FOR THIS HMO DEFAULT

                  All of the listed remedies are in addition to all other
                  remedies available to HHSC by law or in equity, are joint and
                  several, and may be exercised concurrently or consecutively.
                  Exercise of any remedy in whole or in part does not limit HHSC
                  in exercising ail or part of any remaining remedies.

                  For HMO's failure to perform an administrative function under
                  this contract, HHSC may:

-    Terminate the contract if the applicable conditions set out in Article
     18.1.1 are met;

-    Suspend new enrollment as set out in Article 18.3;

-    Assess liquidated money damages as set out in Article 18.4: and/or

-    Require forfeiture of all or part of the TDI performance bond as set out in
     Article 18.9.

18.1.6            TERMINATION BY HMO

18.1.6            HMO may terminate this contract if HHSC fails to pay HMO as
                  required under Article XIII of this contract or otherwise
                  materially defaults in its duties and responsibilities under
                  this contract, or by giving notice no later than 30 days after
                  receiving the capitation rates for the second contract year.
                  Retaining premium, recoupment, sanctions, or penalties that
                  are allowed under this contract or that result from HMO's
                  failure to

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                                       13
<PAGE>

                  perform or HMO's default under the terms of this contract is
                  not cause for termination.

18.2              DUTIES OF CONTRACTING PARTIES UPON TERMINATION

18.2.2            If the contract is terminated by HHSC for any reason other
                  than federal or state funds for the Medicaid program no longer
                  being available or if HMO terminates the contract based on
                  lower capitation rates for the second contract year as set out
                  in Article 13.1.3.1:

18.2.3            If the contract is terminated by HMO for any reason other than
                  based on lower capitation rates for the second contract years
                  as set out in Article 13.1.3.1:

Article XIX       TERM

19.1              The effective date of this contract is September 1, 2000. This
                  contract will terminate on August 31, 2002, unless terminated
                  earlier as provided for elsewhere in the contract.

4.       The Appendices are amended by replacing page 10 of Appendix A
         "Standards for Quality Improvement Programs" to incorporate a change in
         item F, number 1 on recredentialing.

5.       The Appendices are amended by deleting Appendix D, "Required Critical
         Elements," and replacing it with new Appendix D, "Required Critical
         Elements", as attached.

AGREED AND SIGNED by an authorized representative of the parties on August
24, 2001.

HEALTH AND HUMAN SERVICES COMMISSION                   AMERIGROUP Texas, Inc.

By: /s/ Don A. Gilbert                            By: /s/ James D. Donovan, Jr.
    ------------------                                -------------------------
    Don A. Gilbert                                    James D. Donovan, Jr.
                                                      President and CEO

Approved as to Form:

/s/ [ILLEGIBLE]
----------------------------
Office of General Counsel

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                                       14

<PAGE>

                                 AMENDMENT NO. 4
                                     TO THE
                           2000 CONTRACT FOR SERVICES
                                     BETWEEN
                THE HEALTH AND HUMAN SERVICES COMMISSION AND HMO

This Amendment No. 4 is entered into between the Health and Human Services
Commission (HHSC) and AMERIGROUP Texas, Inc. (HMO) in the Dallas Service Area,
to amend the 2000 Contract for Services between the Health and Human Services
Commission and HMO. The effective date of this Amendment is the date HHSC Signs
this Amendment. All other contract provisions remain in full force and effect.
The Parties agree to amend the Contract as follows:

1.       ARTICLE XVIII IS AMENDED TO READ AS FOLLOWS:

15.2              AMENDMENT AND CHANGE REQUEST PROCESS

15.2.1            HHSC and HMO may amend this contract if reductions in funding
                  or appropriations make full performance by either party
                  impracticable or impossible, and amendment could provide a
                  reasonable alternative to termination. If HMO does not agree
                  to the amendment, the contract may be terminated under Article
                  XVIII.

15.2.2            This contract must be amended if either party discovers a
                  material omission of a negotiated or required term, which is
                  essential to the successful performance or maintaining
                  compliance with the terms of the contract. The party
                  discovering the omission must notify the other party of the
                  omission in writing as soon as possible after discovery. If
                  there is a disagreement regarding whether the omission was
                  intended to be a term of the contract, the parties must submit
                  the dispute to dispute resolution under Article 15.9.

15.2.3            This contract may be amended at any time by mutual agreement.

15.2.4            All amendments to this contract must be in writing and signed
                  by both parties.

15.2.5            Any change in either party's obligations under this contract
                  ("Change") requires a written amendment to the contract that
                  is negotiated using the process outlined in Article 15.2.6.

15.2.6            Change Request Process.

15.2.6.1          If federal or state laws, rules, regulations, policies or
                  guidelines are adopted, promulgated, judicially interpreted or
                  changed, or if contracts

October 30, 2001

                                                                          1 of 3

<PAGE>

                  are entered into or changed, the effect of which is to alter
                  the ability of either party to fulfill its obligations under
                  this contract, the parties will promptly negotiate in good
                  faith, using the process outlined in Article 15.2.6,
                  appropriate modifications or alterations to the contract and
                  any appendix (appendices) or attachments(s) made a part of
                  this contract.

15.2.6.2          Change Order Approval Procedure

15.2.6.2.1        During the term of this contract, HHSC or HMO may propose
                  changes in the services, deliverables, or other aspects of
                  this contract ("Changes"), pursuant to the procedures set
                  forth in this article.

15.2.6.2.2        If HHSC proposes a Change, it shall deliver to the HMO a
                  written notice describing the proposed Change which includes
                  the State's estimated fiscal impact on the HMO, if available
                  ("Change Order Request"). HMO must respond to such proposal
                  within 30 calendar days of receipt by preparing and delivering
                  to HHSC, at no additional cost to HHSC a written document (a
                  "Change Order Response"), that specifies:

15.2.6.2.2.1      The financial impact, if any, of the Change Order Request on
                  the HMO and the manner in which such impact was calculated;

15.2.6.2.2.2      The effect, if any, of the Change Order Request on HMO's
                  performance of its obligations under this contract, including
                  the effect on the services or deliverables;

15.2.6.2.2.3      The anticipated time schedule for implementing the Change
                  Order Request; and

15.2.6.2.2.4      Any other information requested in the Change Order Request or
                  which is reasonably necessary for HHSC to make an informed
                  decision regarding the proposal.

15.2.6.2.3        If HMO proposes a Change, it must deliver a HMO Change Order
                  Request to HHSC that includes the proposed Change and
                  information described in Articles 15.2.6.2.2.1 - 15.2.6.2.2.4
                  for a Change Order Response. HHSC must respond to HMO within
                  30 calendar days of receipt of this information.

15.2.6.2.4        Upon HHSC's receipt of a Change Order Request or a Change
                  Order Response, the Parties shall negotiate a resolution of
                  the requested Change in good faith. The parties will exchange
                  information in good faith in an attempt to agree upon the
                  requested Change.

October 30, 2001

                                                                          2 of 3

<PAGE>

15.2.6.3          No Change to the services or deliverables or any other aspect
                  of this contract will become effective without the written
                  approval and execution of a mutually agreeable written
                  amendment to this contract by HHSC and the HMO. Under no
                  circumstances will the HMO be entitled to payment for any work
                  or services rendered under a Change Order that has not been
                  approved by HHSC in accordance with the Change Order
                  Procedures.

15.2.7            The implementation of an amendment to this contract is subject
                  to the approval of the Centers for Medicare and Medicaid
                  Services (CMS, formerly called HCFA).

2.       APPENDIX C: Appendix C is deleted in its entirety and is replaced by a
         new Appendix C which is Attachment No. 1 to this amendment. This
         amendment provides for the deletion of "Dental Benefits for Adults"
         services from the Dallas Service Area contract.

AGREED AND SIGNED by an authorized representative of the parties on
December 13, 2001.

Health and Human Services Commission          AMERIGROUP Texas, Inc.

By: /s/ Don A. Gilbert                        By: /s/ James D. Donoyan, Jr.
    ---------------------------                   -----------------------------
    Don A. Gilbert                                James D. Donoyan, Jr.
                                                  President and CEO

Approved as to Form:

/s/ [ILLEGIBLE]
------------------------------
Office of General Counsel

October 30, 2001

                                                                          3 of 3

<PAGE>

         ATTACHMENT 1

                      PHYSICAL HEALTH VALUE-ADDED SERVICES
                        AMERIGROUP (DALLAS SERVICE AREA)

<TABLE>
<S>                                        <C>
24 Hour Nurse Hotline                      Nurses available 24 hours a day, 7 days a week for assistance with medical issues.

Gifts for completing health education      Gifts are given for completing all prenatal care include: baby gym, diaper bag with
classes and prenatal care                  baby gifts or baby layette. Gifts for completing prenatal classes include: onesy, baby
                                           blanket, baby bibs and washcloths and a bag of baby play toys. More than one gift may be
                                           received for each type of prenatal class that is attended (ie. Prenatal, childbirth,
                                           parenting or breast feeding). Expectant mothers must complete a form to verify prenatal
                                           care or attendance at classes.

Benefit Substitution                       When appropriate (and identified through proved and recognized medical standards
                                           of care). Members are offered services not covered under the plan benefits in
                                           order to avoid an inpatient hospital admission or remove barriers to access and
                                           health care services. These services may include special transportation to
                                           medical appointments, temporary phones in the home, and extra home health care.


Additional transportation                  For Members with chronic illnesses, AMERICAID offers transportation assistance
                                           for medical appointments, as determined appropriate by HMO case manager, through
                                           the provision of taxicab or bus coupons.

Health Promotion with Gifts                Gifts are provided for members that complete THSteps visits including baby
                                           bottles, growth charts and medicine spoons. Members are given a choice of one of
                                           the gifts for each THSteps visit that is completed.

Quarterly Member Newsletter                Quarterly newsletters promoting healthy lifestyles sent to all member
                                           households. AmeriTips provides one page health information on such health-care
                                           topics as alcohol abuse, asthma, ADD, breast feeding, depression, earaches and
                                           fever.
</TABLE>

1999 Contract
August 1999                                                           Appendix C

                                     1 of 2

<PAGE>

         ATTACHMENT 1

<TABLE>
<S>                                        <C>
Membership to Boys/Girls club              All services of the Boys and Girls Club are open to AMERICAID members.
                                           Available to all AMERICAID members age 6-18. One membership per household.
</TABLE>

1999 Contract
August 1999                                                          Appendix C

                                     2 of 2

<PAGE>
                                 AMENDMENT NO. 5
                                     TO THE
                           2000 CONTRACT FOR SERVICES
                                     BETWEEN
                  HEALTH AND HUMAN SERVICES COMMISSION AND HMO

This Amendment No. 5 is entered into between the Health and Human Services
Commission (HHSC) and AMERIGROUP Texas, Inc. (HMO), to amend the 2000 Contract
for Services between the Health and Human Services Commission and HMO in the
Dallas Service Area. The effective date of this amendment is January 1, 2002.
The Parties agree to amend the Contract as follows:

1. Article XIII is amended to read as follows:

ARTICLE   XIII PAYMENT PROVISIONS

13.1      CAPITATION AMOUNTS

13.1.2    HMO capitation rates listed below reflect program increases
          appropriated by the 76th and 77th legislatures for physician services
          (to include THSteps providers) and outpatient facility services. Rates
          will be increased starting January 1, 2002, to reflect increases in
          traditional fee-for-service payments for 1) Evaluation and Management
          Level 3 services (procedure code 99213), and 2) high-volume providers.
          The methodology for determining high-volume providers will be
          distributed to HMO by HHSC ("High-volume Provider Methodology"). The
          first rate increase will be effective January 1, 2002, and will
          reflect increases for procedure code 99213. Rate increases for high
          volume providers will be effective the first day of the month after
          the "High-volume Provider Methodology" is released by HHSC. The
          Methodology will state the amount of each increase (99213 and
          high-volume provider). Final rates with all increases included are
          shown in the table below.

13.1.2.   HMO must submit reports to HHSC indicating the methodology used and
          must certify that the funds provided to the HMO for the pass through
          have been passed through to providers. HMO must use the reporting
          format specified by HHSC and follow the reporting schedule indicated
          on the HHSC deliverables matrix.


                                                    PPAC Rate Increase Amendment
                                                                        12/12/01


13.1.2.2  Capitation Rates
<TABLE>
<CAPTION>
                Risk Group                       Monthly Capitation Amounts

<S>                                              <C>
TANF Adults                                            $196.56
TANF Children > 12 Months of
Age                                                    $ 79.00
Expansion Children > 12 Months
of Age                                                 $ 77.72
Newborns ((less than or equal to)
12 Months of Age)                                      $354.21
TANF Children (less than or equal to)
12 Months of Age                                       $354.21
Expansion Children (less than or equal to)
12 Months of Age                                       $354.21
Federal Mandate Children                               $ 56.75
CHIP Phase I                                           $ 75.37
Pregnant Women                                         $229.56
Disabled/Blind Administration                          $ 14.00
</TABLE>


13.1.2.3  Delivery Supplemental Payment. A one-time per pregnancy supplemental
          payment for each delivery shall be paid to HMO in the following
          amount: $3,076.23. HMO will receive a DSP for each live or still
          birth. The one-time payment is made regardless of whether there is a
          single or multiple births at time of delivery. A delivery is the birth
          of a liveborn infant, regardless of the duration of the pregnancy, or
          a stillborn (fetal death) infant of 20 weeks or more gestation. A
          delivery does not include a spontaneous or induced abortion,
          regardless of the duration of the pregnancy.

13.1.2.4  For an HMO Member who is classified in the Pregnant Women, TANF
          Adults, TANF Children >12 months, Expansion Children >12 months,
          Federal Mandate Children, or CHIP risk group, HMO will be paid the
          monthly capitation amount identified in Article 13.1.2 for each month
          of classification, plus the DSP amount identified in Article 13.1.2.

13.1.2.5  HMO must submit a monthly DSP Report (report) that includes the data
          elements specified by TDH. TDH will consult with contracted HMOs prior
          to revising the report data elements and requirements. The reports
          must be submitted to TDH in the format and time specified by TDH. The
          report must include only unduplicated deliveries. The report must
          include


                                                    PPAC Rate Increase Amendment
                                                                        12/12/01

          only deliveries for which HMO has made a payment for the delivery, to
          either a hospital or other provider. No DSP will be made for
          deliveries which are not reported by HMO to TDH within 210 days after
          the date of delivery, or within 30 days from the date of discharge
          from the hospital for the stay related to the delivery, whichever is
          later.

13.1.2.6  HMO must maintain complete claims and adjudication disposition
          documentation, including paid and denied amounts for each delivery.
          HMO must submit the documentation to TDH within five (5) days from the
          date of a TDH request for documents.

13.1.2.7  The DSP will be made by TDH to HMO within twenty (20) state working
          days after receiving an accurate report from HMO.

13.1.2.8  All infants of age equal to or less than twelve months (Newborns) in
          the TANF Children, Expansion Children, and Newborns risk groups will
          be capitated at the Newborns classification capitation amount in
          Article 13.1.2.

AGREED AND SIGNED by an authorized representative of the parties on
______________________________2001.


Health and Human Services Commission                      AMERIGROUP Texas, Inc.


By:                                              By:
    -------------------------                         --------------------------
     Don A. Gilbert                             James D. Donovan, Jr.
                                                           President and CEO


Approved as to Form:

---------------------------
Office of General Counsel




                                                    PPAC Rate Increase Amendment
                                                                        12/12/01

<PAGE>

                                   AMENDMENT 6
                          TO THE AGREEMENT BETWEEN THE
                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                             AMERIGROUP TEXAS, INC.
                              FOR HEALTH SERVICES
                                     TO THE
                             MEDICAID STAR PROGRAM
                                     IN THE
                          DALLAS SERVICE DELIVERY AREA

<PAGE>

                                   AMENDMENT 6
                          TO THE AGREEMENT BETWEEN THE
                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                              AMERIGROUP TEXAS, INC.
                                FOR HEALTH SERVICES
                                      TO THE
                     MEDICAID STAR PROGRAM IN THE DALLAS SDA

<TABLE>
<S>                                                                                                                 <C>
ARTICLE 1. PURPOSE.............................................................................................      1
  SECTION 1.01 AUTHORIZATION...................................................................................      1
  SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES...............................................................      1
ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES.........................................................      1
  SECTION 2.01 GENERAL.........................................................................................      1
  SECTION 2.02 MODIFICATION OF SECTION 1.4, RENEWAL REVIEWS....................................................      1
  SECTION 2.03 MODIFICATION OF ARTICLE 2, DEFINITIONS..........................................................      2
  SECTION 2.04 MODIFICATION OF SECTION 3.4, PLAN MATERIALS AND DISTRIBUTION OF PLAN MATERIALS..................      3
  SECTION 2.05 MODIFICATION OF SECTION 3.5, RECORDS REQUIREMENT AND RECORDS RETENTION..........................      3
  SECTION 2.06 MODIFICATION OF SECTION 3.7, HMO TELEPHONE ACCESS REQUIREMENTS..................................      3
  SECTION 2.07 MODIFICATION OF SECTION 4.3, PERFORMANCE BOND...................................................      4
  SECTION 2.08 MODIFICATION OF SECTION 4.6, AUDIT..............................................................      4
  SECTION 2.09 MODIFICATION OF SECTION 4.9, THIRD PARTY RECOVERY...............................................      4
  SECTION 2.10 MODIFICATION OF SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS....................................      4
  SECTION 2.11 MODIFICATION TO SECTION 5.4, SAFEGUARDING INFORMATION...........................................      5
  SECTION 2.12 MODIFICATION OF SECTION 5.6, HISTORICALLY UNDERUTILIZED BUSINESSES (HUBS).......................      5
  SECTION 2.13 MODIFICATION OF SECTION 5.10, NOTICE AND APPEAL.................................................      6
  SECTION 2.14 MODIFICATION OF SECTION 6.3, SPAN OF ELIGIBILITY................................................      6
  SECTION 2.15 MODIFICATION OF SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS....................      7
  SECTION 2.16 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES.................................................      8
  SECTION 2.17 MODIFICATION OF SECTION 6.6, BEHAVIORAL HEALTH CARE SERVICES - SPECIFIC REQUIREMENTS ...........      8
  SECTION 2.18 MODIFICATION TO SECTION 6.16, BLIND AND DISABLED MEMBERS........................................      9
  SECTION 2.19 MODIFICATION OF SECTION 8.4, MEMBER ID CARDS....................................................      9
  SECTION 2.20 MODIFICATION OF SECTION 10.1, MODEL MIS REQUIREMENTS............................................      9
  SECTION 2.21 MODIFICATION OF SECTION 10.4, PROVIDER SUBSYSTEM................................................      9
  SECTION 2.22 MODIFICATION OF SECTION 10.9, DATA INTERFACE SUBSYSTEM..........................................      9
  SECTION 2.23 MODIFICATION OF SECTION 10.11, YEAR 2000 (Y2K) COMPLIANCE.......................................     10
  SECTION 2.24 ADDITION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT
     (HIPAA) COMPLIANCE........................................................................................     10
  SECTION 2.25 MODIFICATION OF SECTION 12.1., FINANCIAL REPORTS................................................     10
  SECTION 2.26 MODIFICATION OF SECTION 12.4, SUMMARY REPORT OF PROVIDER COMPLAINTS.............................     11
  SECTION 2.27 MODIFICATION OF SECTION 12.6, MEMBER COMPLAINTS.................................................     12
  SECTION 2.28 MODIFICATION OF SECTION 12.13, EXPEDITED PRENATAL OUTREACH REPORT...............................     12
  SECTION 2.29 ADDITION OF SECTION 12.14, MEMBER HOTLINE PERFORMANCE REPORT....................................     12
  SECTION 2.30 ADDITION OF SECTION 12.15, SUBMISSION OF STAR DELIVERABLES/REPORTS..............................     12
  SECTION 2.31 MODIFICATIONS TO SECTION 13.1, CAPITATION AMOUNTS...............................................     13
  SECTION 2.32 MODIFICATION OF SECTION 13.2, EXPERIENCE REBATE TO THE STATE....................................     13
  SECTION 2.33 SECTION 13.3, PERFORMANCE OBJECTIVES............................................................     15
  SECTION 2.34 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS.....................     15
  SECTION 2.35 MODIFICATION OF SECTION 14.3, NEWBORN ENROLLMENT................................................     16
  SECTION 2.36 MODIFICATION OF SECTION 15.12, NOTICES..........................................................     16
  SECTION 2.37 MODIFICATION OF SECTION 18.1.6, TERMINATION BY HMO..............................................     16
  SECTION 2.38 MODIFICATION OF SECTION 18.10, REVIEW OF REMEDY OR REMEDIES TO BE IMPOSED.......................     16
  SECTION 2.39 MODIFICATION OF SECTION 19.1, CONTRACT TERM.....................................................     17
  SECTION 2.40 MODIFICATIONS TO CONTRACT APPENDICES............................................................     17
ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES........................................................     17
</TABLE>

<PAGE>

                                                    HHSC CONTRACT NO. 529-03-037

STATE OF TEXAS
COUNTY OF TRAVIS

                                   AMENDMENT 6
                          TO THE AGREEMENT BETWEEN THE
                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                             AMERIGROUP TEXAS, INC.
                               FOR HEALTH SERVICES
                                     TO THE
                              MEDICAID STAR PROGRAM
                                     IN THE
                          DALLAS SERVICE DELIVERY AREA

THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the HEALTH &
HUMAN SERVICES COMMISSION ("HHSC"), an administrative agency within the
executive department of the State of Texas, and AMERIGROUP Texas, Inc. ("HMO"),
a health maintenance organization organized under the laws of the State of
Texas, possessing a certificate of authority issued by the Texas Department of
Insurance to operate as a health maintenance organization, and having its
principal office at 2730 N. Stemmons Freeway, Suite 608, Dallas, Texas 75207.
HHSC and HMO may be referred to in this Amendment individually as a "Party" and
collectively as the "Parties."

     The Parties hereby agree to amend their Agreement as set forth in Article 2
of this Amendment.

                               ARTICLE 1. PURPOSE.

SECTION 1.01 AUTHORIZATION.

     This Amendment is executed by the Parties in accordance with Section 15.2
of the Agreement.

SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES.

     This Amendment is effective September 1, 2002, and terminates on August 31,
2003, unless extended or terminated sooner in accordance with the Agreement.

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 GENERAL

     The Health Care Financing Administration (HCFA) has had a name change to
the Centers for Medicare and Medicaid Services (CMS). All references to HCFA in
the Agreement should be replaced with CMS.

SECTION 2.02 MODIFICATION OF SECTION 1.4, RENEWAL REVIEWS

     Section 1.4 is replaced with the following language:

                    "Renewal Review. At its sole discretion, HHSC may choose to
               conduct a renewal review of HMO's performance and compliance with
               this contract as a condition for retention and renewal."

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SECTION 2.03 MODIFICATION OF ARTICLE 2, DEFINITIONS

     (a)The following terms amend and modify the definitions set forth in
Article 2:

                    "CMS means the Centers for Medicare and Medicaid Services,
               formerly known as the Health Care Financing Administration
               (HCFA), which is the federal agency responsible for administering
               Medicare and overseeing state administration of Medicaid.

                    EMERGENCY MEDICAL CONDITION means a medical condition
               manifesting itself by acute symptoms of recent onset and
               sufficient severity (including severe pain), such that a prudent
               layperson, who possesses an average knowledge of health and
               medicine, could reasonably expect the absence of immediate
               medical care could result in:

                    (a) placing the patient's health in serious jeopardy;

                    (b) serious impairment to bodily functions;

                    (c) serious dysfunction of any bodily organ or part;

                    (d) serious disfigurement; or

                    (e) in the case of a pregnant woman, serious jeopardy to the
               health of the fetus.

                    FAIR HEARING means the process adopted and implemented by
               the Texas Health and Human Services Commission, 25 TAC Chapter 1,
               in compliance with federal regulations and state rules relating
               to Medicaid Fair Hearings.

                    HEDS means the HMO/EPO/Dental Services Division of the Texas
               Health and Human Services Commission.

                    HHSC means the Texas Health and Human Services Commission or
               its designees.

                    THIRD PARTY LIABILITY (TPL) means the legal responsibility
               of another individual or entity to pay for all or part of the
               services provided to Members under this contract (see 1 TAC,
               Subchapter 354.2301 et seq., relating to Third Party Resources).

                    TP 40 means Type Program 40, which is a TDHS Medicaid
               program eligibility type assigned to pregnant women under 185% of
               the federal poverty level (FPL).

                    TP 45 means Type Program 45, which is a TDHS Medicaid
               program eligibility code assigned to newborns (under 12 months)
               who are born to mothers who are Medicaid eligible at the time of
               the child's birth.

                    TexMedNet means Texas Medical Network, which is the State's
               information system that processes claims and encounters.
               TexMedNet's functions include, but are not limited to eligibility
               verification, claims and encounters submissions, e-mail
               communications, and electronic funds transfers."

     (b) The term "HHSCS" is deleted and replaced with "TDHS" as defined in
Article 2 of the Contract.

     (c) The term "THHSC" is deleted and replaced with "HHSC" as defined above.


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SECTION 2.04 MODIFICATION OF SECTION 3.4, PLAN MATERIALS AND DISTRIBUTION OF
PLAN MATERIALS

     Section 3.4.3 is replaced with the following language:

                    "3.4.3       All plan materials regarding the STAR Program,
               including Member education materials, must be submitted to HHSC
               for approval prior to distribution. HHSC has fifteen (15) working
               days to review the materials and recommend any suggestions or
               required changes. If HHSC has not responded to HMO by the
               fifteenth (15th) day, HMO may print and distribute these
               materials. HHSC reserves the right to request HMO to modify plan
               materials that are deemed approved and have been printed or
               distributed. These modifications can be made at the next printing
               unless substantial non-compliance exists. An exception to the
               fifteen (15) working day timeframe may be requested in writing by
               HMO, for written provider materials that require a quick
               turn-around time (e.g., letters). These materials will generally
               be reviewed by HHSC within five (5) working days. HHSC reserves
               the right to require revisions to materials if inaccuracies are
               discovered or if changes are required by changes in policy or
               law. These changes can be made at the next printing unless
               substantial non-compliance exists, as determined by HHSC.

SECTION 2.05 MODIFICATION OF SECTION 3.5, RECORDS REQUIREMENT AND RECORDS
RETENTION

     Section 3.5.1 is replaced with the following language:

                    "3.5.1       HMO must keep all records required to be
               created and retained under this Agreement in accordance with the
               standards set forth herein. Records related to Members served in
               the HMO's service area(s) must be made available in HMO's local
               office when requested by HHSC.

                    Original records, except paper claims, must be kept in the
               form they were created in the regular course of business for a
               minimum of three (3) years following the expiration of the
               contract period, including any extensions. Paper claims may be
               digitally copied from the time of initial receipt, if the HMO: 1)
               receives HHSC prior written approval; 2) certifies that an
               unaltered copy of the original claim received can be produced
               upon request; 3) the retention system is reliable and supported
               by a retrieval system that allows reasonable accurate records.
               HHSC may require the HMO to retain the records for an additional
               period if an audit, litigation or administrative action involving
               the records exists."

SECTION 2.06 MODIFICATION OF SECTION 3.7, HMO TELEPHONE ACCESS REQUIREMENTS

     Section 3.7. is replaced with the following language:

                    3.7.1        For all HMO telephone access (including
               Behavioral Health telephone services), HMO must ensure
               adequately-staffed telephone lines. Telephone personnel must
               receive customer service telephone training. HMO must ensure that
               telephone staffing is adequate to fulfill the standards of
               promptness and quality listed below:

                    1. 80% of all telephone calls must be answered within an
               average of 30 seconds;

                    2. The lost (abandonment) rate must not exceed 10%;

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<PAGE>

                    3. HMO cannot impose maximum call duration limits but must
               allow calls to be of sufficient length to ensure adequate
               information is provided to the Member or Provider.

                    4. Telephone services must meet cultural competency
               requirements (see Article 8.8) and provide "linguistic access" to
               all members as defined in Article II. This would include the
               provision of interpretive services required for effective
               communication for Members and providers.

SECTION 2.07 MODIFICATION OF SECTION 4.3, PERFORMANCE BOND

     Section 4.3 is replaced with the following language:

                    "4.3         HMO has furnished HHSC with a performance bond
               in the form prescribed by HHSC and approved by TDI, naming HHSC
               as Obligee, securing HMO's faithful performance of the terms and
               conditions of this Agreement. The performance bond must be issued
               in the amount of $100,000 for the Contract Period, plus an
               additional 12 months after the expiration of the Contract Period.
               If the Contract Period is renewed or extended pursuant to Article
               15, the HMO must replace the performance bond with a separate
               bond covering performance during the renewal or extension period,
               plus an additional 12 months. The bond must be issued by a surety
               licensed by TDI, and specify cash payment as the sole remedy. HMO
               must deliver the bond to HHSC at the same time the signed HMO
               contract, renewal or extension is delivered to HHSC."

SECTION 2.08 MODIFICATION OF SECTION 4.6, AUDIT

     Section 4.6.2 is replaced with the following language:

                    "4.6.2       HHSC or its designee will conduct an audit of
               HMO at least once every two years. HMO is responsible for paying
               the costs of an audit conducted under this Article. The costs of
               the audit paid by HMO are allowable costs under this Agreement."

SECTION 2.09 MODIFICATION OF SECTION 4.9, THIRD PARTY RECOVERY

     Section 4.9.2 is replaced with the following language:

                    "4.9.2       Identification. HMO must develop and implement
               systems and procedures to identify potential third parties who
               may be liable for payment of all or part of the costs for
               providing medical services to Members under this contract
               Potential third parties must include any of the sources
               identified in 42 C.F.R. 433.138, relating to identifying third
               parties, except workers' compensation, uninsured and underinsured
               motorist insurance, first and third party liability insurance and
               tortfeasors. HMO must coordinate with HHSC to obtain information
               from other state and federal agencies and HMO must cooperate with
               HHSC in obtaining information from commercial third party
               resources. HMO must require all providers to comply with the
               provisions of 1 TAC Section 354.2301, et seq., relating to Third
               Party Recovery in the Medicaid program."

SECTION 2.10 MODIFICATION OF SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS

     Section 4.10.8 is replaced with the following language:

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<PAGE>

                    "4.10.8      HMO must comply with the standards adopted by
               the U.S. Department of Health and Human Services under the Health
               Insurance Portability and Accountability Act of 1996 (HIPAA),
               Public Law 104-191, regarding submitting and receiving claims
               information through electronic data interchange (EDI) that allows
               for automated processing and adjudication of claims within two or
               three years, as applicable, from the date the rules promulgated
               under HIPAA are adopted (see 45 CFR parts 160 through 164).

SECTION 2.11 MODIFICATION TO SECTION 5.4, SAFEGUARDING INFORMATION

     Section 5.4. is replaced with the following language:

                    "5.4.1       The use and disclosure of all Member
               information, records, and data (Member Information) collected or
               provided to HMO by HHSC or another state agency is protected by
               state and federal law and regulations, including, but not limited
               to, the Health Insurance Portability and Accountability Act of
               1996 (HIPAA), Public law 104-191, and 45 CFR parts 160 through
               164. HMO agrees to ensure that any of its agents, including
               subcontractors, to whom HMO discloses Member Information agrees
               to the same restrictions and conditions that apply to HMO with
               respect to Member Information.

SECTION 2.12 MODIFICATION OF SECTION 5.6, HISTORICALLY UNDERUTILIZED BUSINESSES
(HUBS)

     Sections 5.6.1 through 5.6.3 are replaced with the following language:

                    "5.6.1       In accordance with Texas Government Code
               Chapter 2161 and 1 TAC Section 111.11 et seq. and Section 392.100
               state agencies are required to make a good faith effort to assist
               Historically Underutilized Businesses (HUBs) in receiving
               contract awards issued by the State. The goal of this program is
               to promote full and equal business opportunity for all businesses
               in contracting with the state. It is HHSC's intent that all
               contractors make a good faith effort to subcontract with HUBs
               during the performance of their contracts.

                    IMPORTANT NOTE: The Health and Human Services Commission has
               concluded that HUB subcontracting opportunities may exist in
               connection with this contract. See Appendix B to the Agreement
               for the following instructions and form: "Grant/Contract
               Applicants Client Services HUB Subcontracting Plan Instructions"
               (C-IGA), and Determination of Good Faith Effort for Grant
               Contracts (C-DGFE). If an approved HUB subcontracting plan is not
               already on file with HHSC, THE HMO SHALL SUBMIT A COMPLETED
               C-DGFE FORM ALONG WITH THE SIGNED CONTRACT OR RENEWAL.

                    If HMO responds, 'yes' to question two on Form C-DGFE, HMO
               shall document good faith efforts to develop a HUB Subcontracting
               Plan by completing and documenting the steps on form C-DGFE.
               Additionally, quarterly reports on HUB subcontracting are
               required according to the schedule on Form C-QSR. Quarterly
               Report forms are included in Appendix B of this amendment.

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<PAGE>

                    If HMO decides after the award to subcontract any part of
               the contract, the HMO shall notify the contract manager prior to
               entering into any subcontract. The HMO shall comply with the good
               faith effort requirements relating to developing and submitting a
               subcontracting plan.

                    5.6.2        HMO is required to submit HUB quarterly reports
               to HHSC as required in Article 12.11.

                    5.6.3        HHSC will assist HMO in meeting the contracting
               and reporting requirements of this Article."

SECTION 2.13 MODIFICATION OF SECTION 5.10, NOTICE AND APPEAL

     Section 5.10 is replaced with the following:

                    "5.10        HMO must comply with the notice requirements
               contained in 1 TAG Section 354.2211, and the maintaining benefits
               and services contained in 1 TAC Section 354.2213, whenever HMO
               intends to take an action affecting the Member benefits and
               services under this contract. Also see the Member appeal
               requirements contained in Article 8.6 of this Agreement."

SECTION  2.14 MODIFICATION OF SECTION 6.3, SPAN OF ELIGIBILITY

     Section 6.3 and its subparts are replaced with the following language"

                    "6.3         The following outlines HMO's responsibilities
               for payment of hospital and freestanding psychiatric facility
               (facility) admissions:

                    6.3.1        The payor responsible for the hospital/facility
               charges at the start of an inpatient stay remains responsible for
               hospital/facility charges until the time of discharge, or until
               such time that there is a loss of Medicaid eligibility.

                    6.3.2        HMO is responsible for professional charges
               during every month for which the payor receives a full capitation
               payment.

                    6.3.3        HMO is not responsible for any services after
               effective date of loss of Medicaid eligibility

                    6.3.4        Plan Change. A Member cannot change from one
               STAR health plan to another STAR health plan during an inpatient
               hospital stay.

                    6.3.5        Hospital/Facility Transfer. Discharge from one
               acute care hospital/facility and readmission to another acute
               care hospital/facility within 24 hours for continued treatment is
               not a discharge under this contract.

                    6.3.6        HMO insolvency or receivership. HMO is
               responsible for payment of all services provided to a person who
               was a Member on the date of insolvency or receivership to the
               same extent they would otherwise be responsible under this
               Article 6.3.

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                                  Page 6 of 17

<PAGE>

                    6.3.7        For purposes of this Section 6.3, a Member
               "loses Medicaid eligibility" when:

                    6.3.7.1      Medicaid eligibility is terminated and never
               regained under one Medicaid Type Program with no subsequent
               transfer of eligibility to another Medicaid Type Program; or

                    6.3.7.2      Medicaid eligibility is terminated and there is
                    a lapse of at least one month in regular Medicaid coverage.
                    The term "regular Medicaid coverage" refers to either
                    traditional fee-for-service Medicaid or Medicaid managed
                    care coverage; or

                    6.3.7.3      A client re-applies for Medicaid eligibility
                    and is certified for prior Medicaid coverage, as defined by
                    TDHS, for any month(s) prior to the month of application.
                    The term "prior Medicaid coverage" refers to Applicants who
                    are eligible for Medicaid coverage during the three-month
                    period before the month they apply for TANF or Medical
                    Programs. Prior Medicaid coverage may be continuous or there
                    may be interrupted periods of eligibility involving all or
                    some of the certified Members.

                    Administrative process limitations within the State's
               application and recertification process do not constitute a "loss
               of Medicaid eligibility".

SECTION 2.15 MODIFICATION OF SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK
PROVIDERS

     Section 6.4.3 is replaced with the following language:

                    "6.4.3       HMO must pay a Member's existing out-of-network
               providers for covered services until the Member's records,
               clinical information and care can be transferred to a network
               provider. Payment must be made within the time period required
               for network providers. This Article does not extend the
               obligation of HMO to reimburse the Member's existing
               out-of-network providers for on-going care for more than 90 days
               after Member enrolls in HMO or for more than nine months in the
               case of a Member who at the time of enrollment in HMO has been
               diagnosed with and receiving treatment for a terminal illness.
               The obligation of HMO to reimburse the Member's existing
               out-of-network provider for services provided to a pregnant
               Member with 12 weeks or less remaining before the expected
               delivery date extends through delivery of the child, immediate
               postpartum care, and the follow-up checkup within the first six
               weeks of delivery.

                    6.4.3.1   HMO will pay reasonable and customary rates for
               all out-of-network provider claims with dates of service between
               September 1, 2002 and November 30,2002. HMO must forward any
               complaints submitted by out-of-network providers during this time
               to HHSC. HHSC will review all complaints and determine whether
               payments were reasonable and customary. HHSC will direct the HMO
               to pay a reasonable and customary amount, as determined by HHSC,
               if it concludes that the payments were not reasonable and
               customary for the provider. Failure to comply with this provision
               constitutes a default under Article XVI, Default and Remedies.

                    6.4.3.2      For all out-of-network provider claims with
               dates of service on or after December 1, 2002, HMO must pay
               providers a reasonable and

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<PAGE>

               customary amount consistent with a methodology approved by HHSC.
               HMO must submit its methodology, along with any supporting
               documentation, to HHSC by September 30, 2002. HHSC will review
               and respond to the information by November 15, 2002. HMO must
               forward any complaints by out-of-network providers submitted
               after December 1, 2002 to HHSC, which will review all complaints.
               If HHSC determines that payment is not consistent with the HMO's
               approved methodology, the HMO must pay the provider a rate, using
               the approved reasonable and customary methodology, as determined
               by HHSC. Failure to comply with this provision constitutes a
               default under Article XVI, Default and Remedies.

SECTION 2.16 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES

     Section 6.5.1 is replaced with the following language:

                    "6.5.1       HMO must pay for the professional, facility,
               and ancillary services that are medically necessary to perform
               the medical screening examination and stabilization of HMO Member
               presenting as an emergency medical condition or an emergency
               behavioral health condition to the hospital emergency department,
               24 hours a day, 7 days a week, rendered by either HMO's
               in-network or out-of-network providers. 6.5.1.1 For all
               out-of-network providers, HMO will pay a reasonable and customary
               amount for emergency services.

                    HMO will pay a reasonable and customary amount for services
               for all out-of-network emergency services provider claims with
               dates of service between September 1, 2002 and November 30, 2002.
               HMO must forward any complaints submitted by out-of-network
               emergency services providers during this time to HHSC. HHSC will
               review all complaints and determine whether payments were
               reasonable and customary. HHSC will direct the HMO to pay a
               reasonable and customary amount, as determined by HHSC, if it
               concludes that the payments were not reasonable and customary for
               the provider.

                    6.5.1.2      For all out-of-network emergency services
               provider claims with dates of service on or after December 1,
               2002, HMO must pay providers a reasonable and customary amount
               consistent with a methodology approved by HHSC. HMO must submit
               its methodology, along with any supporting documentation, to HHSC
               by September 30, 2002. HHSC will review and respond to the
               information by November 15, 2002. HMO must forward any complaints
               by out-of-network emergency services providers submitted after
               December 1, 2002 to HHSC, which will review all complaints. If
               HHSC determines that payment is not consistent with the HMO's
               approved methodology, the HMO must pay the emergency services
               provider a rate, using the approved reasonable and customary
               methodology, as determined by HHSC. Failure to comply with this
               provision constitutes a default under Article XVI, Default and
               Remedies.

SECTION 2.17 MODIFICATION OF SECTION 6.6, BEHAVIORAL HEALTH CARE SERVICES -
SPECIFIC REQUIREMENTS

     Section 6.6.8 is replaced with the following language:

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<PAGE>

                    "6.6.8       When assessing Members for behavioral health
               care services, HMO and network behavioral health providers must
               use the DSM-IV multi-axial classification. HHSC may require use
               of other assessment instrument/outcome measures in addition to
               the DSM-IV. Providers must document DSM-IV and assessment/outcome
               information in the Member's medical record."

SECTION 2.18 MODIFICATION TO SECTION 6.16, BLIND AND DISABLED MEMBERS

     Section 6.16.1 is replaced with the following language:

                    "6.16.1      Blind and disabled Members' SSI status is
               effective the date of State's eligibility system, SAVERR,
               identifies the Member as Type Program 13 (TP13). On this
               effective date, the Member becomes a voluntary STAR enrollee.

                    The State is responsible for updating the State's
               eligibility system within 45 days of official notice of the
               Members' federal SSI eligibility by the Social Security
               Administration (SSA).

SECTION 2.19 MODIFICATION OF SECTION 8.4, MEMBER ID CARDS

     Section 8.4.1 is replaced with the following language:

                    "8.4.1       A Medicaid Identification Form (Form 3087) is
               issued monthly by the TDHS. The form includes the "STAR" Program
               logo and the name and toll free number of the Member's health
               plan. A Member may have a temporary Medicaid Identification (Form
               1027-A), which will include a STAR indicator."

SECTION 2.20 MODIFICATION OF SECTION 10.1, MODEL MIS REQUIREMENTS

     Section 10.1.3.6 is replaced with the following language:

                    "10.1.3.6    HMO is required to provide representation to
               attend and participate in the HHSC Systems Workgroup as a part of
               the Systems Scan Call."

SECTION 2.21 MODIFICATION OF SECTION 10.4, PROVIDER SUBSYSTEM

     Subparts 7 and 8 of Section 10.4 are replaced with the following language:

                    "7. Support national provider number format (UPIN, NPIN,
               CLIA, TPI, etc., as required by HHSC).

                    8. Provide Provider Network and Affiliation files 90 days
               prior to implementation and updates monthly. Format will be
               provided by HHSC to contracted entities."

SECTION 2.22 MODIFICATION OF SECTION 10.9, DATA INTERFACE SUBSYSTEM

     Section 10.9.3 is replaced with the following language:

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<PAGE>

                    "10.9.3      Provider Network and Affiliation Files. The HMO
               will supply network provider data to the Enrollment Broker and
               Claims Administrator. This data will consist of a Provider
               Network File and a Provider Affiliation File. The HMO will submit
               the Provider Network File to the Enrollment Broker and the
               Provider Affiliation File to the Claims Administrator. Both files
               shall accomplish the following objectives:

                    1. Provide identifying information for all managed care
               providers (e.g. name, address, etc.).

                    2. Maintain history on provider enrollment/disenrollment.

                    3. Identify PCP capacity.

                    4. Identify any restrictions (e.g., age, sex, etc.)

                    5. Identify number and types of specialty providers
               available to Members.

                    6. Provide other (Master Provider File) information
               identified by HHSC."

SECTION 2.23 MODIFICATION OF SECTION 10.11, YEAR 2000 (Y2K) COMPLIANCE

     Section 10.11 is deleted in its entirety.

SECTION 2.24 ADDITION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT (HIPAA) COMPLIANCE.

     Section 10.12 is added as follows:

                    "10.12       Health Insurance Portability and Accountability
               Act (HIPAA) Compliance. HMO's system must comply with applicable
               certificate of coverage and data specification and reporting
               requirements promulgated pursuant to the Health Insurance
               Portability and Accountability Act (HIPPA) of 1996, P.L. 104-191
               (August 21, 1996), as amended or modified.

SECTION 2.25 MODIFICATION OF SECTION 12.1., FINANCIAL REPORTS

     Sections 12.1.4, 12.1.11, and 12.13 are replaced with the following
language, and Section 12.14 is added. Sections 12.1.2, 12.1.3, 12.1.7 and
12.1.10 are deleted in their entirety.

                    12.1.2       [Deleted]

                    12.3         [Deleted]

                    12.1.4       Final MCFS Reports. HMO must file two final
               MCFS Reports for each of the following:

                         The initial two-year contract period (SFY 2000-2001),

                         The first one-year contract extension period (SFY
                    2002), and

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                                 Page 10 of 17

<PAGE>

                    This second one-year contract extension period (SFY 2003).

                    The first final report must reflect expenses incurred during
               each contract period and paid through the 90th day after the end
               of the contract period. The first final report must be filed on
               or before the 120th day after the end of each contract period.
               The second final report must reflect expenses incurred during
               each contract period and paid through the 334th day after the end
               of the contract period. The second final report must be filed on
               or before the 365th day after the end of each contract period.

                    12.1.7       [Deleted]

                    12.1.10      [Deleted]

                    12.1.11      IBNR Plan. HMO must furnish a written IBNR Plan
               to manage incurred-but-not-reported (IBNR) expenses, and a
               description of the method of insuring against insolvency,
               including information on all existing or proposed insurance
               policies. The Plan must include the methodology for estimating
               IBNR. The plan and description must be submitted to HHSC no later
               than 60 days after the effective date of this contract. Changes
               to the IBNR plan and description must be submitted to HHSC no
               later than 30 days before changes to the plan are implemented by
               HMO.

                    12.1.13      Each report required under this Article must be
               mailed to: Medicaid HMO Contract Deliverables Manager, HEDS
               Division, Texas Health and Human Services Commission, P.O. Box
               13247, Austin, Texas 78711-3247 (Exception: The MCFS Report may
               be submitted to HHSC via E-mail to deliver@hhsc.state.tx.us).

                    12.1.14      Bonus and/or Incentive Payment Plan. The HMO
               must furnish a written Bonus and/or Incentive Payments Plan to
               HHSC to determine whether such payments are allowable
               administrative expenses in accordance with Appendix L, "Cost
               Principles for Administrative Expenses, 11. Compensation for
               Personnel Services, i. Bonuses and Incentive Payments." The
               written plan must include a description of the plan's criteria
               for establishing bonus and/or incentive payments, the methodology
               to calculate bonus and/or incentive payments, and the timing as
               to when these bonus and/or incentive payments are to be paid. The
               plan and description must be submitted to HHSC for approval no
               later than 30 days after the execution of the contract and any
               contract renewal. If the HMO revises the Bonus and/or Incentive
               Payment Plan, the HMO must submit the revised plan to HHSC for
               approval prior to implementing the plan."

SECTION 2.26 MODIFICATION OF SECTION 12.4, SUMMARY REPORT OF PROVIDER COMPLAINTS

     Section 12.4 is replaced with the following language:

HHSC Contract 529-03-037

                                 Page 11 of 17

<PAGE>

                    "12.4       HMO must submit a Summary Report of Provider
               Complaints. HMO must also reports complaints submitted to its
               subcontracted risk groups (e.g., IPAs). The complaint report
               format must be submitted not later than 45 days following the end
               of the state fiscal quarter in a format specified by HHSC."

SECTION 2.27 MODIFICATION OF SECTION 12.6, MEMBER COMPLAINTS

     Section 12.6 is replaced with the following language:

                    "12.6        HMO must submit a quarterly summary report of
               Member complaints. HMO must also report complaints submitted to
               its subcontracted risk groups (e.g., IPAs). The complaint report
               must be submitted not later than 45 days following the end of the
               state fiscal quarter in a format specified by HHSC."

SECTION 2.28 MODIFICATION OF SECTION 12.13, EXPEDITED PRENATAL OUTREACH REPORT

     Section 12.13 is deleted in its entirety.

SECTION 2.29 ADDITION OF SECTION 12.14, MEMBER HOTLINE PERFORMANCE REPORT

     Section 12.14 is added as follows:

                    "12.14       MEMBER HOTLINE PERFORMANCE REPORT

                    HMO must submit, on a monthly basis, a Member Hotline
               Performance Report that contains all required elements set out in
               Article 3.7 of this Agreement in a formant approved by HHSC. The
               report is due on the 30th of the month following the end of each
               month."

 SECTION 2.30 ADDITION OF SECTION 12.15, SUBMISSION OF STAR DELIVERABLES/REPORTS

     Section 12.15 is added as follows:

                    "12.15       SUBMISSION OF STAR DELIVERABLES/REPORTS

                    12.15.1      Electronic Mail. STAR deliverables and reports
               should be submitted to HHSC via electronic mail unless HHSC
               expressly provides that they must be submitted in a different
               manner. Reports and deliverables that may not be submitted
               electronically include, but are not limited to: Encounter Data,
               Supplemental Delivery Payment data, UDT data, and certain Member
               Materials.

                    12.15.1.1    The e-mail address for deliverables submission
               is deliver@hhsc.state.tx.us. 12. 15. 1.2 Electronic Mail
               Restrictions:

                    File Size: E-mail file size is limited to 2.5 MB. Files
               larger than that will need to be compressed (zip file) or split
               into multiple files for submission.

                    Confidentiality: Routine STAR deliverables/reports should
               not contain any member specific data that would be considered
               confidential.

HHSC Contract 529-03-037

                                 Page 12 of 17




<PAGE>


                    12.15.2      FOHC and RHC Deliverables. HMO may submit FQHC
               and RHC deliverables by uploading the required information to the
               Claims Administrator's Bulleting Board System (BBS). The uploaded
               data must contain a unique 8-digit control number. HMO should
               format the 8-digit control number as follows:

                              2 digit plan code identification number;
                              Julian date; and then

                         -    HMO's 3-digit report number (i.e., HMO's first
                              report will be 001).

                    After uploading the data to the BBS, the HMO must notify
               HHSC via e-mail that it has uploaded the data, and include the
               name of the file and recipient directory. HMO must also mail
               signed original report summaries, including the corresponding
               8-digit control number, to HHSC within three (3) business days
               after uploading the data to the BBS.

                    12.15.3      Special Submission Needs. In special cases
               where other submission methods are necessary, HMO must contact
               the assigned Health Plan Manager for authorization and
               instructions.

                    12.15.4      Deliverables due via Mail. HMO should mail
               reports and deliverables that must be submitted by mail to the
               following address:

                    General Mail:
                    Texas Health & Human Services Commission
                    HEDS Contract Deliverables
                    P.O. Box 13247
                    Austin, Texas 78711-3247

                    Overnight Mail:
                    Texas Health & Human Services Commission
                    HEDS Contract Deliverables
                    12555 Riata Vista Circle
                    Austin, TX 78727

                    12.15.5      Texas Department of Insurance (TDI). The
               submission of deliverables/reports to HHSC does not relieve the
               Plan of any reporting requirements/responsibility with TDI. The
               Plan should continue to report to TDI as they have in the past."

SECTION 2.31 MODIFICATIONS TO SECTION 13.1, CAPITATION AMOUNTS

     Section 13.1.7.1 is added:

                    "13.1.7.1    HMO rates for FY 2002 and FY 2003 include pass
               through funds for providers, as appropriated by the 77th Texas
               Legislature. HMO must file reports on pass through methodology
               expenditures as requested by HHSC."

SECTION 2.32 MODIFICATION OF SECTION 13.2, EXPERIENCE REBATE TO THE STATE

     Sections 13.2.1,13.2.2.1,13.2.3, and 13.2.5 are replaced with the following
language:

HHSC Contract 529-03-037

                                 Page 13 of 17

<PAGE>


                    "13.2.1      For the Contract Period, HMO must pay to HHSC
               an experience rebate calculated in accordance with the tiered
               rebate method listed below based on the excess of allowable HMO
               STAR revenues over allowable HMO STAR expenses as set forth in
               Appendix I, as reviewed and confirmed by HHSC. HHSC reserves the
               right to have an independent audit performed to verify the
               information provided by HMO.

<TABLE>
<CAPTION>
                     GRADUATED REBATE METHOD
----------------------------------------------------------
NET INCOME BEFORE TAXES
  AS A PERCENTAGE OF
       REVENUES               HMO SHARE     STATE SHARE
----------------------------------------------------------
<S>                           <C>           <C>
0% -  3%                        100%             0%
----------------------------------------------------------
Over  3% -  7%                   75%            25%
----------------------------------------------------------
Over  7% - 10%                   50%            50%
----------------------------------------------------------
Over 10% - 15%                   25%            75%
----------------------------------------------------------
Over 15%                          0%           100%
----------------------------------------------------------
</TABLE>
                    13.2.2.1     The experience rebate for the HMO shall be
               calculated by applying the experience rebate formula in Article
               13.2.1 to the sum of the net income before taxes for all STAR
               Medicaid service areas contracted between the State and HMO.

                    13.2.3       Experience rebate will be based on a pre-tax
               basis. Expenses for value-added services are excluded from the
               determination of Net Income Before Taxes reported in the Final
               MCFS Report; however, HMO may subtract from Net Income Before
               Taxes, expenses incurred for value added services for the
               experience rebate calculations.

                    13.2.5       There will be two settlements for payment(s) of
               the experience rebate for SFY 2000-2001, two settlements for
               payment(s) for the experience rebate for SFY 2002, and two
               settlements for payment(s) for the experience rebate for SFY
               2003. The first settlement for the specified contract period
               shall equal 100 percent of the experience rebate as derived from
               Net Income Before Taxes less the value-added services expenses in
               the first final MCFS Report and shall be paid on the same day the
               first final MCFS Report is submitted to HHSC for the specified
               time period. The second settlement shall be an adjustment to the
               first settlement and shall be paid to HHSC on the same day that
               the second final MCFS Report is submitted to HHSC for that
               specified time period if the adjustment is a payment from HMO to
               HHSC. If the adjustment is a payment from HHSC to HMO, HHSC shall
               pay such adjustment to HMO within thirty (30) days of receipt of
               the second final MCFS Report HHSC or its agent may audit the MCFS
               report. If HHSC determines that corrections to the MCFS reports
               are required, based on a audit of other documentation acceptable
               to HHSC, to determine an adjustment to the amount of the second
               settlement, then final adjustment shall be made within three
               years from the date that HMO submits the second final MCFS
               report. HMO must pay the first and second settlements on the due
               dates for the first and second final MCFS reports respectively as
               identified in Article 12.1.4. HHSC may adjust the

HHSC Contract 529-03-037

                                 Page 14 of 17

<PAGE>


               experience rebate if HHSC determines HMO has paid affiliates
               amounts for goods or services that are higher than the fair
               market value of the goods and services in the service area. Fair
               market value may be based on the amount HMO pays a
               non-affiliate(s) or the amount another HMO pays for the same or
               similar service in the service area. HHSC has final authority in
               auditing and determining the amount of the experience rebate."

SECTION 2.33 SECTION 13.3, PERFORMANCE OBJECTIVES

     Section 13.3.9 is replaced with the following language:

                    "13.3.9      The performance objective allocation for HMO
               shall be assigned to each performance objective, described in
               Appendix K, in accordance with the following percentages:

<TABLE>
<CAPTION>
                              PERCENT OF PERFORMANCE OBJECTIVE
     EPSDT SCREENS                       INCENTIVE FUND
-------------------------------------------------------------------
<S>                           <C>
1. < 12 Months                               12%
-------------------------------------------------------------------
2. 12 To 24 Months                           12%
-------------------------------------------------------------------
3. 25 Months - 20 Years                      20%
-------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                              PERCENT OF PERFORMANCE OBJECTIVE
    IMMUNIZATIONS                        INCENTIVE FUND
-------------------------------------------------------------------
<S>                           <C>
4. < 12 Months                               17%
-------------------------------------------------------------------
5. 12 To 24 Months                           12%
-------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                 PERCENT OF PERFORMANCE
    PREGNANCY VISITS            OBJECTIVE INCENTIVE FUND
-------------------------------------------------------------------
<S>                             <C>
6. Initial prenatal exam                   15%
-------------------------------------------------------------------
7. Postpartum visit                        12%
-------------------------------------------------------------------
</TABLE>

SECTION 2.34 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT
PROVISIONS

     Sections 13.6.1.1, 13.6.3 and 13.6.6 are replaced with the following
     language:

                    "13.6.1.1    The mother of the newborn Member may request
               that the newborn's health plan coverage be changed to another HMO
               during the first 90 days following the date of birth, but may
               only do so through the Medicaid managed care Enrollment Broker.

                    13.6.3       All non-TP45 newborns whose mothers are HMO
               Members at the time of the birth will be retroactively enrolled
               into the HMO by TDHS Data Control except as outlined in Article
               13.6.4.

HHSC Contract 529-03-037

                                 Page 15 of 17

<PAGE>

                    13.6.5       HMO is responsible for payment for all covered
               services provided to TP40 members by in-network or out-of-network
               providers from the date of enrollment in HMO, but prior to HMO
               receiving TP40 Member on monthly capitation file. HMO must waive
               requirement for prior authorization (or grant retroactive prior
               authorization) for medically necessary services provided from the
               date of enrollment in HMO, but prior to HMO receiving TP40 member
               on monthly capitation file."

SECTION 2.35 MODIFICATION OF 14.3, NEWBORN ENROLLMENT

     Section 14.3.1.1 is replaced with the following language:

                    "14.3.1.1    A mother of a newborn Member may request a plan
                  change for her newborn during the first 90 days by contacting
                  the Enrollment Broker. If a change is approved, the Enrollment
                  Broker will notify both plans involved in the process. If no
                  alternative to the plan change can be reached, the Enrollment
                  Broker will notify the HMO of the newborn plan change request
                  received from the mother."

SECTION 2.36 MODIFICATION OF SECTION 15.12, NOTICES

     Section 15.12 is replaced with the following language:

                    "Notice may be given by registered mail, facsimile, and/or
               hand delivery. All notices to HHSC shall be addressed to:
               Medicaid HMO Contract Deliverables Manager, HEDS Division, Texas
               Health and Human Services Commission, P.O. Box 13247, Austin,
               Texas 78711-3247, with a copy to the Contract Administrator.
               Notices to HMO shall be addressed to President/CEO, 2730 N.
               Stemmons Freeway, Suite 608, Dallas, Texas 75207."

SECTION 2.37 MODIFICATION OF SECTION 18.1.6, TERMINATION BY HMO

     Section 18.1.6 is replaced with the following language:

                    "18.1.6      HMO may terminate this contract if HHSC fails
               to pay HMO as required under Article 13 of this contract or
               otherwise materially defaults in its duties and responsibilities
               under this contract, or by giving notice no later than 30 days
               after receiving the capitation rates for the Contract Period.
               Retaining premium, recoupment, sanctions, or penalties that are
               allowed under this contract or that result from HMO's failure to
               perform or HMO's default under the terms of this contract is not
               cause for termination."

SECTION 2.38 MODIFICATION OF SECTION 18.10, REVIEW OF REMEDY OR REMEDIES TO BE
IMPOSED

     Section 18.10 is replaced with the following language:

                    "18.10.2     HMO and HHSC must attempt to informally resolve
               a dispute. If HMO and HHSC are unable to informally resolve a
               dispute, HMO must notify the HEDS Manager and Director of
               Medicaid/CHIP Operations that HMO and HHSC cannot agree. The
               Director of Medicaid/CHIP Operations will refer the dispute to
               the State Medicaid

HHSC Contract 529-03-037

                                 Page 16 of 17

<PAGE>

                    Director who will appoint a committee to review the dispute
               under HHSC's dispute resolution procedures. The decision of the
               dispute resolution committee will be HHSC's final administrative
               decision. "

SECTION 1.01 MODIFICATION OF SECTION 19.1, CONTRACT TERM

     Section 19.1 is replaced with the following language:

                    "19.1        The effective date of this contract is
               September 1, 2000. This contract will terminate on August
               31, 2003 unless extended or terminated earlier as provided for
               elsewhere in this contract."

SECTION 1.02 MODIFICATIONS TO CONTRACT APPENDICES.

     The following appendices are replaced with the versions attached to this
Amendment:

               -    Appendix B, HUB

               -    Appendix C, Value-added Services

               -    Appendix F, Texas Trauma Facilities

               -    Appendix G, Texas Hemophilia Centers

               -    Appendix I, Financial Statistical Report

               -    Appendix K, Preventive Health Performance Objectives

            ARTICLE 2. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

     The Parties contract and agree that the terms of the Agreement will remain
in effect and continue to govern except to the extent modified in this
Amendment.

     By signing this Amendment, the Parties expressly understand and agree that
this Amendment is hereby made a part of the Agreement as though it were set out
word for word in the Agreement.

     IN WITNESS HEREOF, HHSC AND THE HMO HAVE EACH CAUSED THIS AMENDMENT TO BE
SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE.

        AMERIGROUP TEXAS, INC.           HEALTH & HUMAN SERVICES COMMISSION


By: /s/ James D. Donovan, Jr.          By: /s/ [ILLEGIBLE]
   ------------------------------         ------------------------------
   James D. Donovan, Jr.                  Don Gilbert
   President and CEO                   FOR Commissioner

Date: 8/27/2002                        Date: 8.29.02

HHSC Contract 529-03-037

                                 Page 17 of 17
<PAGE>

                                                    HHSC CONTRACT NO. 529-03-037

STATE OF TEXAS

COUNTY OF TRAVIS

                                   AMENDMENT 7
                          TO THE AGREEMENT BETWEEN THE
                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                             AMERIGROUP TEXAS, INC.
                              FOR HEALTH SERVICES
                                     TO THE
                             MEDICAID STAR PROGRAM
                                     IN THE
                          DALLAS SERVICE DELIVERY AREA

     THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the
HEALTH & HUMAN SERVICES COMMISSION ("HHSC"), an administrative agency within the
executive department of the State of Texas, and AMERIGROUP TEXAS, INC.
("CONTRACTOR"), a health maintenance organization organized under the laws of
the State of Texas, possessing a certificate of authority issued by the Texas
Department of Insurance to operate as a health maintenance organization, and
having its principal office at 2730 N. Stemmons Freeway, Suite 608, Dallas,
Texas 75207. HHSC and CONTRACTOR may be referred to in this Amendment
individually as a "Party" and collectively as the "Parties."

     The Parties hereby agree to amend their Agreement as set forth in Article 2
of this Amendment.

                               ARTICLE 1. PURPOSE.

SECTION 1.01 AUTHORIZATION.

     This Amendment is executed by the Parties in accordance with Article 15.2
of the Agreement.

SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES.

     This Amendment is effective November 1, 2002.

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 MODIFICATION OF ARTICLE 2 DEFINITIONS

     The following term is added to amend the definitions set forth in Article
2:

                    "EXPERIENCE REBATE PERIOD means each period within the
               Contract Period related to the calculations and settlements of
               Experience Rebates to HHSC described in Section 13.2. The
               Contract Period consists of the following Experience Rebate
               Periods:

                    -    September 1, 1999 through August 31, 2001 (1st
                         Experience Rebate Period)

                    -    September 1, 2001 through August 31, 2002 (2nd
                         Experience Rebate Period)

HHSC Contract 529-03-037

                                  Page 1 of 4

<PAGE>

                    -    September 1, 2002 through August 31, 2003 (3rd
                         Experience Rebate Period)"

SECTION 2.02 MODIFICATION TO SECTION 13.2, EXPERIENCE REBATE TO STATE

     Section 13.2 is replaced with the following language:

                    "13.2.1      HMO must pay to HHSC an experience rebate for
               each Experience Rebate Period. HMO will calculate the experience
               rebate in accordance with the tiered rebate formula listed below
               based on Net Income Before Taxes (excess of allowable revenues
               over allowable expenses) as set forth in Appendix I. The HMO's
               calculations are subject to HHSC approval, and HHSC reserves the
               right to have an independent audit performed to verify the
               information provided by HMO.

<TABLE>
<CAPTION>
                   GRADUATED REBATE FORMULA
--------------------------------------------------------------
 NET INCOME BEFORE TAXES
AS A PERCENTAGE OF TOTAL
        REVENUES                 HMO SHARE     HHSC SHARE
--------------------------------------------------------------
<S>                              <C>           <C>
0% - 3%                            100%             0%
--------------------------------------------------------------
Over 3% -   7%                      75%            25%
--------------------------------------------------------------
Over 7% -  10%                      50%            50%
--------------------------------------------------------------
Over 10% - 15%                      25%            75%
--------------------------------------------------------------
Over 15%                             0%           100%
--------------------------------------------------------------
</TABLE>

                    13.2.2       Carry Forward of Prior Experience Rebate Period
               Losses: Losses incurred for one Experience Rebate Period can only
               be carried forward as an offset to Net Income Before Taxes in the
               next Experience Rebate Period.

                    13.2.2.1     HMO shall calculate the experience rebate by
               applying the experience rebate formula in Article 13.2.1 as
               follows:

                    For the 1st Experience Rebate Period, to the Net Income
               Before Taxes for each STAR Medicaid service area contracted
               between HHSC and HMO. The HMO will separately calculate the
               experience rebate for each service area, and losses in one
               service area cannot be used to offset Net Income Before Taxes in
               another service area. Losses from the 1st Experience Rebate
               Period can be carried forward to the 2nd Experience Rebate Period
               for the same service area.

                    For the 2nd Experience Rebate Period, to the sum of the Net
               Income Before Taxes for all STAR Medicaid service areas
               contracted between HHSC and HMO. Losses from the 2nd Experience
               Rebate Period can be carried forward to the 3rd Experience Rebate
               Period.

                    For the 3rd Experience Rebate Period, to the sum of the Net
               Income Before Taxes for all CHIP, STAR Medicaid, and STAR+PLUS
               Medicaid service areas contracted between HHSC or TDHS and HMO.

HHSC Contract 529-03-037

                                  Page 2 of 4

<PAGE>

                    13.2.3       Experience rebate will be based on a pre-tax
               basis. Expenses for value-added services are excluded from the
               determination of Net Income Before Taxes reported in the Final
               MCFS Report; however, HMO may subtract from Net Income Before
               Taxes, expenses incurred for value added services for the
               experience rebate calculations.


                    13.2.4       Population-Based Initiatives (PBIs) and
               Experience Rebates: HMO may subtract from an experience rebate
               owed to HHSC, expenses for population-based health initiatives
               that have been approved by HHSC. A PBI is a project or program
               designed to improve some aspect of quality of care, quality of
               life, or health care knowledge for the Medicaid population that
               may also benefit the community as a whole. Value-added service
               does not constitute a PBI. Contractually required services and
               activities do not constitute a PBI.


                    13.2.5       There will be two settlements for payment(s) of
               the experience rebate for the 1st Experience Rebate Period, two
               settlements for payment(s) of the experience rebate for the 2nd
               Experience Rebate Period, and two settlements for payment(s) of
               the experience rebate for the 3rd Experience Rebate Period.
               Settlement payments are payable to HHSC. The first settlement for
               the specified Experience Rebate Period shall equal 100 percent of
               the experience rebate as derived from Net Income Before Taxes
               reduced by any value-added services expenses in the first Final
               MCFS Report and shall be paid on the same day that the first
               Final MCFS Report is submitted to HHSC for the specified time
               period. The second settlement shall be an adjustment to the first
               settlement and shall be paid on the same day that the second
               Final MCFS Report is submitted to HHSC for that specified time
               period if the adjustment is a payment from HMO to HHSC. If the
               adjustment is a payment from HHSC to HMO, HHSC shall pay such
               adjustment to HMO within thirty (30) days of receipt of the
               second Final MCFS Report. HHSC or its agent may audit the MCFS
               Reports. If HHSC determines that corrections to the MCFS Reports
               are required, based on an audit of other documentation acceptable
               to HHSC, to determine an adjustment to the amount of the second
               settlement, then final adjustment shall be made within three (3)
               years from the date that HMO submits the second Final MCFS
               Report. HMO must pay the first and second settlements on the due
               dates for the first and second Final MCFS Reports, respectively,
               as identified in Article 12.1.4. HHSC may adjust the experience
               rebate if HHSC determines HMO has paid (an) affiliate(s) amounts
               for goods or services that are higher than the fair market value
               of the goods and services in the service area. Fair market value
               may be based on the amount HMO pays (a) non-affiliate(s) or the
               amount another HMO pays for the same or similar goods and
               services in the service area. HHSC has final authority in
               auditing and determining the amount of the experience rebate."

             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

     The Parties contract and agree that the terms of the Agreement will remain
in effect and continue to govern except to the extent modified in this
Amendment.

     By signing this Amendment, the Parties expressly understand and agree that
this Amendment is hereby made a part of the Agreement as though it were set out
word for word in the Agreement.

HHSC Contract 529-03-037

                                  Page 3 of 4

<PAGE>

     IN WITNESS HEREOF, HHSC AND THE CONTRACTOR HAVE EACH CAUSED THIS AMENDMENT
TO BE SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE.

          AMERIGROUP TEXAS, INC.            HEALTH & HUMAN SERVICES COMMISSION

     By:_________________________        By:__________________________________
        James D. Donovan, Jr.               Don A. Gilbert
        President and CEO                   Commissioner

Date: ________________________           Date:_______________________________

HHSC Contract 529-03-037

                                  Page 4 of 4
<PAGE>

                                   AMENDMENT 8

                                TO THE AGREEMENT
                                   BETWEEN THE

                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                             AMERIGROUP TEXAS, INC.

                                       FOR
                               HEALTH SERVICES TO
                            THE MEDICAID STAR PROGRAM

                                     IN THE
                          DALLAS SERVICE DELIVERY AREA

<PAGE>

                                   AMENDMENT 8
                          TO THE AGREEMENT BETWEEN THE
          HEALTH & HUMAN SERVICES COMMISSION AND AMERIGROUP TEXAS, INC.
                FOR HEALTH SERVICES TO THE MEDICAID STAR PROGRAM
                       IN THE DALLAS SERVICE DELIVERY AREA

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                    <C>
ARTICLE 1. PURPOSE...............................................................................       1

   SECTION 1.01 AUTHORIZATION....................................................................       1
   SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES................................................       1

ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES...........................................       1

   SECTION 2.01 GENERAL..........................................................................       1
   SECTION 2.02 MODIFICATION OF ARTICLE 2, DEFINITIONS...........................................       1
   SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS...........................       3
   SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS RETENTION..........       3
   SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS.....................       3
   SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE REQUIREMENTS .........       4
   SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES...................................................       4
   SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK PROVIDERS.........       5
   SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES..................................       5
   SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL HEALTH CARE
       NEEDS OR CHRONIC OR COMPLEX CONDITIONS....................................................       7
   SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS................      10
   SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS..................................      10
   SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL...................      10
   SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS..............................      13
   SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK.....................................      13
   SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS...................................      14
   SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS................      21
   SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND DISTRIBUTION..........      21
   SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT SUBSYSTEM..........      21
   SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND
       ACCOUNTABILITY ACT (HIPAA) COMPLIANCE.......................:.............................      22
   SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE
       IMPROVEMENT PROGRAM.......................................................................      22
   SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY IMPROVEMENT
       PROGRAM...................................................................................      22
   SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS...............................      23
   SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS.......................      23
   SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS.................................      24
   SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES.............................      24
   SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT
       PROVISIONS................................................................................      25
   SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION..........................      25
   SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS...................................      25
   SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO.....................................      25
   SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES...........................      26
   SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM.................................................      26
   SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT PROGRAMS...........      26
   SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS....................................      26
   SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES................................      26
   SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS.........................      26
   SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES...............................      26

ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES..........................................      27
</TABLE>

                                        i
<PAGE>

               for a resident of a rural area with only one HMO, the denial of a
               Medicaid Members' request to obtain services outside of the
               network.

                    APPEAL means the formal process by which a Member or his or
               her representative request a review of an HMO's action, as
               defined above.

                    COLD-CALL MARKETING means any unsolicited personal contact
               by the HMO with a potential Member for the purpose of marketing.

                    MEMBER COMPLAINT OR GRIEVANCE means an expression of
               dissatisfaction about any matter other than an action, as defined
               above. As provided by 42 C.F.R. Section 438.400, possible
               subjects for complaints or grievances include, but are not
               limited to, the quality of care of services provided, and aspects
               of interpersonal relationships such as rudeness of a provider or
               employee, or failure to respect the Member's rights.

                    EMERGENCY MEDICAL CONDITION, means a medical condition
               manifesting itself by acute symptoms of recent onset and
               sufficient severity (including severe pain), such that a prudent
               layperson, who possesses an average knowledge of health and
               medicine, could reasonably expect the absence of immediate
               medical care could result in:

                    (a)  placing the patient's health in serious jeopardy;

                    (b)  serious impairment to bodily functions;

                    (c)  serious dysfunction of any bodily organ or part;

                    (d)  serious disfigurement; or

                    (e)  in the case of a pregnant women, serious jeopardy to
                    the health of a woman or her unborn child.

                    EXPERIENCE REBATE means the portion of the HMO's net income
               before taxes (financial Statistical Report, Part 1, Line 14) that
               is returned to the state in accordance with Section 13.2.

                    EXPEDITED APPEAL means an appeal to the HMO in which the
               decision is required quickly based on the Member's health status
               and taking the time for a standard appeal could jeopardize the
               Member's life or health or ability to attain, maintain, or regain
               maximum function.

                    MARKETING means any communication from an HMO to a Medicaid
               recipient who is not enrolled with the HMO that can reasonably be
               interpreted as intended to influence the recipient to enroll in
               that particular HMO's Medicaid product, or either to not enroll
               in, or to disenroll from another HMO's Medicaid product.

                    MARKETING MATERIALS means materials that are produced in any
               medium by or on behalf of an HMO and can reasonably be
               interpreted as intended to market to potential enrollees.

                    MEMBER OR ENROLLEE, means a person who: is entitled to
               benefits under Title XIX of the Social Security Act and the Texas
               Medical Assistance Program (Medicaid), is in a Medicaid
               eligibility category included in the STAR Program, and is
               enrolled in the STAR Program.

                    POST-STABILIZATION CARE SERVICES means covered services,
               related to an emergency medical condition that are provided after
               an Member is

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<PAGE>


               stabilized in order to maintain the stabilized condition, or,
               under the circumstances described in 42 C.F.R. Section
               438.114(b)&(e) and 42 C.F.R. Section 422.113(c)(iii) to improve
               or resolve the Member's condition.

                    SPECIAL HEALTH CARE NEEDS means Member with an increased
               prevalence of risk of disability, including but not limited to:
               chronic physical or developmental condition; severe and
               persistent mental illness; behavioral or emotional condition that
               accompanies the Member's physical or developmental condition.

                    STABILIZE means to provide such medical care as to assure
               within reasonable medical probability that no deterioration of
               the condition is likely to result from, or occur from, or occur
               during discharge, transfer, or admission of the Member."

SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS

     Section 3.2 is modified to amend Section 3.2.4.3 add new Sections 3.2.6 and
3.2.7, as follows:

                    "3.2.4.3 [Contractor] understands and agrees that neither
               HHSC, nor the HMO's Medicaid Members, are liable or responsible
               for payment for any services authorized and provided under this
               contract.

                    3.2.6 In accordance with 42 C.F.R. Section 438.230(b)(3),
               all subcontractors must be subject to a written monitoring plan,
               for any subcontractor carrying out a major function of the HMO's
               responsibility under this contract. For all subcontractors
               carrying out a major function of the HMO's contract
               responsibility, the HMO must prepare a formal monitoring process
               at least annually. HHSC may request copies of written monitoring
               plans and the results of the HMO's formal monitoring process.

                    3.2.7 In accordance with 42 C.F.R. Section 438.210(e), HMO
               may not structure compensation to utilization management
               subcontractors or entities to provide incentives to deny, limit,
               reduce, or discontinue medically necessary services to any
               Member."

SECTION 2.04 MODIFICATION TO SECTION 3.5, RECORDS REQUIREMENTS AND RECORDS
RETENTION

     Section 3.5.5, Medical Records, is modified as follows:

                    "3.5.5    Medical Records. HMO must require, through
               contractual provisions or provider manual, providers to create
               and keep medical records in compliance with the medical records
               standards contained in Appendix O, Standards for Medical Records.
               All medical records must be kept for at least five (5) years,
               except for records of rural health clinics, which must be kept
               for a period of six (6) years from the date of service."

SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS

     Section 4.10.8 is modified as follows:

                    "4.10.8   HMO must comply with the standards adopted by the
               U.S. Department of Health and Human Services under the Health
               Insurance Portability and Accountability Act of 1996 (HIPAA),
               Public Law 104-191, regarding submitting and receiving claims
               information through electronic data interchange (EDI) that allows
               for automated

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               processing and adjudication of claims within the federally
               mandated timeframes (see 45 C.F.R. parts 160 through 164)."

SECTION 2.06 ADDITION TO ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE
REQUIREMENTS

     Section 5.11 is added as follows:

                    "5.11     DATA CERTIFICATION

                         5.11.1 In accordance with 42 C.F.R. Sections 438.604
               and 438.606, HMO must certify in writing:

                         (a) encounter data;

                         (b) delivery supplemental data and other data submitted
               pursuant to this agreement or State or Federal law or regulation
               relating to payment for services.

                         5.11.2 The certification must be submitted to HHSC
               concurrently with the certified data or other documents.

                         5.11.3 The certification must:

                         (a) be signed by the HMO's Chief Executive Officer;
               Chief Financial Officer; or an individual with delegated
               authority to sign for, and who reports directly to, either the
               Chief Executive Officer or Chief Financial Officer; and

                    (b) contain a statement that to the best knowledge,
               information and belief of the signatory, the HMO's certified data
               or information are accurate, complete, and truthful."

SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES

     Section 6.1 is modified to add new section 6.1.9 as follows:

                    "6.1.9    In accordance with 42 C.F.R. Section 438.102, HMO
               may file an objection to provide, reimburse for, or provide
               coverage of, counseling or referral service for a covered
               benefit, based on moral or religious grounds.

                    6.1.9.1   HMO must work with HHSC to develop a work plan to
               complete the necessary tasks to be completed and determine an
               appropriate date for implementation of the requested changes to
               the requirements related to covered services. The work plan will
               include timeframes for completing the necessary contract and
               waiver amendments, adjustments to capitation rates,
               identification of HMO and enrollment materials needing revision,
               and notifications to Members.

                    6.1.9.2   In order to meet the requirements of Section
               6.1.9.1, HMO must notify HHSC of grounds for and provide detail
               concerning its moral or religious objections and the specific
               services covered under the objection, no less than 120 days prior
               to the proposed effective date of the policy change.

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<PAGE>

                    6.1.9.3   HMO must notify all current Members of the intent
               to change covered services at least 30 days prior to the
               effective date of the change in accordance with 42 C.F.R. Section
               438.102(b)(ii)(B).

                    6.1.9.4   HHSC will provide information to all current
               Members on how and where to obtain the service that has been
               discontinued by the HMO in accordance with 42 C.F.R. Section
               438.102(c)."

SECTION 2.08 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND OUT-OF-NETWORK
PROVIDERS

     Section 6.4 is modified to add new Sections 6.4.6 and 6.4.7 as follows:

                    "6.4.6    HMO must provide Members with timely and adequate
               access to out-of-network services for as long as those services
               are necessary and covered benefits not available within the
               network, in accordance with 42 C.F.R. Section 438.206(b)(4). HMO
               will not be obligated to provide a Member with access to
               out-of-network services if such services become available from a
               network provider.

                    6.4.7     HMO must require through contract provisions or
               the provider manual that each Member have access to a second
               opinion regarding the use of any health care service. A Member
               must be allowed access to a second opinion from a network
               provider or out-of-network provider if a network provider is not
               available, at no additional cost to the Member, in accordance
               with 42 C.F.R. Section 438.206(b)(3)."

SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES

     Section 6.5 is deleted in its entirety and replaced with the following
language:

                    "6.5.1    HMO policy and procedures, covered benefits,
               claims adjudication methodology, and reimbursement performance
               for emergency services must comply with all applicable state and
               federal laws and regulations including 42 C.F.R. Section 438.114,
               whether the provider is in network or out of network.

                    6.5.2     HMO must pay for the professional, facility, and
               ancillary services that are medically necessary to perform the
               medical screening examination and stabilization of HMO Member
               presenting as an emergency medical condition or an emergency
               behavioral health condition to the hospital emergency department,
               24 hours a day, 7 days a week, rendered by either HMO's
               in-network or out-of-network providers.

                    6.5.2.1   For all out-of-network emergency services
               providers, HMO will pay a reasonable and customary amount for
               emergency services. HMO policies and procedures must be
               consistent with this agreement's prudent lay person definition of
               an emergency medical condition and claims adjudication processes
               required under Section 7.6 of this agreement and 42 C.F.R.
               Section 438.114.

                         HMO will pay a reasonable and customary amount for
               services for all out-of-network emergency services provider
               claims with dates of service between September 1, 2002 and
               November 30,

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<PAGE>

               2002. HMO must forward any complaints submitted by out-of-network
               emergency services providers during this time to HHSC. HHSC will
               review all complaints and determine whether payments were
               reasonable and customary. HHSC will direct the HMO to pay a
               reasonable and customary amount, as determined by HHSC, if it
               concludes that the payments were not reasonable and customary for
               the provider.

                    6.5.2.2   For all out-of-network emergency services provider
               claims with dates of service on or after December 1, 2002, HMO
               must pay providers a reasonable and customary amount consistent
               with a methodology approved by HHSC. HMO must submit its
               methodology, along with any supporting documentation, to HHSC by
               September 30, 2002. HHSC will review and respond to the
               information by November 15, 2002. HMO must forward any complaints
               by out-of-network emergency services providers to HHSC, which
               will review all complaints. If HHSC determines that payment is
               not consistent with the HMO's approved methodology, the HMO must
               pay the emergency services provider a rate, using the approved
               reasonable and customary methodology, as determined by HHSC.
               Failure to comply with this provision constitutes a default under
               Article 16, Default and Remedies.

                    6.5.3     HMO must ensure that its network primary care
               providers (PCPs) have after-hours telephone availability that is
               consistent with Section 7.8.10 of this contract. This telephone
               access must be available 24 hours a day, 7 days a week throughout
               the service area.

                    6.5.4     HMO cannot require prior authorization as a
               condition for payment for an emergency medical condition, an
               emergency behavioral health condition, or labor and delivery. HMO
               cannot limit what constitutes an emergency medical condition on
               the basis of lists of diagnoses or symptoms. HMO cannot refuse to
               cover emergency services based on the emergency room provider,
               hospital, or fiscal agent not notifying the Member's primary care
               provider or HMO of the Member's screening and treatment within 10
               calendar days of presentation for emergency services. HMO may not
               hold the Member who has an emergency medical condition liable for
               payment of subsequent screening and treatment needed to diagnose
               the specific condition or stabilize the patient. HMO must accept
               the emergency physician or provider's determination of when the
               Member is sufficiently stabilized for transfer or discharge.

                    6.5.5     Medical Screening Examination for emergency
               services. A medical screening examination needed to diagnose an
               emergency medical condition shall be provided in a hospital based
               emergency department that meets the requirements of the Emergency
               Medical Treatment and Active Labor Act (EMTALA) 42 C.F.R. Section
               489.20, Section 489.24 and Section 438.114(b)&(c). HMO must pay
               for the emergency medical screening examination, as required by
               42 U.S.C. Section 1395dd. HMOs must reimburse for both the
               physician's services and the hospital's emergency services,
               including the emergency room and its ancillary services.

                    6.5.6     Stabilization Services. When the medical screening
               examination determines that an emergency medical condition
               exists,

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<PAGE>

               HMO must pay for emergency services performed to stabilize the
               Member. The emergency physician must document these services in
               the Member's medical record. HMOs must reimburse for both the
               physician's and hospital's emergency stabilization services
               including the emergency room and its ancillary services.

                    6.5.7     Post-stabilization Care Services. HMO must cover
               and pay for post-stabilization care services in the amount,
               duration, and scope necessary to comply with 42 C.F.R. Section
               438.114(b)&(e) and 42 C.F.R. 422.113(c)(iii). The HMO is
               financially responsible for post-stabilization care services
               obtained within or outside the network that are not pre-approved
               by a plan provider or other HMO representative, but administered
               to maintain, improve, or resolve the Member's stabilized
               condition if:

                    (a) the HMO does not respond to a request for preapproval
               within 1 hour;

                    (b) the HMO cannot be contacted;

                    (c) or the HMO representative and the treating physician
               cannot reach an agreement concerning the Member's care and a plan
               physician is not available for consultation. In this situation,
               the HMO must give the treating physician the opportunity to
               consult with a plan physician and the treating physician may
               continue with care of the patient until an HMO physician is
               reached or the HMO's financial responsibility ends as follows:
               the HMO physician with privileges at the treating hospital
               assumes responsibility for the Member's care; the HMO physician
               assumes responsibility for the Member's care through transfer;
               the HMO representative and the treating physician reach an
               agreement concerning the Member's care; or the Member is
               discharged.

                    6.5.8     HMO must provide access to the HHSC-designated
               Level I and Level II trauma centers within the State or hospitals
               meeting the equivalent level of trauma care. HMOs may make
               out-of-network reimbursement arrangements with the
               HHSC-designated Level I and Level II trauma centers to satisfy
               this access requirement."

SECTION 2.10 MODIFICATION OF SECTION 6.13, PEOPLE WITH DISABILITIES, SPECIAL
HEALTH CARE NEEDS OR CHRONIC OR COMPLEX CONDITIONS

     Section 6.13 is deleted in its entirety and replaced with the following:

                    "6.13.1   HMO shall provide the following services to
               persons with disabilities, special health care needs, or chronic
               or complex conditions. These services are in addition to the
               covered services described in detail in the Texas Medicaid
               Provider Procedures Manual (Provider Procedures Manual) and the
               Texas Medicaid Bulletin, which is the bi-monthly update to the
               Provider Procedures Manual. Clinical information regarding
               covered services is published by the Texas Medicaid program in
               the Texas Medicaid Service Delivery Guide.

                    6.13.2    HMO must develop and maintain a system and
               procedures for identifying Members who have disabilities, special
               health care needs or chronic or complex medical and behavioral
               health

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               conditions. Once identified, HMO must have effective health
               delivery systems to provide the covered services to meet the
               special preventive, primary acute, and specialty health care
               needs appropriate for treatment of the individual's condition.
               The guidelines and standards established by the American Academy
               of Pediatrics, the American College of Obstetrics/Gynecologists,
               the U.S. Public Health Service, and other medical and
               professional health organizations and associations' practice
               guidelines whose standards are recognized by HHSC must be used in
               determining the medically necessary services, assessment and plan
               of care for each individual.

                    6.13.2.1  In accordance with 42 C.F.R. 438.208(b)(3), HMO
               shall provide information that identifies Members who the HMO has
               assessed as special health care needs Members to the State's
               enrollment broker. The information will be provided in a format
               to be specified by HHSC and updated by the 10th day of each
               month. In the event that a special health care needs Member
               changes health plans, HMO will work with receiving HMO to provide
               information concerning the results of the HMO's identification
               and assessment of that Member's needs, to prevent duplication of
               those activities.

                    6.13.3    HMO must require that the PCP for all persons with
               disabilities, special health care needs or chronic or complex
               conditions develop a plan of care to meet the needs of the
               Member. The plan of care must be based on health needs,
               specialist(s) recommendations, and periodic reassessment of the
               Member's developmental and functional status and service delivery
               needs. HMO must require providers to maintain record keeping
               systems to ensure that each Member who has been identified with a
               disability or chronic or complex condition has an initial plan of
               care in the primary care provider's medical records, that Member
               agrees to that plan of care, and that the plan is updated as
               often as the Member's needs change, but at least annually.

                    6.13.4    HMO must provide a primary care and specialty care
               provider network for persons with disabilities, special health
               care needs, or chronic or complex conditions. Specialty and
               subspecialty providers serving all Members must be Board
               Certified/Board Eligible in their specialty. HMO may request
               exceptions from HHSC for approval of traditional providers who
               are not board-certified or board-eligible but who otherwise meet
               HMO's credentialing requirements.

                    6.13.5    HMO must have in its network PCPs and specialty
               care providers that have documented experience in treating people
               with disabilities, special health care needs, or chronic or
               complex conditions, including children. For services to children
               with disabilities, special health care needs, or chronic or
               complex conditions, HMO must have in its network PCPs and
               specialty care providers that have demonstrated experience with
               children with disabilities, special health care needs, or chronic
               or complex conditions in pediatric specialty centers such as
               children's hospitals, medical schools, teaching hospitals and
               tertiary center levels.

                    6.13.6    HMO must provide information, education and
               training programs to Members, families, PCPs, specialty
               physicians, and community agencies about the care and treatment
               available in

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<PAGE>

               HMO's plan for Members with disabilities, special health care
               needs, or chronic or complex conditions.

                    HMO must ensure Members with disabilities, special health
               care needs, or chronic or complex conditions have direct access
               to a specialist.

                    6.13.7    HMO must coordinate care and establish linkages,
               as appropriate for a particular Member, with existing
               community-based entities and services, including but not limited
               to: Maternal and Child Health, Children with Special Health Care
               Needs (CSHCN), the Medically Dependent Children Program (MDCP),
               Community Resource Coordination Groups (CRCGs), Interagency
               Council on Early Childhood Intervention (ECI), Home and
               Community-based Services (HCS), Community Living Assistance and
               Support Services (CLASS), Community Based Alternatives (CBA), In
               Home Family Support, Primary Home Care, Day Activity and Health
               Services (DAHS), Deaf/Blind Multiple Disabled waiver program and
               Medical Transportation Program (MTP).

                    6.13.8    HMO must include TDH approved pediatric transplant
               centers, TDH designated trauma centers, and TDH designated
               hemophilia centers in its provider network (see Appendices E, F,
               and G for a listing of these facilities).

                    6.13.9    HMO must ensure Members with disabilities or
               chronic or complex conditions have access to treatment by a
               multidisciplinary team when determined by the Member's PCP to be
               medically necessary for effective treatment, or to avoid separate
               and fragmented evaluations and service plans. The teams must
               include both physician and non-physician providers determined to
               be necessary by the Member's PCP for the comprehensive treatment
               of the Member. The team must:

                    6.13.9.1  Participate in hospital discharge planning;

                    6.13.9.2  Participate in pre-admission hospital planning for
               non-emergency hospitalizations;

                    6.13.9.3  Develop specialty care and support service
               recommendations to be incorporated into the primary care
               provider's plan of care;

                    6.13.9.4  Provide information to the Member and the Member's
               family concerning the specialty care recommendations; and

                    6.13.9.5  HMO must develop and implement training programs
               for primary care providers, community agencies, ancillary care
               providers, and families concerning the care and treatment of a
               Member with a disability or chronic or complex conditions.

                    6.13.10   HMO must identify coordinators of medical care to
               assist providers who serve Members with disabilities and chronic
               or complex conditions and the Members and their families in
               locating and accessing appropriate providers inside and outside
               HMO's network.

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<PAGE>

                    6.13.11   HMO must assist, through information and referral,
               eligible Members in accessing providers of non-capitated Medicaid
               services listed in Article 6.1.8, as applicable.

                    6.13.12   HMO must ensure that Members who require routine
               or regular laboratory and ancillary medical tests or procedures
               to monitor disabilities, special health care needs, or chronic or
               complex conditions are allowed by HMO to receive the services
               from the provider in the provider's office or at a contracted lab
               located at or near the provider's office."

SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS

     Section 7.1.3 is amended to add new Section 7.1.3.5, as follows:

                    "7.1.3.5  Prenatal Care within 2 weeks of request."

SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS

     Section 7.2.8.2.1 is added and Section 7.2.9.2 is modified, as follows:

                    "7.2.8.2.1 [Provider] understands and agrees that the HMO's
               Medicaid enrollees are not to be held liable for the HMO's debts
               in the event of the entity's insolvency in accordance with 42
               C.F.R. Section 438.106(a).

                    7.2.9.2   A provider who is terminated is entitled to an
               expedited review process by HMO on request by the provider. HMO
               must make a good faith effort to provide written notice of the
               provider's termination to HMO's Members receiving primary care
               from, or who were seen on a regular basis by, the terminated
               provider within 15 days after receipt or issuance of the
               termination notice, in accordance with 42 C.F.R. Section
               438.10(f)(5). If a provider is terminated for reasons related to
               imminent harm to patient health, HMO must notify its Members
               immediately of the provider's termination.

                    7.2.12    Notice to Rejected Providers. In accordance with
               42 C.F.R. Section 438.129(a)(2), if an HMO declines to include
               individual or groups of providers in its network, it must give
               the affected providers written notice of the reason for its
               decision."

SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL

     The qualifications for a "Hospital" in Section 7.7 is replaced with the
     following language. Section 7.7 is retitled Section 7.7.1 and new Section
     7.7.2, Provider Credentialing and Recredentialing is added to Section 7.7:

                    "7.7.1 PROVIDER QUALIFICATIONS - GENERAL

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PROVIDER                                   QUALIFICATION
--------------------------------------------------------------------------------
<S>                 <C>
Hospital            An institution licensed as a general or special hospital by
                    the State of Texas under Chapter 241 of the Health and
                    Safety Code, which is enrolled as a provider in the Texas
                    Medicaid Program. HMO will require that all facilities in
                    the network used for acute inpatient specialty care for
                    people under age 21 with disabilities, special health care
                    needs, or chronic or complex conditions will have a
                    designated pediatric unit; 24 hour laboratory and blood
                    bank
--------------------------------------------------------------------------------
</TABLE>

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                                     10 of 27
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
PROVIDER                                   QUALIFICATION
--------------------------------------------------------------------------------
<S>                 <C>
                    availability; pediatric radiological capability; meet JCAHO
                    standards; and have discharge planning and social service
                    units. HMO may request exceptions to this requirement for
                    specific hospitals within their networks, from
                    HHSC."
--------------------------------------------------------------------------------
</TABLE>

                    "7.7.2    PROVIDER CREDENTIALING AND RECREDENTIALING

                    In accordance with 42 C.F.R. Section 438.214, HMO's standard
               credentialing and recredentialing process must include the
               following provisions to determine whether physicians and other
               health care professionals, who are licensed by the State and who
               are under contract with HMO, are qualified to perform their
               services.

                    7.7.2.1   Written Policies and Procedures. MCO has written
               policies and procedures for the credentialing process that
               includes MCO's initial credentialing of practitioners as well as
               its subsequent recredentialing, recertifying and/or reappointment
               of practitioners.

                    7.7.2.2   Oversight by Governing Body. The Governing Body,
               or the group or individual to which the Governing Body has
               formally delegated the credentialing function, has reviewed and
               approved the credentialing policies and procedures.

                    7.7.2.3   Credentialing Entity. The plan designates a
               credentialing committee or other peer review body, which makes
               recommendations regarding credentialing decisions.

                    7.7.2.4   Scope. The plan identifies those practitioners who
               fall under its scope of authority and action. This shall include,
               at a minimum, all physicians, dentists, and other licensed health
               practitioners included in the review organization's literature
               for Members, as an indication of those practitioners whose
               service to Members is contracted or anticipated.

                    7.7.2.5   Process. The initial credentialing process obtains
               and reviews verification of the following information, at a
               minimum:

                    a) The practitioner holds a current valid license to
               practice;

                    b) Valid DEA or CDS certificate, as applicable;

                    c) Graduation from medical school and completion of a
               residency or other post-graduate training, as applicable;

                    d) Work history;

                    e) Professional liability claims history;

                    f) The practitioner holds current, adequate malpractice
               insurance according to the plan's policy;

                    g) Any revocation or suspension of a state license or
               DEA/BNDD number;

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                    h) Any curtailment or suspension of medical staff privileges
               (other than for incomplete medical records);

                    i) Any sanctions imposed by Medicaid and/or Medicare;

                    j) Any censure by the State or County Medical Association;

                    k) MCO requests information on the practitioner from the
               National Practitioner Data Bank and the State Board of Medical
               Examiners;

                    l) The application process includes a statement by the
               Applicant regarding: (This information should be used to evaluate
               the practitioner's current ability to practice.)

                    m) Any physical or mental health problems that may affect
               current ability to provide health care;

                    n) Any history of chemical dependency/substance abuse;

                    o) History of loss of license and/or felony convictions;

                    p) History of loss or limitation of privileges or
               disciplinary activity; and

                    q) An attestation to correctness/completeness of the
               application.

                    7.2.2.6   There is an initial visit to each potential
               primary care practitioner's office, including documentation of a
               structured review of the site and medical record keeping
               practices to ensure conformance with MCO's standards.

                    7.7.2.7   Recredentialing. A process for the periodic
               reverification of clinical credentials (recredentialing,
               reappointment, or recertification) is described in MCO's policies
               and procedures.

                    7.7.2.8   There is evidence that the procedure is
               implemented at least every three years.

                    7.7.2.9   MCO conducts periodic review of information from
               the National Practitioner Data Bank, along with performance data
               on all physicians, to decide whether to renew the participating
               physician agreement. At a minimum, the recredentialing,
               recertification or reappointment process is organized to verify
               current standing on items listed in "E-1" through "E-7" and item
               "E-13" above.

                    7.7.2.10   The recredentialing, recertification or
               reappointment process also includes review of data from: a)
               Member complaints and b) results of quality reviews.

                    7.7.2.11  Delegation of Credentialing Activities. If MCO
               delegates credentialing (and recredentialing, recertification, or
               reappointment) activities, there is a written description of the
               delegated activities, and the delegate's accountability for these
               activities. There is also evidence that the delegate accomplished
               the credentialing activities. MCO monitors the effectiveness of
               the delegate's credentialing and reappointment or recertification
               process.

                    7.7.2.12  Retention of Credentialing Authority. MCO retains
               the right to approve new providers and sites and to terminate or

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               suspend individual providers. MCO has policies and procedures for
               the suspension, reduction or termination of practitioner
               privileges.

                    7.7.2.13  Reporting Requirement. There is a mechanism for,
               and evidence of implementation of, the reporting of serious
               quality deficiencies resulting in suspension or termination of a
               practitioner, to the appropriate authorities. MCO will implement
               and maintain policies and procedures for disciplinary actions
               including reducing, suspending, or terminating a practitioner's
               privileges.

                    7.7.2.14  Appeals Process. There is a provider appellate
               process for instances where MCO chooses to reduce, suspend or
               terminate a practitioner's privileges with the organization.

SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS

     Section 7.8.1.1 is added and Sections 7.8.8 and 7.8.11.4 are modified with
the following language:

                    "7.8.1.1  HMO must provide supporting documentation, as
               specified and requested by the State, to verify that their
               provider network meets the requirements of this contract at the
               time the HMO enters into a contract and at the time of a
               significant change as required by 42 C.F.R. Section 438.207(b). A
               significant change can be, but is not limited to, change in
               ownership (purchase, merger, acquisition), new start-up,
               bankruptcy, and/or a major subcontractor change directly
               affecting a provider network such as (IPA's, BHO, medical groups,
               etc.).

                    7.8.8     The PCP for a Member with disabilities, special
               health care needs, or chronic or complex conditions may be a
               specialist who agrees to provide PCP services to the Member. The
               specialty provider must agree to perform all PCP duties required
               in the contract and PCP duties must be within the scope of the
               specialist's license. Any interested person may initiate the
               request for a specialist to serve as a PCP for a Member with
               disabilities, special health care needs, or chronic or complex
               conditions.

                    7.8.11.4  HMO must require PCPs for children under the age
               of 21 to provide or arrange to have provided all services
               required under Section 6.8 relating to Texas Health Steps,
               Section 6.9 relating to Perinatal Services, Section 6.10 relating
               to Early Childhood Intervention, Section 6.11 relating to WIC,
               Section 6.13 relating to People With Disabilities, special health
               care needs, or chronic or complex conditions, and Section 6.14
               relating to Health Education and Wellness and Prevention Plans.
               PCP must cooperate and coordinate with HMO to provide Member and
               the Member's family with knowledge of and access to available
               services."

SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK

     Section 8.2.4 is added with the following language:

                    "8.2.4    In accordance with 42 C.F.R. Section 438.100, HMO
               must maintain written policies and procedures for informing
               Members of their rights and responsibilities. HMO must notify its
               Members of their right to request a copy of these rights and
               responsibilities."

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SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS

     Section 8.5 is deleted in its entirety and replaced with the following
language:

                    "8.5      MEMBER COMPLAINT AND APPEAL SYSTEM

                    HMO must develop, implement and maintain a Member complaint
               and appeal system that complies with the requirements in
               applicable federal and state laws and regulations, including 42
               C.F.R. Section 431.200 and 42 C.F.R. Part 483, Subpart F,
               "Grievance System;" and the provisions of 1 T.A.C. Chapter 357
               relating to managed care organizations. The complaint and appeal
               system must include a complaint process, an appeal process, and
               access to HHSC's Fair Hearing System. The procedures must be
               reviewed and approved in writing by HHSC. Modifications and
               amendments to the Member complaint and appeal system must be
               submitted to HHSC at least 30 days prior to the implementation of
               the modification or amendment.

                    For purposes of Section 8.5., an "authorized representative"
               is any person or entity acting on behalf of the Member and with
               the Member's written consent. A provider may be an "authorized
               representative."

                    8.5.1     MEMBER COMPLAINT PROCESS

                    8.5.1.1   HMO must have written policies and procedures for
               receiving, tracking, responding to, reviewing, reporting and
               resolving complaints by Members or their authorized
               representatives.

                    8.5.1.2   HMO must resolve complaints within 30 days from
               the date that the complaint was received. The complaint procedure
               must be the same for all Members under this contract. The Member
               or Member's authorized representative may file a complaint either
               orally or in writing. HMO must also inform Members how to file a
               complaint directly with HHSC.

                    8.5.1.3   HMO must designate an officer of HMO who has
               primary responsibility for ensuring that complaints are resolved
               in compliance with written policy and within the time required.
               An "officer" of HMO means a president, vice president, secretary,
               treasurer, or chairperson of the board for a corporation, the
               sole proprietor, the managing general partner of a partnership,
               or a person having similar executive authority in the
               organization.

                    8.5.1.4   HMO must have a routine process to detect patterns
               of complaints. The process must involve management, supervisory,
               and quality improvement staff in the development of policy and
               procedural improvements to address the complaints.

                    8.5.1.5   HMO's complaint procedures must be provided to
               Members in writing and through oral interpretive services. A
               written description of HMO's complaint procedures must be
               available in prevalent non-English languages identified by HHSC,
               at a 4th to 6th grade reading level. HMO must include a written
               description of the complaint process in the Member Handbook. HMO
               must maintain and

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               publish in the Member Handbook, at least one local and one
               toll-free telephone number with TeleTypewriter/Telecommunications
               Device for the Deaf (TTY/TTD) and interpreter capabilities for
               making complaints.

                    8.5.1.6   HMO's process must require that every complaint
               received in person, by telephone or in writing must be
               acknowledged and recorded in a written record and logged with the
               following details: date; identification of the individual filing
               the complaint; identification of the individual recording the
               complaint; nature of the complaint; disposition of the complaint
               (i.e., how the HMO resolved the complaint); corrective action
               required; and date resolved.

                    8.5.1.7   HMO is prohibited from discriminating or taking
               punitive action against a Member or his or her representative for
               making a complaint.

                    8.5.1.8   If the Member makes a request for disenrollment,
               the HMO shall give the Member information on the disenrollment
               process and direct the Member to the Enrollment Broker. If the
               request for disenrollment includes a complaint by the Member, the
               complaint will be processed separately from the disenrollment
               request, through the complaint process.

                    8.5.1.9   HMO will cooperate with the Enrollment Broker,
               HHSC, and HHSC's Member resolution service contractors to resolve
               all Member complaints. Such cooperation may include, but is not
               limited to, providing information or assistance to internal
               complaint committees.

                    8.5.1.10  HMO must provide designated staff to assist
               Members in understanding and using HMO's complaint system. HMO's
               designated staff must assist Members in writing or filing a
               complaint and monitoring the complaint through the HMO's
               complaint process until the issue is resolved.

                    8.5.2     STANDARD MEMBER APPEAL PROCESS

                    8.5.2.1   HMO must develop, implement and maintain an appeal
               procedure that complies with the requirements in federal laws and
               regulations, including 42 C.F.R. Section 431.200 and 42 C.F.R.
               Part 438, Subpart F, "Grievance System." An appeal is a
               disagreement with an "action" as defined in Article 2 of the
               Contract. The appeal procedure must be the same for all Members.
               When a Member or his or her authorized representative expresses
               orally or in writing any dissatisfaction or disagreement with an
               action, the HMO must regard the expression of dissatisfaction as
               a request to appeal an action.

                    8.5.2.2   A Member must file a request for an internal
               appeal within 30 days from receipt of the notice of the action.
               To ensure continuation of currently authorized services, however,
               the Member must file the appeal on or before the later of: 10
               days following the HMO's mailing of the notice of the action or
               the intended effective date of the proposed action.

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                    8.5.2.3   HMO must designate an officer who has primary
               responsibility for ensuring that appeals are resolved in
               compliance with written policy and within the time required. An
               "officer" of HMO means a president, vice president, secretary,
               treasurer, or chairperson of the board for a corporation, the
               sole proprietor, the managing general partner of a partnership,
               or a person having similar executive authority in the
               organization.

                    8.5.2.4   The provisions of Article 21.58A, Texas Insurance
               Code, relating to a Member's right to appeal an adverse
               determination made by HMO or a utilization review agent by an
               independent review organization, do not apply to a Medicaid
               recipient. Federal fair hearing requirements (Social Security Act
               Section 1902a(3), codified at 42 C.F.R. Section 431.200 et. seq.)
               require the agency to make a final decision after a fair hearing,
               which conflicts with the State requirement that the IRO make a
               final decision. Therefore, Article 21.58A is pre-empted by the
               federal requirement.

                    8.5.2.5   HMO must have policies and procedures in place
               outlining the role of HMO's Medical Director for an appeal of an
               action. The Medical Director must have a significant role in
               monitoring, investigating and hearing appeals. In accordance with
               42 C.F.R. Section 438.406, the HMO's policies and procedures must
               require that individuals who make decisions on appeals were not
               involved in any previous level of review or decision-making, and,
               are health care professionals who have the appropriate clinical
               expertise, as determined by HHSC, in treating the Member's
               condition or disease.

                    8.5.2.6   HMO must provide designated staff to assist
               Members in understanding and using HMO's appeal process. HMO's
               designated staff must assist Members in writing or filing an
               appeal and monitoring the appeal through the HMO's appeal process
               until the issue is resolved.

                    8.5.2.7   HMO must have a routine process to detect patterns
               of appeals. The process must involve management, supervisory, and
               quality improvement staff in the development of policy and
               procedural improvements to address the appeals.

                    8.5.2.8   HMO's appeal procedures must be provided to
               Members in writing and through oral interpretive services. A
               written description of HMO's appeal procedures must be available
               in prevalent non-English languages identified by HHSC, at a 4th
               to 6th grade reading level. HMO must include a written
               description in the Member Handbook. HMO must maintain and publish
               in the Member Handbook at least one local and one toll-free
               telephone number with TTY/TTD and interpreter capabilities for
               requesting an appeal of an action.

                    8.5.2.9   HMO's process must require that every oral appeal
               received must be confirmed by a written, signed appeal by the
               Member or his or her representative, unless the Member or his or
               her representative requests an expedited resolution. All appeals
               must be recorded in a written record and logged with the
               following details: date notice is sent; effective date of the
               action; date the Member or his or her representative requested
               the appeal; date the appeal was followed

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               up in writing; identification of the individual filing; nature of
               the appeal; disposition of the appeal; notice of disposition to
               Member.

                    8.5.2.10  HMO must send a letter to the Member within 5
               business days acknowledging receipt of the appeal request. Except
               as provided in Section 8.5.3.2, HMO must complete the entire
               appeal process within 30 calendar days after receipt of the
               initial written or oral request for appeal. The timeframe may be
               extended up to 14 calendar days if the Member requests an
               extension; or the HMO shows that there is a need for additional
               information and how the delay is in the Member's interest. If the
               timeframe is extended, the HMO must give the Member written
               notice of the reason for delay if the Member had not requested
               the delay.

                    8.5.2.11  During the appeal process, HMO must provide the
               Member a reasonable opportunity to present evidence, any
               allegations of fact or law, in person as well as in writing. The
               HMO must inform the Member of the time available for providing
               this information, and in the case of an expedited resolution,
               that limited time will be available (see Section 8.5.3.2).

                    8.5.2.12  HMO must provide the Member and his or her
               representative opportunity, before and during the appeals
               process, to examine the Member's case file, including medical
               records and any other documents considered during the appeal
               process. HMO must include, as parties to the appeal, the Member
               and his or her representative or the legal representative of a
               deceased Member's estate.

                    8.5.2.13  In accordance with 42.C.F.R. Section 438.420, HMO
               must continue the Member's benefits currently being received by
               the Member, including the benefit that is the subject of the
               appeal, if all of the following criteria are met: 1) the Member
               or his or her representative files the appeal timely (as defined
               in Section 8.5.2.2); 2) the appeal involves the termination,
               suspension, or reduction of a previously authorized course of
               treatment; 3) the services were ordered by an authorized
               provider; 4) the original period covered by the original
               authorization has not expired; and 5) the Member requests an
               extension of the benefits. If, at the Member's request, the HMO
               continues or reinstates the Member's benefits while the appeal is
               pending, the benefits must be continued until one of the
               following occurs: the Member withdraws the appeal; 10 days pass
               after the HMO mails the notice, providing the resolution of the
               appeal against the Member, unless the Member, within the 10-day
               timeframe, has requested a State fair hearing with continuation
               of benefits until a State fair hearing decision can be reached; a
               state fair hearing office issues a hearing decision adverse to
               the Member; the time period or service limits of a previously
               authorized service has been met.

                    8.5.2.14  In accordance with 42 C.F.R. Section 438.420(d),
               if the final resolution of the appeal is adverse to the Member,
               and upholds the HMO's action, then to the extent that the
               services were furnished to comply with Section 8.5.2.13, the HMO
               may recover such costs from the Member.

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                    8.5.2.15  If the HMO or state fair hearing officer reverses
               a decision to deny, limit, or delay services that were not
               furnished while the appeal was pending, the HMO must authorize or
               provide the disputed services promptly, and as expeditiously as
               the Member's health condition requires.

                    8.5.2.16  If the HMO or state fair hearing officer reverses
               a decision to deny authorization of services and the Member
               received the disputed services while the appeal was pending, the
               HMO will be responsible for the payment of services.

                    8.5.2.17  HMO is prohibited from discriminating against a
               Member or his or her representative for making an appeal.

                    8.5.3     EXPEDITED HMO APPEALS

                    8.5.3.1   In accordance with 42 C.F.R. Section 438.410, HMO
               must establish and maintain an expedited review process for
               appeals, when the HMO determines (for a request from a Member) or
               the provider indicates (in making the request on the Member's
               behalf or supporting the Member's request) that taking the time
               for a standard resolution could seriously jeopardize the Member's
               life or health. HMO must follow all appeal requirements for
               standard Member appeals, as set forth in Section 8.5.2, except
               where differences are specifically noted. Requests for expedited
               appeals must be accepted orally or in writing.

                    8.5.3.2   HMO must complete investigation and resolution of
               an appeal relating to an ongoing emergency or denial of continued
               hospitalization: (1) in accordance with the medical or dental
               immediacy of the case; and (2) not later than one business day
               after the complainant's request for appeal is received.

                    8.5.3.3   Members must exhaust the HMO's expedited appeal
               process before making a request for an expedited state fair
               hearing. After HMO receives the request for an expedited appeal,
               it must hear an approved requests for a Member to have an
               expedited appeal and notify the Member of the outcome of the
               appeal within 3 business days, except as stated in 8.5.3.2. This
               timeframe may be extended up to 14 calendar days if the Member
               requests an extension; or the HMO shows (to the satisfaction of
               HHSC, upon HHSC's request) that there is a need for additional
               information and how the delay is in the Member's interest. If the
               timeframe is extended, the HMO must give the Member written
               notice of the reason for delay if the Member had not requested
               the delay.

                    8.5.3.4   If the decision is adverse to the Member,
               procedures relating to the notice in Section 8.5.5 must be
               followed. The HMO is responsible for notifying the Member of
               their rights to access an expedited state fair hearing. HMO will
               be responsible for providing documentation to the State and the
               Member, indicating how the decision was made, prior to state's
               expedited fair hearing.

                    8.5.3.5   The HMO must ensure that punitive action is
               neither taken against a provider who requests an expedited
               resolution or supports a Member's request.

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                    8.5.3.6   If the HMO denies a request for expedited
               resolution of an appeal, it must: (1) transfer the appeal to the
               timeframe for standard resolution set forth in Section 8.5.2, and
               (2) make a reasonable effort to give the Member prompt oral
               notice of the denial, and follow up within two calendar days with
               a written notice.

                    8.5.4     ACCESS TO STATE FAIR HEARING

                    8.5.4.1   HMO must inform Members that they generally have
               the right to access the state fair hearing process in lieu of the
               internal appeal system provided by HMO procedures set forth in
               Sections 8.5.2 and 8.5.3. The notice must comply with the
               requirements of 1 T.A.C. Chapter 357. In the case of an expedited
               State Fair Hearing Process, the HMO must inform the Member that
               he or she must first exhaust the HMO's internal expedited appeal
               process.

                    8.5.4.2   HMO must notify Members that they may be
               represented by an authorized representative in the state fair
               hearing process.

                    8.5.5     NOTICES OF ACTION AND DISPOSITION OF APPEALS

                    8.5.5.1   NOTICE OF ACTION. HMO must notify the Member, in
               accordance with 1 T.A.C. Chapter 357, whenever HMO takes an
               action as defined in Article 2 of this contract. The notice must
               contain the following information:

                    (a) the action the HMO or its contractor has taken or
               intends to take;

                    (b) the reasons for the action;

                    (c) the Member's right to access the HMO internal appeal
               process, as set forth in Sections 8.5.2 and 8.5.3, and/or to
               access to the State Fair Hearing Process as provided in Section
               8.5.4;

                    (d) the procedures by which Member may appeal HMO's action;

                    (e) the circumstances under which expedited resolution is
               available and how to request it;

                    (f) the circumstances under which a Member can continue to
               receive benefits pending resolution of the appeal (see Section
               8.5.2.13), how to request that benefits be continued, and the
               circumstances under which the Member may be required to pay the
               costs of these services;

                    (g) the date the action will be taken;

                    (h) a reference to the HMO policies and procedures
               supporting the HMO's action;

                    (i) an address where written requests may be sent and a
               toll-free number that the Member can call to request the
               assistance of a Member representative, file an appeal, or request
               a Fair Hearing;

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                    (j) an explanation that Members may represent themselves, or
               be represented by a provider, a friend, a relative, legal counsel
               or another spokesperson;

                    (k) a statement that if the Member wants a HHSC Fair Hearing
               on the action, Member must make, in writing, the request for a
               Fair Hearing within 90 days of the date on the notice or the
               right to request a hearing is waived;

                    (l) a statement explaining that HMO must make its decision
               within 30 days from the date the appeal is received by HMO, or 3
               business days in the case of an expedited appeal; and a statement
               explaining that the hearing officer must make a final decision
               within 90 days from the date a Fair Hearing is requested; and

                    (m) any other information required by 1 T.A.C. Chapter 357
               that relates to a managed care organization's notice of action.

                    8.5.5.2   TIMEFRAME FOR NOTICE OF ACTION

                    In accordance with 42 C.F.R. Section 438.404(c), the HMO
               must mail a notice of action within the following timeframes:

                         (1)  For termination, suspension, or reduction of
               previously authorized Medicaid-covered services, within the
               timeframes specified in 42 C.F.R. Sections 431.211, 431.213, and
               431.214.

                         (2)  For denial of payment, at the time of any action
               affecting the claim.

                         (3)  For standard service authorization decisions that
               deny or limit services, within the timeframe specified in 42
               C.F.R. Section 438.210(d)(1).

                         (4)  If the HMO extends the timeframe in accordance
               with 42 C.F.R. Section 438.210(d)(1), it must--

                         (a)  Give the Member written notice of the reason for
               the decision to extend the timeframe and inform the Member of the
               right to file a grievance if he or she disagrees with that
               decision; and

                         (b)  Issue and carry out its determination as
               expeditiously as the Member's health condition requires and no
               later than the date the extension expires.

                         (5)  For service authorization decisions not reached
               within the timeframes specified in 42 C.F.R. Section 438.210(d)
               (which constitutes a denial and is thus an adverse action), on
               the date that the timeframes expire.

                         (6)  For expedited service authorization decisions,
               within the timeframes specified in 42 C.F.R. Section 438.210(d).

                    8.5.5.3.  NOTICE OF DISPOSITION OF APPEAL. In accordance
               with 42 C.F.R. Section 438.408(e), HMO must provide written

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               notice of disposition of all appeals including expedited appeals.
               The written resolution notice must include the results and date
               of the appeal resolution. For decisions not wholly in the Members
               favor, the notice must contain:

                    (a) the right to request a fair hearing,

                    (b) how to request a state fair hearing,

                    (c) the circumstances under which the Member can continue to
               receive benefits pending a hearing (see Section 8.5.2.13),

                    (d) how to request the continuation of benefits,

                    (e) if the HMO's action is upheld in a hearing, the Member
               may be liable for the cost of any services furnished to the
               Member while the appeal is pending; and

                    (f) any other information required by 1 T.A.C. Chapter 357
               that relates to a managed care organization's notice of
               disposition of an appeal."

                    8.5.5.4   TIMEFRAME FOR NOTICE OF RESOLUTION OF APPEALS. In
               accordance with 42 C.F.R. Section 438.408, HMO must provide
               written notice of resolution of appeals, including expedited
               appeals, as expeditiously as the Member's health condition
               requires, but the notice must not exceed the timelines as
               provided in 8.5.2 or 8.5.3. For expedited resolution of appeals,
               HMO must make reasonable efforts to give the Member prompt oral
               notice of resolution of the appeal, and follow up with a written
               notice within the timeframes set forth in Section 8.5.3. If the
               HMO denies a request for expedited resolution of an appeal, HMO
               must transfer the appeal to the timeframe for standard resolution
               as provided in Section 8.5.2. and make reasonable efforts to give
               the Member prompt oral notice of the denial, and follow up within
               two calendar days with a written notice."

SECTION 2.17 DELETION OF SECTION 8.6, MEMBER NOTICE, APPEALS AND FAIR HEARINGS

     Section 8.6 is deleted in its entirety. (Information concerning Member
     appeals and fair hearings is now located in Section 8.5 above.)

                    8.6       [deleted]

SECTION 2.18 MODIFICATION OF SECTION 9.01, MARKETING MATERIAL MEDIA AND
DISTRIBUTION

     New Section 9.1.1 is added as follows:

                    "9.1.1    HMO may not make any assertion or statement
               (orally or in writing) it is endorsed by the CMS, a Federal or
               State government or agency, or similar entity."

SECTION 2.19 MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT
SUBSYSTEM

   In Section 10.7, requirements 5 and 9 from the "Functions and Features"
   provision are deleted.

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<PAGE>

SECTION 2.20 MODIFICATION OF SECTION 10.12, HEALTH INSURANCE PORTABILITY AND
ACCOUNTABILITY ACT (HIPAA) COMPLIANCE

          Section 10.12 is modified to add new Section 10.12.1 as follows:

                    "10.12.1  HMO must provide its Members with a privacy notice
               as required by HIPAA. The 4th to 6th grade reading level has been
               waived for the notices and are allowable at a 12th grade reading
               level. The HMO is not required to send the notice out in Spanish
               but must reference on their English notice, in Spanish, where to
               call to obtain a copy. HMO must provide HHSC with a copy of their
               privacy notice for filing, but does not need to have HHSC
               approval."

SECTION 2.21 MODIFICATION OF SECTION 11.1, QUALITY ASSESSMENT AND PERFORMANCE
IMPROVEMENT PROGRAM

          Sections 11.1, and 11.5 are deleted and replaced with the following
          language:

                    "11.1     QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT
                              PROGRAM

                    HMO must develop, maintain, and operate a quality assessment
               and performance improvement program consistent with the
               requirements of 42 C.F.R. Section 438.240 and Sections 10.7,
               12.10 and Appendix A of this agreement.

                    11.5      Behavioral Health Integration into QIP. If an HMO
               provides behavioral health services, it must integrate behavioral
               health into its quality assessment and performance improvement
               program and include a systematic and on-going process for
               monitoring, evaluating, and improving the quality and
               appropriateness of behavioral health care services provided to
               Members. HMO must collect data, monitor and evaluate for
               improvements to physical health outcomes resulting from
               behavioral health integration into the overall care of the
               Member."

SECTION 2.22 MODIFICATION TO ARTICLE 11, QUALITY ASSURANCE AND QUALITY
IMPROVEMENT PROGRAM

          Article 11 is modified to add new Section 11.7, Practice Guidelines.

                    "11.7     PRACTICE GUIDELINES

                         In accordance with 42 C.F.R. Section 438.236, HMO must
               adopt practice guidelines, that are based on valid & reliable
               clinical evidence or a consensus of health care professionals in
               the particular field; consider the needs of the HMO's Members;
               are adopted in consultation with contracting health care
               professionals; and are reviewed and updated periodically as
               appropriate. The HMO must disseminate the guidelines to all
               affected providers and, upon request to Members and potential
               Members. The HMO's decisions regarding utilization management,
               member education, coverage of services, and other areas included
               in the guidelines, must be consistent with the HMO's guidelines."

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SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS

          Section 12.6, Member Complaints is replaced with the following
          language. Sections 12.8, Utilization Management Reports -- Behavioral
          Health and 12.9, Utilization Management Reports -- Physical Health are
          deleted and replaced with new Section 12.8, Utilization Management
          Reports, as follows:

                    "12.6     MEMBER COMPLAINTS & APPEALS

                    HMO must submit a quarterly summary report of Member
               complaints and appeals. HMO must also report complaints and
               appeals submitted to its subcontracted risk groups (e.g., IPAs).
               The complaint and appeals report must be submitted not later than
               45 days following the end of the state fiscal quarter in a format
               specified by HHSC.

                    12.8      UTILIZATION MANAGEMENT REPORTS

                    12.8.1    Written Program Description. MCO has a written
               utilization management program description, which includes, at a
               minimum, procedures to evaluate medical necessity, criteria used,
               information sources and the process used to review and approve
               the provision of medical services.

                    12.8.2    Scope. The program has mechanisms to detect
               underutilization as well as overutilization, including but not
               limited to generation of provider profiles.

                    12.8.3    Preauthorization and Concurrent Review
               Requirements. For MCOs with preauthorization or concurrent review
               program:

                    12.8.4    Qualified medical professionals supervise
               preauthorization and concurrent review decisions.

                    12.8.5    Efforts are made to obtain all necessary
               information, including pertinent clinical information, and
               consult with the treating physician as appropriate.

                    12.9      [deleted]"

SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS

          Sections 12.10.1 through 12.10.3 are deleted. Sections 12.10.5 and
          12.10.6 are added as follows:

                    "12.10.1  [deleted]

                    12.10.2   [deleted]

                    12.10.3   [deleted]

                    12.10.5   Written Annual Report. HMO must file a written
                    annual report with HHSC describing the HMO's quality
                    assessment and performance improvement projects.

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                    12.10.6   Encounter Data. In accordance with 42 C.F.R.
                    438.240(c)(2), HMO must submit the encounter data identified
                    in Section 10.5 of this agreement, at least monthly to HHSC,
                    so that HHSC may complete a performance measurement report."

SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS

          Section 13.1.2 is modified as follows:

          13.1.2    The monthly capitation amounts and the Delivery Supplemental
                    Payment (DSP) amount effective as of September 1, 2003 are
                    listed below.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------
            DALLAS SDA                                     MONTHLY
            RISK GROUP                               CAPITATION AMOUNTS
-----------------------------------------------------------------------
<S>                                                  <C>
TANF Children (> 1 year of age)                           $  83.68
------------------------------------------------------------------
TANF Adults                                               $ 197.70
------------------------------------------------------------------
Pregnant Women                                            $ 301.91
------------------------------------------------------------------
Newborns* (up to 12 Months of Age)                        $ 337.98
------------------------------------------------------------------
Expansion Children (> 1 year of Age)                      $ 112.22
------------------------------------------------------------------
Federal Mandate Children                                  $  64.33
------------------------------------------------------------------
Disabled/Blind Administration                             $  14.00
------------------------------------------------------------------
</TABLE>

* Includes TANF Child & Expansion Children up to 12 months of Age.

<TABLE>
----------------
<S>         <C>
[ILLEGIBLE] HMO
-----------
            HHSC
-----------
----------------
</TABLE>

                    Delivery Supplemental Payment. A one-time per pregnancy
                    supplemental payment for each delivery shall be paid to HMO
                    as provided below in the following amount: $3,076.23.

SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES

     Section 13.3.1 is amended as follows,, and Sections 13.3.2 - 13.3.10 are
     deleted in their entirety.

                    13.3.1    Performance Objectives. Performance Objectives are
               contained in Appendix K of this contract. HMO must meet the
               benchmarks established by HHSC for each objective.

                    13.3.2    [deleted]

                    13.3.3    [deleted]

                    13.3.4    [deleted]

                    13.3.5    [deleted]

                    13.3.6    [deleted]

                    13.3.7    [deleted)

                    13.3.8    [deleted]

                    13.3.9    [deleted]

                    13.3.10   [deleted]


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<PAGE>

                    13.3.10.1 [deleted]

SECTION 2.27 MODIFICATION OF SECTION 13.5, NEWBORN AND PREGNANT WOMEN PAYMENT
PROVISIONS

          Section 13.5.5 is modified to comply with HIPAA requirements, as
          follows:

                    "13.5.5   The Enrollment Broker will provide a daily
               enrollment file, which will list all TP40 Members who received
               State-issued Medicaid I.D. numbers, for each HMO. HHSC will
               guarantee capitation payments to the HMOs for all TP40 Members
               who appear on the capitation and capitation adjustment files. The
               Enrollment Broker will provide a pregnant women exception report
               to the HMOs, which can be used to reconcile the pregnant women
               daily enrollment file with the monthly enrollment, capitation and
               capitation adjustment files."

SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION

          Section 14.1.2.8 is modified as follows and 14.1.2.9 is deleted:

                    "14.1.2.8 FEDERAL MANDATE CHILDREN (MAO) - Children aged
               6-18 whose families' income is below 100% Federal Poverty Income
               Limit.

                    14.1.2.9  [deleted]"

SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS

     Article 15 is modified to add new Section 15.14, Global Drafting
     Conventions, as follows:

                    "15.14 GLOBAL DRAFTING CONVENTIONS.

                        15.14.1   The terms "include," "includes," and
               "including" are terms of inclusion, and where used in the
               Agreement, are deemed to be followed by the words "without
               limitation."

                        15.14.2   Any references to "Sections," "Exhibits," or
               "Attachments" are deemed to be references to Sections, Exhibits,
               or Attachments to the Agreement.

                        15.14.3   Any references to agreements, contracts,
               statutes, or administrative rules or regulations in the Agreement
               are deemed references to these documents as amended, modified, or
               supplemented from time to time during the term of the Agreement."

SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO

          Section 16.3.4, Failure to Comply with Federal Laws and Regulations,
          is modified to add Section 16.3.4.7 with the following language:

                    "16.3.4.7 HMO's failure to comply with requirements related
               to Members with special health care needs in Section 6.13 of this
               Contract, pursuant to 42 C.F.R. Section 438.208(c).

                    16.3.4.8  HMO's failure to comply with requirement in
               Sections 7.2.6 and 7.2.8.7 of this Contract, pursuant to 42
               C.F.R. 438.102(a).

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SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES

          Sections 18.8.2 and 18.8.7 are modified as follows:

                    "18.8.2   For a default under 16.3.4.2, for each default
               HHSC may assess double the excess amount charged in the violation
               of the federal requirements or $25,000, whichever is greater.
               HHSC will deduct from the penalty the amount of the overcharge
               and return it to the affected Member(s)

                    18.8.7    HMO may be subject to civil monetary penalties
               under the provisions of 42 C.F.R. Part 1003 and 42 C.F.R. Part
               438, Subpart I in addition to or in place of withholding payments
               for a default under Section 16.3.4"

SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM

          Section 19.1 is modified as follows:

                    "19.1     The effective date of this contract is September
               1, 2000. This contract and all amendments thereto will terminate
               on August 31, 2004, unless extended or terminated earlier as
               provided for elsewhere in this contract."

SECTION 2.33 MODIFICATION TO APPENDIX A, STANDARDS FOR QUALITY IMPROVEMENT
PROGRAMS

                    Appendix A is replaced with the attached Appendix A and
               Attachment A-A.

SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS

                    Appendix D is replaced with the attached Appendix D.

SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES

                    Appendix E is replaced with the attached Appendix E.

SECTION 2.36 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS

                    New Appendix O is added to the contract with the attached
               Appendix O.

SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES

                    Appendix K is replaced with the attached Appendix K

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             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

     The Parties contract and agree that the terms of the Agreement will remain
in effect and continue to govern except to the extent modified in this
Amendment.

     By signing this Amendment, the Parties expressly understand and agree that
this Amendment is hereby made a part of the Agreement as though it were set out
word for word in the Agreement.

     IN WITNESS HEREOF, HHSC AND THE CONTRACTOR HAVE EACH CAUSED THIS AMENDMENT
TO BE SIGNED AND DELIVERED BY ITS DULY AUTHORIZED REPRESENTATIVE.

    AMERIGROUP TEXAS, INC.                    HEALTH & HUMAN SERVICES COMMISSION

By: /s/ James D. Donovan, Jr.               By:
    -----------------------------               --------------------------------
    James D. Donovan, Jr.                       Albert Hawkins
    President and CEO                           Commissioner

Date: 8/6/03                                Date:
                                                  ------------------------------

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