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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)
[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the fiscal year ended                 December 31, 1999
                          ------------------------------------------------------

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the transition period from                         to
                               -----------------------    ----------------------

Commission File Number:                           0-19442
                       ---------------------------------------------------------

                            OXFORD HEALTH PLANS, INC.
             (Exact name of registrant as specified in its charter)

                Delaware                       06-1118515
      (State or other jurisdiction            (IRS Employer
   of incorporation or organization)        Identification No.)


48 Monroe Turnpike, Trumbull, Connecticut         06611
(Address of principal executive offices)        (Zip Code)

                                (203) 459 - 6000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par
         Value $.01 Per Share

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             Yes  X     No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of March 1, 2000, there were 82,002,179 shares of common stock issued and
outstanding. The aggregate market value of such stock held by nonaffiliates, as
of that date, was $1,254,846,000.

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's definitive Proxy Statement to be filed pursuant to
Regulation 14A (Part III)
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                                     PART I

ITEM 1.   BUSINESS

GENERAL

    Oxford Health Plans, Inc. ("Oxford" or the "Company"), incorporated under
the laws of the State of Delaware on September 17, 1984, is a health care
company currently providing health benefit plans primarily in New York, New
Jersey and Connecticut. The Company's product line includes its point-of-service
("POS") plans, the Freedom Plan and the Liberty Plan, traditional health
maintenance organizations ("HMOs"), preferred provider organizations ("PPOs"),
Medicare+Choice ("Medicare") plans and third-party administration of
employer-funded benefit plans ("self-funded health plans"). The Company's
principal executive offices are located at 48 Monroe Turnpike, Trumbull,
Connecticut 06611, and its telephone number is (203) 459-6000. Unless the
context otherwise requires, references to Oxford or the Company include its
subsidiaries.

    The Company currently offers its products through its HMO subsidiaries,
Oxford Health Plans (NY), Inc. ("Oxford NY"), Oxford Health Plans (NJ), Inc.
("Oxford NJ") and Oxford Health Plans (CT), Inc. ("Oxford CT") and through
Oxford Health Insurance, Inc. ("OHI"), the Company's health insurance
subsidiary. OHI currently does business under accident and health insurance
licenses granted by the Departments of Insurance of New York, New Jersey,
Connecticut and Pennsylvania.

    The Company is not dependent on any single employer or group of employers,
as the largest employer group contributed approximately 1% of total premiums
earned during 1999 and the ten largest employer groups contributed approximately
6.5% of total premiums earned during 1999. The Company's Medicare revenue under
its contracts with the federal Health Care Financing Administration ("HCFA")
represented approximately 18% of its premium revenue earned during 1999.

LOSSES/FINANCING

     The Company incurred net losses of $291 million in 1997 and $624 million in
1998. As a result of such losses, the Company was required to make capital
contributions of $4.5 million and $537.5 million to certain of its HMO and
insurance subsidiaries in 1999 and 1998, respectively. In order to fund its
operating losses and such capital contributions, in May 1998 the Company raised
a total of $710 million in new capital (the "Financing") through the following
arrangements: (i) the Company sold $350 million of preferred stock to TPG
Partners II, L.P. (formerly TPG Oxford LLC) and certain of its affiliates
("TPG") and designees under an Investment Agreement, dated as of February 23,
1998, as amended, together with warrants to acquire up to 22,530,000 shares of
the Company's common stock at an exercise price of $17.75; (ii) the Company
issued $200 million of 11% Senior Notes due 2005 (the "Senior Notes") pursuant
an Indenture, dated as of May 13, 1998; and (iii) the Company entered into a
Term Loan Agreement, dated as of May 13, 1998 (the "Term Loan"), pursuant to
which the Company borrowed $150 million in the form of a senior secured term
loan. For additional information regarding the preferred stock, the warrants,
the Senior Notes and the Term Loan, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and Capital Resources".
Simultaneously with the aforementioned transactions, Norman C. Payson, M.D., the
Company's Chief Executive Officer, purchased 644,330 shares of Oxford common
stock for a purchase price of $10 million.

OPERATIONAL TURNAROUND

    In May 1998, the Company commenced a major restructuring effort (the
"Turnaround Plan") designed to reduce medical and administrative costs,
strengthen its computer systems, reduce claims payment delays, shed unprofitable
lines of business, exit businesses not related to its core Tri-State market area
and increase premium yields on its products. By the close of 1998, the Company
had installed a new senior management team, withdrawn from the Illinois market
and shut down its specialty management business, imposed stronger utilization
controls, reduced fee structures for certain physicians and other providers and
started the process of rationalizing its commercial book of business. During
1999 the Company substantially completed its withdrawal from the Florida, New
Hampshire and Pennsylvania markets, disposed of its minority interest in Ralin,
Inc. and disposed of its wholly-owned mail order pharmacy subsidiary, Direct
Script, Inc. During 1999, the Company also exited the Medicaid business, exited
the Medicare business in Pennsylvania and in several counties in New York, New

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Jersey and Connecticut where reimbursement was unacceptable, entered into an
agreement transferring medical cost risk for its Medicare members in certain New
York counties, increased premium yield, reduced acute hospital utilization days,
stabilized its computer operations, reduced clean claims payment to
approximately 10 days on average and deleted certain unprofitable products, all
of which contributed to a medical loss ratio (" MLR") in the fourth quarter of
1999 of 81.8% (exclusive of favorable prior period reserve developments). With
respect to administrative costs, the Company reduced its full-time equivalent
staff count from over 7,200 in the beginning of 1998 to approximately 4,200 at
the end of 1999, vacated over 1,000,000 square feet of space, reorganized work
flows and generally tightened costs so as to reduce the fourth quarter 1999
administrative loss ratio to 12.5% (exclusive of a one time insurance premium
charge).

RECENT FINANCIAL DEVELOPMENTS

     As a result of the Turnaround Plan, the Company had net income of $319.9
million in 1999 (including the recognition of deferred tax assets of $225
million) and produced operating cash flow of $95 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations". These
results permitted the Company to repurchase (i) 89,616 shares of Series E
Cumulative Preferred Stock, par value $.01 per share (the "Series E Preferred
Stock") and 28,780 shares of Series D Cumulative Preferred Stock, par value $.01
per share (the "Series D Preferred Stock") with dividend rates of approximately
14% and 5%, respectively, at a total cost of $130 million and (ii) $14 million
of loans outstanding under its Term Loan. The Company has remaining cash
available in the parent company of approximately $100 million. The Company may
repurchase a portion of its Term Loan from such available cash in the second
quarter of 2000 and may repurchase Senior Notes and additional shares of Series
D Preferred Stock or Series E Preferred Stock.

COMPANY'S FUTURE STRATEGY

     The Company's strategy for operating its business during the Years 2000 and
2001 consists of three main elements: (1) to expand its small group and large
group business through increased sales, (2) to continue the reduction in
administrative costs that began under the Turnaround Plan while improving
operating performance and continuing to have reasonable operating results and
(3) to reduce its cost of capital by reducing amounts outstanding under or
restructuring the agreements in respect of the Series D Preferred Stock and
Series E Preferred Stock, Term Loan and Senior Notes.


PRODUCTS

FREEDOM PLAN

    Oxford's Freedom Plan is a POS health care plan that combines the benefits
of Oxford's HMOs with some of the benefits of conventional indemnity health
insurance. Oxford's Freedom Plan gives members the option at any time of using
the network of providers under contract with Oxford's HMOs or exercising their
freedom to choose providers not under contract with Oxford, although certain
benefits are only available through network providers. The Freedom Plan had
approximately 1,210,500 members at December 31, 1999 compared with 1,318,100 at
the end of 1998. As a percentage of total premiums earned, Freedom Plan premiums
were 67.9% in 1999 and 61.0% in 1998. The largest employer group offering the
Freedom Plan accounted for approximately 1.2% of Freedom Plan premiums earned
during 1999, and the ten largest employer groups offering the Freedom Plan
accounted for 7.2% of Freedom Plan premiums earned in 1999.

    Oxford has targeted small to medium-size employers (10 to 1,500 employees)
for this product. New York Freedom Plan enrollment accounts for almost 80% of
all Freedom Plan enrollment. In New York, each Freedom Plan member currently
receives two forms of coverage - HMO coverage through Oxford NY and conventional
insurance through OHI, although Oxford intends to transition its large Freedom
Plan groups to an OHI stand-alone product by 2001 subject to regulatory
approval. In New Jersey and Connecticut, each member receives Freedom Plan
coverage through one contract. For Freedom Plan coverage, employers receive one
monthly bill and have both the in-network and out-of-network coverage
administered by Oxford.

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    HMOs

    Oxford currently offers HMO plans in New York, New Jersey and Connecticut.
The largest HMO commercial employer group accounted for 4.5% of total HMO
premiums earned during 1999, while the ten largest HMO groups accounted for
20.3% of total HMO premiums earned in 1999. Commercial HMO membership was
approximately 235,400 members at December 31, 1999 compared with 260,700 members
at the end of 1998. As a percentage of total premiums earned, group commercial
HMO revenues were 11.9% in 1999 and 11.8% in 1998.

    Liberty Plan

    The Company's Liberty Plan is a POS health care plan. This plan offers lower
premiums than the standard Freedom Plan by allowing member groups to choose from
a smaller network of in-network providers. The Company believes that the Liberty
Plan provider network, while smaller than the Freedom Plan network, is
competitive in size and quality with networks of certain other health plans in
the New York metropolitan area. Liberty Plan membership, which is included in
the Freedom Plan membership, was approximately 143,400 members at December 31,
1999 compared with 140,800 members at the end of 1998.

    Individual Plans

    New York requires HMOs doing business in the community-rated small group
market to offer POS and HMO coverage with mandated benefits to individuals (the
"New York Mandated Plans"). Oxford also continues to cover individuals in New
York under a grandfathered POS plan (together with the New York Mandated Plans,
the "New York Individual Plans"). The grandfathered plan is closed to new
membership. The Company offers individual HMO and various individual indemnity
plans in New Jersey (the "New Jersey Mandated Plans"). The Company had
approximately 63,700 members in the New York Individual Plans as of December 31,
1999 as compared with 68,700 members as of December 31, 1998. The Company had
approximately 5,200 members in the New Jersey Mandated Plans as of December 31,
1999. Such membership amounts are included in the Freedom Plan and HMO plan
membership.

    The Company believes it experiences significant selection bias in its New
York Individual Plans, which are chosen, on average, by individuals who require
more health care services than the average commercial population. In April 1998,
the New York State Insurance Department ("NYSID") directed the Company to apply
funds allocated to the Company from the New York State Market Stabilization
Pools (the "Pools") in the individual and small group market in lieu of
requested rate increases. The Company received approximately $12.8 million in
1998 from the Pools. The NYSID is currently finalizing two sets of regulations
which will modify the methodology used to fund the Pools and to distribute
monies from the Pools. One proposed regulation will change the distribution
formula of the remaining 1997 and 1998 Pool amounts. The second regulation will
make changes to the pooling methodology to fund the Pools on a permanent basis
retroactive to January 2000 and to distribute monies from the Pools retroactive
to January 1999. Although the Company anticipates that it will receive refunds
from the Pools for 1999 and 2000, there can be no assurance that such payments
will be received or, if received, will cover the Company's excess costs in the
New York Individual Plans.

    In an effort to better control medical costs and utilization and to promote
affordability for the individual plans, beginning in September 1999 for new
members, and upon renewal for existing members, the Company converted the
provider network serving the New York Individual Plans from the Freedom Plan
network of providers to the smaller Liberty Plan network of providers. The
Company also filed with the NYSID an overall scheduled rate increase of
approximately 10% for the New York Mandated Plans to be effective April 1, 2000.
The Company expects that the New York Individual Plans will continue to
experience losses due to high medical costs. Further, there can be no assurance
that the Company will continue to be successful in implementing the foregoing
network changes or cost and utilization controls.

    Medicare

    The Company offers as Oxford Medicare Advantage a number of Medicare plans
to Medicare eligible individuals through its New York, New Jersey and
Connecticut HMO subsidiaries.

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     At December 31, 1999, the Company had approximately 97,700 Medicare members
enrolled in its Medicare plans compared with 148,600 members at the end of 1998.
The reduction in membership is primarily the result of the Company's withdrawal
from the Medicare program in certain counties in New York, New Jersey and
Connecticut and from the Commonwealth of Pennsylvania. Medicare accounted for
approximately 17.6% of total premiums earned for the year ended December 31,
1999 compared with 21.9% in 1998. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for a description of prior
operating losses incurred in the Company's Medicare programs.

    Under its Medicare contracts with HCFA, the Company receives a fixed per
member per month capitation amount established annually by HCFA. The Company
bears the risk that the actual costs of health care services may exceed the
capitation amounts received by the Company. See "Business - Government
Regulation - Recent Regulatory Developments". Medicare contracts provide
revenues that are generally higher per member than those for non-Medicare
members. Such contracts, however, also carry certain risks such as higher
comparative medical costs and regulatory and reporting requirements per member.
The Company has developed a network of physicians and other providers to serve
its Medicare enrollees. The Company has an agreement covering approximately
22,000 Medicare members in certain New York counties pursuant to which it has
transferred a substantial portion of the medical cost risk for its Medicare
business in these counties to a large hospital system. See "Business - Cost
Containment Arrangements - Medicare".

    Medicaid

    The Company withdrew from the Medicaid program in Connecticut and New
Jersey, effective April 1, 1998 and July 1, 1998, respectively. In January 1999,
the Company completed the assignment of its New York Medicaid contract and
certain rights under its provider agreements to a third party for approximately
$13.5 million. In January 1999, the Company also concluded the sale of its
Pennsylvania HMO subsidiary, including the Pennsylvania Medicaid business, for
approximately $7.1 million. Accordingly, as of February 1, 1999, the Company
ceased participating in any state Medicaid programs.

    Other Products

    The Company currently offers a PPO product in New Jersey and Pennsylvania
and a non-gatekeeper POS plan in New York. The current Pennsylvania PPO
membership is minimal. Applications for approval of PPO products have been filed
in both New York and Connecticut.

    Oxford also offers self-funded health plans pursuant to which the employer
self-insures, and Oxford processes, health care expenses. Oxford assumes no risk
for the cost of health care for these contracts and receives a monthly fee for
its administrative services. As of December 31, 1999, the Company was
administering nineteen self-funded groups in New York and eleven self-funded
groups in New Jersey, covering approximately 50,100 members in total. As a
percentage of total premiums earned, self-funded revenues were 0.4% in both 1999
and 1998.

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MARKETING AND SALES

    Oxford distributes its products through several different internal channels,
including direct sales representatives, business representatives, inbound
telemarketing representatives and executive account representatives as well as
through external insurance agents, brokers and consultants.

    Internal Representatives

    The direct sales representatives sell the Company's traditional HMO
programs, the Freedom Plan, the Liberty Plan, the PPO plans and the self-funded
plans directly to employers. The direct sales force is organized into units in
each of the Company's regions. Separate regional sales executives are
responsible for each direct sales unit. The Company also maintains a Medicare
sales force that sells directly to Medicare beneficiaries. The Company's
marketing department develops television advertising, as well as direct mail
advertising, targeted print advertisements and internally generated marketing
publications for use by the direct sales force, the Medicare sales force and the
independent brokers, agents and consultants.

    The Company maintains regional executive account representatives who work
directly with employer groups exceeding 1,000 lives as well as accounts
maintained by noncommissioned consultants. The Company also maintains staff that
is responsible for business opportunities associated with inbound calls from
prospective members and group accounts. Account managers responsible for
servicing employer accounts sold directly or through a broker or agent are
employed on a regional basis. These account managers are the principal
administrative contact for employers and their benefit managers by, among other
things, conducting on-site employee meetings and by providing reporting and
troubleshooting services.

    Independent Insurance Agents and Brokers

    The primary distribution system for the group health insurance industry in
the Company's service areas has been independent insurance agents and brokers.
Oxford markets its commercial products through approximately 10,200 independent
insurance agents and brokers as of December 31, 1999 (compared with 9,200 at the
end of 1998) who are paid a commission on sales. The Company maintains regional
broker business unit representatives who work directly with the independent
agents and brokers. The independent insurance agents and brokers have been
responsible for a significant portion of Oxford's Freedom Plan and Liberty Plan
enrollment growth during their initial years, and the Company expects to
continue using independent insurance agents and brokers in its marketing system
in the future. The Company believes that the New York metropolitan market, in
particular, is influenced significantly by independent agents and brokers, and
that utilization of this distribution system is an integral part of a successful
marketing strategy in the region. However, no assurance can be given that the
Company will continue to be able to maintain as large a distribution system of
independent insurance agents and brokers as it has in the past.

PHYSICIAN NETWORK

    The Company's HMO and POS health care programs are designed around primary
care physicians, who assume overall responsibility for the care of members and
determine or recommend the nature and extent of services provided to any given
member. Primary care physicians provide preventive and routine medical care and
are also responsible for making referrals to contracted specialist physicians,
hospitals and other providers. Medical care provided directly by primary care
physicians includes the treatment of illnesses not requiring referrals, as well
as periodic physical examinations, routine immunizations, maternity and well
child care and other preventive health services.

    Oxford maintains a network of more than 52,000 physicians and other
providers that are under contract with the Company, of which approximately
30,200 are in New York, 14,100 are in New Jersey and 7,600 are in Connecticut.
The Company also maintains a small network of providers to service its remaining
Pennsylvania PPO business. The majority of Oxford's physicians have contracted
individually and directly with Oxford, although Oxford also has contracts with
hospitals, physician hospital organizations, individual practice associations
("IPAs") and physician groups. The Company has four arrangements with physician
IPA groups

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("Partnerships") whereby the Partnerships assume certain risks for
medical costs and can receive incentive payments upon achievement of certain
benchmarks.

    Exclusive of the Partnerships and the risk sharing arrangement for a portion
of the Company's Medicare business described below, Oxford compensates its
participating physicians primarily based upon a fixed fee schedule, under which
physicians receive payment for specific procedures and services. The Company's
fee-for-service reimbursement program for participating physicians is designed
to achieve delivery of cost-effective, quality health care by its physician
network.

    The Company worked during 1999 to improve its relations with the physician
community. Local physicians have been added to the board of directors of Oxford
NY, Oxford NJ and Oxford CT and local specialty colleges have been involved in
the development of the Company's utilization management policies. In addition,
the Company has over 100 practicing physicians from its service area
participating on committees that advise the Company on the development of
treatment and payment policies.

HOSPITAL ARRANGEMENTS

    The Company has contracts with over 240 hospitals in its New York, New
Jersey and Connecticut service areas providing for inpatient and outpatient care
to the Company's members at prices usually discounted from the hospital's billed
charges. The Company believes that the rates in these contracts are generally
competitive and, in many cases, revenue received from the Company represents a
significant portion of the hospital's total revenue. Most of these contracts may
be terminated after a specified notice period or have remaining terms of less
than one year. In addition, there has been significant consolidation among
hospitals in the Company's service area, which tends to enhance the combined
entity's bargaining power with managed care payors. As a result, the Company has
the risk that certain hospitals may seek higher rates and, in connection
therewith, threaten to or, in fact, terminate their agreements with the Company.
In 1999, the Company entered into multi-year agreements with two major hospital
systems in an attempt to reduce its future risk with respect to hospital costs
and is currently negotiating with other hospital systems for similar long-term
arrangements. See "Cautionary Statement Regarding Forward - Looking Statements".

COST CONTAINMENT ARRANGEMENTS

     Medicare

     In an effort to control increasing medical costs in its Medicare programs,
the Company has an agreement with North Shore-Long Island Jewish Health Systems
("North Shore") pursuant to which it has transferred to North Shore a
substantial portion of the medical cost risk for its approximately 22,000
Medicare members in certain New York counties where it had experienced
substantial losses. The Company and North Shore have made progress in resolving
certain initial operational difficulties. The Company bears the risk of
nonperformance or default by North Shore, and the failure of the North Shore
arrangement could have a material adverse effect on the Company's results of
operations. A similar agreement covering New Jersey Medicare members was
terminated in July 1999. The Company is currently in arbitration proceedings to
resolve the New Jersey agreement. See "Legal Proceedings - Other".

     Implementing the Medicare risk sharing contract involves various risks and
operational challenges, and there can be no assurance that this contract will be
successful in reducing the Company's future costs. Moreover, cost savings under
this contract are achieved in certain instances through fee reductions, more
rigorous utilization review and reductions in the size of the provider network,
all of which may adversely affect member and provider satisfaction with the
Company's Medicare plans. This arrangement is subject to compliance with risk
sharing regulations adopted by HCFA and the State of New York which require
disclosure and reinsurance for specified levels of risk sharing. See "Cautionary
Statement Regarding Forward - Looking Statements".

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     Ancillary Services

     In 1999 the Company entered into long-term cost containment agreements with
various entities which are structured to provide savings to the Company over the
next several years. With respect to laboratory and radiology services, the
Company's exposure for specified procedures is fixed at a negotiated aggregate
per member per month cost which is significantly less than the Company's
historical costs for such services. In the case of pharmacy costs, the vendor
has agreed to assume, subject to various qualifications, a large portion of the
Company's pharmacy cost increases during the 1999-2000 years based upon
underlying pharmacy cost trend guarantees which are lower than expected national
pharmacy cost trends. In the case of physical therapy services, the Company has
a long-term agreement with an insurance company which, through reinsurance,
limits the Company's cost for physical therapy services to a negotiated range of
costs which are below the Company's historical costs with the Company retaining
risk for costs in excess of the reinsurance limit. The Company also has
reinsurance supporting the radiology services agreement.

     In these agreements, the Company undertakes various obligations, including
changes to its medical management policies and internal business procedures,
some of which require computer programming, alteration of existing referral
patterns and the like, as well as regulatory approvals. Because of the
complexity of its medical delivery system, disputes arise over the degree of the
Company's satisfaction of its various obligations under these cost containment
agreements. Some of these disputes involve substantial amounts and some are in
arbitration. The Company believes its financial statements are fairly stated as
to the potential effect of such disputes. The aggregate effect of such cost
containment agreements in 1999 was to substantially reduce the Company's costs
for covered services and to contribute in part to the Company's ability to
constrain the net increase in its total medical costs. The Company expects such
agreements to assist in constraining 2000 medical cost increases to less than
expected premium rate increases, but there can be no assurance that the
Company's medical costs will be so limited.

CONTROL OF HEALTH CARE COSTS

    Oxford's medical review program attempts to measure and, in some cases,
influence inappropriate utilization of certain outpatient services, elective
surgeries and hospitalizations provided to Oxford members. Under the medical
review program, for many of Oxford's plans, physicians and members are obligated
to contact Oxford prior to providing or receiving specified treatments.
Utilizing standardized protocols on a procedure-specific basis, Oxford's staff
of registered nurses and physicians may review the proposed treatment for
consistency with established norms and standards.

    Oxford's outpatient cost control program is based on the primary care system
of health care coordination, which promotes consistency and continuity in the
delivery of health care. For most plans sold, each person who enrolls in an
Oxford plan must select a participating primary care physician who serves as the
manager of the member's total health care needs. Members generally see their
primary care physician for routine and preventive medical services. The primary
care physician either provides necessary services directly or authorizes
referrals for specialist physicians, diagnostic tests and hospitalizations.
Except in life-threatening situations, in order to receive the highest level of
benefits, all elective hospitalizations must be authorized in advance by a
member's primary care physician and must be delivered by providers who have
contracted with Oxford. For out-of-network services, the member must obtain
approval directly from Oxford in order to receive the highest level of benefits.

    In connection with its review of certain claims, the Company may compare the
services rendered by its participating physicians to an independently developed
pattern of treatment standards. This pattern of treatment analysis may allow the
Company to identify procedures that were not consistent with a patient's
diagnoses, as well as billing abuses and irregularities. Separate claims
auditing systems are utilized for certain hospital diagnosis related group
payments and other surgical payments. Oxford utilizes a hospital bill audit
program which has yielded savings with respect to hospital claims, through
pricing reviews, medical chart audits and on-site hospital reviews. Oxford's
claim auditing program includes a computer program that also seeks to identify
aberrant physician billing practices, and helps isolate specific physicians who
are not practicing and billing in a manner consistent with Oxford's health care
philosophy. In addition, the Company maintains management information systems
which help identify aberrant medical care costs. Not all cost control procedures
are applied to all claims, depending on the size and type of claim, existing
claim backlogs and other factors. In addition, regulatory considerations, the
threat of litigation or liability concerns, operational and systems issues and

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arrangements with hospitals and physicians may limit the Company's ability to
apply all available cost control measures.

     Beginning in the second half of 1999, in an attempt to overcome issues
surrounding retrospective denial of payment for health care services, lack of
assigned responsibility and accountability and to improve communication and
enhance customer service, the Company implemented the Day of Service-Decision
Making program. The Day of Service-Decision Making program commits the Company
to making payment certification decisions about hospital stays in advance so the
hospital is advised in advance if a hospital day will be approved and can,
therefore, more appropriately manage post-hospital care through nursing home or
home health care providers. As a result of the Day of Service-Decision Making
program, the Company's use of retrospective denials of hospital days has
generally ceased except in unusual circumstances.

STATUS OF INFORMATION SYSTEMS

    During 1999, the Company resolved a majority of its software and hardware
problems that began in 1996 with the conversion of a significant part of its
business operations to a new computer system. The Company's claims payments and
group and individual billing operations are substantially current. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". The Company continues to seek improvements and additional
functionality in, and to more closely integrate, its two computer systems.

    There can be no assurance that the Company will be successful in preventing
future system problems that could result in payment delays and claims processing
errors. Operating and other issues can lead to data problems that affect
performance of important functions, including claims payment and group and
individual billing. Computer hardware is subject to unplanned downtime, as well
as natural disasters, which could adversely affect the Company's operations.

QUALITY MANAGEMENT

    The majority of Oxford's physicians in its commercial and Medicare rosters
are board certified in their specialty (by passing certifying examinations in
the specialty as recognized by the American Board of Specialties) or become
board certified within five years of becoming eligible. Board certification is
one measure of a physician's expertise. Additionally, Oxford has a credentialing
procedure that consists of: primary verification of all credentials; query of
the National Practitioner Data Bank, state medical boards and admitting
hospitals for malpractice history, disciplinary actions and/or restrictions of
hospital privileges; and on-site office evaluation of selected providers to
determine compliance with Oxford standards. Oxford also periodically
recredentials all providers. The recredentialing review consists of repeating
the initial credentialing process as well as a review of the provider's practice
history with Oxford. This process also includes evaluating the results of
quality assurance reviews, complaints from members concerning the provider,
utilization patterns and the provider's compliance with Oxford's administrative
protocols.

    The Company's physician contracts require adherence to Oxford's Quality
Assurance and Utilization Review Programs. Oxford's Quality Management
Committees, which are composed of physicians from within Oxford's network of
providers, advise the Company's Chief Medical Officer concerning the development
of credentialing and other medical quality criteria. The committees also provide
oversight of Oxford's Quality Management and Utilization Management Programs
through peer review and ongoing review of performance indicators.

    The Company seeks to evaluate the quality and appropriateness of medical
services provided to its members by performing member and physician satisfaction
studies. The Company conducts on-site review of medical records at selected
physician offices facilitating retrieval of statistical information which allows
for problem resolution in the event of member or physician complaints and for
retrieval of data when conducting focused studies.

    In February 1999, the National Committee on Quality Assurance ("NCQA")
conducted its regular periodic review of the Company's accreditation and in July
1999 the Company was awarded the status of "Accredited" which is valid for one
year. There can be no assurance that the Company's accreditation will be renewed
or that the Company will achieve the same level of accreditation in the future.

                                       9
<PAGE>   10
RISK MANAGEMENT

    The Company limits, in part, the risk of catastrophic losses by maintaining
high deductible reinsurance coverage. The Company does not consider this
coverage to be material as the cost is not significant and the likelihood that
coverage will be applicable is low. The Company's operating subsidiaries also
maintain insolvency coverage as required by the states in which they do
business.

    The Company also maintains general liability, property, employee fidelity,
directors and officers, and professional liability insurance coverage in amounts
the Company deems prudent. The Company requires contracting physicians,
physician groups and hospitals to maintain professional liability and
malpractice insurance in an amount consistent with industry standards.

     In the fourth quarter of 1999, the Company purchased new insurance policies
providing additional coverage of certain legal defense costs, including
judgments and settlements, if any, incurred by the Company and individual
defendants in certain pending lawsuits and investigations, including, among
others, the securities class action pending against the Company and certain of
its directors and officers and the pending stockholder derivative actions.
Subject to the terms of the policies, the insurers have agreed to pay 90% of the
amount, if any, by which covered costs exceed $175 million, provided that the
aggregate amount of insurance under these new policies is limited to $200
million and the aggregate amount of new insurance in respect of defense costs
other than judgments and settlements, if any, is limited to $10 million. The
policies do not cover taxes, fines or penalties imposed by law or the cost to
comply with any injunctive or other nonmonetary relief or any agreement to
provide any such relief. The coverage under the new policies is in addition to
approximately $40 million of coverage remaining under preexisting insurance that
is not subject to the $175 million retention applicable to the new policies. A
charge of $24 million for premiums and other costs associated with the new
insurance coverage is included in the Company's results of operations for 1999.

GOVERNMENT REGULATION

    The Company's HMO and insurance subsidiaries are subject to substantial
federal and state government regulation, including licensing and other
requirements relating to the offering of the Company's existing products in new
markets and offerings of new products, both of which may restrict the Company's
ability to expand its business. The failure of the Company's subsidiaries to
comply with existing or future laws and regulations could materially and
adversely affect the operations, financial condition and prospects of the
Company.

    Federal Regulation

    One of the most significant applicable federal laws is the Health
Maintenance Organization Act of 1973, as amended (the "HMO Act"), and the rules
and regulations promulgated thereunder. The HMO Act governs federally qualified
HMOs and competitive medical plans ("CMPs") and prescribes the manner in which
such HMOs and CMPs must be organized and operated in order to maintain federal
qualification and/or to be eligible to enter into Medicare contracts with the
federal government. Oxford NY, Oxford NJ and Oxford CT are qualified CMPs under
HCFA's requirements. In order to maintain this status, Oxford NY, Oxford NJ and
Oxford CT must remain in compliance with certain financial, reporting and
organizational requirements under applicable federal statutes and regulations in
addition to meeting the requirements established pursuant to applicable state
law.

    The Company's health plans with Medicare contracts, Oxford NY, Oxford NJ and
Oxford CT, are subject to regulation by HCFA. HCFA has the right, directly and
through peer review organizations, to audit health plans operating under
Medicare contracts to determine each health plan's compliance with HCFA's
contracts and regulations and the quality of care being rendered to the health
plan's Medicare members. In addition, HCFA regulations prohibit HMOs with
Medicare contracts from including any direct or indirect payment to physicians
or groups as an inducement to reduce or limit medically necessary services to a
Medicare beneficiary. These regulations impose reinsurance, disclosure and other
requirements relating to physician incentive plans that place physicians
participating in a Medicare plan at substantial financial risk. The Company's
ability to maintain compliance with these rules and regulations depends, in
part, on its receipt of timely and accurate information from its providers.

                                       10
<PAGE>   11
     Other federal laws which govern the Company's business and which
significantly affect its operations include, among others:

     -   the federal Health Insurance Portability and Accountability Act of 1996
         ("HIPAA") (i) ensures portability of health insurance to individuals
         changing jobs or moving to individual coverage by limiting application
         of preexisting condition exclusions, (ii) guarantees availability of
         health insurance to employees in the small group market and (iii)
         prevents exclusion of individuals from coverage under group plans based
         on health status. New York State has a similar law. Effective January
         2001, HIPAA will impose new standards of protection against
         inappropriate use and disclosure of patient-identifiable health
         information that are applicable to health plans, their contracted
         entities and business partners. Violations of this regulation will be
         subject to significant penalties. Finally, to the extent this
         regulation does not provide for complete federal preemption of state
         laws, it increases the Company's burden of complying with inconsistent
         standards;

     -   the Mental Health Parity Act of 1996 ("MHPA") prohibits group health
         plans and health insurance issuers providing mental health benefits
         from imposing lower aggregate annual or lifetime dollar-limits on
         mental health benefits than any such limits for medical or surgical
         benefits. MHPA's requirements do not apply to small employers who have
         between 2 and 50 employees or to any group health plan whose costs
         increase one percent or more due to the application of these
         requirements;

     -   the Women's Health and Cancer Rights Act of 1998 requires health
         insurance carriers of group and individual commercial policies that
         cover mastectomies to cover reconstructive surgery or related services
         following a mastectomy;

     -   the Newborn's and Mothers' Health Protection Act of 1996 generally
         prohibits group health plans and health insurance issuers from
         restricting benefits for a mother's or newborn child's hospital stay in
         connection with childbirth to less than 48 hours for a vaginal delivery
         and to less than 96 hours for a cesarean section;

     -   the Employee Retirement Income Security Act of 1974 ("ERISA") governs
         self-funded plans. There have been recent legislative attempts to limit
         ERISA's preemptive effect on state laws. If such limitations are
         enacted, they might increase the Company's exposure under state law
         claims that relate to self-funded plans administered by the Company and
         may permit greater state regulation of other aspects of those business
         operations; and

     -   the Balanced Budget Act of 1997 (the "1997 Act") changed the way health
         plans are compensated for Medicare members by eliminating over five
         years amounts paid for graduate medical education and increasing the
         blend of national cost factors applied in determining local
         reimbursement rates over a six-year phase-in period. Both changes will
         have the effect of reducing reimbursement in high cost metropolitan
         areas with a large number of teaching hospitals, such as the Company's
         service areas. In January 1999, Congress developed a new risk
         adjustment mechanism that will be phased in over five years, beginning
         in 2000. Although it is likely that reimbursement rates will be
         adversely affected by this new risk adjustment mechanism and the 1997
         Act, the Company cannot predict the ultimate impact that the new
         mechanism and the 1997 Act will have on its Medicare business and
         results of operations in future periods.

    State Regulation

    Oxford's HMO subsidiaries are licensed to operate as HMOs by the insurance
departments, and, in some cases, health departments, in the states in which they
operate. Applicable state statutes and regulations require Oxford's HMO
subsidiaries to file periodic reports with the relevant state agencies and
contain requirements relating to operations, premium rates and covered benefits,
financial condition and marketing practices. In addition, state regulations
require the Company's HMO and insurance subsidiaries to maintain restricted cash
or available cash reserves and restrict their abilities to make dividend
payments, loans or other transfers of cash to the Company. For a description of
regulatory capital requirements, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources". State regulatory authorities exercise oversight regarding the
Company's HMOs' provider networks, medical care delivery and quality

                                       11
<PAGE>   12
assurance programs and reporting requirements, form contracts, including risk
sharing contracts, claims payment standards, compliance with benefit mandates,
utilization review standards, including internal and external appeals, and
financial condition. The Company's HMOs are also subject to periodic examination
by the relevant state regulatory authorities. For a description of recent
examinations, see "Legal Proceedings - State Insurance and Health Departments".

    OHI is an accident and health insurance company licensed by the New York
State Insurance Department and licensed as a foreign insurer by the insurance
departments of New Jersey, Pennsylvania and Connecticut. Applicable state laws
and regulations contain requirements relating to OHI's financial condition,
reserve requirements, premium rates, form contracts, and the periodic filing of
reports with the applicable insurance departments. OHI is also subject to
periodic examination by the applicable state insurance departments. For a
description of recent examinations, see "Legal Proceedings - State Insurance and
Health Departments".

    Certain state regulations require that HMOs utilize standard "community
rates" in determining HMO premiums. Such community rates are generally revised
annually by the HMO and, in most cases, must be approved in advance by the
applicable state insurance department. The methodology employed in determining
premiums for the Company's Freedom Plan products utilizing an HMO must also be
approved in advance by the applicable state insurance department and combine the
relevant community rate with traditional indemnity insurance rating criteria.
The Company's ability to increase rates on its products is, in certain
instances, subject to prior approval of state insurance department. For a
description of certain regulatory issues relating to the Company's rates, see
"Legal Proceedings - State Insurance and Health Departments".

    Applicable New York statutes and regulations require the prior approval of
the New York State Commissioner of Health and the New York State Superintendent
of Insurance for any change of control of Oxford NY or the Company and the prior
approval of the New York State Superintendent of Insurance for any change of
control of OHI or the Company. Similar laws in other states where the Company
has incorporated HMOs require insurance department approval of any change in
control of the Company or the relevant HMO subsidiary. For purposes of these
statutes and regulations, generally "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity. Control is presumed to exist when a person, group of
persons or entity acquires the power to vote 10% or more of the voting
securities of another entity.

    In 1997, 1998 and 1999 New Jersey, Connecticut and New York all implemented
significant pieces of legislation relating to managed care plans which contain
provisions relating, among other things, to consumer disclosure, utilization
review, removal of providers from the network, appeals processes for both
providers and members, mandatory benefits and products, state funding pools,
prompt payment and provider contract requirements. These states also all passed
legislation governing the prompt payment of claims that requires, among other
things, that health plans pay claims within certain prescribed time periods or
pay interest ranging from 10% to 12% per annum plus penalties. The NYSID has
recently indicated that it will also fine insurers $1,000 for each prompt
payment violation. Unless the New York legislature passes pending legislation
which would create an accuracy threshold, such proposed fines could have an
adverse effect on the Company's results of operations. See "Legal Proceedings
State Insurance and Health Departments".

                                       12
<PAGE>   13
    Other recent state legislation which governs the Company's business and
which significantly affect its operations include, among others:

     -   The Health Care Reform Act of New York ("HCRA") governs health care
         financing policies in New York, including graduate medical education
         and bad debt and charity care ("BDCC") assessments. Among other things,
         HCRA will: (i) reduce the amount of graduate medical education funding
         financed by payors by a total of $90 million through June 2003; (ii)
         exclude certain laboratory services from the BDCC assessments; (iii)
         provide a limited amount of stop loss insurance funds to cover 90% of
         certain of the paid claims for the New York Mandated Plans; and (iv)
         require New York HMOs to offer health plans with limited benefits to
         certain small groups and individuals for which a limited amount of stop
         loss insurance will be available.

     -   Effective July 1, 1999, New York State enacted a law establishing a
         right for health care consumers to obtain an external review of
         determinations made by HMOs and insurers when coverage of health care
         has been denied on grounds that the service is not medically necessary
         or such service is experimental or investigational. The law also
         imposes other burdensome contractual and reporting requirements on New
         York health plans.

     -   In December 1999, the State of New Jersey announced a voluntary
         agreement by nine New Jersey HMOs, including Oxford NJ, to cover
         routine patient care costs, including but not limited to, physician
         fees and laboratory expenses associated with hospitalization of their
         members who qualify for enrollment in certain clinical trials.

     -   Both Connecticut and New Jersey have enacted changes to their mental
         health coverage requirements generally to require health plans to
         provide coverage for mental health conditions in the same manner as
         other medical conditions.

    Proposed Regulatory Developments

    President Clinton has proposed expanding Medicare coverage to individuals
between the ages of 55 and 64. There is significant opposition to his proposal,
and the Company cannot predict the outcome of the legislative process or the
impact of the proposal on the Company's results of operations. Congress is
considering significant other changes to the Medicare program, including changes
which could significantly reduce reimbursement to HMOs. In addition, long-term
structural changes to the Medicare program are currently being considered by
Congress and the Administration in the aftermath of the failure of the National
Bipartisan Commission on the Future of Medicare to reach a consensus on
recommended changes to the Medicare program.

    State and federal government authorities are continually considering changes
to laws and regulations applicable to Oxford's HMO and insurance subsidiaries.
Over the past several years there has been significant controversy over claims
that care or payment for care has allegedly been inappropriately withheld or
delayed by managed care plans. This has led to significant public and political
support for reform of managed care regulation. The U.S. Congress and each of the
states in which Oxford operates are currently considering regulations or
legislation relating to mandatory benefits (such as mental health), provider
compensation arrangements, health plan liability to members who do not receive
appropriate care, disclosure and composition of physician networks, and health
plan solvency standards. For example, the New Jersey State legislature is
currently considering legislation which includes a $50 million assessment on
HMOs in the state based on market share to help cover the unpaid provider claims
from two insolvent New Jersey HMOs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations". In recent years, bills have been
introduced in the legislature in New York, New Jersey and Connecticut including
some form of the so-called "Any Willing Provider" initiative which would require
HMOs to allow any physician meeting their credentialing criteria to join their
physician network regardless of geographic need, hospital admitting privileges
and other important factors. Certain of these bills have also included
provisions relating to mandatory disclosure of medical management policies and
physician reimbursement methodologies. Numerous other health care proposals have
been introduced in the U.S. Congress and in state legislatures. These include
provisions which place limitations on premium levels, impose health plan
liability to members who do not receive appropriate care, increase minimum
capital and reserves and other financial viability requirements, prohibit or
limit capitated arrangements or provider financial incentives, mandate benefits
(including mandatory length of stay with surgery or emergency

                                       13
<PAGE>   14
room coverage) and an antitrust exemption to permit competing health care
professionals to bargain collectively with health plans and other entities.

    Recently enacted legislation and the proposed regulatory changes described
above, if enacted, could increase health care costs and administrative expenses,
reduce Medicare reimbursement rates and otherwise adversely affect the Company's
business, results of operations and financial condition.

COMPETITION

    HMOs and health insurance companies operate in a highly competitive
environment. The Company has numerous competitors, including for-profit and
not-for-profit HMOs, PPOs, and indemnity insurance carriers, some of which have
substantially larger enrollments than the Company. The Company competes with
independent HMOs, such as Health Insurance Plan of New York, which have
significant enrollment in the New York metropolitan area. The Company also
competes with HMOs and managed care plans sponsored by large health insurance
companies, such as CIGNA Corporation, Aetna U.S. Healthcare Inc., UnitedHealth
Group and Blue Cross/Blue Shield. These competitors have large enrollment in the
Company's service areas and, in some cases, greater financial resources than the
Company. Additional competitors may enter the Company's markets in the future.
The Company believes that the network of providers under contract with Oxford is
an important competitive factor. However, the cost of providing benefits is in
many instances the controlling factor in obtaining and retaining employer
groups, and certain of Oxford's competitors have set premium rates at levels
below Oxford's rates for comparable products. Oxford anticipates that premium
pricing will continue to be highly competitive.

    To address rising health care costs, some large employer groups have
consolidated their health benefits programs and have considered a variety of
health care options to encourage employees to use the most cost-effective form
of health care services. These options, which include traditional indemnity
insurance plans, HMOs, POS plans, and PPO plans, may be provided by third
parties or may be self-funded by the employer. POS plans have gained favor with
some employer groups because they allow for the consolidation of health benefit
programs. The Company believes that employers will seek to offer health plans,
similar to the Company's Freedom and Liberty Plans, that provide for "in plan"
and "out-of-plan" options while encouraging members to use the most
cost-effective form of health care services through, among other things,
increased copayments, deductibles and coinsurance. Although the Company's POS
products, the Freedom Plan and Liberty Plan, offer this alternative to
employers, there is no assurance that the Company will be able to continue to
compete effectively for the business of employer groups.

EMPLOYEES

    At December 31, 1999, the Company had approximately 4,200 full-time
employees, none of whom is represented by a labor union.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    Certain statements contained in "Business", "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", including statements concerning future results of operations or
financial position, future liquidity, future health care and administrative
costs, future premium rates and yields for commercial and Medicare business, the
employer renewal process, future growth or reduction in membership and
membership composition, future health care benefits, future provider network,
future provider utilization rates, future medical loss ratio levels, future
claims payment, service performance and other operations matters, future
administrative loss ratio levels, the Company's information systems, proposed
efforts to control health care and administrative costs, future impact of
risk-sharing and cost-containment agreements with health care providers, the
Company's future strategy, future enrollment levels, future government
regulation and relations and the impact of new laws and regulation, the future
of the health care industry, and the impact on the Company of legal proceedings
and regulatory investigations and examinations, and other statements contained
herein regarding matters that are not historical facts, are forward-looking
statements (as such term is defined in the Securities Exchange Act of 1934, as
amended). Because such statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, those discussed below.

                                       14
<PAGE>   15
    Inability to control, and unpredictability of, health care costs

    The Company's future results of operations depend, in part, on its ability
to predict and control health care costs (through, among other things,
appropriate benefit design, utilization review and case management programs and
risk-sharing and other payment arrangements with providers) while providing
members with coverage for the health care benefits provided under their
contracts. However, Oxford's ability to contain such costs may be adversely
affected by various factors, including: new technologies and health care
practices, hospital costs, changes in demographics and trends, new mandated
benefits or practices, selection biases, increases in unit costs paid to
providers, major epidemics, catastrophes, inability to establish acceptable
compensation arrangements with providers, operational and regulatory issues
which could delay, prevent or impede those arrangements, and higher utilization
of medical services, including higher out-of-network utilization under POS
plans. There can be no assurance that Oxford will be successful in mitigating
the effect of any or all of the above-listed or other factors.

    Medical costs payable in Oxford's financial statements include reserves for
incurred but not reported or paid claims ("IBNR") which are estimated by Oxford.
Oxford estimates the amount of such reserves primarily using standard actuarial
methodologies based upon historical data including the average interval between
the date services are rendered and the date claims are received and paid, denied
claims activity, expected medical cost inflation, seasonality patterns and
changes in membership. The estimates for submitted claims and IBNR are made on
an accrual basis and adjusted in future periods as required. Oxford believes
that its reserves for IBNR are adequate in order to satisfy its ultimate claim
liability. However, Oxford's prior rapid growth, delays in paying claims, paying
or denying claims in error and changing speed of payment affect the Company's
ability to rely on historical information in making IBNR reserve estimates.
There can be no assurances as to the ultimate accuracy of such estimates. Any
adjustments to such estimates could adversely affect Oxford's results of
operations in future periods.

    The effect of higher administrative costs

     Although a key element of the Company's future strategy is a reduction in
administrative expenses, no assurance can be given that the Company will be able
to achieve such reductions, especially since such reductions will involve
changing work processes and staffing levels for various functions which, in
turn, could involve operational challenges and the risk of unanticipated costs,
including unexpected employee attrition.

    Changes in laws and regulations

    The health care financing industry in general, and HMOs in particular, are
subject to substantial federal and state government regulation, including, but
not limited to, regulations relating to cash reserves, minimum net worth,
licensing requirements, approval of policy language and benefits, mandatory
products and benefits, provider compensation arrangements, member disclosure,
premium rates and periodic examinations by state and federal agencies. State
regulations require the Company's HMO and insurance subsidiaries to maintain
restricted cash or available cash reserves and restrict their ability to make
dividend payments, loans or other payments to the Company.

    In recent years, significant federal and state legislation affecting the
Company's business was enacted. For example, New York State implemented a
requirement that health plans pay interest on delayed payment of claims at a
rate of 12% per annum, effective January 1998, and that managed care members
have a right to an external appeal of certain final adverse determinations,
effective July 1999. In addition, Connecticut and New Jersey enacted legislation
in 1999 concerning prompt payment of claims, mental health parity and other
mandated benefits and practices. State and federal government authorities are
continually considering changes to laws and regulations applicable to the
Company and are currently considering regulations relating to mandatory benefits
and products, defining medical necessity, provider compensation, health plan
liability to members who fail to receive appropriate care, disclosure and
composition of physician networks, all of which would apply to the Company. In
addition, Congress is considering significant changes to Medicare legislation
and proposals relating to health care reform, including a comprehensive package
of regulations on managed care called the "Patient Bill of Rights" legislation.
Separate and distinct versions of the Patient Bill of Rights have passed both
the House of Representatives and the Senate and are awaiting action by a
conference committee.

                                       15
<PAGE>   16
    Premiums for Oxford's Medicare programs are determined through formulas
established by HCFA for Oxford's Medicare contracts. Federal law provides for
annual adjustments in Medicare reimbursement by HCFA which could reduce the
reimbursement received by the Company. Premium rate increases in a particular
region that are lower than the rate of increase in health care service expenses
for Oxford's Medicare members in such region, could adversely affect Oxford's
results of operations. Any Medicare risk agreements entered into by Oxford could
pose operational challenges for the Company and could be adversely affected by
regulatory actions or by the failure of the risk contractor to comply with the
terms of such agreement and failure under any such agreement could have an
adverse effect on the Company's Medicare membership or its relationship with its
providers. Oxford's Medicare programs are subject to certain additional risks
compared to commercial programs, such as higher comparative medical costs,
higher levels of utilization and higher marketing and advertising costs. See
"Business-Government Regulation".

    Service and management information systems

    The Company's claims and service systems depend upon the smooth functioning
of two complex computer systems. While these systems presently operate at 99%
availability and are sufficient to operate the Company's current business, the
systems remain subject to unexpected interruptions resulting from occurrences
such as hardware failures or the impact of ongoing program modifications. There
can be no assurance that such interruptions will not occur in the future and any
such interruptions could adversely affect the Company's business and results of
operations. Moreover, operating and other issues can lead to data problems that
affect performance of important functions, including, but not limited to, claims
payment and group and individual billing. There can also be no assurance that
the process of improving existing systems, developing systems to support the
Company's operations and improving service levels will not be delayed or that
additional systems issues will not arise in the future.

    Health care provider network

    The Company is subject to the risk of disruption in its health care provider
network. Network physicians, hospitals and other health care providers could
terminate their contracts with the Company. In addition, disputes often arise
under provider contracts which could adversely affect the Company or could
expose the Company to regulatory or other liabilities; such disruptions could
have a material adverse effect on the Company's ability to market its products
and service its membership. Cost-containment arrangements entered into by Oxford
could be adversely affected by regulatory actions or by the failure of the
providers to comply with the terms of such agreements. Furthermore, the effect
of mergers and consolidations of health care providers or potential unionization
of, or concerted action by, physicians in the Company's service areas could
enhance the providers' bargaining power with respect to higher reimbursement
levels and changes to the Company's utilization review and administrative
procedures.

    Pending litigation and other proceedings against Oxford

    The Company is a defendant in a large number of purported securities class
action lawsuits and shareholder derivative lawsuits which were filed after a
substantial decline in the price of the Company's common stock in October 1997.
The Company is also the subject of examinations, investigations and inquiries by
several Federal and state governmental agencies. For a discussion of these
proceedings, as well as other lawsuits pending against the Company, see "Legal
Proceedings". The results of these lawsuits, examinations, investigations and
inquiries could adversely affect the Company's results of operations, financial
condition, membership growth and ability to retain members through the
imposition of sanctions, required changes in operations and potential
limitations on enrollment. In addition, evidence obtained in governmental
proceedings could be used adversely against the Company in civil proceedings.
The Company cannot predict the outcomes of these lawsuits, examinations,
investigations and inquiries.



    Negative HMO publicity and potential for additional litigation

    The managed care industry, in general, has received significant negative
publicity. This publicity has led to increased legislation, regulation and
review of industry practices. Certain litigation, including purported class

                                       16
<PAGE>   17
actions on behalf of plan members recently commenced against certain large,
national health plans, has resulted in negative publicity for the managed care
industry and creates the potential for similar litigation against the Company.
These factors may adversely affect the Company's ability to market its products
and services, may require changes to its products and services and may increase
the regulatory burdens under which the Company operates, further increasing the
costs of doing business and adversely affecting the Company's results of
operations.

    Concentration of business

    The Company's commercial and Medicare business is concentrated in New York,
New Jersey and Connecticut, with more than 80% of its tri-state commercial
premium revenues received from New York business. As a result, changes in
regulatory, market or health care provider conditions in any of these states,
particularly New York, could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
Company's Medicare revenue represented approximately 18% of its premiums earned
during the year 1999.

                                       17
<PAGE>   18
ITEM 2.  PROPERTIES

Summarized in the table below are the Company's major lease commitments for
currently occupied office space, excluding formerly occupied office space in
various cities which have been either subleased to new tenants or charged to the
Company's restructuring reserve.

<TABLE>
<CAPTION>
                                         TYPE                EARLIEST TERMINATION                CURRENT
            LOCATION                   OF SPACE                      DATE                      SQUARE FEET
            --------                   --------                      ----                      -----------
<S>                                 <C>                     <C>                                <C>
      Trumbull, CT                  Administrative          December-00                        238,000
      Nashua, NH                    Administrative          June-04                            132,000
      Hooksett, NH                  Administrative          November-02                        121,000
      Trumbull, CT                  Administrative          April-02                           115,000
      Milford, CT                   Administrative          February-02                         60,000
      White Plains, NY              Sales/Admin             November-00                         85,000
      Hidden River, FL              Administrative          January-04                          63,000
      Woodbridge, NJ                Administrative          March-02                            22,000
      New York, NY                  Sales/Admin             July-05                             28,000
      Melville, NY                  Sales/Admin             June-02                             27,000
</TABLE>

ITEM 3.  LEGAL PROCEEDINGS

SECURITIES CLASS ACTION LITIGATION

    As previously reported by the Company, following the October 27, 1997
decline in the price per share of the Company's common stock, more than fifty
purported securities class action lawsuits were filed against the Company and
certain of its officers in the United States District Courts for the Eastern
District of Arkansas, the Eastern District of New York, the Southern District of
New York and the District of Connecticut. The captions of these actions have
previously been reported by the Company.

    By order dated April 29, 1998, the Judicial Panel on Multidistrict
Litigation ("JPML") transferred these actions together with the federal
shareholder derivative actions discussed below, for coordinated or consolidated
pretrial proceedings in the United States District Court for the Southern
District of New York before Judge Charles L. Brieant. Judge Brieant consolidated
the class actions for pretrial purposes under the caption In re Oxford Health
Plans, Inc. Securities Litigation, MDL-1222 (CLB). On July 15, 1998, Judge
Brieant appointed the Public Employees Retirement Associates of Colorado
("ColPERA"), three individual shareholders (the "Vogel plaintiffs") and The PBHG
Funds, Inc. ("PBHG"), as co-lead plaintiffs and ColPERA's counsel (Grant &
Eisenhofer), the Vogel plaintiffs' counsel (Milberg Weiss Hynes Lerach &
Bershad), and PBHG's counsel (Chitwood & Harley), as co-lead counsel. (ColPERA
appealed this decision; the United States Court of Appeals for the Second
Circuit dismissed the appeal.)

    On October 2, 1998, the co-lead plaintiffs filed a Consolidated and Amended
Class Action Complaint ("Amended Complaint"). The Amended Complaint (which has
since been further amended by stipulation) names as defendants Oxford, Oxford
NY, KPMG LLP (which was Oxford's outside independent auditor during 1996 and
1997) and several current or former Oxford directors and officers (Stephen F.
Wiggins, William M. Sullivan, Andrew B. Cassidy, Brendan R. Shanahan, Benjamin
H. Safirstein, Robert M. Smoler, Robert B. Milligan, David A. Finkel, Jeffery H.
Boyd, and Thomas A. Travers). The Amended Complaint purports to be brought on
behalf of purchasers of Oxford's common stock during the period from November 6,
1996 through December 9, 1997 (the "Class Period"), purchasers of Oxford call
options or sellers of Oxford put options during the Class Period and on behalf
of persons who, during the Class Period, purchased Oxford's securities
contemporaneously with sales of Oxford's securities by one or more of the
individual defendants. The Amended Complaint alleges that defendants violated
Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder by
making false and misleading statements and failing to disclose certain allegedly
material information regarding changes in

                                       18
<PAGE>   19
Oxford's computer system and the Company's membership, enrollment, revenues,
medical expenses and ability to collect on its accounts receivable. The Amended
Complaint also asserts claims against the individual defendants alleging
"controlling person" liability under Section 20(a) of the Exchange Act. The
Amended Complaint also alleges violations of Section 20A of the Exchange Act by
virtue of the individual defendants' sales of shares of Oxford's common stock
while the price of that common stock was allegedly artificially inflated by
allegedly false and misleading statements and omissions. The Amended Complaint
seeks unspecified damages, attorneys' and experts' fees and costs, and such
other relief as the court deems proper.

    On December 18, 1998, Oxford, the individual defendants and, separately,
KPMG LLP, moved to dismiss the Amended Complaint. On May 25, 1999 and June 8,
1999, Judge Brieant issued decisions denying the motions to dismiss. On June 10,
1999, KPMG LLP moved for reconsideration of the decision denying its motion to
dismiss. On July 9, 1999, Judge Brieant granted KPMG LLP's motion for
reconsideration, and on reconsideration adhered to the prior disposition.

    By order dated July 9, 1999, as amended on July 29, 1999, the Court approved
a Case Management Plan submitted by counsel for both plaintiffs and defendants,
which Plan provides, inter alia, that (1) the parties shall attempt to complete
all merits discovery in the case by September 15, 2000, and (2) summary judgment
motions shall be filed by August 17, 2001. No date for the commencement of any
trial has been set. On August 25, 1999, plaintiffs moved to certify a class
consisting of all purchasers of shares of Oxford common stock or Oxford call
options and sellers of Oxford put options during the Class Period and a
sub-class of all persons who purchased shares of Oxford common stock
contemporaneously with sales of such stock during the Class Period by the
individual defendants. On February 28, 2000, the Court granted plaintiffs'
motion to declare a class action and approved of plaintiffs' proposed class of
purchasers of Oxford common stock and call options, and sellers of Oxford put
options, during the Class Period. The Court further ruled that lead plaintiffs
ColPERA and PBHG and plaintiff Al Tawil satisfied the requirements for
appointment as class representative. Moreover, the Court invited two of the
Vogel plaintiffs to apply for appointment as one or more additional class
representatives. The Court reserved entry of an order of class certification
until Oxford and the individual defendants take discovery of such proposed class
representatives.

    The State Board of Administration of Florida (the "SBAF") has stipulated,
and Judge Brieant has ordered, that in the action brought by it individually
(the "SBAF Action"), SBAF will be bound by the dismissal of any claims it has
that are asserted in the Amended Complaint. On September 22, 1999, SBAF filed an
Amended Complaint (the "Amended SBAF Complaint"). The Amended SBAF Complaint
asserts claims: (i) against all of the defendants alleging violations of Section
10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder; (ii) against
the individual defendants alleging violations of Section 20(a) of the Exchange
Act; (iii) against all of the defendants alleging violations of Section 18(a) of
the Exchange Act; (iv) against all of the defendants alleging common law fraud
and deceit; (v) against all of the defendants alleging negligent
misrepresentation; (vi) against individual defendant Andrew Cassidy alleging
violation of Section 20(A) of the Exchange Act; and (vii) against all of the
defendants alleging violations of the securities laws of the State of Florida.
The Amended SBAF Complaint alleges damages of $26,784,291.96 and seeks interest,
costs and attorneys' fees. The parties are negotiating a stipulation regarding a
stay of the action that would obviate the need for the defendants to respond to
the Amended SBAF Complaint at this time.

    The outcomes of these actions cannot be predicted at this time, although the
Company believes that it and the individual defendants have substantial defenses
to the claims asserted and intends to defend the actions vigorously.

STOCKHOLDER DERIVATIVE LITIGATION

    As previously reported by the Company, in the months following the October
27, 1997 decline in the price per share of the Company's common stock, ten
purported stockholder derivative actions were commenced on behalf of the Company
in Connecticut Superior Court (the "Connecticut derivative actions") and in the
United States District Courts for the Southern District of New York and the
District of Connecticut (the "federal derivative actions") against the Company's
directors and certain of its officers (and the Company itself as a nominal
defendant).

                                       19
<PAGE>   20
    The complaints in the Connecticut derivative actions generally allege that
defendants breached their fiduciary obligations to the Company, mismanaged the
Company and wasted its assets in planning and implementing certain changes to
Oxford's computer system, by making misrepresentations concerning the status of
those changes in Oxford's computer system, by failing to design and to implement
adequate financial controls and information systems for the Company, and by
making misrepresentations concerning Oxford's membership enrollment, revenues,
profits and medical costs in Oxford's financial statements and other public
representations. The complaints further allege that certain of the defendants
breached their fiduciary obligations to the Company by disposing of Oxford
common stock while the price of that common stock was artificially inflated by
their alleged misstatements and omissions. The complaints seek unspecified
damages, attorneys' and experts' fees and costs and such other relief as the
court deems proper. None of the plaintiffs has made a demand on the Company's
Board of Directors that Oxford pursue the causes of action alleged in the
complaint. Each complaint alleges that plaintiff's duty to make such a demand
was excused by the directors' alleged conflict of interest with respect to the
matters alleged therein.

    In March 1998, Oxford and certain of the individual defendants moved to
dismiss or, alternatively, to stay the Connecticut derivative actions. Since
then, the parties to the Connecticut derivative actions have stipulated, under
certain conditions, to hold all pretrial proceedings in those actions in
abeyance during the pretrial proceedings in the federal derivative actions, and
to allow the plaintiffs in the Connecticut derivative actions to participate to
a limited extent in any discovery that is ultimately ordered in the federal
derivative actions. On February 19, 1999, Judge Brieant entered an order in the
federal derivative actions permitting the plaintiffs in the Connecticut
derivative actions to participate to a limited extent in any discovery that
occurs in the federal derivative actions.

    Meanwhile, on January 27, 1998, defendants filed an application with the
JPML to transfer the federal derivative actions for consolidated or coordinated
pretrial proceedings before Judge Charles L. Brieant of the Southern District of
New York. On April 28, 1998, the JPML entered an order transferring all of these
actions for consolidated or coordinated pretrial proceedings, together with the
securities class actions discussed above, before Judge Brieant. The parties to
the federal derivative actions agreed to suspend discovery in those actions
until the filing of a consolidated amended derivative complaint in those actions
and during the pendency of any motion to dismiss or to stay the federal
derivative actions or the securities class actions. A stipulation memorializing
this agreement, consolidating the federal derivative actions under the caption
In re Oxford Health Plans, Inc. Derivative Litigation, MDL-1222-D, and
appointing lead counsel for the federal derivative plaintiffs, was entered and
so ordered by Judge Brieant on September 26, 1998.

    On October 2, 1998, the federal derivative plaintiffs filed an amended
complaint. On January 29, 1999, they filed a second amended derivative complaint
(the "Amended Derivative Complaint"). The Amended Derivative Complaint names as
defendants certain of Oxford's current and former directors (Stephen F. Wiggins,
James B. Adamson, Robert B. Milligan, Fred F. Nazem, Marcia J. Radosevich,
Benjamin H. Safirstein and Thomas A. Scully) and the Company's former auditors
KPMG LLP, together with the Company itself as a nominal defendant. The Amended
Derivative Complaint alleges that the individual defendants breached their
fiduciary obligations to the Company, mismanaged the Company and wasted its
assets in planning and implementing certain changes to Oxford's computer system,
by making misrepresentations concerning the status of those changes to Oxford's
computer system, by failing to design and implement adequate financial controls
and information systems for the Company and by making misrepresentations
concerning Oxford's membership, enrollment, revenues, profits and medical costs
in Oxford's financial statements and other public representations. The Amended
Derivative Complaint further alleges that certain of the individual defendants
breached their fiduciary obligations to the Company by selling shares of Oxford
common stock while the price of the common stock was allegedly artificially
inflated by their alleged misstatements and omissions. The Amended Derivative
Complaint seeks declaratory relief, unspecified damages, attorneys' and experts'
fees and costs and such other relief as the court deems proper. No demand has
been made upon the Company's Board of Directors that Oxford pursue the causes of
action alleged in the Amended Derivative Complaint. The Amended Derivative
Complaint alleges that the federal derivative plaintiffs' duty to make such a
demand was excused by the individual defendants' alleged conflict of interest
with respect to the matters alleged therein.

    On March 15, 1999, Oxford, the individual defendants and, separately, KPMG
LLP, moved to dismiss the Amended Derivative Complaint, and oral argument on
defendants' motion was heard on June 24, 1999. By Memorandum and Order dated
July 19, 1999, Judge Brieant ordered that the motions of Oxford, the individual

                                       20
<PAGE>   21
defendants and KMPG LLP be held in abeyance until such time as the securities
class action litigation is resolved or discovery is completed, or until further
order of the Court, and that by March 1, 2000, the Court would reassess the
status of the motions to dismiss. The Court further ordered that, in the
interim, the derivative plaintiffs shall not conduct their own discovery but
shall be permitted limited participation in discovery conducted in the
securities class action litigation. Subsequently, the federal derivative
plaintiffs withdrew their claims against KPMG LLP and asserted them in an action
commenced in New York State Supreme Court under the caption Fritschle v. KPMG
Peat Marwick LLP, Index No. 99-18612 (N.Y. County). Oxford's and KPMG LLP's
responses to the complaint in that action are currently due on March 31, 2000.
On March 9, 2000, Judge Brieant issued a decision denying Oxford's and the
individual defendants' motion to dismiss the Amended Derivative Complaint.

    Although the outcome of the federal and Connecticut derivative actions
cannot be predicted at this time, the Company believes that the defendants have
substantial defenses to the claims asserted in the complaints.

STATE INSURANCE AND HEALTH DEPARTMENTS

    On August 10, 1998, the New York State Insurance Department ("NYSID")
completed its triennial examination and market conduct examination of Oxford's
New York HMO and insurance subsidiaries. In the Reports on Examination (the
"Reports") the NYSID, based on information available through July 1998,
determined that certain assets on the December 31, 1997 balance sheets of the
Company's New York subsidiaries should not be admitted for statutory reporting
purposes and NYSID actuaries recorded additional reserves totaling approximately
$81.3 million for both subsidiaries on the balance sheet as determined by the
examiners. The Company contributed $152 million to the capital of its New York
HMO and insurance subsidiaries in satisfaction of the issues raised in the
Reports relating to the subsidiaries' financial statements, and maintaining such
subsidiaries' compliance with statutory capital requirements as of June 30,
1998. The Reports also made certain recommendations relating to financial
record-keeping, settlement of intercompany accounts and compliance with certain
NYSID regulations. The Company has agreed to address the recommendations in the
Reports. As previously reported, in December 1997, the Company made additions of
$164 million to the reserves of its New York subsidiaries at the direction of
the NYSID. The NYSID issued a Market Conduct Report identifying several alleged
violations of state law and NYSID regulations. On December 22, 1997, the NYSID
and Oxford entered into a stipulation under which Oxford promised to take
certain corrective measures and to pay restitution and a $3 million fine. The
stipulation provides that the NYSID will not impose any other fines for Oxford's
conduct up to November 1, 1997. The NYSID has continued to review market conduct
issues, including, among others, those relating to claims processing, the level
of commissions paid to brokers and the determination of premium rates for
commercial group customers. The Company has agreed to take certain other
corrective actions with respect to certain of these market conduct issues,
including an audit of its compliance with the stipulation conducted by Ernst &
Young, but additional corrective action may be required and such actions could
adversely affect the Company's results of operations.

    On January 5, 1999, March 29, 1999, July 14, 1999, and November 19, 1999,
the Company agreed to pay fines of $40,900, $51,900, $30,200, and $28,650,
respectively, to the NYSID in connection with certain alleged violations of New
York's prompt payment law. Fines for similar alleged violations have also been
imposed on other health plans in New York. In January 2000, the NYSID released
Circular Letter No. 6, which announced the imposition of significantly higher
penalties for insurers that have repeatedly failed to comply with the prompt pay
statute. By letter dated February 2, 2000, the NYSID informed the Company that
its review of complaints closed against the Company in the latter half of 1999
had established 507 violations of the prompt pay statute, and required a fine of
$507,000. Similar letters were submitted to other health plans in New York.
Oxford has submitted a detailed response to the NYSID asserting that the number
of potential violations is significantly less than that alleged, and that
because the great majority of complaints at issue involve old claims from 1997
or 1998, there is no basis for imposing higher fines. The NYSID has also
requested additional information concerning delayed claim payments and has
informed Oxford that it will continue to review complaints on an ongoing basis
to establish violations of the prompt pay statute, and that such violations
would result in additional fines.

    The NYSID has also raised certain issues relating to the Company's
responsiveness to provider and member complaints during the period 1997 through
1999. Oxford has agreed to settle all issues related to this subject for this
time period by payment of a fine of $150,000.

                                       21
<PAGE>   22
    The NYSID has also raised certain issues relating to the Company's
methodology for determining premium rates for the Company's large group
business. The NYSID has alleged that the Company's use of experience rating in
this line of business has been inappropriate; the Company has responded that its
rating has been consistent with its filed rating methodology and has otherwise
been proper. In order to avoid similar issues, and in order to avoid issues
raised by the NYSID's proposed Regulation 62, the Company plans to offer its
large group Freedom Plan product through its health insurance subsidiary. The
implementation of this plan should permit the Company to maintain a pricing
methodology which is substantially similar to that which is currently employed.
The offering is subject to NYSID approval of forms and rates and there can be no
assurance approval will be timely received. The approval process may also give
rise to regulatory issues, which could affect the terms of the products to be
offered or the terms of arrangements between the Company and healthcare
providers.

    At this time, the Company cannot predict the outcome of enforcement of the
New York prompt payment law or the Company's negotiations with the NYSID over
premium pricing practices.

    The New Jersey Department of Health and Senior Services ("NJDHSS") and the
New Jersey Department of Banking and Insurance ("NJDBI") have completed their
1997/1998 audit, market conduct and financial examinations of the Company's New
Jersey HMO subsidiary. The Company has accepted, without admitting any
violations, consent orders from the NJDHSS and NJDBI imposing fines of $135,000
and $140,000, respectively, in connection with the alleged technical violations
of the New Jersey insurance law and associated regulations. In addition, as part
of the NJDBI examination, the Company has agreed to collateralize certain
provider advances to assure their continued status as admitted assets.

    The Company is also subject to examinations from time to time with respect
to financial condition and market conduct for its HMO and insurance subsidiaries
in other states where it conducts business. The outcome of any such
examinations, if commenced, cannot be predicted at this time.

NEW YORK STATE ATTORNEY GENERAL

    As previously reported, on November 6, 1997, the New York State Attorney
General served a subpoena duces tecum on the Company requiring the production of
various documents, records and materials "in regard to matters relating to the
practices of the Company and others in the offering, issuance, sale, promotion,
negotiation, advertisement, distribution or purchase of securities in or from
the State of New York." Since then, Oxford has produced a substantial number of
documents in response to the subpoena, and expects to produce additional
documents. In addition, some of Oxford's present and former directors and
officers have provided testimony to the Attorney General's staff.

    On April 12, 1999, the Attorney General served a subpoena duces tecum on
Oxford seeking production of certain documents relating to Oxford's handling of
inquiries, claims and complaints regarding emergency medical services. The
subpoena was accompanied by a letter stating that, based on an examination of
materials relating to Oxford's New York Individual Plans, Oxford appeared to be
in violation of certain provisions of the Managed Care Reform Act of 1996 that
relate to the provision and disclosure of emergency medical services. By letter
dated April 20, 1999, Oxford submitted a response to the Attorney General's
letter outlining the steps it has taken to comply with the relevant provisions
of the Managed Care Reform Act.

    The Attorney General served another subpoena duces tecum, dated July 20,
1999, on Oxford. This subpoena was served on Oxford and other New York health
care plans as part of an investigation by the Attorney General. The subpoena
seeks production of certain documents relating to Oxford's utilization review
process. Utilization review is the review undertaken by a health care plan to
determine whether a requested health care service that has been, will be or is
being provided to an Oxford member is medically necessary. Oxford has produced
documents and files in response to the subpoena.

    The Attorney General's Health Care Bureau also periodically inquires of the
Company with respect to hospital and provider payment issues and member
complaints.

    The Company intends to cooperate fully with the Attorney General's
inquiries, the outcome of which cannot be predicted at this time.

                                       22
<PAGE>   23
SECURITIES AND EXCHANGE COMMISSION

    As previously reported, the Company received an informal request on December
9, 1997 from the Securities and Exchange Commission's Northeast Regional Office
seeking production of certain documents and information concerning a number of
subjects, including disclosures made in the Company's October 27, 1997 press
release announcing a loss in the third quarter. Oxford has produced documents
and has provided information in response to this informal request.

    The Commission has served the Company and certain of its current and former
officers and directors with several subpoenae duces tecum requesting documents
concerning a number of subjects, including, but not limited to, the Company's
public disclosure of internal and external audits, uncollectible premium
receivables, timing of and reserves with respect to payments to vendors, doctors
and hospitals, payments and advances to medical providers, adjustments related
to terminations of group and individual members and for nonpaying group and
individual members, computer system problems, agreements with the New York State
Attorney General, employment records of former employees, and the sale of Oxford
securities by officers and directors. Oxford and certain of its current and
former officers and directors have produced and are continuing to produce
documents in response to these subpoenae. Certain of Oxford's present and former
directors, officers and employees have provided testimony to the Commission.

    Oxford intends to cooperate fully with the Commission and cannot predict the
outcome of the Commission's investigation at this time.

MEDICAL SOCIETY ARBITRATION PROCEEDINGS

    As previously reported by the Company, on February 3, 1998, the New York
County Medical Society ("NYCMS") initiated an arbitration proceeding before the
American Arbitration Association ("AAA") in New York against Oxford alleging
breach of the written agreements between Oxford and some NYCMS physician members
and failure to adopt standards and practices consistent with the intent of those
agreements. The notice of intent to arbitrate was subsequently amended to join
thirteen additional New York medical associations as co-claimants. NYCMS and the
other claimants seek declaratory and injunctive relief requiring various changes
to Oxford's internal practices and policies, including practices in the
processing and payment of claims submitted by physicians. On August 12, 1999,
the New York State Supreme Court granted Oxford's petition for a permanent stay
of this proceeding and on September 22, 1999, NYCMS filed a notice of appeal of
this decision.

    In addition, on March 30, 1998, Oxford received a demand for arbitration
from two physicians purporting to commence a class action arbitration before the
AAA in Connecticut against Oxford alleging breach of contract and violation of
the Connecticut Unfair Insurance Practices Act. Also, some individual physicians
claiming that payments under their contracts with Oxford were delayed have
announced their intention to commence arbitration proceedings against Oxford.
Oxford has been served with notices of intent to arbitrate, on behalf of more
than thirty-five individual physicians. More than twenty-five arbitration
proceedings have been filed by individual physicians, one of which has been
withdrawn.

    In November 1998, various individual physicians purported to amend their
demands for arbitration by adding a claim for punitive damages. These claims all
allege that Oxford's failure to develop the computer systems and personnel
necessary for the prompt and efficient processing of claims was reckless and
intentional, and that Oxford's failure to pay claims was arbitrary, capricious
and without a good faith basis. On May 14, 1999, Oxford filed a motion to
dismiss the punitive damages claim in one of the individual arbitration cases,
Ritch v. Oxford, on the grounds that, inter alia, plaintiff had failed to allege
any tort claim and that a complaint for breach of contract will not support
punitive damages. After briefing and oral argument on this issue in the Ritch
case, plaintiff was permitted to amend his complaint on June 17, 1999 to add a
cause of action for fraud. Oxford subsequently renewed its motion to dismiss the
punitive damages claim, which motion was granted on August 10, 1999. The Company
will seek to have the decision with respect to the punitive damages motion
followed in the other individual arbitration cases.

    In September 1999, Oxford and counsel for the NYCMS and various individual
physicians agreed to suspend all arbitration proceedings on behalf of the NYCMS
and the individual physicians pending settlement talks. The outcome and
settlement prospects of the various arbitration proceedings cannot be predicted
at this time

                                       23
<PAGE>   24
although the Company believes that it has substantial defenses to
the claims asserted and intends to defend the arbitrations vigorously.

OTHER CLASS ACTIONS

    As previously reported by the Company, on May 19, 1997, Oxford was served
with a purported "Class Action Complaint" filed in the New York State Supreme
Court, New York County by two physicians and a medical association of five
physicians (Jeffrey S. Oppenheim, M.D., et al. v. Oxford Health Plans, Inc.).
Plaintiffs alleged that Oxford (i) failed to make timely payments to plaintiffs
for claims submitted for health care services and (ii) improperly withheld from
plaintiffs a portion of plaintiffs' agreed compensation. Plaintiffs alleged
causes of action for common law fraud and deceit, negligent misrepresentation,
breach of fiduciary duty, breach of implied covenants and breach of contract.
The complaint sought an award of an unspecified amount of compensatory and
exemplary damages, an accounting and equitable relief.

    On July 24, 1997, Oxford and plaintiffs reached a settlement in principle of
the class claims wherein Oxford agreed to pay, from September 1, 1997 to January
1, 2000, interest at certain specified rates to physicians who did not receive
payments from Oxford within certain specified time periods after submitting
"clean claims" (a term that was to be applied in a manner consistent with
certain industry guidelines). Moreover, Oxford agreed to provide to plaintiffs'
counsel, on a confidential basis, certain financial information that Oxford
believed would demonstrate that Oxford acted within its contractual rights in
making decisions on payments withheld from plaintiffs and members of the alleged
class. The settlement in principle provided that, if plaintiffs' counsel
reasonably does not agree with Oxford's belief in this regard, plaintiffs retain
the right to proceed individually (but not as a class) against Oxford by way of
arbitration. Oxford has supplied financial information to plaintiffs' counsel
and has exchanged draft settlement papers with plaintiffs' counsel.

    The Company has been the subject of a suit in New York State Supreme Court
brought by plaintiffs purporting to represent a class of former and current
members of the Company's New York Individual Plans. The complaint primarily
seeks (1) a declaration that Oxford may not retroactively terminate any members
for nonpayment and may only terminate after a separate notice of termination
upon 30 days notice and (2) monetary damages on behalf of a subclass of all
individuals previously terminated for nonpayment by Oxford. In a January 1999
decision, the Court limited the class to only those former or present members of
the Company's old individual Freedom Plan, decertified the much larger class of
individuals insured under a new individual Freedom Plan contract, and stated
that Oxford's termination procedures were consistent with the new plan's
contract. However, the Court also found that plaintiffs had established as a
matter of law that the old plan's contract was ambiguous and that Oxford had
violated the old contract by terminating individuals without 30 days notice. In
a March 7, 2000 opinion, the Appellate Division, First Department, affirmed the
Supreme Court's decision to certify a class limited to members of the old plan
and its ruling that the old plan had been violated as a matter of law. The
appellate court also dismissed the plaintiffs' claims for misrepresentation,
waiver and estoppel. By decision dated March 8, 2000, the Supreme Court denied
plaintiffs' motion to amend their complaint by expanding their existing causes
of action and adding a claim for punitive damages. Trial on plaintiff's
remaining claims is expected to occur by the summer of 2000.

    On May 18, 1998, a purported "Class Action Complaint" was brought against
Oxford and other unnamed defendant plan administrators filed in the United
States District Court for the Eastern District of New York by four plaintiffs
who claim to be beneficiaries of defendants' health insurance plans seeking
declaratory and other relief from defendants for alleged wrongful denial of
insurance coverage for the drug Viagra. On September 8, 1998, Oxford moved to
dismiss the complaint based on plaintiffs' failure to exhaust their
administrative remedies. By Memorandum and Order dated August 23, 1999, this
motion was denied.

    OTHER

    On October 26, 1998, Complete Medical Care, P.C. ("CMC"), United Medical
Care, P.C. ("UMC"), Comprehensive Health Care Corp. ("CHC") and Oscar Fukilman,
M.D. commenced actions in the Supreme Court of the State of New York for New
York County against Oxford and certain of its officers. The complaints in United
Medical Care, P.C. v. Oxford Health Plans, Inc. et al., Index No. 605176/98, and
Complete Medical Care, P.C. v. Oxford Health Plans, Inc. et al., Index No.
605178/98, generally allege that Oxford and the individual defendants: (i)
breached, and have announced their intention to breach, certain agreements with
CMC and UMC for the

                                       24
<PAGE>   25
delivery of health care services to certain of Oxford's members; (ii) breached
an implied covenant of good faith and fair dealing with UMC and CMC; (iii)
fraudulently induced CMC and UMC to enter into their respective agreements with
Oxford; (iv) tortiously interfered with CMC's and UMC's current and prospective
contractual relations with certain physicians; and (v) defamed CMC and UMC. The
complaints each seek at least $165 million in damages, at least $500 million in
punitive damages, unspecified interest, costs and disbursements, and such other
relief as the court deems proper. The complaint in the Complete Medical Care
action also alleges that Oxford has unjustly enriched itself by withholding from
CMC certain funds to which CMC claims it is entitled, and seeks the imposition
of a constructive trust with respect to those funds. The complaint in Oscar
Fukilman, M.D. et al v. Oxford Health Plans, Inc. et al., Index No. 604177/98,
alleges that Oxford and certain officers defamed, and conspired to defame, Dr.
Fukilman and CHC, and seeks at least $25 million in damages and unspecified
costs and disbursements and such other relief as the court deems proper. On
January 8, 1999, defendants: (1) served an answer and counterclaims in the
Complete Medical Care case; (2) filed a motion to compel arbitration and dismiss
the United Medical Care complaint; and (3) moved to dismiss the Fukilman v.
Oxford complaint. By opinion dated January 12, 2000, the New York Supreme Court
granted defendants' motion to compel arbitration in the UMC litigation and
further ordered the Fukilman v. Oxford case also be resolved by arbitration. In
light of the Court's ruling, defendants have recently moved to consolidate and
compel arbitration of the CMC case before the same arbitration panel.

    On September 28, 1999, Travers O'Keefe & Associates, Inc. ("Travers"), an
insurance brokerage firm, brought an action against the Company and its
insurance subsidiary, Oxford Health Insurance, Inc. (for this paragraph only,
together, "Oxford") in the New York State Supreme Court, County of New York.
Travers alleged that Oxford's termination of its broker contract was in
retaliation for complaints made by Travers against Oxford with the NYSID and
asserted claims for breach of contract and tortious interference with contract
and sought damages in excess of $10 million. Oxford has asserted various
counterclaims and a third-party complaint alleging that Travers and a former
Oxford employee have engaged in a pattern of wrongdoing against Oxford. On March
1, 2000, following oral argument, Justice Ramos dismissed Travers' complaint
against Oxford from the bench, with a written decision to follow; he reserved
decision on whether to dismiss Oxford's counterclaim and third-party complaint.
Travers may appeal the dismissal of its claims.

    In December 1999, the Heritage New Jersey Medical Group ("Heritage")
submitted a demand for arbitration of various disputes arising out of its August
3, 1998 agreements with Oxford, which agreements had delegated to Heritage the
responsibility for the delivery of medical services to the Company's New Jersey
Medicare membership. In July 1999, in view of the uncertainties in the
regulatory environment and other considerations, the Company decided to wind
down its network management agreements with Heritage. The Heritage arbitration
demand alleges that Oxford has violated its obligations under the August 3, 1998
agreements, and demands an accounting and compensatory damages for lost profits
and administrative expenses, as well as punitive damages and attorneys fees.

    Although the outcome of these actions cannot be predicted at this time, the
Company believes that it and the individual defendants have substantial defenses
to the claims asserted and intends to defend the actions vigorously.

    Oxford, like HMOs and health insurers generally, excludes certain health
care services from coverage under its POS, HMO, PPO and other plans. In the
ordinary course of business, the Company is subject to legal claims asserted by
its members for damages arising from decisions to restrict reimbursement for
certain treatments. The loss of even one such claim, if it were to result in a
significant punitive damage award, could have a material adverse effect on the
Company's financial condition or results of operations. The risk of potential
liability under punitive damages theories may also significantly increase the
difficulty of obtaining reasonable settlements of coverage claims.

   In addition, several managed care organizations have recently been sued in
purported class action lawsuits asserting various causes of action under RICO,
ERISA and state law. These lawsuits typically assert that the defendant health
plans have employed criteria and procedures for providing care that are
inconsistent with those stated in the certificates and other information
provided to their members, and that because of these intentional
misrepresentations and omissions, a class of all plan members has been injured
by virtue of the fact that they received benefits of lesser value than the
benefits represented to and paid for by such members. The potential

                                       25
<PAGE>   26
exists for similar law suits to be filed against the Company. The financial and
operational impact that such evolving theories of recovery may have on the
managed care industry generally, or Oxford in particular, is presently unknown.

   In the ordinary course of its business, the Company also is subject to claims
and legal actions by members in connection with benefit coverage determinations
and alleged acts by network providers and by health care providers and others.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1999.


                                       26
<PAGE>   27


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   The Company's common stock is traded in the over-the-counter market on the
Nasdaq National Market under the symbol "OXHP".  The following table sets
forth the range of high and low sale prices for the common stock for the
periods indicated as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>
                                 1999                            1998
                        ----------------------          -----------------------
                         HIGH             LOW            HIGH             LOW
                         ----             ---            ----             ---
<S>                     <C>             <C>             <C>             <C>
First Quarter           $20.02          $15.00          $22.00          $14.00
Second Quarter           21.25           13.88           19.50           14.50
Third Quarter            17.88           12.50           16.38            5.81
Fourth Quarter           17.25            9.94           15.81            7.00
</TABLE>

   As of March 1, 2000, there were 1,543 shareholders of record of the
Company's common stock.

   The Company has not paid any cash dividends on its common stock since its
formation and does not intend to pay any cash dividends on common stock in
the foreseeable future.  Additionally, the Company's ability to declare and
pay dividends to its shareholders may be dependent on its ability to obtain
cash distributions from its operating subsidiaries.  The ability to pay
dividends is also restricted by insurance and health regulations applicable
to its subsidiaries.  See "Business - Government Regulation".  Furthermore,
the Investment Agreement between the Company and TPG, and the other
agreements and instruments entered into in connection with the Financing,
prohibit the Company from paying cash dividends on its common stock.

   For a discussion of the sale of the Series D and Series E Preferred Stock
and warrants to purchase common stock of the Company pursuant to the
Investment Agreement, the sale of the Senior Notes and the sale of common
stock to Norman C. Payson, M.D. pursuant to his employment agreement, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".


                                       27
<PAGE>   28
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

   The operating data and balance sheet information set forth below for each
year in the five-year period ended December 31, 1999 have been derived from
the consolidated financial statements of the Company.  The information below
is qualified by reference to and should be read in conjunction with the
audited consolidated financial statements and related notes and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included herein.


<TABLE>
<CAPTION>
(In thousands, except per share amounts and
operating statistics)                            1999              1998              1997              1996              1995 (5)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>               <C>               <C>               <C>
Revenues and Earnings:
    Operating revenues                        $ 4,115,134      $  4,630,166      $  4,179,816       $ 3,032,569        $1,745,975
    Investment and other income, net               82,632            89,245            71,448            42,620            19,711
    Net earnings (loss)                           319,940          (596,792)         (291,288)           99,623            52,398
    Net earnings (loss) for common shares         274,440          (624,460)         (291,288)           99,623            52,398
Financial Position:
    Working capital                               442,693           209,443            85,790           451,957           103,448
    Total assets                                1,686,888         1,637,750         1,390,101         1,356,397           611,149
    Long-term debt (1)                            350,000           350,000                --                --                --
    Redeemable preferred stock (2)                344,316           298,816                --                --                --
    Common shareholders' equity (deficit)          98,755          (181,105)          349,216           598,170           220,033
Net Earnings (Loss) Per Common Share (3):
    Basic                                     $      3.38      $      (7.79)     $      (3.70)      $      1.34        $     0.78
    Diluted                                   $      3.26      $      (7.79)     $      (3.70)      $      1.25        $     0.71
    Weighted-average number of
      common shares outstanding:
        Basic                                      81,273            80,120            78,635            74,285            67,450
        Diluted                                    84,231            80,120            78,635            79,662            73,344
Operating Statistics:
    Enrollment                                  1,593,700         1,881,400         2,008,100         1,535,500         1,007,700
    Fully insured member months                19,326,700        23,081,900        21,584,700        15,604,400         9,338,610
    Self-funded member months                     625,600           765,500           602,900           474,200           514,200
    Medical loss ratio (4)                           82.1%             94.4%             94.0%             80.1%             77.5%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)   During the first quarter of 2000, the Company repurchased approximately
      $14 million of principal outstanding under its Term Loan.

(2)   During the first quarter of 2000, the Company repurchased shares of its
      redeemable preferred stock for approximately $130 million.

(3)   Per share amounts and weighted-average number of common share amounts have
      been restated to reflect the two-for-one stock splits in 1996 and 1995.

(4)   Defined as health care services expense as a percentage of premiums
      earned.

(5)   In July 1995, the Company completed a merger with OakTree Health Plan,
      Inc. ("OakTree") whereby OakTree was merged into a subsidiary of the
      Company. The merger was accounted for as a pooling of interests and,
      accordingly, all prior period consolidated financial statements have been
      restated as if the merger took place at the beginning of such periods.


                                       28
<PAGE>   29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

   The Company's revenues consist primarily of commercial premiums derived
from its Freedom Plan, Liberty Plan and health maintenance organizations
("HMOs").  Revenues also include reimbursements under government contracts
relating to its Medicare+Choice ("Medicare") programs (and, prior to 1999,
its Medicaid programs), third-party administration fee revenue for its
self-funded plan services (which is stated net of direct expenses such as
third-party reinsurance premiums) and investment income.  Since the Company
provides services on a prepaid basis, with premium levels fixed for one-year
periods, unexpected cost increases during the annual contract period cannot
be passed on to employer groups or members.

   Health care services expense primarily comprises payments to physicians,
hospitals and other health care providers under fully insured health care
business and includes an estimated amount for incurred but not reported or
paid claims ("IBNR").  The Company estimates IBNR expense based on a number
of factors, including prior claims experience.  The ultimate payment of
unpaid claims attributable to any period may be more or less than the amount
of IBNR reported. The Company's results for the year ended December 31, 1998
were adversely affected by additions to the Company's reserves for IBNR in
the second and fourth quarters.  See "Liquidity and Capital Resources".

   The Company's results for 1999 and 1998 were adversely affected by
significant restructuring charges, and results for 1998 and 1997 were
adversely affected by write-downs of strategic investments.  Additionally,
1999 includes a charge of $24 million for the purchase of insurance policies
for litigation matters.  Net income for 1999 was favorably affected by the
reversal of $225 million of deferred tax valuation allowances.

   The following table provides certain statement of operations data expressed
as a percentage of total revenues and the medical loss ratio for the years
indicated:

<TABLE>
<CAPTION>
                                                    1999              1998              1997
---------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>               <C>
Revenues:
   Premiums earned                                   97.7%             97.7%             98.0%
   Third-party administration, net                    0.4%              0.4%              0.3%
   Investment and other income, net                   1.9%              1.9%              1.7%
---------------------------------------------------------------------------------------------
     Total revenues                                 100.0%            100.0%            100.0%
---------------------------------------------------------------------------------------------

Expenses:
   Health care services                              80.1%             92.2%             92.1%
   Marketing, general and                            14.3%             16.4%             17.3%
   administrative
   Interest and other financing costs                 1.2%              1.2%              0.3%
   Restructuring charges                              0.5%              2.4%               --
   Write-downs of strategic
   investments                                         --               0.8%              1.0%
---------------------------------------------------------------------------------------------
     Total expenses                                  96.1%            113.0%            110.7%
---------------------------------------------------------------------------------------------

Operating earnings (loss)                             3.9%            (13.0%)           (10.7%)

Income from affiliate                                  --                --               0.6%
---------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                   3.9%            (13.0%)           (10.1%)
Income tax benefit                                   (3.7%)            (0.4%)            (3.3%)
---------------------------------------------------------------------------------------------
Net earnings (loss)                                   7.6%            (12.6%)            (6.8%)
Less preferred dividends and amortization            (1.1%)            (0.6%)              --
=============================================================================================
Net earnings (loss) for common shares                 6.5%            (13.2%)            (6.8%)
=============================================================================================

Medical loss ratio (1)                               82.1%             94.4%             94.0%
=============================================================================================
</TABLE>

   (1) The medical loss ratios for 1998 and 1997 reflect significant additions
to the Company's reserves recorded in each year. A portion of the reserve
additions in 1998 and 1997 represent revisions to estimates for claims
incurred in prior years.  Accordingly, the medical loss ratios on an incurred
basis would be different from those shown above.


                                       29
<PAGE>   30
RESTRUCTURING CHARGES AND WRITE-DOWNS OF STRATEGIC INVESTMENTS

   During the third quarter of 1999, the Company recorded pretax restructuring
charges totaling $19.9 million ($11.3 million after income tax benefits, or
$0.13 per diluted share) in connection with additional steps taken under the
Company's plan (the "Turnaround Plan") to improve operations and restore the
Company's profitability.  These charges included estimated costs related to:
(i) $8.7 million for severance costs associated with work force reductions;
(ii) $7.4 million of costs associated with additional consolidation of the
Company's office facilities inclusive of the net write-off of $6.4 million in
fixed assets, consisting primarily of leasehold improvements; (iii) $4.3
million for the write-off of certain computer equipment; and (iv) $1.7
million related to leases for equipment no longer used in operations.  These
charges were partially offset by a pretax gain of $2.5 million related to the
disposal of the Company's minority investment in Ralin Medical, Inc., which
was written down in value as part of the Company's 1998 restructuring charge.

   During the first half of 1998, the Company recorded restructuring charges
totaling $123.5 million ($114.8 million after income tax benefits, or $1.43
per share).  These charges resulted from the Company's actions to better
align its organization and cost structure as part of the Company's Turnaround
Plan.  These charges included estimated costs related to: (i) $55.7 million
associated with the disposition or closure of noncore businesses; (ii) $29.3
million for the write-down of certain property and equipment; (iii) $24.8
million for severance and related costs; and (iv) $13.7 million for net costs
of operations consolidation, including long-term lease commitments.  The
ending reserves for these charges were generally classified in the Company's
balance sheet as accounts payable and accrued expenses with the exception of
property and equipment, which were written down to their estimated net
realizable values.

   The tables below present the activity for the restructuring charge
reserves established in 1999 and 1998 as part of the Turnaround Plan.

<TABLE>
<CAPTION>
(In thousands)                                   1998            Cash                                            12/31/98
                                             Restructuring     Received         Noncash        Changes in      Restructuring
                                                Charges          (Used)         Activity        Estimate          Reserves
--------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>             <C>             <C>              <C>
Provisions for loss on noncore businesses      $  55,700        $ (9,827)       $(18,725)       $(13,343)          $13,805
Write down of property and equipment              29,272              --         (28,267)         (1,005)               --
Severance and related costs                       24,800          (4,246)        (11,200)             --             9,354
Costs of consolidating operations                 13,728            (548)             --           4,505            17,685
--------------------------------------------------------------------------------------------------------------------------
                                               $ 123,500        $(14,621)       $(58,192)       $ (9,843)          $40,844
                                               ===========================================================================
</TABLE>


<TABLE>
<CAPTION>
(In thousands)                                 12/31/98       Cash                        1999                        12/31/99
                                            Restructuring   Received       Noncash    Restructuring   Changes in    Restructuring
                                              Reserves        (Used)       Activity     Charges         Estimate       Reserves
---------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>           <C>           <C>            <C>              <C>
Provisions for loss on noncore businesses    $ 13,805        $  4,343      $(14,493)     $    --        $ (1,590)        $ 2,065
Severance and related costs                     9,354         (10,380)           --        8,750              --           7,724
Costs of consolidating operations              17,685         (14,272)           --        3,003           1,590           8,006
                                             -------------------------------------------------------------------------------------
                                             $ 40,844        $(20,309)     $(14,493)     $11,753        $     --         $17,795
                                             =====================================================================================
</TABLE>

   The Company believes that the remaining restructuring reserves as of December
31, 1999 are adequate and that no revisions of estimates are necessary at this
time.

   Provisions for loss on noncore business

   As part of its Turnaround Plan, the Company decided to withdraw from
noncore markets by selling or closing its HMO and insurance businesses in
Pennsylvania, Illinois, Florida and New Hampshire.  Total premium revenue for
these businesses in 1998 was approximately $170.4 million, with operating
losses totaling approximately $37 million.  In addition, the Company decided
to close its specialty management initiatives and to sell or close certain
other health care services operations and investments in noncore businesses.
Restructuring reserves were established relating to estimated losses
associated with premium deficiencies in the HMO and insurance


                                       30
<PAGE>   31
subsidiaries to be sold or closed, the net book value of noncore investments was
reduced to their estimated recoverable value, and accruals were recorded for
incremental disposition and closing costs associated with the Turnaround Plan.
The Company estimated the net recovery of its investments in these entities by
evaluating the assets and operations for impairment. This evaluation included an
assessment of asset recoverability for these entities, premium deficiency
analysis assuming timely exit of these noncore markets and the establishment of
premium deficiency reserves, estimated incremental disposition and closing
costs, including professional services and anticipated proceeds related to the
disposition of assets. In determining the estimated fair values, the Company
reviewed detailed asset listings for each location to be vacated. Based upon the
asset classification, acquisition date and anticipated net proceeds, if any,
upon disposition, as determined by the Company, the assets were written down to
estimated fair value. The fair values were determined based on the best
information available in the circumstances, including prior experience in
disposing of similar assets and discussions with potential purchasers of the
assets. The Company substantially completed the disposition of all of the
property and equipment in 1999. The Company calculated premium deficiency
reserves based upon expected premium revenue, medical expense and administrative
expense levels and remaining contractual obligations using the Company's
historical experience. Of the $55.7 million originally recorded as provision for
loss on noncore businesses in 1998, $25.2 million related to premium deficiency
reserves, $27.9 million related to asset valuation write-downs and reserves,
$2.2 million related to legal fees to be incurred in connection with preparation
of agreements for sale or disposition of assets, accounting fees to be incurred
for final statutory audits and brokerage costs and $0.4 million related to
defined severance arrangements for employees of these entities. Approximately
250 employees in the noncore businesses were terminated between June 30, 1998
and December 31, 1998.

   The cash activity during 1999 is comprised of proceeds of $7.1 million
related to the sale of the Company's Pennsylvania subsidiary, partially
offset by $2.8 million in cash payments for medical and other costs as the
operations were disposed of or shut down.  The non-cash activity represents
the specific write-off of the net assets of the noncore businesses. Due to
greater than anticipated recoveries, the Company has revised its estimate of
the remaining costs associated with the final disposition or closure of these
operations and investments.  Reserves of $1.6 million were re-allocated to
costs of consolidating operations in the fourth quarter of 1999.  As of
December 31, 1999, the ending reserve of $2.1 million represents a valuation
allowance for noncore assets yet to be disposed of and an estimate of
remaining legal costs related to the disposition of the related noncore
businesses.

   Severance and related costs

   The Company's Turnaround Plan contemplated significant changes in the
Company's senior management and, in connection therewith, fifteen members of
senior management were replaced and certain members of the former management
team were granted severance arrangements.  As a result, the Company recorded
restructuring charges related to severance costs of $24.8 million in 1998.
In the third quarter of 1999, the Company recorded an additional $8.8 million
for severance and related costs as a result of an additional reduction in
force in which approximately 650 employees were terminated.  The cash
activity during 1999 reflects payments to former employees in accordance with
their respective severance arrangements.  The December 31, 1999 balance
represents contracted amounts payable through the first half of 2001 related
to individuals who are no longer employed by the Company at year end.

   Costs of consolidating operations

   During 1998, the costs of consolidating operations reserve was established
for $13.7 million of estimated costs associated with future rental
obligations (net of estimated sublease revenues), commissions, legal costs,
penalties and other expenses relating to disposition of excess space.  The
Company vacated its leased space located in Philadelphia, Pennsylvania;
Edison, New Jersey; Chicago, Illinois; Sarasota, Florida; Norwalk,
Connecticut; and one of two facilities in Milford, CT.  In addition, the
amount of leased space located in New York, New York and White Plains, New
York was reduced.  The Company recorded an additional restructuring charge of
approximately $4.5 million in the fourth quarter of 1998 as a change in
estimate because the Company's experience in negotiating subleases and lease
cancellations through the fourth quarter indicated that costs would exceed
previous estimates.


                                       31
<PAGE>   32
   During the third quarter of 1999, the Company recorded an increase of $3
million to this reserve for the net costs associated with relocating its
corporate headquarters and the cessation of operations at its Ireland
facility.  Additionally, as a result of revisions in the estimates related to
the 1998 reserves, $1.6 million was added to the reserves in the fourth
quarter of 1999. The Company's related lease obligations for these properties
extend to July 2005.

   The remaining costs of operations consolidations reserve is comprised of
the following estimated costs associated with the disposition of leased space
no longer used in operations:

<TABLE>
<CAPTION>
(In millions)                                        1999              1998
---------------------------------------------------------------------------
<S>                                               <C>               <C>
Gross future minimum rentals                      $  16.6           $  26.1
Sublease income                                     (12.9)            (14.0)
Lease termination penalties                           3.4               2.5
Other costs                                           0.9               3.1
---------------------------------------------------------------------------
  Total operations consolidation reserve          $   8.0           $  17.7
===========================================================================
</TABLE>


   Write downs of strategic investments and gain on Health Partners

   The Company disposed of its 47% interest in Health Partners, Inc. ("Health
Partners") in October 1997, and received 2,090,109 shares of common stock of
FPA Medical Management, Inc. ("FPAM") stock with a market value of
approximately $76.4 million, resulting in a pretax gain of approximately
$63.1 million.  As of December 31, 1997, the market value of the FPAM stock
had dropped to approximately $38.4 million.  At year-end 1997, the Company
wrote down its investment in FPAM by $38 million, thereby reducing the 1997
pretax gain on the sale of Health Partners to approximately $25.2 million
($20.5 million after taxes, or $.26 per share).

   During the second quarter of 1998, the Company sold 540,000 shares of FPAM
and recognized a loss of $8.1 million.  In July 1998, FPAM filed for
protection under Chapter 11 of the U.S. Bankruptcy Code and the market value
per share of its common stock fell below one dollar.  The Company wrote down
its remaining investment in FPAM to nominal value and recognized a loss in
the second quarter of 1998 of $30.2 million.  The total 1998 recognized loss
and write down of $38.3 million, or $.49 per share, has been recognized as
write downs of strategic investments in the accompanying financial statements.

   The 1997 charges resulted from a reduction in the level of future
investment in expansion markets and, accordingly, the Company wrote down its
investments in its Florida and Illinois subsidiaries and one affiliate.
These write downs have been shown as write-downs of strategic investments in
the accompanying financial statements and are summarized as follows:

<TABLE>
<CAPTION>
(In thousands)                                                         1997
------------------------------------------------------------------------------
<S>                                                                  <C>
Compass PPA, Incorporated                                            $ 23,427
Riscorp Health Plans, Inc.                                              3,894
St. Augustine Health Care, Inc.                                        14,297
------------------------------------------------------------------------------
   Total                                                             $ 41,618
==============================================================================
</TABLE>

                                       32
<PAGE>   33
   Write down of property and equipment

   During the third quarter of 1999, the Company recorded an additional
restructuring charge of $10.7 million related to costs associated with the
continued consolidation of the Company's office facilities. The majority of
these costs were associated with the relocation of its corporate headquarters
and the cessation of operations at its Ireland facility. The charges were
comprised of the net write-off of $6.4 million in fixed assets (primarily
leasehold improvements) and $4.3 million for the write-off of computer
equipment no longer used in operations.

   During 1998, in connection with the Company's attempts to reduce
administrative costs under the Turnaround Plan, the Company decided to
consolidate operations and reduce its occupied square footage from
approximately 2 million square feet under lease to approximately 1.2 million
square feet.  The Company has attempted to dispose of property and equipment
as it vacated the facilities. The 1998 estimate for write-down of property
and equipment included provisions for the estimated losses related to
vacating certain facilities in connection with the Company's Turnaround
Plan.  The 1998 charge included an estimated provision for loss related to
leasehold improvements ($12.5 million), office furniture ($11.8 million),
computers and office equipment ($4 million) and software ($1 million).  In
determining the estimated fair values, the Company reviewed detailed asset
listings for each location to be vacated.  Based upon the asset
classification, acquisition date and anticipated net proceeds, if any, upon
disposition, as determined by the Company, the assets were written down to
their estimated fair value. The fair values were determined based on the best
information available in the circumstances, including prior experience in
disposing of similar assets and discussions with potential purchasers of the
assets.  The Company completed the disposition or sale of these assets during
1999.  Additionally, the Company anticipated and experienced a reduction in
workforce of over 1,000 employees as a result of this consolidation and its
administrative expense reduction plan.

   As a consequence of the charges described in the previous paragraphs,
comparisons of operating results for 1999, 1998 and 1997 may not be
meaningful.

   The Company's results of operations are dependent, in part, on its ability
to predict and maintain effective control over health care costs (through,
among other things, appropriate benefit design, utilization review and case
management programs and its risk sharing and cost containment agreements with
providers) while providing members with coverage for the health care benefits
provided under their contracts.  Factors such as new technologies, health
care practices, hospital costs, changes in demographics and trends, selection
biases, increases in unit costs paid to providers, major epidemics,
catastrophes, inability to establish acceptable compensation agreements with
providers, higher utilization of medical services, including higher
out-of-network utilization under POS plans, operational and regulatory issues
and numerous other factors may affect the Company's ability to control such
costs.  The Company attempts to use its medical cost containment
capabilities, such as claim auditing systems and utilization review
protocols, with a view to reducing the rate of growth in health care service
expense.


                                       33
<PAGE>   34
RESULTS OF OPERATIONS

   Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

   Total revenues for the year ended December 31, 1999 were $4.2 billion, down
11.1% from $4.7 billion in the prior year. Net income attributable to common
stock in 1999 totaled $274.4 million, or $3.26 per diluted share compared to
a net loss of $624.4 million, or $7.79 per share, in 1998.  Results of
operations in 1999 were adversely affected by net restructuring charges of
$19.9 million related to additional steps taken in the Company's Turnaround
Plan and a charge of $24 million for litigation insurance coverage.  Net
income for 1999 was favorably affected by the reversal of $225 million of
deferred tax valuation allowances.  Results of operations in 1998 were
adversely affected by significantly higher medical costs in the Company's
commercial group business, Medicare, Medicaid and New York Individual Plans.
Additionally, 1998 included approximately $113.7 million of restructuring
charges, a $31.8 million premium deficiency reserve for losses on government
contracts and $38.3 million of write-downs of strategic investments.  See
"Liquidity and Capital Resources" and "Overview".

   The following tables show plan revenues earned and membership by product:

<TABLE>
<CAPTION>
                                                                                 Percent
(Dollars in thousands)                          1999               1998           Change
--------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>              <C>
REVENUES:
   Freedom, Liberty
   and Other Plans                          $2,848,931          $2,813,712           1.3%
   HMOs                                        500,888             542,835          (7.7%)
   -----------------------------------------------------------------------
     Commercial                              3,349,819           3,356,547          (0.2%)
   -----------------------------------------------------------------------
   Medicare                                    737,754           1,010,831         (27.0%)
   Medicaid                                     11,983             244,950         (95.1%)
   -----------------------------------------------------------------------
     Government programs                       749,737           1,255,781         (40.3%)
   -----------------------------------------------------------------------
   Total premium revenues                    4,099,556           4,612,328         (11.1%)
   Third-party administration, net              15,578              17,838         (12.7%)
   Investment and other income                  82,632              89,245          (7.4%)
   -----------------------------------------------------------------------
   Total revenues                           $4,197,766          $4,719,411         (11.1%)
   =======================================================================
</TABLE>


<TABLE>
<CAPTION>
                                               As of December 31,
                                         -----------------------------         Percent
                                           1999                1998             Change
-----------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>
MEMBERSHIP:
   Freedom, Liberty
   and Other Plans                       1,210,500          1,318,100           (8.2%)
   HMOs                                    235,400            260,700           (9.7%)
---------------------------------------------------------------------
     Commercial                          1,445,900          1,578,800           (8.4%)
---------------------------------------------------------------------
   Medicare                                 97,700            148,600          (34.3%)
   Medicaid                                     --             97,800         (100.0%)
---------------------------------------------------------------------
     Government programs                    97,700            246,400          (60.3%)
---------------------------------------------------------------------
   Total fully insured                   1,543,600          1,825,200          (15.4%)
   Third-party administration               50,100             56,200          (10.9%)
---------------------------------------------------------------------
     Total membership                    1,593,700          1,881,400          (15.3%)
=====================================================================
</TABLE>

   Total commercial premiums earned for the year ended December 31, 1999
decreased 0.2% to $3.3 billion compared with $3.4 billion in the prior year.
This decrease is primarily attributable to a 7.9% decrease in member months
in the Company's commercial health care programs, primarily due to a 7.2%
member months decrease in the Freedom Plan.  Average premium yields of
commercial programs were 8.4% higher in 1999, when compared with 1998.  In
response to higher medical costs incurred in 1998 in the Company's core
commercial business, the Company increased its premium rates based on
estimates of future medical costs.  The Company's 1999 commercial revenue as
compared to 1998 was adversely affected by the Company's disposition or
withdrawal from noncore commercial markets in Pennsylvania, Illinois, Florida
and New Hampshire.  In addition, the Company experienced attrition of
commercial members in its core commercial markets in 1999 and


                                       34
<PAGE>   35
expects such attrition to continue, although to a lesser extent in 2000,
adversely affecting revenue. The majority of the attrition in commercial members
was due to the Company's continued efforts to rationalize its product lines and
not renew groups or products where underwriting margins were unacceptable.

   Premiums earned from government programs decreased 40.3% to $0.7 billion in
1999 compared with $1.26 billion in 1998. The overall decrease was
attributable to the complete withdrawal from the Company's New York and
Pennsylvania Medicaid markets in January 1999 and a 34.7% decrease in member
months of Medicare programs.  The Company expects its Medicare revenue to be
lower in 2000 as the result of withdrawals from Medicare in certain counties
and net losses in membership due to changes in provider arrangements and
changes in benefit plans in other counties in 1999 and 1998.  Reimbursement
levels for the Company's 2000 Medicare business are expected to be
approximately 2.0% higher than 1999 (net of the applicable HCFA user fee).
The Company believes that future Medicare premiums may be adversely affected
by the implementation of risk adjustment mechanisms announced by HCFA.  See
"Business - Government Regulations - Recent Regulatory Developments".

   Net investment and other income for the year ended December 31, 1999
decreased 7.4% to $82.6 million from $89.2 million in the prior year.  Net
investment income decreased $17.7 million or 22.2% to $62.1 million in 1999
compared with $79.8 million in 1998.  The decline is due primarily to a $22.8
million decline in capital gains realized during the year, partially offset
by higher average invested balances.  In 1999, other income includes a $13.5
million gain on the sale of the Company's New York Medicaid business and a $7
million gain on the sale of the business and certain assets of the Company's
wholly-owned mail order pharmacy subsidiary, Direct Script, Inc.  In 1998,
other income includes $5.1 million related to the sale of the Company's New
Jersey Medicaid business. See "Liquidity and Capital Resources".

   Health care service expense stated as a percentage of premium revenues (the
"medical loss ratio") was 82.1% for 1999 compared with 94.4% for 1998.
Overall per member per month revenue in 1999 increased 6.2% to $212.12 from
$199.82 in 1998 due primarily to a 9.1% increase in premium yields for the
Company's Freedom and Liberty Plans and lesser increases for the Company's
Medicare programs.  Overall per member per month health care services
expenses decreased 7.7% to $174.10 in 1999 from $188.61 in 1998. Health care
service expenses benefited from initiatives to improve health care
utilization and reduce costs as well as a change in membership mix whereby
government program membership was reduced. Health care service expense in
1999 included the favorable development of prior period estimates of medical
costs of approximately $28.7 million in 1999.  Excluding this favorable
development, the medical loss ratio was 82.8% for 1999.

   In 1999 and 1998 the Company expensed a total of $73.9 million and $76.4
million, respectively, for graduate medical education and a total of $41.9
million and $54.8 million, respectively, for hospital bad debt and charity
care.  Health care services expense in 1998 included a provision of $25
million related to valuation reserves established in respect of provider
advances.  See "Liquidity and Capital Resources".

   Marketing, general and administrative expenses decreased $172.8 million or
22.4% to $599.2 million for 1999 compared with $772.0 million for 1998.
Marketing, general and administrative expenses as a percent of operating
revenue were 14.6% in 1999 compared with 16.7% in 1998.  Significant expense
reductions in 1999 compared to 1998 include $66.5 million in payroll and
employee related expenses, $24.7 million in occupancy and depreciation costs,
$22.2 million in operating costs (primarily telephone and postage expenses)
and $18.3 million in marketing and outside services.  Substantially all of
these cost reductions were a result of the Company's Turnaround Plan.
Marketing, general and administrative expenses in 1998 included $35.2 million
related to provisions for uncollectible notes and accounts receivable as a
result of increases in termination of nonpaying commercial members and
groups, the exiting of noncore markets and the exiting and restructuring of
Medicaid and Medicare programs, which made it more difficult for the Company
to collect amounts due on notes and accounts receivable.  Although the
Company experienced lower levels of administrative costs in 1999 as compared
to 1998, such costs in future periods may also be adversely affected by costs
associated with responding to regulatory inquiries, investigations and
defending pending securities class actions, shareholder derivative and other
litigation, including fees and disbursements of counsel and other experts to
the extent such costs are not reimbursed under existing policies of insurance
and exceed existing accruals.  There can be no assurance that ultimate costs
will not exceed those estimates.  See "Legal Proceedings".


                                       35
<PAGE>   36
   The Company incurred interest and other financing charges of $38.3 million
and $41.6 million in 1999 and 1998, respectively, related to debt issued in
1998.  Interest expense on capital leases entered into during 1998 aggregated
$2 million in 1999 and $1.4 million in 1998.  Interest expense on delayed
claims totaled $9.2 million in 1999 compared to $14.1 million in 1998.
Interest payments have been made in accordance with the Company's interest
payment policy and applicable law.  The Company's future results will
continue to reflect interest payments on delayed claims, although the Company
believes such interest payments will be less in the future than they were in
1999, as will interest expense on outstanding indebtedness.

   During the second quarter of 1998, the Company incurred a net loss of
$507.6 million.  At that time, the Company evaluated the deferred tax assets
arising from the net loss and established a valuation allowance pending the
results of its Turnaround Plan.  During 1998, the Company performed detailed
analyses to assess the realizability of the Company's deferred tax assets.
These analyses included an evaluation of the results of operations for 1998
and prior periods, the progress to date in its Turnaround Plan and
projections of future results of operations, including the estimated impact
of the Turnaround Plan.  Based on these analyses, management concluded that
it was not more likely than not that all of its deferred tax assets would be
fully realized.  In that regard, the Company established a valuation
allowance of $282.6 million as of December 31, 1998.

   In light of the Company's progress during 1999 in its Turnaround Plan,
estimates of future earnings and the expected timing of the reversal of other
net tax deductible temporary differences, management concluded that a
valuation allowance was no longer necessary for its federal net operating
loss carryforwards and certain other temporary differences.  Management
believes that the Company will obtain the full benefit of the net deferred
tax assets recorded at December 31, 1999.  The income tax benefit recorded
for 1999 includes the reversal of $225 million of deferred tax valuation
allowances.  The remaining valuation allowance at December 31, 1999 of $42.5
million relates primarily to capital loss carryforwards and state net
operating loss carryforwards.

   As of December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $538 million, which will begin to expire in
2012.


                                       36
<PAGE>   37
   Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

   Total revenues for the year ended December 31, 1998 were $4.7 billion, up
11.0% from $4.3 billion in the prior year. The net loss attributable to
common stock for 1998 totaled $624.4 million, or $7.79 per share, compared
with a net loss of $291.3 million, or $3.70 per share, for 1997. Results of
operations for the year 1998 were adversely affected by significantly higher
medical costs in the Company's commercial group business, Medicare, Medicaid
and New York Individual Plans as well as approximately $113.7 million of
restructuring charges, a $31.8 million premium deficiency reserve for losses
on government contracts and $38.3 million of write downs of strategic
investments.  Results of operations for 1998 included interest and financing
expense of $57.1 million relating primarily to debt issuance costs and
interest on claims for medical services.  Results of operations for 1997 were
adversely affected by a pretax charge of approximately $173.5 million
relating to accounts receivable write-offs and additions to accounts
receivable reserves, write downs of strategic investments of approximately
$41.6 million relating to write downs of certain investments and a pretax
charge of approximately $327 million relating to increased reserves for
medical costs payable.  See "Liquidity and Capital Resources" and "Overview".

   The following tables show plan revenues earned and membership by product:

<TABLE>
<CAPTION>
                                                                                   Percent
(Dollars in thousands)                          1998               1997             Change
-------------------------------------------------------------------------------------------------
<S>                                         <C>                 <C>                  <C>
REVENUES:
   Freedom, Liberty
   and Other Plans                          $2,813,712          $2,468,259           14.0%
   HMOs                                        542,835             463,428           17.1%
   -----------------------------------------------------------------------
     Commercial                              3,356,547           2,931,687           14.5%
   -----------------------------------------------------------------------
   Medicare                                  1,010,831             916,126           10.3%
   Medicaid                                    244,950             319,411           (23.3%)
   -----------------------------------------------------------------------
     Government programs                     1,255,781           1,235,537            1.6%
   -----------------------------------------------------------------------
   Total premium revenues                    4,612,328           4,167,224           10.7%
   Third-party administration, net              17,838              12,592           41.7%
   Investment and other income                  89,245              71,448           24.9%
   -----------------------------------------------------------------------
   Total revenues                           $4,719,411          $4,251,264           11.0%
   =======================================================================
</TABLE>


<TABLE>
<CAPTION>
                                               As of December 31,
                                         -----------------------------         Percent
                                            1998               1997            Change
---------------------------------------------------------------------------------------
<S>                                      <C>                <C>                <C>
   MEMBERSHIP:
      Freedom, Liberty
      and Other Plans                    1,318,100          1,333,500          (1.2%)
      HMOs                                 260,700            270,400          (3.6%)
      ---------------------------------------------------------------
        Commercial                       1,578,800          1,603,900          (1.6%)
      ---------------------------------------------------------------
      Medicare                             148,600            161,000          (7.7%)
      Medicaid                              97,800            189,600          (48.4%)
      ---------------------------------------------------------------
        Government programs                246,400            350,600          (29.7%)
      ---------------------------------------------------------------
      Total fully insured                1,825,200          1,954,500          (6.6%)
      ---------------------------------------------------------------
      Third-party administration            56,200             53,600           4.9%
       ---------------------------------------------------------------
        Total membership                 1,881,400          2,008,100          (6.3%)
      ================================================================================
</TABLE>

   Total commercial premiums earned for the year ended December 31, 1998
increased 14.5% to $3.4 billion compared with $2.9 billion in the prior year.
This increase is primarily attributable to a 11.2% increase in member months
in the Company's commercial health care programs, including a 10.8% member
months increase in the Freedom Plan.  Average premium yields of commercial
programs were 2.9% higher in 1998 when compared with 1997. Medical costs
incurred in 1998 in the Company's core commercial business were higher than
estimates used in establishing rates for groups sold and renewing in late
1997 and early 1998.  As a consequence, premium rates were insufficient and
the Company incurred losses.


                                       37
<PAGE>   38
   Premiums earned from government programs increased 1.6% to $1.26 billion in
1998 compared with $1.24 billion in 1997. The overall increase was
attributable to an 8.3% increase in member months of Medicare programs
offset, in part, by a 28.0% decline in member months of Medicaid programs due
primarily to the withdrawal from the Connecticut and New Jersey Medicaid
markets during 1998.  Additionally, the Company's New York Medicaid contract
was assigned to a third party in January 1999, and the Company's Pennsylvania
subsidiary, including its Pennsylvania Medicaid business, was sold in January
1999.  As of February 1, 1999, the Company had no Medicaid members and had
limited Medicaid revenue in 1999.

   Net investment and other income for the year ended December 31, 1998
increased 24.9% to $89.2 million from $71.4 million in the prior year
primarily due to higher investment income as a result of an increase in
average invested balances in 1998 resulting from the Company's May 1998
Financing.  Investment income also benefited from the movement from low yield
municipal bonds and equity securities to high quality government and
corporate fixed income investments.  This increase in interest income during
1998 more than offset a $10.6 million decrease in net capital gains from
1997.  In addition, the Company recognized income of approximately $5.1
million in the second quarter of 1998 related to the sale of its New Jersey
Medicaid business. See "Liquidity and Capital Resources".

   Health care services expense stated as a percentage of premium revenues
(the "medical loss ratio") was 94.4% for the year 1998 compared with 94.0%
for the year 1997.  Overall per member per month revenue in 1998 was $199.82
compared to $193.06 in 1997, however, overall per member per month health
care services expenses increased 4.0% to $188.61 in 1998 from $181.38 in
1997.  Software and hardware problems experienced in the conversion of a
portion of the Company's computer system in prior periods resulted in
significant delays in the Company's payment of provider claims and adversely
affected payment accuracy during 1997.  Medical costs for 1997 reflect
additions to the Company's reserves for IBNR in the third quarter of 1997
aggregating $88 million and in the fourth quarter of 1997 aggregating $239
million.  Of the total 1997 reserve additions of $327 million, approximately
$90 million related to incurred costs for periods prior to 1997.  These
reserve additions represent revisions to estimates of the Company's incurred
medical costs based on information gained in the process of reviewing and
reconciling previously delayed claims and claims paid or denied in error.
These revised estimates resulted from significant increases in medical costs
in prior periods in the Company's commercial, Medicare, Medicaid and New York
Individual plans that exceeded prior estimates.  Health care services expense
for 1998 and 1997 also included provisions of $25 million and $10 million,
respectively, related to valuation reserves established in respect of
provider advances.

   As part of its Turnaround Plan, the Company decided to restructure its
Medicare arrangements and/or withdraw from Medicare in the counties where the
Medicare business was not profitable and to withdraw from the Medicaid
business entirely.  Premium deficiency reserves totaling $51 million were
established in the second quarter of 1998 and charged to health care services
expense.  Based on the Company's decision to restructure or withdraw from
these businesses by the end of 1998, the reserves were determined by
estimating the premium deficiency for the remainder of 1998.

   The Company entered into an agreement to dispose of its remaining Medicaid
business in the fourth quarter of 1998, completed two Medicare risk transfer
agreements late in the third quarter of 1998 and notified HCFA in the fourth
quarter of 1998 of its intention to withdraw from Medicare in certain
counties effective January 1, 1999. Under the two risk sharing arrangements
the Company transferred a substantial portion of the medical cost risk
associated with the provision of medical services to certain of the Company's
Medicare members to a network management company in one case and an
integrated health care system in the other.  These risk transfer agreements
had five year terms and provided for delegation of certain claims payment and
utilization management functions, subject to oversight by the Company.  The
providers agreed to provide or arrange for providing all covered health care
services for this membership in return for payment by the Company of a fixed
per member per month payment based on a percentage of premium received by the
Company. In the event the providers fail to fulfill their obligations under
the risk transfer agreements, the Company remains primarily liable to pay the
cost of covered services.  Losses in these programs amounted to $31.8 million
in the second half of 1998 and were charged against the reserves established
in the second quarter of 1998.  As a result of the Company's early completion
of this portion of its Turnaround Plan, the remaining reserve balance of
$19.2 million was reversed as a reduction of health care services expense in
the fourth quarter of 1998, which reduced the net loss by $0.24 per share.


                                       38
<PAGE>   39
    As part of the Turnaround Plan, the Company decided that it was not in a
position to make the investment in noncore markets required to achieve
normalized operating results.  Accordingly, the Company decided to withdraw
from certain states, namely Pennsylvania, New Hampshire, Florida and
Illinois, and focus on its core businesses of commercial and Medicare
membership in New York, New Jersey and Connecticut.  The Company was
prohibited by the various state regulators from simply canceling the
outstanding policies and immediately withdrawing from these noncore markets.
As a result, the Company was required to continue to service the outstanding
policies.  Using these assumptions, the premium deficiency reserve
aggregating $25.2 million was established for the noncore businesses in
accordance with SFAS  5 and the AICPA Healthcare Audit Guide.

   The Company recognizes premium deficiency reserves based upon expected
premium revenue, medical expense and administrative expense levels and
remaining contractual obligations using the Company's historical experience.
The Company evaluated the necessity for premium deficiency reserves in
periods prior to 1998 and concluded that no reserves were required since, at
that time, the Company was projecting marginal profits or immaterial losses
on these businesses based on normalized premiums and medical and
administrative expense levels.  The projections that had previously shown
marginal profits or immaterial losses on these businesses contemplated growth
in the underlying business to support administrative expense levels, premium
increases, reductions in medical costs resulting from improved medical
management, systems and operational improvements and revised provider
contracts.

   Results in the fourth quarter of 1998 were affected by the establishment of
an additional $49 million in medical claims reserves for disputed claims, a
$27 million provision for anticipated losses on individual products and net
accruals of $30 million for certain other medical expense liabilities,
partially offset by favorable medical reserve adjustments of $92 million
arising from recent claims experience which showed better than expected
medical costs during 1998, principally in the Company's Medicare business.
The establishment of an additional $49 million in claims reserves for
disputed claims was made based on experience in reconciling provider accounts
receivables as part of a settlement process designed to assist in the
recovery of advances.  These settlements are not associated with specific
dates of service.  The $27 million provision for losses on individual
products reflected an expected premium deficiency arising from the Company's
decision to seek an approximately 9% increase in premium on its New York
individual products, instead of seeking a higher increase which would involve
uncertainties associated with the requirement of a public rate hearing.  Net
accruals of $30 million, primarily for 1998, were made for New York hospital
bad debt and charity care, demographic pool charges and graduate medical
education charges based on internal assessments and reconciliation of
liabilities under these programs.

   The Company's paid and received claims data and revised estimates showed
significant increases in medical costs in 1996, 1997 and 1998 for the
Company's commercial, Medicare, Medicaid and New York Individual Plans. These
increases resulted primarily from higher expenses for hospital and specialist
physician services and increases in per member per month pharmacy costs.
Results for 1998 continued to reflect high costs in these areas.  The
Company's Turnaround Plan was designed to address the operating losses
incurred in these lines of business.  Moreover, improvement of results in the
New York Mandated plans will require increases in rates or additional cost
control measures that require NYSID approval.  The Company expects to
continue to experience losses in these plans.

   Marketing, general and administrative expenses increased 4.7% to $772
million during the year 1998 compared with $737.4 million during the year
1997. The increase in 1998 was primarily attributable to a $20 million rise
in payroll and benefits due to higher average staffing levels through the
first half of 1998 and an $8 million increase in consulting fees primarily
related to enhancements to management information systems offset, in part, by
significantly lower marketing expenses for advertising and member
acquisition.  Marketing, general and administrative expenses as a percent of
operating revenue were 16.7% during 1998 compared with 17.6% during 1997.
Marketing, general and administrative expenses included $35.2 million and $15
million in 1998 and 1997, respectively, related to provisions for
uncollectible notes and accounts receivable.  The increase in 1998 was
primarily a result of increases in termination of nonpaying commercial
members and groups, the exiting of noncore markets and the exiting and
restructuring of Medicaid and Medicare programs, which make it more difficult
for the Company to collect amounts due on notes and accounts receivable.  The
Company's Turnaround Plan called for significant reductions in administrative
costs.  The Company expects that results for 1999 may continue to be
adversely affected by high administrative costs.  Moreover, the Company may
decide to increase certain administrative costs to attempt to improve service
levels.  Administrative costs in future periods


                                       39
<PAGE>   40
may also be adversely affected by costs associated with responding to regulatory
inquiries, investigations and defending pending securities class actions,
shareholder derivative and other litigation, including fees and disbursements of
counsel and other experts, to the extent such costs are not reimbursed under
existing policies of insurance and exceed existing accruals. There can be no
assurance that ultimate costs will not exceed those estimates. See "Legal
Proceedings". The Company's ability to control administrative costs could also
be adversely affected by a continuation of the high level of employee attrition
that the Company has experienced over the last several quarters.

   Effective January 1, 1997, the Health Care Reform Act of New York ("HCRA")
required that the Company make payments to state funding pools to finance
hospital bad debt and charity care, graduate medical education and other
state programs under HCRA.  Previously, hospital bad debt and charity care
and graduate medical education were financed by surcharges on payments to
hospitals for inpatient services.  In 1998 and 1997, the Company expensed a
total of $76.4 million and $72.5 million, respectively, for graduate medical
education, and the Company expensed a total of $54.8 million and $23.9
million, respectively, for hospital bad debt and charity care.  Because these
payment obligations were not offset by corresponding reductions in payments
to hospitals and others, the Company believes its costs have increased.  It
is not possible to determine the precise impact, however, due to changes made
in the Company's hospital contracts and the effect of overall changes in
hospital costs during the period.

   The Company incurred interest and other financing charges of $41.6 million
in 1998 related to the issuance of $200 million in bridge financing in the
first quarter of 1998 and $350 million of long-term debt in May 1998.
Interest expense on capital leases entered into in 1998 aggregated $1.4
million.  No such interest was incurred in 1997.  Interest expense on delayed
claims totaled $14.1 million in 1998, compared with $11.1 million in 1997.
Interest payments have been made in accordance with the Company's interest
payment policy and applicable law.  The Company's future results will
continue to reflect interest payments by the Company on delayed claims as
well as interest expense on outstanding indebtedness incurred in 1998.

   During the second quarter of 1998, the Company incurred a net loss of
$507.6 million.  At that time, the Company evaluated the deferred tax assets
arising from the net loss and established a full valuation allowance pending
the results of its Turnaround Plan.  Subsequent to the second quarter of
1998, the Company performed detailed analyses to assess the realizability of
the Company's deferred tax assets.  These analyses included an evaluation of
the results of operations for 1998 and prior periods, the progress to date in
its Turnaround Plan and projections of future results of operations,
including the estimated impact of the Turnaround Plan.  Based on these
analyses, the Company did not believe that it was more likely than not that
all of its deferred tax assets would be fully realizable.  The Company
recorded a valuation allowance of $282.6 million.

INFLATION

   Although the rate of inflation has remained relatively stable in recent
years, health care costs have generally been rising at a higher rate than the
consumer price index.  Through 1998, the Company has experienced significant
increases in medical costs in its commercial, Medicare and New York
Individual Plans. The Company employs various means to reduce the negative
effects of inflation.  The Company has increased overall commercial premium
rates when practicable in order to attempt to maintain margins.  The
Company's cost-control measures and risk-sharing arrangements with various
health care providers as well as its withdrawal from participation in state
Medicaid programs may mitigate the effects of inflation on its operations.
There is no assurance that the Company's efforts to reduce the impact of
inflation will be successful or that the Company will be able to increase
premiums to offset cost increases associated with providing health care.

LIQUIDITY AND CAPITAL RESOURCES

   Cash provided by operations was $35.5 million in 1999 versus cash used by
operations of $46.5 million in 1998.  The improvement is primarily
attributable to the increase in net earnings and reductions in premiums
receivable.

   Cash used for capital expenditures totaled $9 million during 1999.  This
amount was used primarily for computer equipment and software.  The Company
currently anticipates that capital expenditures and payments under capital
leases for 2000 will be approximately $23 million, a significant portion of
which will be devoted to


                                       40
<PAGE>   41
management information systems. Except for anticipated capital expenditures, the
Company currently does not have a commitment for use of material cash. During
the first quarter of 2000, the Company repurchased shares of its Series D and
Series E Preferred Stock for an aggregate amount of $130 million and repurchased
$14 million of loans outstanding under its existing Term Loan. Additional
reductions in indebtedness will depend on the availability of cash at the parent
company, which will depend in part on its ability to receive dividends from its
subsidiary companies. See "Liquidity and Capital Resources - Financing".

   Cash and investments aggregating $61.6 million at December 31, 1999 have
been segregated as restricted investments to comply with federal and state
regulatory requirements.  The amount includes $5.2 million as collateral for
certain advances made by the Company's New Jersey subsidiary.  The Company
expects to have the restriction on the New Jersey funds removed during 2000.
With respect to the Company's New York subsidiaries, the minimum amount of
surplus required is based on a formula established by NYSID.  These statutory
surplus requirements amounted to approximately $133.3 million and $130
million at December 31 1999 and 1998, respectively.  In addition, the
Company's subsidiaries are subject to certain restrictions on their abilities
to make dividend payments, loans or other transfers of cash to the parent
company.  These restrictions limit the ability of the Company to use cash
generated by subsidiary operations to pay the obligations of the parent,
including debt service and other financing costs.

   In September 1998, the National Association of Insurance Commissioners
("NAIC") adopted new minimum capitalization requirements, known as risk-based
capital rules, for health care coverage provided by HMOs and other
risk-bearing health care entities.  Depending on the nature and extent of the
new minimum capitalization requirements ultimately adopted by each state,
there could be an increase in the capital required for certain of the
Company's regulated subsidiaries. The Connecticut Department of Insurance has
promulgated regulations based on the NAIC model which are applicable to its
1999 annual financial statements.  Neither New York nor New Jersey has
enacted similar legislation; however, risk-based capital legislation has been
introduced in New York.  In addition, the New Jersey Department of Banking
and Insurance ("NJDBI") published solvency regulations in June 1999 that
resulted in an additional $1.5 million solvency deposit by Oxford NJ.  NYSID
has announced an intention to strengthen current solvency regulations to
allow NYSID to take over failing health plans without a court order; however,
capitalization requirements continue to be subject to state interpretation
from time to time.  The Company believes that the current capitalization of
the subsidiaries is sufficient to meet these requirements.

   The New Jersey State legislature has passed legislation that includes a
$50 million assessment on HMOs in the state based on market share and to be
collected over a three-year period.  Although the Company does not anticipate
that this assessment will have a material impact on its operations, the
assessment may result in the necessity of making a capital contribution to
Oxford NJ in an amount up to approximately $5 million.

   As a result of delays in claims payments in prior periods, the Company
experienced a significant increase in medical claims payable.  The increase
in medical costs payable was mitigated by progress in paying backlogged
claims, by making advance payments to providers and through reductions in
IBNR relating to the Company's exit from certain businesses during the first
quarter of 1998 and thereafter.  Outstanding provider advances amounted to
$43.6 million, net of a $30.8 million valuation reserve, at December 31, 1999
and are netted against medical costs payable in the Company's consolidated
balance sheet.  The Company believes that it will be able to recover the net
outstanding advance payments, either through repayment by the provider or
application against future claims.

   The Company's medical costs payable was $699.6 million (including $570.7
million of IBNR) as of December 31, 1999, before netting advance claim
payments of $43.6 million compared with $989.7 million (including $864.5
million for IBNR) as of December 31, 1998, before netting advance claim
payments of $139.5 million. The Company estimates the amount of its IBNR
reserves using standard actuarial methodologies based upon historical data,
including the average intervals between the date services are rendered and
the date claims are received and paid, denied claims activity, expected
medical cost inflation, seasonality patterns and changes in membership. The
liability is also affected by shared risk arrangements, including
arrangements relating to the Company's Medicare business in certain counties
and Private Practice Partnerships ("Partnerships").  In determining the
liability for medical costs payable, the Company accounts for the financial
impact of the transfer of risk for certain Medicare members and the
experience of risk-sharing Partnership providers (who may be entitled to
credits from Oxford for favorable experience or subject to deductions for
accrued deficits).  In the case of the North Shore Medicare risk arrangement
described below, the Company no


                                       41
<PAGE>   42
longer records a reserve for claims liability since the payment obligation has
been transferred to North Shore. The Company has reviewed its Partnership
program and has terminated most of its Partnership arrangements as a result of
difficulties and expense associated with administering the program as well as
other considerations. The Company believes that its reserves for medical costs
payable are adequate to satisfy its ultimate claim liabilities. However, the
Company's prior rapid growth, delays in paying claims, paying or denying claims
in error and changing speed of payment may affect the Company's ability to rely
on historical information in making IBNR reserve estimates.

   In an effort to control increasing medical costs in its Medicare programs,
the Company has an agreement with North Shore-Long Island Jewish Health
Systems ("North Shore") pursuant to which it has transferred to North Shore a
substantial portion of the medical cost risk associated with its
approximately 22,000 Medicare members in certain New York counties where it
had experienced substantial losses. The Company and North Shore have made
progress in resolving certain initial operational difficulties.  The Company
bears the risk of nonperformance or default by North Shore, and the failure
of the North Shore arrangement could have a material adverse effect on the
Company's results of operations. A similar agreement covering New Jersey
Medicare members was terminated in July 1999.  The Company is currently in
arbitration proceedings to resolve the New Jersey agreement.  See "Legal
Proceedings".

   The Company made $4.5 million and $537.5 million in capital contributions
to its operating subsidiaries in 1999 and 1998, respectively.  These
contributions were made to ensure that each subsidiary had sufficient surplus
as of December 31, 1999 and 1998 under applicable regulations after giving
effect to operating losses and reductions to surplus resulting from the
non-admissibility of certain assets.

   Financing

   In the first quarter of 1998, the Company issued $200 million of senior
secured increasing rate notes due February 6, 1999 ("Bridge Notes") pursuant
to an agreement between the Company and an affiliate of Donaldson Lufkin &
Jenrette Securities Corporation.  The Company used the proceeds of the Bridge
Notes to make a portion of the above described contributions to its HMO
subsidiaries, to pay expenses in connection with the issuance of the Bridge
Notes and for general corporate purposes.  The Bridge Notes were redeemed as
part of the financing arrangements described below.

   Pursuant to an Investment Agreement, dated as of February 23, 1998 (the
"Investment Agreement"), between the Company and TPG Oxford LLC ("TPG",
together with the investors thereunder, the "Investors"), the Investors, on
May 13, 1998, purchased $350 million in redeemable Preferred Stock with
Warrants to acquire up to 22,530,000 shares of common stock.  The Preferred
Stock and Warrants were issued without registration under the Securities Act
in reliance on Section 4(2) of the Securities Act, which provides an
exemption for transactions not involving any public offering.  In determining
that such exemption was available, the Company relied on, among other things,
the facts that the Preferred Stock and Warrants were being issued through
direct communication only to a limited number of sophisticated investors
having knowledge and access to information regarding the Company and that the
certificates evidencing such Preferred Stock and Warrants bear a legend
restricting transfer in non-registered transactions.  The Warrants have an
exercise price of $17.75, which represented a 5% premium over the average
trading price of Oxford shares for the 30 trading days ended February 20,
1998.

   The Preferred Stock was originally issued as 245,000 shares of Series A
and 105,000 shares of Series B. The Series A Preferred Stock carried a cash
dividend of 8% per annum, payable quarterly, provided that prior to May 13,
2000, the Series A Preferred Stock accumulated dividends at a rate of
8.243216% per annum, payable annually in cash or additional shares of Series
A Preferred Stock, at the option of the Company.  The Series A Preferred
Stock was issued with Series A Warrants to purchase 15,800,000 shares of
common stock, or approximately 19.9% of the then outstanding voting power of
Oxford's common stock. The Series A Preferred Stock had approximately 16.6%
of the combined voting power of Oxford's then outstanding common stock and
the Series A Preferred Stock.  The Series B Preferred Stock, which was
originally issued with Series B Warrants to purchase nonvoting junior
participating preferred stock, was nonvoting and carried a cash dividend of
9% per annum, payable quarterly, provided that prior to May 13, 2000, the
Series B Preferred Stock accumulated dividends at a rate of 9.308332% per
annum, payable annually in cash or additional shares of Series B Preferred
Stock, at the option of the Company.  The Preferred Stock was not redeemable
by the


                                       42
<PAGE>   43
Company prior to May 13, 2003. Thereafter, subject to certain conditions, the
Series A and Series B Preferred Stock were each redeemable at the option of the
Company at a redemption price of $1,000 per share (in each case, plus accrued
and unpaid dividends), and were subject to mandatory redemption at the same
price on May 13, 2008. The Series A Warrants and the Series B Warrants expire on
the earlier of May 13, 2008 or redemption of the related series of Preferred
Stock. The Warrants are detachable from the Preferred Stock. With respect to
dividend rights, the Series A and Series B Preferred Stock rank on a parity with
each other and prior to the Company's common stock.

   Simultaneously with the consummation of the Investment Agreement, the
Company issued $200 million principal amount of 11% Senior Notes due 2005.
The Senior Notes were issued in a private placement to Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), the initial purchasers, who agreed
to sell the Senior Notes only to "qualified institutional buyers", as defined
in Rule 144A under the Securities Act in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A, or
outside the United States in accordance with Regulation S under the
Securities Act.  DLJ received $6 million in discounts and commissions in
connection with the initial purchase of the Senior Notes.  The Senior Notes
are senior unsecured obligations of the Company and rank pari passu in right
of payment with all current and future senior indebtedness of the Company.
The Company's obligations under the Senior Notes are effectively subordinated
to all existing and future secured indebtedness of the Company to the extent
of the value of the assets securing such indebtedness and are structurally
subordinated to all existing and future indebtedness, if any, of the
Company's subsidiaries.  Interest is payable semi-annually on May 15 and
November 15 of each year commencing November 15, 1998.  At any time on or
before May 15, 2001, the Company may redeem for cash up to 33 1/3% of the
original aggregate principal amount of the Senior Notes at a redemption price
of 111% of the principal amount thereof, in each case, plus any accrued and
unpaid interest thereon to the redemption date, with the net proceeds of a
public equity offering provided that at least 66 2/3% of the original
aggregate principal amount of the Senior Notes remains outstanding
immediately after the occurrence of such redemption.  After May 15, 2002, the
Senior Notes will be subject to redemption for cash at the option of the
Company, in whole or in part, at a redemption prices ranging from 105.5% of
face amount beginning May 15, 2002 to 100% on and after May 15, 2004.

   At the same time, the Company entered into a Term Loan Agreement pursuant
to which the Company borrowed $150 million in the form of a senior secured
term loan (the "Term Loan") with a final maturity in 2003 at which time all
outstanding amounts will be due and payable.  Prior to the final maturity of
the Term Loan there are no scheduled principal payments.  The Term Loan
provides for mandatory prepayments in certain circumstances.  The Term Loan
bears interest at a rate per annum equal to the administrative agent's
reserve adjusted LIBO rate plus 4.25%.

   Also simultaneously with the transactions described above, Norman C.
Payson, M.D., the Company's Chief Executive Officer, purchased 644,330 shares
of Oxford common stock for an aggregate purchase price of $10 million
pursuant to his employment agreement.  The common stock issued to Dr. Payson
was issued without registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, which provides an exemption for
transactions not involving any public offering.

   The aggregate proceeds of the above Financing of $710 million were
utilized, in part, to retire the Bridge Notes, make capital contributions to
certain regulated subsidiaries, pay fees and expenses approximating $39
million related to the transactions and fund operating losses and
restructuring charges in 1998.

   On August 28, 1998, the Company held its annual shareholders meeting at
which its shareholders approved the vesting of voting rights in respect of
the Series B Preferred Stock and the issuance, subject to adjustment, of up
to 6,730,000 shares of common stock upon exercise of the Series B Warrants.
This approval resulted in the reduction of the dividend on the Series B
Preferred Stock to 8% (8.243216% prior to May 13, 2000) and an increase in
the voting rights of TPG to 22.1% of the combined voting power of the
Company's outstanding common stock and Series A and Series B Preferred Stock.

   On February 13, 1999, the Company entered into a Share Exchange Agreement
(the "Exchange Agreement") with TPG, its affiliates and others to make an
adjustment of the dividends payable on the shares of Series A Preferred Stock
and Series B Preferred Stock in connection with the possible sale of shares
of Preferred Stock by the holders thereof to institutional holders.  Pursuant
to the Exchange Agreement, the


                                       43
<PAGE>   44
245,000 shares of Series A Preferred Stock were exchanged for 260,146.909 shares
of a new Series D Preferred Stock (the "Series D Preferred Stock"), and the
105,000 shares of Series B Preferred Stock were exchanged for 111,820.831 shares
of a new Series E Preferred Stock (the "Series E Preferred Stock"). In the
exchange, (1) a holder received in exchange for each share of Series A Preferred
Stock, one share of Series D Preferred Stock, plus 0.061824118367 share of
Series D Preferred Stock representing dividends on the Series A Preferred Stock
accrued and unpaid through February 13, 1999, and (2) a holder received in
exchange for each share of Series B Preferred Stock, one share of Series E
Preferred Stock, plus 0.064960295238 share of Series E Preferred Stock
representing dividends on the Series B Preferred Stock accrued and unpaid
through February 13, 1999. As a result of the exchange, the holders hold only
Series D Preferred Stock and Series E Preferred Stock. On March 9, 1999, the
Company filed Certificates of Elimination for the Series A Preferred Stock and
the Series B Preferred Stock that have the effect of eliminating from the
Certificate of Incorporation all matters with respect to the Series A Preferred
Stock and the Series B Preferred Stock. The terms of the shares of the Series D
Preferred Stock are identical to the terms of the Series A Preferred Stock,
except that the Series D Preferred Stock accumulates cash dividends at the rate
of 5.12981% per annum, payable quarterly, provided that prior to May 13, 2000,
the Series D Preferred Stock accumulates dividends at a rate of 5.319521% per
annum, payable annually in cash or additional shares of Series D Preferred
Stock, at the option of the Company. The terms of the shares of the Series E
Preferred Stock are identical to the terms of the shares of the Series B
Preferred Stock, except that the Series E Preferred Stock accumulates cash
dividends at a rate of 14.00% per annum, payable quarterly, provided that prior
to May 13, 2000, the Series E Preferred Stock accumulates dividends at a rate of
14.589214% per annum, payable annually in cash or additional shares of Series E
Preferred Stock, at the option of the Company. In addition, prior to May 13,
2000, the holders of the Series D Preferred Stock may not use the Series D
Preferred Stock in connection with the exercise of the Warrants unless they use
a percentage of the total amount of Series D Preferred Stock issued on February
13, 1999 that does not exceed the percentage of the total number of shares of
Series E Preferred Stock issued on February 13, 1999 that have been redeemed,
repurchased or retired by the Company, or used as consideration in connection
with the exercise of the Warrants by the holders. With respect to dividend
rights, the Series D Preferred Stock and Series E Preferred Stock rank on a
parity with each other and prior to the Company's common stock.

   The aggregate cost to the Company of dividends on the Series D Preferred
Stock and Series E Preferred Stock is the same as the aggregate cost to the
Company of dividends on the Series A Preferred Stock and Series B Preferred
Stock.  The respective voting rights of the holders of the Series A Preferred
Stock and Series B Preferred Stock have not changed as the result of the
exchange of such shares for shares of Series D Preferred Stock and Series E
Preferred Stock.  The exchange had no effect on the consolidated balance
sheet as the issuance of additional redeemable preferred stock effected the
in-kind payment of the accrued redeemable preferred stock dividend which had
previously been credited to redeemable preferred stock. In the Company's
view, there was no difference in the aggregate fair value between the
redeemable preferred stock issued in the exchange and the redeemable
preferred stock canceled in the exchange.

   Pursuant to the provisions of the Series D Preferred Stock and Series E
Preferred Stock, on May 13, 1999, the Company issued (a) a dividend in the
amount of $13.2988 per share of Series D Preferred Stock in the form of
shares of such Series D Preferred Stock to the holders of record as of April
28, 1999 and (b) a dividend in the amount of $36.4730 per share of Series E
Preferred Stock in the form of shares of such Series E Preferred Stock to the
holders of record as of April 28, 1999.

   On February 29, 2000, the Company repurchased 28,780 shares of Series D
Preferred Stock for approximately $30 million and 89,616 shares of Series E
Preferred Stock for approximately $100 million.

   Under certain circumstances, the Company has the right to exchange the
Series D Preferred Stock or the Series E Preferred Stock on any dividend
payment date for junior subordinated debentures issued pursuant to an
indenture.  The indenture that would govern the junior subordinated
debentures would have terms comparable to the terms of the series of
Preferred Stock that is exchanged, including an interest rate that is the
same as the dividend rate on that series of Preferred Stock.

   In September 1999, the privately-placed Senior Notes were exchanged for an
equal amount of substantially identical Senior Notes registered under the
Securities Act.


                                       44
<PAGE>   45
   In the first quarter of 2000, the Company repurchased approximately $14
million principal amount of the Term Loan.

   YEAR 2000 READINESS AND COSTS

   The Company completed its assessment, planning, remediation and testing of
its computer programs associated with its mission critical systems that could
be affected by the "Year 2000" date issue.  The Year 2000 problem was the
result of computer programs being written using two digits rather than four
to define the applicable year.  The Company did not experience any
significant interruption of business operations or any other system failures
or disruptions as a result of the failure of any of its business systems or
those of its material vendors as a result of the Year 2000 issue.

   The Company is required to submit periodic reports regarding Year 2000
compliance to certain of the regulatory authorities which regulate its
business.  The Company is in compliance with such Year 2000 reporting
requirements.  Such regulatory authorities have also asked the Company to
submit to certain audits regarding its Year 2000 compliance.

   The Company incurred expenses of approximately $4 million in 1999 and $9.8
million in 1998 related to its Year 2000 compliance efforts. The Company does
not expect Year 2000 costs to be material in 2000.


                                       45
<PAGE>   46
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   The Company's consolidated balance sheet as of December 31, 1999 includes
a significant amount of assets whose fair value is subject to market risk.
Since a substantial portion of the Company's investments are in fixed income
securities, interest rate fluctuations represent the largest market risk
factor affecting the Company's consolidated financial position.  Interest
rates are managed within a tight duration band, 2.25 to 2.5 years, and credit
risk is managed by investing in U.S. government obligations and in corporate
debt securities with high average quality ratings and maintaining a
diversified sector exposure within the debt securities portfolio.  The
Company's investment in equity securities as of December 31, 1999 was not
significant.

   In order to determine the sensitivity of the Company's investment
portfolio to changes in market risk, valuation estimates were made on each
security in the portfolio using a duration model.  Duration models measure
the expected change in security market prices arising from hypothetical
movements in market interest rates.  Convexity further adjusts the estimated
price change by mathematically "correcting" the changes in duration as market
interest rates shift.  The model used industry standard calculations of
security duration and convexity as provided by third party vendors such as
Bloomberg and Yield Book.  For certain structured notes, callable corporate
notes, and callable agency bonds, the duration calculation utilized an
option-adjusted approach, which helps to ensure that hypothetical interest
rate movements are applied in a consistent way to securities that have
embedded call and put features.  The model assumed that changes in interest
rates were the result of parallel shifts in the yield curve.  Therefore, the
same basis point change was applied to all maturities in the portfolio.  The
change in valuation was tested using positive and negative adjustments in
yield of 100 and 200 basis points.  Hypothetical immediate increases of 100
and 200 basis points in market interest rates would decrease the fair value
of the Company's investments in debt securities as of December 31, 1999 by
approximately $20.6 million and $40.5 million, respectively (compared to
$23.3 million and $45.9 million as of December 31 1998, respectively).
Hypothetical immediate decreases of 100 and 200 basis points in market
interest rates would increase the fair value of the Company's investment in
debt securities as of December 31, 1999 by approximately $21.2 million and
$42.3 million, respectively (compared to $22.4 million and $45.7 million as
of December 31, 1998, respectively).  Because duration and convexity are
estimated rather than known quantities for certain securities, there can be
no assurance that the Company's portfolio would perform in-line with the
estimated values.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   See Index to Consolidated Financial Statements and Schedules on page 49.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

   Effective June 2, 1998, the Company dismissed KPMG LLP as the independent
auditors of the Company.  At the same time, the Company selected the firm of
Ernst & Young LLP to serve as the independent auditors of the Company.  The
report of KPMG LLP on the financial statements of the Company for the year
ended December 31, 1997 and the reports of Ernst & Young LLP on the financial
statements of the Company for the years ended December 31, 1999 and 1998
contained no adverse opinion or disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles.  This
change in auditors was approved by the Audit Committee of the Board of
Directors of the Company.  During 1997 and through June 2, 1998, there were
no disagreements with KPMG LLP concerning accounting principles or practices,
financial statement disclosures or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of KPMG LLP would have
caused KPMG LLP to make reference thereto in their report on the financial
statements for such years, and there were no reportable events as that term
is defined in Item 304(a)(1)(v) of Regulation S-K.  The Company provided KPMG
LLP with a copy of the disclosure contained herein and has requested that
KPMG LLP furnish it with a letter addressed to the Securities and Exchange
Commission stating whether or not it agrees with the above statements.  A
copy of such letter, dated June 9, 1998, is filed as an exhibit to the
Company's Form 8-K filed on June 9, 1998 with the Securities and Exchange
Commission.


                                       46
<PAGE>   47
                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

ITEM 11. EXECUTIVE COMPENSATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by Items 10 through 13 is incorporated by
reference to Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended, within
120 days after December 31, 1999.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   Exhibits and Financial Statement Schedules

     1.  All financial statements - see Index to Consolidated Financial
         Statements and Schedules on page 49.

     2.  Financial statement schedules - see Index to Consolidated Financial
         Statements and Schedules on page 49.

     3.  Exhibits - see Exhibit Index on page 86.

(b)   Reports on Form 8-K

   In a report on Form 8-K dated October 29, 1999 and filed on November 3,
1999, the Company reported, under Item 5. "Other Events", its earnings press
release for the third quarter of 1999 and the resignation of its President.

   In a report on Form 8-K dated December 30, 1999 and filed on January 3,
2000, the Company reported, under Item 5. "Other Events", certain changes to
senior management.






                                  SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 24th day
of March, 2000.

                                     OXFORD HEALTH PLANS, INC.

                                     By:  /s/ NORMAN C. PAYSON, M.D.
                                          -------------------------------
                                               NORMAN C.PAYSON, M.D.
                                        Chairman and Chief Executive Officer



                                       47
<PAGE>   48
      Pursuant to the requirements of the Securities Act of 1933, this Report
has been signed by the following persons on behalf of the Registrant on March
24, 2000 in the capacities indicated.


<TABLE>
<CAPTION>
Signature                                 Title
---------                                 -----
<S>                                       <C>
/s/  NORMAN C. PAYSON, M.D.               Principal Executive Officer,
-------------------------------           and Chairman of the Board
Norman C. Payson, M.D.


/s/ KURT B. THOMPSON                      Principal Financial Officer and Principal
-------------------------------           Accounting Officer
Kurt B. Thompson


-------------------------------           Director
Fred F. Nazem



-------------------------------           Director
David Bonderman


/s/ JONATHAN J. COSLET                    Director
-------------------------------
Jonathan J. Coslet


-------------------------------           Director
James G. Coulter


/s/ ROBERT B. MILLIGAN, JR.               Director
-------------------------------
Robert B. Milligan, Jr.


/s/  MARCIA J. RADOSEVICH, PH.D           Director
-------------------------------
Marcia J. Radosevich, Ph.D.


/s/  BENJAMIN H. SAFIRSTEIN, M.D.         Director
-------------------------------
Benjamin H. Safirstein, M.D.


/s/  THOMAS A. SCULLY                     Director
-------------------------------
Thomas A. Scully


-------------------------------           Director
Kent J. Thiry


/s/ STEPHEN F. WIGGINS                    Director
-------------------------------
Stephen F. Wiggins
</TABLE>


                                       48
<PAGE>   49
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                                                 Page
                                                                                 ----
<S>                                                                              <C>
Independent Auditors' Reports.............................................        50
Consolidated Balance Sheets as of December 31, 1999 and 1998..............        52
Consolidated Statements of Operations for the years ended December 31, 1999,
   1998 and 1997..........................................................        53
Consolidated Statements of Shareholders' Equity (Deficit) and Comprehensive
Earnings (Loss)
   for the years ended December 31, 1999, 1998 and 1997...................        54
Consolidated Statements of Cash Flows for the years ended December 31, 1999,
   1998 and 1997..........................................................        55
Notes to Consolidated Financial Statements................................        57
Independent Auditors' Reports on Financial Statement Schedules............        80

Financial Statement Schedules:
I  Condensed Financial Information of Registrant..........................        82
II Valuation and Qualifying Accounts......................................        85
</TABLE>


                                       49
<PAGE>   50
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Oxford Health Plans, Inc.:

   We have audited the consolidated balance sheets of Oxford Health Plans,
Inc. and subsidiaries (the "Company") as of December 31, 1999 and 1998, and
the related consolidated statements of operations, shareholders' equity
(deficit) and comprehensive earnings (loss) and cash flows for each of the
years in the two year period ended December 31, 1999.  These consolidated
financial statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Oxford
Health Plans, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
two year period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.


                                                 Ernst & Young LLP

New York, New York
February 10, 2000, except for the
last paragraph of Notes 6 and 7 as
to which the date is March 3, 2000.


                                       50

<PAGE>   51


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
Oxford Health Plans, Inc.:

    We have audited the accompanying consolidated statements of operations,
shareholders' equity (deficit) and comprehensive earnings (loss) and cash flows
of Oxford Health Plans, Inc. and subsidiaries for the year ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

    We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of Oxford Health Plans, Inc. and subsidiaries for the year ended December
31, 1997 in conformity with generally accepted accounting principles.



                                                                       KPMG LLP

Stamford, Connecticut
February 23, 1998

                                       51
<PAGE>   52
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                      (In thousands, except share amounts)
<TABLE>
<CAPTION>

                        ASSETS
Current assets:                                                                  1999               1998
---------------------------------------------------------------------------------------------------------
<S>                                                                         <C>               <C>
    Cash and cash equivalents                                               $   332,882       $   237,717
    Investments - available-for-sale, at fair value                             829,054           922,990
    Premiums receivable, net                                                     64,071           110,254
    Other receivables                                                            32,588            36,540
    Prepaid expenses and other current assets                                     3,862             9,746
    Deferred income taxes                                                        68,266            43,385
---------------------------------------------------------------------------------------------------------
        Total current assets                                                  1,330,723         1,360,632

Property and equipment, net                                                      49,519           112,941
Deferred income taxes                                                           231,512            94,182
Restricted investments - held-to-maturity, at amortized cost                     61,603            56,493
Other noncurrent assets                                                          13,531            13,502
---------------------------------------------------------------------------------------------------------
        Total assets                                                        $ 1,686,888       $ 1,637,750
=========================================================================================================

     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Medical costs payable                                                   $   656,063       $   850,197
    Trade accounts payable and accrued expenses                                 122,345           176,833
    Unearned premiums                                                            97,155           105,993
    Current portion of capital lease obligations                                 12,467            15,938
    Deferred income taxes                                                          --               2,228
---------------------------------------------------------------------------------------------------------
        Total current liabilities                                               888,030         1,151,189

Long-term debt                                                                  350,000           350,000
Obligations under capital leases                                                  5,787            18,850
Redeemable preferred stock                                                      344,316           298,816

Shareholders' equity (deficit):
    Preferred stock, $.01 par value, authorized 2,000,000 shares;
      none issued and outstanding                                                  --                --
    Common stock, $.01 par value, authorized 400,000,000 shares;
      issued and outstanding 81,986,457 in 1999 and 80,515,872 in 1998              820               805
    Additional paid-in capital                                                  488,030           506,243
    Accumulated deficit                                                        (372,350)         (692,290)
    Accumulated other comprehensive earnings (loss)                             (17,745)            4,137
---------------------------------------------------------------------------------------------------------
        Total shareholders equity (deficit)                                      98,755          (181,105)
---------------------------------------------------------------------------------------------------------
        Total liabilities and shareholders' equity (deficit)                $ 1,686,888       $ 1,637,750
=========================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       52
<PAGE>   53
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF
                       OPERATIONS YEARS ENDED DECEMBER 31,
                       1999, 1998 AND 1997 (In thousands,
                            except per share amounts)


<TABLE>
<CAPTION>

                                                                                  1999             1998              1997
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>               <C>               <C>
Revenues:
    Premiums earned                                                          $ 4,099,556       $ 4,612,328       $ 4,167,224
    Third-party administration, net                                               15,578            17,838            12,592
    Investment and other income, net                                              82,632            89,245            71,448
----------------------------------------------------------------------------------------------------------------------------
      Total revenues                                                           4,197,766         4,719,411         4,251,264
----------------------------------------------------------------------------------------------------------------------------

Expenses:
    Health care services                                                       3,365,340         4,353,537         3,916,742
    Marketing, general and administrative                                        599,151           772,015           737,425
    Interest and other financing charges                                          49,626            57,090            11,118
    Restructuring charges                                                         19,963           113,657              --
    Write-downs of strategic investments                                            --              38,341            41,618
----------------------------------------------------------------------------------------------------------------------------
      Total expenses                                                           4,034,080         5,334,640         4,706,903
----------------------------------------------------------------------------------------------------------------------------

Operating earnings (loss)                                                        163,686          (615,229)         (455,639)

Equity in net loss of affiliate                                                     --                --              (1,140)
Gain on sale of affiliate                                                           --                --              25,168
----------------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                                              163,686          (615,229)         (431,611)
Income tax benefit                                                              (156,254)          (18,437)         (140,323)
----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                                              319,940          (596,792)         (291,288)
Less preferred dividends and amortization                                        (45,500)          (27,668)             --
----------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) attributable to common shares                            $   274,440       $  (624,460)      $  (291,288)

============================================================================================================================

Earnings (loss) per common and common equivalent share:
      Basic                                                                  $      3.38       $     (7.79)      $     (3.70)
      Diluted                                                                $      3.26       $     (7.79)      $     (3.70)

Weighted-average common stock and common stock equivalents outstanding:
      Basic                                                                       81,273            80,120            78,635
      Effect of dilutive securities - stock options                                2,958              --                --
----------------------------------------------------------------------------------------------------------------------------
      Diluted                                                                     84,231            80,120            78,635
============================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                       53
<PAGE>   54
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                       AND COMPREHENSIVE EARNINGS (LOSS)
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)
<TABLE>
<CAPTION>
                                                     Common Stock
                                                 ---------------------                                                Accumulated
                                                                       Additional     Retained                           Other
                                                 Number of     Par       Paid-In      Earnings      Comprehensive    Comprehensive
                                                   Shares      Value     Capital     (Deficit)      Earnings (Loss)  Earnings (Loss)
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>          <C>           <C>           <C>             <C>
Balance at January 1, 1997                        77,376     $     774    $ 391,602     $ 195,790     $    --             $  10,004

Exercise of stock options                          2,098            21       21,243          --            --                  --
Tax benefit realized upon exercise of stock
  options                                           --            --         24,808          --            --                  --
Net loss                                            --            --           --        (291,288)     (291,288)               --
Depreciation in value of available-for-sale
  securities, net of deferred income taxes          --            --           --            --          (3,738)             (3,738)
                                                                                                      ---------
Comprehensive loss                                                                                    $(295,026)
                                                                                                      =========
-------------------------------------------------------------------------------------------------                      ------------
Balance at December 31, 1997                      79,474           795      437,653       (95,498)         --                 6,266

Exercise of stock options                            397             4        2,651          --            --                  --
Proceeds from sale of common stock                   645             6        9,994          --            --                  --
Issuance of warrants                                --            --         67,000          --            --                  --
Compensatory stock grants under
  executive stock agreements                        --            --         16,613          --            --                  --
Preferred stock dividends and
  amortization of discount                          --            --        (26,103)         --            --                  --
Amortization of preferred stock issuance
  costs                                             --            --         (1,565)         --            --                  --
Net loss                                            --            --           --        (596,792)     (596,792)               --
Depreciation in value of available-for-sale
  securities, net of deferred taxes                 --            --           --            --          (2,129)             (2,129)
                                                                                                      ---------
Comprehensive loss                                                                                    $(598,921)
                                                                                                      =========
-------------------------------------------------------------------------------------------------                      ------------
Balance at December 31, 1998                      80,516           805      506,243      (692,290)                            4,137

Exercise of stock options                          1,470            15       18,171          --            --                  --
Tax benefit realized upon exercise of stock
  options                                           --            --          2,648          --            --                  --
Compensatory stock grants under
  executive stock agreements                        --            --          6,468          --            --                  --
Preferred stock dividends and
  amortization of discount                          --            --        (43,136)         --            --                  --
Amortization of preferred stock issuance
  costs                                             --            --         (2,364)         --            --                  --
Net income                                          --            --           --         319,940     $ 319,940                --
Depreciation in value of available-for-sale
  securities, net of deferred taxes                 --            --           --            --         (21,882)            (21,882)
                                                                                                      ---------
Comprehensive earnings                                                                                $ 298,058
                                                                                                      =========
-------------------------------------------------------------------------------------------------                      ------------
Balance at December 31, 1999                      81,986     $     820    $ 488,030     $(372,350)                        $ (17,745)
=================================================================================================                      ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       54
<PAGE>   55
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)
<TABLE>
<CAPTION>

Cash flows from operating activities:                                 1999             1998             1997
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>             <C>
    Net earnings (loss)                                          $   319,940     $  (596,792)    $  (291,288)
    Adjustments to reconcile net earnings (loss) to net cash
      provided by operating activities:
        Depreciation and amortization                                 54,542          67,141          61,045
        Non-cash restructuring charges and write-downs
           of strategic investments                                    8,355         101,547          41,618
        Deferred income taxes                                       (159,563)        (18,437)        (75,279)
        Provision (credit )for doubtful accounts and advances         (4,200)         60,209          25,000
        Equity in net loss of affiliate                                 --              --             1,140
        Realized loss (gain) on sale of investments                    5,181         (10,695)        (28,736)
        Gain on sale of noncore investments and affiliate             (9,500)           --           (25,168)
        Other, net                                                     6,468          13,289             245
        Changes in assets and liabilities:
           Premiums receivable                                        46,183         130,183          25,942
           Other receivables                                           7,290           2,679         (18,320)
           Prepaid expenses and other current assets                   2,526             351          (3,928)
           Medical costs payable                                    (189,934)         62,238         116,387
           Trade accounts payable and accrued expenses               (39,995)         33,802          84,967
           Income taxes payable/refundable                              --           121,102        (123,624)
           Unearned premiums                                          (8,838)        (18,610)         61,378
           Other, net                                                 (2,927)          5,511          (3,959)
------------------------------------------------------------------------------------------------------------
             Net cash provided (used) by operating activities         35,528         (46,482)       (152,580)
------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
    Capital expenditures                                              (8,987)        (40,045)       (101,946)
    Purchases of available-for-sale securities                      (868,655)     (1,353,403)       (589,690)
    Sales and maturities of available-for-sale securities            919,940         996,988         790,795
    Proceeds from sale of non-core investments                        12,450            --              --
    Acquisitions, net of cash acquired                                  --            (1,312)        (14,034)
    Investments in and advances to unconsolidated affiliates            --            (5,410)        (19,842)
    Other, net                                                         3,237            (307)         (1,986)
------------------------------------------------------------------------------------------------------------
             Net cash provided (used) by investing activities         57,985        (403,489)         63,297
------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
    Proceeds from exercise of stock options                           18,186           2,655          21,264
    Payments under capital leases                                    (16,534)         (5,463)           --
    Proceeds of notes and loans payable                                 --           550,000            --
    Redemption of notes and loans payable                               --          (200,000)           --
    Proceeds of preferred stock, net of issuance expenses               --           271,148            --
    Proceeds of warrants                                                --            67,000            --
    Proceeds from issuance of common stock                              --            10,000            --
    Debt issuance expenses                                              --           (11,793)           --
------------------------------------------------------------------------------------------------------------
             Net cash provided by financing activities                 1,652         683,547          21,264
------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                  95,165         233,576         (68,019)
Cash and cash equivalents at beginning of year                       237,717           4,141          72,160
------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                         $   332,882     $   237,717     $     4,141
============================================================================================================
</TABLE>


                                       55
<PAGE>   56
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)
                                   (Continued)
<TABLE>
<CAPTION>

                                                                          1999          1998         1997
------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>          <C>          <C>
Supplemental schedule of non-cash investing and financing activities:
    Unrealized appreciation (depreciation) of investments                $(21,882)    $ (4,255)    $ (6,336)
    Capital lease obligations incurred                                       --         40,251         --
    Preferred stock dividends paid in-kind                                 30,486       18,548         --
    Amortization of preferred stock discount                               12,650        7,555         --
    Amortization of preferred stock issuance expenses                       2,364        1,565         --
    Tax benefit realized on exercise of stock options                       2,648         --         24,808
    Sale of affiliate in a pooling-of-interests transaction                  --           --         38,442
</TABLE>

See accompanying notes to consolidated financial statements.


                                       56
<PAGE>   57
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    ORGANIZATION

    Oxford Health Plans, Inc. ("Oxford" or the "Company") is a regional health
care company providing health care coverage primarily in New York, New Jersey
and Connecticut. Oxford was incorporated on September 17, 1984 and began
operations in 1986. Oxford owns and operates three health maintenance
organizations ("HMOs"), which are qualified as Competitive Medical Plans, and an
accident and health insurance company and offers a health benefits
administrative service.

    Oxford's HMOs, Oxford Health Plans (NY), Inc. ("Oxford NY"), Oxford Health
Plans (NJ), Inc. ("Oxford NJ") and Oxford Health Plans (CT), Inc. ("Oxford CT")
have each been granted a certificate of authority to operate as a health
maintenance organization by the appropriate regulatory agency of the state in
which it operates. Oxford Health Insurance, Inc. ("OHI") currently does business
under accident and health insurance licenses granted by the Department of
Insurance in the states of New York, New Jersey, Connecticut and in the
Commonwealth of Pennsylvania.

    Oxford maintains a health care network of physicians and ancillary health
care providers who have entered into formal contracts with Oxford. These
contracts set reimbursement at either fixed levels or pursuant to certain
risk-sharing arrangements and require adherence to Oxford's policies and
procedures for quality and cost-effective treatment.

(2)    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (a) Principles of consolidation. The consolidated financial statements are
presented in accordance with United States generally accepted accounting
principles ("GAAP") and include the accounts of Oxford Health Plans, Inc. and
all majority-owned subsidiaries. All intercompany balances have been eliminated
in consolidation. The Company's investment in Health Partners, Inc. was
accounted for using the equity method until its disposal in October 1997 (see
note 12).

    (b) Premium revenue. Membership contracts are generally established on a
yearly basis subject to cancellation by the employer group or Oxford upon 30
days written notice. Premiums, including premiums from both commercial and
governmental programs, are due monthly and are recognized as revenue during the
period in which Oxford is obligated to provide services to members, and are net
of estimated terminations of members and groups. The Company receives premium
payments from the federal Health Care Financing Administration ("HCFA") on a
monthly basis for its Medicare membership. In 1999, premiums received from HCFA
represented approximately 18% of the Company's total premium revenue earned.
Membership and category eligibility are periodically reconciled with HCFA and
could result in revenue adjustments. The Company is not aware of any material
claims, disputes or settlements relating to revenues it has received from HCFA.
Premiums receivable are presented net of valuation allowances for estimated
uncollectible amounts of $10 million and $37.7 million in 1999 and 1998,
respectively. Unearned premiums represent the portion of premiums received for
which Oxford is not obligated to provide services until a future date. All other
material revenue is generated from investments, as described in (f) below.
Investment income is recognized when earned and included in investment and other
income.

    (c) Health care services cost recognition. The Company contracts with
various health care providers for the provision of certain medical care services
to its members and generally compensates those providers on a fee-for-service
basis or pursuant to certain risk-sharing arrangements. Costs of health care and
medical costs payable for health care services provided to enrollees are
estimated by management based on evaluations of providers' claims submitted and
provisions for incurred but not reported or paid claims ("IBNR"). The Company
estimates the provision for IBNR using standard actuarial methodologies based
upon historical data including the period between the date services are rendered
and the date claims are received and paid, denied claim activity, expected
medical cost inflation, seasonality patterns and changes in membership. The
estimates for submitted claims and IBNR are made on an accrual basis and
adjusted in future periods as required. Adjustments to prior period estimates,
if any, are included in the current period. Medical costs payable also reflects
surplus or deficit experience for physicians participating in risk-sharing
arrangements and payments required by public policy

                                       57
<PAGE>   58
initiatives. Advances to providers for delayed claims amounting to $43.6 million
and $139.5 million, net of valuation reserves of $30.8 million and $35 million,
as of December 31, 1999 and 1998, respectively, have been applied against
medical claims payable in the accompanying balance sheets. Management believes
that the Company's reserves for medical costs payable are adequate to satisfy
its ultimate claim liabilities.

     Losses, if any, are recognized when it is probable that the expected future
health care cost of a group of existing contracts (and the costs necessary to
maintain those contracts) will exceed the anticipated future premiums,
investment income and reinsurance recoveries on those contracts. Groups of
contracts are defined as commercial, individual and government contracts
consistent with the method of establishing premium rates. The Company recognizes
premium deficiency reserves based upon expected premium revenue, medical expense
and administrative expense levels and remaining contractual obligations using
the Company's historical experience. Anticipated investment income is not
included in the recognition of premium deficiency reserves since its effect is
deemed to be immaterial. The Company evaluates the need for premium deficiency
reserves on a quarterly basis. Premium deficiency reserves aggregated
approximately $26.6 million and $27.4 million as of December 31, 1999 and 1998,
respectively. Such reserves are included in medical costs payable in the
accompanying consolidated balance sheets.

    (d) Reinsurance. Reinsurance premiums are reported as health care services
expense, while related reinsurance recoveries are reported as deductions from
health care services expense. The Company limits, in part, the risk of
catastrophic losses by maintaining high deductible reinsurance coverage. The
Company does not consider this coverage to be material as the cost is not
significant and the likelihood that coverage will be applicable is low.

    (e) Cash equivalents. The Company considers all highly liquid investments
with original maturities of three months or less to be cash equivalents.

    (f) Investments. Investments are classified as either available-for-sale or
held-to-maturity. Investments that the Company has the intent and ability to
hold to maturity are designated as held-to-maturity and are stated at amortized
costs. The Company has determined that all other investments might be sold prior
to maturity to support its investment strategies. Accordingly, these other
investments are classified as available-for-sale and are stated at fair value
based on quoted market prices. Unrealized gains and losses on available-for-sale
investments are excluded from earnings and are reported in accumulated other
comprehensive earnings (loss), net of income tax effects. Realized gains and
losses are determined on a specific identification basis and are included in
results of operations. Investment income is recognized in accordance with GAAP,
accrued when earned and included in investment and other income.

    (g) Property and equipment. Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful lives of the related assets,
which range from three to five years. Leasehold improvements are amortized using
the straight-line method over the shorter of the lease terms or the estimated
useful lives of the assets.

    (h) Computer software costs. Internal and external direct and incremental
costs of $3.1 million incurred in developing or obtaining computer software for
internal use were capitalized during 1999. These costs are presented in property
and equipment and are being amortized using the straight-line method over their
estimated useful lives, generally two years. Prior to 1999, computer software
costs were expensed as incurred.

    (i) Income taxes. The Company recognizes deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Accordingly, deferred tax liabilities
and assets are determined based on the temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The Company provides a valuation reserve against the estimated amounts of
deferred taxes that it believes may not be realized.


                                       58
<PAGE>   59
    (j) Impairment of long-lived assets and assets to be disposed of. The
Company reviews assets and certain identifiable intangibles for impairment
whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
estimated costs to sell.

    (k) Earnings per share. Basic earnings per share is calculated on the
weighted-average number of common shares outstanding. Diluted earnings per share
is calculated on the weighted-average number of common shares and common share
equivalents resulting from options and warrants outstanding.

    Options to purchase 12.3 million shares of common stock at prices ranging
from $16.36 to $74.00 per share and warrants to purchase 22.5 million shares of
common stock at $17.75 per share were outstanding at December 31, 1999 but were
not included in the computation of diluted earnings per share as the impact
would have been antidilutive.

    (l) Stock option plans. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS 123 also allows entities to continue to apply the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees", and provide pro forma net earnings and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
subsequent years as if the fair-value-based method defined in SFAS 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS 123 (see
note 9). With respect to the independent contractor grants, it is the Company's
policy to record such grants and re-issuance grants issued after December 15,
1995, based on the fair market value measurement criteria of SFAS 123.

    (m) Marketing costs. Marketing and other costs associated with the
acquisition of plan member contracts are expensed as incurred.

    (n) Use of estimates. The accompanying financial statements have been
prepared in accordance with GAAP. The preparation of financial statements in
conformity with GAAP requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those estimates.

    (o) Reporting comprehensive income. The changes in value of
available-for-sale securities as reported in the consolidated statements of
shareholders' equity (deficit) and comprehensive earnings (loss) include
unrealized holding gains (losses) on available-for-sale securities of $(27.1)
million, $6.4 million and $22.4 million in 1999, 1998 and 1997, respectively,
reduced by the tax effects of $1.6 million and $7.5 million in 1998 and 1997,
respectively, and reclassification adjustments of $5.2 million, $10.7 million
and $28.7 million in 1999, 1998 and 1997, respectively, reduced by the tax
effects of $3.7 million and $10.1 million in 1998 and 1997, respectively.

    (p) Reclassifications. Certain reclassifications have been made to prior
years' financial statement amounts to conform to the 1999 presentation.


                                       59
<PAGE>   60
(3)    INVESTMENTS

    The following is a summary of marketable securities as of December 31, 1999
and 1998:
<TABLE>
<CAPTION>

                                                                        Gross          Gross
(In thousands)                                       Amortized        Unrealized     Unrealized       Fair
December 31, 1999:                                     Cost             Gains          Losses        Value
--------------------------------------------------------------------------------------------------------------
<S>                                                   <C>             <C>             <C>             <C>
Available-for-sale:
  U.S. government obligations                         $385,529        $   --          $  7,556        $377,973
  Corporate obligations                                435,910             309          10,137         426,082
  Municipal bonds                                       25,360            --               361          24,999
--------------------------------------------------------------------------------------------------------------
    Total investments                                 $846,799        $    309        $ 18,054        $829,054
==============================================================================================================
Held-to-maturity - U.S. government obligations        $ 61,603        $   --          $    346        $ 61,257
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>

December 31, 1998:                                    Cost             Gains          Losses           Value
--------------------------------------------------------------------------------------------------------------
<S>                                                  <C>             <C>             <C>             <C>
Available-for-sale:
  U.S. government obligations                         $585,028        $  4,568        $  1,673        $587,923
  Corporate obligations                                331,596           3,688             218         335,066
--------------------------------------------------------------------------------------------------------------
    Total debt securities                              916,624           8,256           1,891         922,989
  Equity securities                                          1            --              --                 1
--------------------------------------------------------------------------------------------------------------
    Total investments                                 $916,625        $  8,256        $  1,891        $922,990
==============================================================================================================
Held-to-maturity - U.S. government obligations        $ 56,493        $  1,028        $   --          $ 57,521
==============================================================================================================
</TABLE>

    The amortized cost and estimated fair value of marketable debt securities at
December 31, 1999, by contractual maturity, are shown below. Actual maturities
may differ from contractual maturities because the issuers of securities may
have the right to prepay such obligations without prepayment penalties.
<TABLE>
<CAPTION>

                                                                   Available-for-Sale              Held-to-Maturity
                                                               --------------------------------------------------------
                                                               Amortized          Fair        Amortized         Fair
(In thousands)                                                    Cost           Value           Cost          Value
-----------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>             <C>            <C>
Due in one year or less                                          $ 157,393      $ 156,685       $ 25,560       $ 25,542
Due after one year through five years                              664,390        647,658         36,043         35,715
Due after five years through ten years                              25,016         24,711            --            --
-----------------------------------------------------------------------------------------------------------------------
    Total                                                        $ 846,799      $ 829,054       $ 61,603       $ 61,257
=======================================================================================================================
</TABLE>

Certain information related to marketable securities is as follows:
<TABLE>
<CAPTION>

(In thousands)                                                             1999            1998            1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>               <C>
Proceeds from sale or maturity of available-for-sale securities        $ 916,231         $ 993,488         $ 790,795
Proceeds from sale or maturity of held-to-maturity securities              3,709             3,500              --
--------------------------------------------------------------------------------------------------------------------
Total proceeds from sale or maturity of marketable securities          $ 919,940         $ 996,988         $ 790,795
====================================================================================================================

Gross realized gains on sale of available-for-sale securities          $   2,474         $  19,986         $  36,615
Gross realized losses on sale of available-for-sale securities            (7,655)           (9,291)           (7,879)
--------------------------------------------------------------------------------------------------------------------
Net realized gains (losses) on sale of marketable securities           $  (5,181)        $  10,695         $  28,736
====================================================================================================================
Net unrealized (loss) on available-for-sale securities included
    in comprehensive (loss)                                            $ (21,882)        $  (4,255)        $  (6,336)
Deferred income tax benefit                                                 --              (2,126)           (2,598)
--------------------------------------------------------------------------------------------------------------------
Other comprehensive (loss)                                             $ (21,882)        $  (2,129)        $  (3,738)
--------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       60
<PAGE>   61
    Net investment income in 1999, 1998 and 1997 was $62.1 million, $79.8
million and $71.4 million, respectively. Other income includes a $13.5 million
gain on the sale of the New York Medicaid business and a $7 million gain on the
sale of the assets of the Company's wholly-owned subsidiary, Direct Script, Inc.
in 1999 and a $5.1 million gain related to the sale of the New Jersey Medicaid
business in 1998.

(4)    INCOME TAXES

Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>
(In thousands)                        Current          Deferred           Total
---------------------------------------------------------------------------------
<S>                                  <C>               <C>               <C>
Year ended December 31, 1999:
    Federal                          $    --           $(150,406)        $(150,406)
    State and local                       --              (5,848)           (5,848)
----------------------------------------------------------------------------------
      Total                          $    --           $(156,254)        $(156,254)
==================================================================================

Year ended December 31, 1998:
    Federal                          $    --           $ (14,371)        $ (14,371)
    State and local                       --              (4,066)           (4,066)
----------------------------------------------------------------------------------
      Total                          $    --           $ (18,437)        $ (18,437)
==================================================================================

Year ended December 31, 1997:
    Federal                          $ (68,604)        $ (78,577)        $(147,181)
    State and local                      3,560             3,298             6,858
----------------------------------------------------------------------------------
      Total                          $ (65,044)        $ (75,279)        $(140,323)
==================================================================================
</TABLE>

    Cash paid (received) for income taxes was approximately $3 million, $(113)
million and $67 million for 1999, 1998 and 1997, respectively.

    Income tax expense differed from the amounts computed by applying the
federal income tax rate of 35% to earnings (loss) before income taxes as a
result of the following:
<TABLE>
<CAPTION>

(In thousands)                                                             1999            1998              1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>               <C>
Income tax expense (benefit) at statutory tax rate                     $  57,290         $(215,330)        $(151,064)
State and local income taxes, net of Federal income tax benefit           11,746           (47,143)            4,458
Change in valuation allowance                                           (225,002)          245,702              --
Write-off of goodwill                                                       --                --               9,895
Other, net                                                                  (288)           (1,666)           (3,612)
--------------------------------------------------------------------------------------------------------------------
  Income tax benefit                                                   $(156,254)        $ (18,437)        $(140,323)
====================================================================================================================
</TABLE>


                                       61
<PAGE>   62
    The tax effects of temporary differences that give rise to significant
portions of the net deferred tax assets at December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>

(In thousands)                                                   1999              1998
----------------------------------------------------------------------------------------
<S>                                                          <C>               <C>
Deferred tax assets:
    Net operating loss carryforwards                         $ 238,122         $ 256,024
    Medical costs payable                                       18,363            15,357
    Allowance for doubtful accounts                             17,174            18,804
    Unearned premiums                                            8,194             9,088
    Trade accounts payable and accrued expenses                  8,426            20,298
    Write-down of investment in affiliate                       13,422            19,402
    Property and equipment                                      11,495             6,750
    Restructuring related                                        8,929            64,712
    Unrealized depreciation of short-term investments            7,469              --
    Other                                                       10,653             9,730
----------------------------------------------------------------------------------------
      Total gross deferred assets                              342,247           420,165
    Less valuation allowances                                  (42,469)         (282,598)
----------------------------------------------------------------------------------------
      Total deferred tax assets                                299,778           137,567
----------------------------------------------------------------------------------------
Deferred tax liabilities:
    Unrealized appreciation of short-term investments             --               2,228
----------------------------------------------------------------------------------------
      Net deferred tax assets                                $ 299,778         $ 135,339
========================================================================================
</TABLE>

    During the second quarter of 1998, the Company incurred a net loss of $507.6
million. At that time, the Company evaluated the deferred tax assets arising
from the net loss and established a full valuation allowance pending the results
of its Turnaround Plan. During 1998, the Company performed detailed analyses to
assess the realizability of the Company's deferred tax assets. These analyses
included an evaluation of the results of operations for 1998 and prior periods,
the progress to date in its Turnaround Plan and projections of future results of
operations, including the estimated impact of the Turnaround Plan. Based on
these analyses, management concluded that it was not more likely than not that
all of its deferred tax assets would be fully realized. The Company established
a valuation allowance of $282.6 million as of December 31, 1998.

    In light of the Company's progress during 1999 in its Turnaround Plan,
estimates of future earnings and the expected timing of the reversal of other
net tax deductible temporary differences, management concluded that a valuation
allowance was no longer necessary for its federal net operating loss
carryforwards and certain other temporary differences. Management believes that
the Company will obtain the full benefit of the net deferred tax assets recorded
at December 31, 1999. The income tax benefit recorded for 1999 includes the
reversal of $225 million of deferred tax valuation allowances. The remaining
valuation allowance at December 31, 1999 of $42.5 million relates primarily to
capital loss carryforwards and state net operating loss carryforwards.

    As of December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $538 million, which will begin to expire in 2012.


                                       62
<PAGE>   63
(5)    PROPERTY AND EQUIPMENT

     Property and equipment, net of accumulated depreciation is as follows:
<TABLE>
<CAPTION>

                                                               As of December 31,
                                                          ---------------------------
(In thousands)                                               1999              1998
-------------------------------------------------------------------------------------
<S>                                                       <C>               <C>
Land and buildings                                        $      40         $     230
Furniture and fixtures                                       11,732            31,747
Equipment                                                   135,551           204,249
Leasehold improvements                                       35,291            37,146
-------------------------------------------------------------------------------------
    Property and equipment, gross                           182,614           273,372
Accumulated depreciation and amortization                  (133,095)         (160,431)
=====================================================================================
    Property and equipment, net                           $  49,519         $ 112,941
=====================================================================================
</TABLE>


     Depreciation and amortization of property and equipment aggregated $49.8
million, $63.7 million and $57.9 million at December 31, 1999, 1998 and 1997,
respectively.

(6)    DEBT

     Long-term debt consists of the following:
<TABLE>
<CAPTION>

(In thousands)                                        1999                1998
--------------------------------------------------------------------------------
<S>                                               <C>                 <C>
11% Senior Notes due 2005                           $200,000            $200,000
Term Loan due 2003                                   150,000             150,000
--------------------------------------------------------------------------------
    Total long-term debt                            $350,000            $350,000
================================================================================
</TABLE>

     Simultaneously with the consummation of the agreement with TPG described in
note 7, the Company issued $200 million principal amount of 11% Senior Notes due
2005 (the "Senior Notes"). The Senior Notes were issued in a private placement
to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), the initial
purchaser, who agreed to sell the Senior Notes only to "qualified institutional
buyers", as defined in Rule 144A under the Securities Act in reliance upon the
exemption from the registration requirements of the Securities Act provided by
Rule 144A, or outside the United States in accordance with Regulation S under
the Securities Act. DLJ received $6 million in discounts and commissions in
connection with the initial purchase of the Senior Notes. The Senior Notes are
senior unsecured obligations of the Company and rank pari passu in right of
payment with all current and future senior indebtedness of the Company. The
Company's obligations under the Senior Notes are effectively subordinated to all
existing and future secured indebtedness of the Company to the extent of the
value of the assets securing such indebtedness and are structurally subordinated
to all existing and future indebtedness, if any, of the Company's subsidiaries.
Interest is payable semiannually on May 15 and November 15 of each year
commencing November 15, 1998.

     At any time on or before May 15, 2001, the Company may redeem for cash up
to 33 1/3% of the original aggregate principal amount of the Senior Notes at a
redemption price of 111% of the principal amount thereof, in each case plus any
accrued and unpaid interest thereon to the redemption date, with the net
proceeds of a public equity offering provided that at least 66 2/3% of the
original aggregate principal amount of the Senior Notes remains outstanding
immediately after the occurrence of such redemption. After May 15, 2002, the
Senior Notes will be subject to redemption for cash at the option of the
Company, in whole or in part, at redemption prices ranging from 105.5% of face
amount beginning May 15, 2002 to 100% on and after May 15, 2004.

     The Senior Notes indenture provides that upon the occurrence of a change of
control (as defined), each holder of Senior Notes will have the right to require
the Company to repurchase all or any part of such holder's Senior Notes pursuant
to the offer described therein at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of purchase. The indenture also
contains covenants for the benefit of the holders of Senior Notes that, among
other things, restrict the ability of the Company to pay any dividend or make
any payment or distribution or incur additional indebtedness.


                                       63
<PAGE>   64
     In September 1999, the privately-placed Senior Notes were exchanged for an
equal amount of substantially identical Senior Notes registered under the
Securities Act.

     At the same time, the Company entered into a Term Loan Agreement that
provided for a new $150 million senior secured term loan (the "Term Loan") with
a final maturity in 2003 at which time all outstanding amounts will be due and
payable. Prior to the final maturity of the Term Loan, there are no scheduled
principal payments. The Term Loan provides for mandatory prepayments of the Term
Loan from (1) net proceeds from the sale of assets, subject to certain
exceptions and to the receipt of any required regulatory approvals; (2) net
proceeds from the issuance of debt securities; and (3) 50% of the net proceeds
from certain equity issuances. The Term Loan also provides for mandatory
prepayment of the entire aggregate principal amount of the Term Loan plus a
premium equal to 1% of the aggregate principal amount of the Term Loan upon a
"change of control." The Term Loan bears interest at a rate per annum equal to
the administrative agent's reserve adjusted LIBO rate plus 4.25%. As of December
31, 1999, the interest rate on the Term Loan was 10.7125%. Interest is payable
semiannually on May 15 and November 15 each year commencing November 15, 1998.
The Term Loan is secured by a perfected first priority security interest in
substantially all of the assets of the Company. The Term Loan contains covenants
that, among other things, restrict the ability of the Company to pay any
dividend or make any payment or distribution or incur additional indebtedness.

     The costs incurred in connection with the issuance of the Senior Notes and
Term Loan, aggregating approximately $7.1 million and $4.7 million,
respectively, have been capitalized and are being amortized over periods of
seven years and five years, respectively.

     In the first quarter of 1998, the Company issued $200 million of senior
secured increasing rate notes due February 6, 1999 ("Bridge Notes"). The Bridge
Notes bore interest at prime plus 2.5% per annum during the first three months,
and thereafter the spread over prime increased by 0.5% every three months;
provided however, that the per annum interest rate would not be less than 10.5%,
nor more than 17%. The Company used the proceeds of the Bridge Notes to make
capital contributions to certain of its HMO subsidiaries, to pay for expenses in
connection with the issuance of the Bridge Notes and for general corporate
purposes. The Company capitalized the costs of $9.9 million incurred in the
issuance of the Bridge Notes, and these costs were to be amortized over the life
of the Bridge Notes. The capitalized debt issuance costs were written off on May
13, 1998 due to extinguishment of the Bridge Notes using funds obtained through
the financings referred to above and in note 7.

     The Company made cash payments for interest expense on indebtedness and
delayed claims of approximately $53 million, $38.7 million and $5.3 million in
1999, 1998 and 1997, respectively.

     During the first quarter of 2000, the Company repurchased approximately $14
million of principal outstanding under the Term Loan.

(7)    REDEEMABLE PREFERRED STOCK

     Pursuant to an Investment Agreement, dated as of February 23, 1998 (the
"Investment Agreement"), between the Company and TPG Oxford LLC ("TPG", together
with the investors thereunder, the "Investors"), the Investors, on May 13, 1998,
purchased $350 million in redeemable Preferred Stock with Warrants to acquire up
to 22,530,000 shares of common stock. The Preferred Stock and Warrants were
issued without registration under the Securities Act in reliance on Section 4(2)
of the Securities Act, which provides an exemption for transactions not
involving any public offering. In determining that such exemption was available,
the Company relied on, among other things, the facts that the Preferred Stock
and Warrants were being issued through direct communication only to a limited
number of sophisticated investors having knowledge and access to information
regarding the Company and that the certificates evidencing such Preferred Stock
and Warrants bear a legend restricting transfer in nonregistered transactions.
Dividends on the Preferred Stock are being paid in kind for the first two years.
The Warrants have an exercise price of $17.75, which represented a 5% premium
over the average trading price of Oxford shares for the 30 trading days ended
February 20, 1998.

     The Preferred Stock was originally issued as 245,000 shares of Series A and
105,000 shares of Series B. The Series A Preferred Stock carried a cash dividend
of 8% per annum, payable quarterly, provided that prior to May 13, 2000, the
Series A Preferred Stock accumulated dividends at a rate of 8.243216% per annum,
payable

                                       64
<PAGE>   65
annually in cash or additional shares of Series A Preferred Stock, at the option
of the Company. The Series A Preferred Stock was issued with Series A Warrants
to purchase 15,800,000 shares of common stock, or approximately 19.9% of the
then outstanding voting power of the Company's common stock. The Series A
Preferred Stock had approximately 16.6% of the combined voting power of the
Company's then outstanding common stock and the Series A Preferred Stock. The
Series B Preferred Stock, which was originally issued with Series B Warrants to
purchase nonvoting junior participating preferred stock, was nonvoting and
carried a cash dividend of 9% per annum, payable quarterly, provided that prior
to May 13, 2000, the Series B Preferred Stock accumulated dividends at a rate of
9.308332% per annum, payable annually in cash or additional shares of Series B
Preferred Stock, at the option of the Company. The terms of the agreement
prohibit the Company from paying cash dividends on its common stock. The
Preferred Stock was not redeemable by the Company prior to May 13, 2003.
Thereafter, subject to certain conditions, the Series A and B Preferred Stock
were each redeemable at the option of the Company at a redemption price of
$1,000 per share (in each case, plus accrued and unpaid dividends), and were
subject to mandatory redemption at the same price on May 13, 2008. The Series A
and Series B Warrants expire on the earlier of May 13, 2008 or redemption of the
related series of Preferred Stock. The Warrants are detachable from the
Preferred Stock. The carrying value of the Preferred Stock has been reduced in
the financial statements by the value of the Warrants, estimated to be
approximately $67 million at the date of issuance. This amount has been added to
additional paid-in capital and is being amortized using the interest method over
five years. The costs incurred in connection with the issuance of the Preferred
Stock aggregated approximately $11.9 million and have been charged against the
Preferred Stock in the accompanying balance sheet. Such costs will be amortized
over a period of five years. With respect to dividend rights, the Series A and
Series B Preferred Stock rank on a parity with each other and prior to the
Company's common stock.

     On August 28, 1998, the Company held its annual shareholders meeting at
which its shareholders approved the vesting of voting rights in respect of the
Series B Preferred Stock and the issuance, subject to adjustment, of up to
6,730,000 shares of common stock upon exercise of the Series B Warrants. This
approval resulted in the reduction of the dividend on the Series B Preferred
Stock to 8% (8.243216% prior to May 13, 2000) and an increase in the voting
rights of TPG to approximately 22.1% of the combined voting power of the
Company's then outstanding common stock and Series A and Series B Preferred
Stock.

     On February 13, 1999, the Company entered into a Share Exchange Agreement
(the "Exchange Agreement") with TPG, its affiliates and others to make an
adjustment of the dividends payable on shares of Series A Preferred Stock and
Series B Preferred Stock in connection with the possible sale of shares of
Preferred Stock by the holders thereof to institutional holders. Pursuant to the
Exchange Agreement, the 245,000 shares of Series A Preferred Stock were
exchanged for 260,146.909 shares of a new Series D Preferred Stock (the "Series
D Preferred Stock"), and the 105,000 shares of Series B Preferred Stock were
exchanged for 111,820.831 shares of a new Series E Preferred Stock (the "Series
E Preferred Stock"). In the exchange, (1) a holder received in exchange for each
share of Series A Preferred Stock, one share of Series D Preferred Stock, plus
0.061824118367 share of Series D Preferred Stock representing dividends on the
Series A Preferred Stock accrued and unpaid through February 13, 1999, and (2) a
holder received in exchange for each share of Series B Preferred Stock, one
share of Series E Preferred Stock, plus 0.064960295238 share of Series E
Preferred Stock representing dividends on the Series B Preferred Stock accrued
and unpaid through February 13, 1999. As a result of the exchange, the holders
hold only Series D preferred Stock and Series E Preferred Stock. On March 9,
1999, the Company filed Certificates of Elimination for the Series A Preferred
Stock and the Series B Preferred Stock that have the effect of eliminating from
the Certificate of Incorporation all matters set forth in the Certificates of
Designations with respect to the Series A Preferred Stock and the Series B
Preferred Stock. The terms of the shares of the Series D Preferred Stock are
identical to the terms of the Series A Preferred Stock, except that the Series D
Preferred Stock accumulates cash dividends at the rate of 5.12981% per annum,
payable quarterly, provided that prior to May 13, 2000, the Series D Preferred
Stock accumulates dividends at a rate of 5.319521% per annum, payable annually
in cash or additional shares of Series D Preferred Stock, at the option of the
Company. The terms of the shares of the Series E Preferred Stock are identical
to the terms of the shares of the Series B Preferred Stock, except that the
Series E Preferred Stock accumulates cash dividends at a rate of 14% per annum,
payable quarterly, provided that prior to May 13, 2000, the Series E Preferred
Stock accumulates dividends at a rate of 14.589214% per annum, payable annually
in cash or additional shares of Series E Preferred Stock, at the option of the
Company. In addition, prior to May 13, 2001, the holders of the Series D
Preferred Stock may not use the Series D Preferred Stock in connection with the
exercise of the Warrants, unless they use a percentage of the total amount of
Series D Preferred Stock issued on February 13, 1999 that does not exceed the
percentage of the total number of shares of Series E Preferred Stock issued on


                                       65
<PAGE>   66
February 13, 1999 that have been redeemed, repurchased or retired by the
Company, or used as consideration in connection with the exercise of the
Warrants by the holders. With respect to dividend rights, the Series D Preferred
Stock and Series E Preferred Stock rank on a parity with each other and prior to
the Company's common stock.

     The aggregate cost to the Company of dividends on the Series D Preferred
Stock and Series E Preferred Stock is the same as the aggregate cost to the
Company of dividends on the Series A Preferred Stock and Series B Preferred
Stock. The respective voting rights of the holders of the Series A Preferred
Stock and Series B Preferred Stock have not changed as the result of the
exchange of such shares for shares of Series D Preferred Stock and Series E
Preferred Stock. The exchange had no effect on the consolidated balance sheet as
the issuance of additional redeemable preferred stock effected the in-kind
payment of the accrued redeemable preferred stock dividend which had previously
been credited to redeemable preferred stock. In the Company's view, there was no
difference in the aggregate fair value between the redeemable preferred stock
issued in the exchange and the redeemable preferred stock canceled in the
exchange.

     Pursuant to the provisions of the Series D Preferred Stock and Series E
Preferred Stock, on May 13, 1999, the Company issued (a) a dividend in the
amount of $13.2988 per share of Series D Preferred Stock in the form of shares
of such Series D Preferred Stock to the holders of record as of April 28, 1999,
and (b) a dividend in the amount of $36.4730 per share of Series E Preferred
Stock in the form of shares of such Series E Preferred Stock to the holders of
record as of April 28, 1999.

     Activity for redeemable preferred stock is as follows:
<TABLE>
<CAPTION>

(In thousands)                                                    1999             1998
---------------------------------------------------------------------------------------
<S>                                                          <C>              <C>
Beginning balance                                            $ 298,816        $    --
Issuance of preferred stock, net of issuance expenses             --            338,148
Discount allocated to detachable warrants                         --            (67,000)
Accrued  in-kind dividends                                      30,486           18,548
Amortization of discount                                        12,650            7,555
Amortization of issuance expenses                                2,364            1,565
---------------------------------------------------------------------------------------
Ending balance                                               $ 344,316        $ 298,816
=======================================================================================
</TABLE>

     Under certain circumstances, the Company has the right to exchange the
Series D Preferred Stock or the Series E Preferred Stock on any dividend payment
date for junior subordinated debentures issued pursuant to an indenture. The
indenture that would govern the junior subordinated debentures would have terms
comparable to the terms of the series of Preferred Stock that is exchanged,
including an interest rate that is the same as the dividend rate on that series
of Preferred Stock.

     Simultaneously with closing of the Investment Agreement, Norman C. Payson,
M.D., the Company's Chief Executive Officer, purchased 644,330 shares of Oxford
common stock at an aggregate purchase price of $10 million pursuant to his
employment agreement. The common stock issued to Dr. Payson was issued without
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, which provides an exemption for transactions not involving any
public offering.

     The aggregate proceeds of $710 million related to the Senior Notes, Term
Loan, common stock sale to Dr. Payson and the Investment Agreement were
utilized, in part, to retire the previously outstanding Bridge Notes, make
capital contributions to certain regulated subsidiaries and pay fees and
expenses related to the transactions. The balance has been and will be used for
subsidiary capital contributions, as necessary, and for general corporate
purposes.

     On February 29, 2000, the Company repurchased 28,780 shares of Series D
Preferred Stock for approximately $30 million and 89,616 shares of Series E
Preferred Stock for approximately $100 million.


                                       66
<PAGE>   67
(8)    COMMON STOCK

     On March 17, 1997, Oxford's Board of Directors unanimously adopted a
resolution authorizing an amendment to Oxford's certificate of incorporation to
increase the number of authorized shares of common stock from 200 million shares
to 400 million shares, subject to shareholder approval. On April 22, 1997, the
Company's shareholders approved such amendment.

(9)    STOCK OPTION PLANS

     The Company grants fixed stock options under its 1991 Stock Option Plan, as
amended (the "Employee Plan"), to certain key employees and consultants, under
its 1997 Independent Contractor Stock Option Plan (the "Independent Contractor
Plan") to certain independent contractors who materially contribute to the
long-term success of the Company and under its Nonemployee Directors' Stock
Option Plan, as amended (the "Nonemployee Plan"), to outside directors to
purchase common stock at a price not less than 100% of quoted market value at
date of grant.

     The Employee Plan provides for granting of nonqualified stock options and
incentive stock options which vest as determined by the Company and expire over
varying terms, but not more than seven years from date of grant. The Employee
Plan is administered by a compensation committee currently comprised of four
members of the Board of Directors, selected by the Board. The committee
determines the individuals to whom awards shall be granted as well as the terms
and conditions of each award, the grant date and the duration of each award. All
options are initially granted at fair market value on date of grant. The
Company's previous nonqualified employee stock option plan terminated in 1991,
except as to options theretofore granted.

     The Independent Contractor Plan provides for granting of nonqualified stock
options which vest as determined by the Company and expire over varying terms,
but not more than seven years from the date of grant. The Employee Plan and the
Independent Contractor Plan are administered by a committee consisting of five
members of the Board of Directors, selected by the Board. The committee
determines the individuals to whom awards shall be granted as well as the terms
and conditions of each award, the grant date and the duration of each award. All
options are granted at fair market value on the date of the grant.

     The Nonemployee Plan provides for granting of nonqualified stock options to
eligible nonemployee directors of the Company. The plan provides that each year
on the first Friday following the Company's annual meeting of stockholders, each
individual elected, re-elected or continuing as a nonemployee director will
automatically receive a nonqualified stock option for 5,000 shares of common
stock with an exercise price at the fair market value on that date. The plan
further provides that one-fourth of the options granted under the plan vest on
each of the date of grant and the Friday prior to the second, third and fourth
annual meeting of stockholders following the date of such grant.


                                       67
<PAGE>   68
     Stock option activity for all fixed option plans, adjusted for all stock
splits, is summarized as follows:
<TABLE>
<CAPTION>

                                                             Weighted-Average
                                                Shares       Exercise Prices
----------------------------------------------------------------------------
<S>                                          <C>                   <C>
   Outstanding at January 1, 1997              9,291,812             $18.25
    Granted                                    3,332,186              72.58
    Exercised                                 (2,098,157)             10.14
    Cancelled                                   (319,012)             37.35
--------------------------------------------------------
    Outstanding at December 31, 1997          10,206,829              37.06
    Granted                                   11,810,173              12.95
    Exercised                                   (397,103)              6.67
    Cancelled                                 (6,319,168)             46.41
--------------------------------------------------------
    Outstanding at December 31, 1998          15,300,731              15.40
    Granted                                    3,634,141              16.74
    Exercised                                 (1,470,585)             12.35
    Cancelled                                 (2,201,930)             22.51
--------------------------------------------------------
    Outstanding at December 31, 1999          15,262,357             $15.04
===========================================================================
    Exercisable at December 31, 1999           5,842,259             $15.50
===========================================================================
</TABLE>

     As of December 31, 1999, there were 18,384,534 shares of common stock
reserved for issuance under the plans, including 3,122,177 shares reserved for
future grant. In addition, there were 22,530,000 shares of common stock reserved
for issuance in connection with the warrants issued to TPG (see note 7).

     With the exception of the options described in the next paragraph, the
Company, as of October 1, 1998, offered certain option holders the right to
exchange unexercised options granted subsequent to January 10, 1995 and prior to
December 2, 1997 for options equal to one-half the number of unexercised shares
exchanged. Exercise prices of options granted during that period ranged from
$21.22 per share to $85.812 per share. The options received in exchange were
granted at the then current market value of $9.875 per share and vest over a
period of three years. A total of 1,234,464 original option shares were
exchanged. The Directors, the Chairman, the President, the Chief Executive
Officer and certain Executive Vice Presidents were not permitted to participate
in this exchange.

     On August 8, 1997, the Company granted a total of 3,162,436 options under
the Employee Plan and the Independent Contractor Plan to employees and certain
independent contractors of the Company with an exercise price of $74.00. As a
consequence of the significant decrease in the market price of the Company's
common stock in the fourth quarter of 1997, in order to ensure that options
granted in 1997 provide a meaningful incentive to the grantees, the Board of
Directors, on December 13, 1997, approved an option reissuance grant for
employees and certain independent contractors. All of the Directors, the
Chairman, the President, the Chief Executive Officer and Executive Vice
Presidents (other than one Executive Vice President, who commenced employment in
October 1997) were excluded from the reissuance grant. Under the reissuance
grant, the grantees were offered the right to cancel options granted during 1997
and receive options to purchase the same number of shares so canceled with a
grant date of January 2, 1998 and an exercise price of $17.125 per share.

     Under the terms of an employment agreement, Norman C. Payson, M.D., the
Chief Executive Officer of the Company, was granted on February 23, 1998 a
nonqualified stock option (the "Option") to purchase 2,000,000 shares of common
stock at an exercise price of $15.52 per share and, in August 1998, a
nonqualified stock option (the "Additional Option") was granted to purchase an
additional 1,000,000 shares of Company common stock under the 1991 Stock Option
Plan. The Option generally provides that 800,000 shares will vest on February
23, 1999, and that the remaining 1,200,000 shares will vest ratably on a monthly
basis over the 36 month period ending February 23, 2002, provided in each case
that Dr. Payson is employed by the Company on the applicable vesting date. The
Option also provides for acceleration of vesting and extended exercisability
periods in certain circumstances, including certain terminations of employment
and a change in control (as defined in the Employee Plan) of the Company. The
difference between the exercise price and the fair market

                                       68
<PAGE>   69
value of the shares subject to the Option on the date of issuance has been
accounted for as unearned compensation and is being amortized to expense over
the period restrictions lapse. Unearned compensation charged to operations in
1999 and 1998 was approximately $2.2 million and $3.2 million, respectively. The
Additional Option has an exercise price equal to $6.0625, vests ratably over the
four years from the date of grant, and is otherwise subject to the terms and
conditions of the Employee Plan. The Additional Option also provides for
accelerated vesting following a change in control (as defined in the Employee
Plan). Nonqualified options to acquire a total of 1,600,000 shares of the
Company's common stock at the then current market prices were granted to two
executive officers of the Company on March 30, 1998 and December 30, 1999.

     In the fourth quarter of 1999, terms of the option agreements between the
Company and two former executives were amended to allow for an extension of the
exercise period. As a result, the Company recorded additional compensation
expense of $4.2 million ($2.5 million net of deferred tax benefits).

     Information about fixed stock options outstanding at December 31, 1999, is
summarized as follows:
<TABLE>
<CAPTION>

                                                                            Weighted -
                                                       Weighted -            Average
             Range of               Number               Average            Remaining
          Exercise Prices         Outstanding       Exercise Price       Contractual Life
      ------------------------   --------------------------------------------------------
<S>                              <C>               <C>                 <C>
         $ 0.32 -  $  5.00           299,392           $ 0.98              1.0 Years
           5.01 -    10.00         4,186,466             6.88              3.2 Years
          10.01 -    15.00         1,178,750            12.52              6.5 Years
          15.01 -    20.00         8,589,428            16.65              4.0 Years
          20.01 -    25.00           496,367            23.68              1.1 Years
          25.01 -    50.00           231,954            45.44              1.8 Years
          50.01 -    74.00           280,000            72.96              3.0 Years
                                  ---------------------------
         $ 0.32 -  $ 74.00        15,262,357           $15.04              3.8 Years
      ==========  =========       ===========================
</TABLE>



     Information about fixed stock options exercisable at December 31, 1999, is
summarized as follows:
<TABLE>
<CAPTION>

                                                                   Weighted -
                   Range of               Number                     Average
                Exercise Prices         Exercisable            Exercise Price
            ------------------------   --------------------------------------
<S>                                    <C>                    <C>
               $ 0.32 -    $ 5.00             299,392                $ 0.98
                 5.01 -     10.00           1,780,830                  7.32
                10.01 -     15.00             105,000                 13.19
                15.01 -     20.00           2,842,885                 16.03
                20.01 -     25.00             489,367                 23.71
                25.01 -     50.00             179,785                 45.45
                50.01 -     74.00             145,000                 72.49
                                       ------------------------------------
               $ 0.32 -   $ 74.00           5,842,259                $15.50
               ======     =======      ====================================
</TABLE>


                                       69
<PAGE>   70
     The Company applies APB Opinion No. 25 and related interpretations in
accounting for the plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans other than for modifications of option terms
that result in new measurement dates. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the grant dates
for grants under these plans consistent with the methodology of SFAS 123, the
Company's net earnings (loss) and earnings (loss) per share for the years ended
December 31, 1999, 1998 and 1997, would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>

(In thousands, except per share amounts)                                   1999               1998               1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>                 <C>                <C>                <C>
Net earnings (loss) for common shares                As reported       $   274,440        $  (624,460)       $  (291,288)
                                                     Pro forma         $   244,422        $  (711,311)       $  (315,188)

Basic earnings (loss) per share                      As reported       $      3.38        $     (7.79)       $     (3.70)
                                                     Pro forma         $      3.01        $     (8.88)       $     (4.01)

Diluted earnings (loss) per share                    As reported       $      3.26        $     (7.79)       $     (3.70)
                                                     Pro forma         $      2.90        $     (8.88)       $     (4.01)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>

     The per share weighted-average fair value of stock options granted was
$8.21, $9.00 and $40.03 during 1999, 1998, and 1997, respectively, estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants: no dividend yield for
any year; expected volatility of 73.67%, 72.94% and 69.56%, risk-free interest
rates of 5.66%, 5.33% and 6.15% in 1999, 1998 and 1997, respectively, and
expected lives of four years for all years.

     Pro forma net income reflects only options granted since 1995. Therefore,
the full impact of calculating compensation cost for stock options under SFAS
123 is not reflected in the pro forma net income amounts presented for 1997
because compensation cost is reflected over the options' vesting period of four
years and compensation cost for options granted prior to January 1, 1995 is not
considered.

(10)   LEASES

     Oxford leases office space and equipment under capital and operating
leases. Rent expense under operating leases for the years ended December 31,
1999, 1998, and 1997 was approximately $14.8 million, $31 million and $22.6
million, respectively. The Company's lease terms range from one to seven years
with certain options to renew. Certain lease agreements provide for escalation
of payments based on fluctuations in certain published cost-of-living indices.

     Property held under capital leases is summarized as follows:
<TABLE>
<CAPTION>
(In thousands)                                             1999          1998
--------------------------------------------------------------------------------
<S>                                                     <C>            <C>
Computer equipment                                       $ 35,471       $ 39,792
Other equipment                                               671            671
--------------------------------------------------------------------------------
    Gross                                                  36,142         40,463
Less accumulated amortization                             (19,543)        (7,940)
--------------------------------------------------------------------------------
    Net capital lease assets                             $ 16,599       $ 32,523
================================================================================
</TABLE>


                                       70
<PAGE>   71
     Future minimum lease payments required under capital and operating leases
that have initial or remaining noncancelable lease terms in excess of one year
at December 31, 1999 were as follows:
<TABLE>
<CAPTION>

                                                       Capital         Operating
(In thousands)                                         Leases           Leases
---------------------------------------------------------------------------------
<S>                                                   <C>              <C>
2000                                                    $ 12,812         $ 16,500
2001                                                       6,704           16,900
2002                                                            -          13,800
2003                                                            -          12,100
2004                                                            -           9,400
Thereafter                                                      -           8,400
---------------------------------------------------------------------------------
Total minimum future rental payments                      19,516         $ 77,100
                                                                     ============
Less amount representing interest                         (1,262)
------------------------------------------------------------------
Present value of minimum lease payments                   18,254
Less current maturities                                  (12,467)
------------------------------------------------------------------
Obligations under capital leases                        $  5,787
==================================================================
</TABLE>


     The above amounts for operating leases are net of future minimum subrentals
aggregating approximately $11.4 million.

(11)   ACQUISITIONS

     As of August 1, 1997, the Company acquired all of the outstanding stock of
Compass PPA, Incorporated, the holding company for a Chicago-based HMO, for
approximately $8.2 million in cash. The acquisition was recorded as a purchase
and resulted in goodwill of approximately $24.1 million. Subsequent to the
acquisition, the Company decided to reduce the level of its future investment in
expansion markets and, based on an analysis of the negative cash flows of this
Illinois company, determined that the carrying amount in excess of tangible book
value of its investment was not recoverable. Accordingly, the Company, as of
December 31, 1997, wrote off the remaining unamortized goodwill of $23.4
million.

     On November 3, 1997, the Company acquired all of the outstanding stock of
Riscorp Health Plans, Inc., a Florida-based HMO, for approximately $5.3 million
in cash. The acquisition was recorded as a purchase and resulted in goodwill of
approximately $3.9 million. During 1998, the Company made an additional
contingent payment of $1.3 million. Subsequent to the acquisition, the Company
decided to reduce the level of its future investment in expansion markets and,
based on an analysis of the negative cash flows of this Florida company,
determined that the carrying amount in excess of tangible book value of its
investment was not recoverable. Accordingly, the Company wrote off the goodwill
of $3.9 million in 1997 and the contingent payment of $1.3 million in 1998.

     Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
permits evaluation of asset value and impairment based upon present value of
expected cash flows, using discount rates commensurate with the risks involved.
Based on decisions not to make additional investments and projected negative
cash flow, asset values of the above investments were deemed to be equal to
tangible net assets, which consisted primarily of cash and marketable securities
held to pay claims and premiums receivable.

     These acquisitions were accounted for by the purchase method and have been
included from the date of acquisition. The pro forma effects of the acquisitions
on the consolidated results of operations for the year ended December 31, 1997
assuming these acquisitions had occurred as of January 1, 1996, is not material
and has not been presented.

<PAGE>   72
(12)   RELATED PARTY TRANSACTIONS

     In October 1997, the Company disposed of its 47% interest in Health
Partners, Inc. ("Health Partners") in a pooling of interests transaction. Health
Partners was established to provide management and administrative services to
physicians, medical groups and other providers of health care. The investment
had been accounted for using the equity method. Under this method, the Company
recognized losses of $1.1 million in 1997. The Company received 2,090,109 shares
of common stock of FPA Medical Management, Inc. ("FPAM") with a market value as
of the closing of approximately $76.4 million, resulting in a pretax gain at the
time of closing of approximately $63.1 million. As of December 31, 1997, the
market value of the FPAM stock had been reduced to approximately $38.4 million.
Because management believed that the decline was other than temporary, the
Company, as of December 31, 1997, wrote down its investment in FPAM by $38
million. As a result, the Company ultimately recognized in 1997 a pretax gain of
approximately $25.2 million ($20.5 million after taxes, or $.26 per share) on
the sale of Health Partners. During 1998, the Company wrote down to nominal
value its remaining investment in FPAM (see note 14). The Company contracts with
provider groups managed by Health Partners in the Company's service areas.

     Oxford provided $14.3 million in equity and debt financing, representing a
19.9% interest, to St. Augustine Health Care, Inc. ("St. Augustine"). As of
December 31, 1997, the Company decided to reduce the level of its future
investment in expansion markets. The Company determined that its investment in
St. Augustine was worthless after attempts to dispose of the investment through
a sale process failed. During 1997, the Company wrote off the $14.3 million
carrying value of its investment in the capital stock and subordinated surplus
notes of St. Augustine. The Company fully disposed of its interest in St.
Augustine in October 1998 for consideration of less than one thousand dollars.
No gain or loss was recognized on the transaction.

(13)   RESTRUCTURING CHARGES

     During the third quarter of 1999, the Company recorded pretax restructuring
charges totaling $19.9 million ($11.3 million after income tax benefits, or
$0.13 per diluted share) in connection with additional steps taken under the
Company's plan ("Turnaround Plan") to improve operations and restore the
Company's profitability. These charges included estimated costs related to: (i)
$8.7 million for severance costs associated with work force reductions; (ii)
$7.4 million of costs associated with additional consolidation of the Company's
office facilities inclusive of the net write-off of $6.4 million in fixed
assets, consisting primarily of leasehold improvements; (iii) $4.3 million for
the write-off of certain computer equipment; and (iv) $1.7 million related to
leases for equipment no longer used in operations. These charges were partially
offset by a pretax gain of $2.5 million related to the disposal of the Company's
minority investment in Ralin Medical, Inc., which was written down in value as
part of the Company's 1998 restructuring charge.

     During the first half of 1998, the Company recorded restructuring charges
totaling $123.5 million ($114.8 million after income tax benefits, or $1.43 per
share). These charges resulted from the Company's actions to better align its
organization and cost structure as part of the Company's Turnaround Plan. These
charges included estimated costs related to: (i) $55.7 million associated with
the disposition or closure of noncore businesses; (ii) $29.3 million for the
write down of certain property and equipment; (iii) $24.8 million for severance
and related costs; and (iv) $13.7 million for net costs of operations
consolidation, including long term lease commitments. The ending reserves for
these charges were generally classified in the Company's balance sheet as
accounts payable and accrued expenses with the exception of property and
equipment, which were written down to their estimated net realizable values.




                                       72
<PAGE>   73
     The tables below present the activity for the restructuring charge reserves
established in 1999 and 1998 as part of the Turnaround Plan.


<TABLE>
<CAPTION>
                                                  1998           Cash                                    12/31/98
                                              Restructuring    Received     Noncash      Changes in   Restructuring
(In thousands)                                   Charges        (Used)      Activity      Estimate       Reserves
--------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>         <C>           <C>           <C>
Provisions for loss on noncore businesses       $  55,700     $  (9,827)  $ (18,725)    $  (13,343)      $  13,805
Write down of property and equipment               29,272           --      (28,267)        (1,005)          --
Severance and related costs                        24,800        (4,246)    (11,200)          --             9,354
Costs of consolidating operations                  13,728          (548)       --             4,505         17,685
                                            ------------------------------------------------------------------------
                                                $ 123,500     $ (14,621)  $ (58,192)     $  (9,843)      $  40,844
                                            ========================================================================
</TABLE>

<TABLE>
<CAPTION>

                                                12/31/98         Cash                      1999                        12/31/99
                                             Restructuring     Received     Noncash     Restructuring   Changes in   Restructuring
(In thousands)                                  Reserves        (Used)      Activity      Charges         Estimate      Reserves
----------------------------------------------------------------------------------------------------------------------------------

<S>                                          <C>               <C>          <C>         <C>             <C>          <C>
Provisions for loss on noncore businesses       $  13,805       $  4,343    $(14,493)     $    --          $(1,590)    $   2,065
Severance and related costs                         9,354        (10,380)       --            8,750            --          7,724
Costs of consolidating operations                  17,685        (14,272)        --           3,003          1,590         8,006
                                            --------------------------------------------------------------------------------------
                                                $  40,844       $(20,309)   $(14,493)     $  11,753        $   --      $  17,795
                                            ======================================================================================
</TABLE>


     The Company believes that the remaining restructuring reserves as of
December 31, 1999 are adequate and that no revisions of estimates are necessary
at this time.

     Provisions for loss on noncore business

     As part of its Turnaround Plan, the Company decided to withdraw from
noncore markets by selling or closing its HMO and insurance businesses in
Pennsylvania, Illinois, Florida and New Hampshire. Total premium revenue for
these businesses in 1998 was approximately $170.4 million, with operating losses
totaling approximately $37 million. In addition, the Company decided to close
its specialty management initiatives and to sell or close certain other health
care services operations and investments in noncore businesses. Restructuring
reserves were established relating to estimated losses associated with premium
deficiencies in the HMO and insurance subsidiaries to be sold or closed, the net
book value of noncore investments was reduced to their estimated recoverable
value, and accruals were recorded for incremental disposition and closing costs
associated with the Turnaround Plan. The Company estimated the net recovery of
its investments in these entities by evaluating the assets and operations for
impairment. This evaluation included an assessment of asset recoverability for
these entities, premium deficiency analysis assuming timely exit of these
noncore markets and the establishment of premium deficiency reserves, estimated
incremental disposition and closing costs including professional services and
anticipated proceeds related to the disposition of assets. In determining the
estimated fair values, the Company reviewed detailed asset listings for each
location to be vacated. Based upon the asset classification, acquisition date
and anticipated net proceeds, if any, upon disposition, as determined by the
Company, the assets were written down to estimated fair value. The fair values
were determined based on the best information available in the circumstances,
including prior experience in disposing of similar assets and discussions with
potential purchasers of the assets. The Company substantially completed the
disposition of all of the property and equipment in 1999. The Company calculated
premium deficiency reserves based upon expected premium revenue, medical expense
and administrative expense levels and remaining contractual obligations using
the Company's historical experience. Of the $55.7 million originally recorded as
provision for loss on noncore businesses in 1998, $25.2 million related to
premium deficiency reserves, $27.9 million related to asset valuation
write-downs and reserves, $2.2 million related to accounting fees to be incurred
for final statutory audits and legal fees to be incurred in connection with
preparation of agreements for sale or disposition of assets and brokerage costs
and $0.4 million related to defined severance arrangements for employees of
these entities. Approximately 250 employees in the noncore businesses have been
terminated since June 30, 1998.


                                       73
<PAGE>   74
     The cash activity during 1999 is comprised of proceeds of $7.1 million
related to the sale of the Company's Pennsylvania subsidiary, partially offset
by $2.8 million in cash payments for medical and other costs as the operations
were disposed of or shut-down. The non-cash activity represents the specific
write-off of the net assets of the noncore businesses. Due to recoveries greater
than anticipated, the Company has revised its estimate of the remaining costs
associated with the final disposition or closure of these operations and
investments. Reserves of $1.6 million were re-allocated to costs of
consolidating operations in the fourth quarter of 1999. As of December 31, 1999,
the ending reserve of $2.1 million represents a full valuation allowance for
noncore assets yet to be disposed of and an estimate of remaining legal costs
related to the disposition of the related noncore businesses.

     Severance and related costs

     The Company's Turnaround Plan contemplated significant changes in the
Company's senior management and, in connection therewith, fifteen members of
senior management were replaced and certain members of the former management
team were granted severance arrangements. As a result, the Company recorded
restructuring charges related to severance costs of $24.8 million in 1998. In
the third quarter of 1999, the Company recorded an additional $8.8 million for
severance and related costs as a result of an additional reduction in force in
which approximately 650 employees were terminated. The cash activity during 1999
reflects payments to former employees in accordance with their respective
severance arrangements. The December 31, 1999 balance represents contracted
amounts payable through the first half of 2001 and is related to individuals who
are no longer employed by the Company.

     Costs of consolidating operations

     During 1998, the costs of consolidating operations reserve was established
for $13.7 million of estimated costs associated with future rental obligations
(net of estimated sublease revenues), commissions, legal costs, penalties and
other expenses relating to disposition of excess space. The Company vacated its
leased space located in Philadelphia, Pennsylvania; Edison, New Jersey; Chicago,
Illinois; Sarasota, Florida; Norwalk, Connecticut; and one of two facilities in
Milford, CT. In addition, the amount of leased space located in New York, New
York and White Plains, New York was reduced. The Company recorded an additional
restructuring charge of approximately $4.5 million in the fourth quarter of 1998
as a change in estimate as the Company's experience in negotiating subleases and
lease cancellations through the fourth quarter indicated that costs would exceed
previous estimates.

     During the third quarter of 1999, the Company recorded an increase of $3
million to this reserve for the net costs associated with relocating its
corporate headquarters and the cessation of operations at its Ireland facility.
Additionally, as a result of revisions in the estimates related to the 1998
reserves, $1.6 million was added to the reserves in the fourth quarter of 1999.
The Company's related lease obligations for these properties extend to July
2005.

     The remaining costs of the operations consolidations reserve is comprised
of the following estimated costs associated with the disposition of leased space
no longer used in operations:

<TABLE>
<CAPTION>
(In millions)                                                                                     1999          1998
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>           <C>
Gross future minimum rentals                                                                     $ 16.6        $ 26.1
Sublease income                                                                                   (12.9)        (14.0)
Lease termination penalties                                                                         3.4           2.5
Other costs                                                                                         0.9           3.1
-------------------------------------------------------------------------------------------------------------------------
  Total operations consolidation reserve                                                         $  8.0        $ 17.7
=========================================================================================================================
</TABLE>


     Write down of property and equipment

     As discussed above during the third quarter of 1999, the Company recorded
an additional restructuring charge which included $10.7 million of costs
associated with the continued consolidation of the Company's office facilities.
The majority of these costs were associated with relocating its corporate
headquarters and the


                                       74
<PAGE>   75
cessation of operations at its Ireland facility. The charges were comprised of
the net write-off of $6.4 million in fixed assets (primarily leasehold
improvements) and $4.3 million for the write-off of computer equipment no longer
used in operations.

     During 1998, in connection with the Company's attempts to reduce
administrative costs under the Turnaround Plan, the Company decided to
consolidate operations and reduce its occupied square footage from approximately
2 million square feet under lease to approximately 1.2 million square feet. The
Company attempts to dispose of property and equipment as it vacates the
facilities. The 1998 estimate for write down of property and equipment included
provisions for the estimated losses related to vacating certain facilities in
connection with the Company's Turnaround Plan. The 1998 charge included an
estimated provision for loss related to leasehold improvements ($12.5 million),
office furniture ($11.8 million), computers and office equipment ($4 million)
and software ($1 million). In determining the estimated fair values, the Company
reviewed detailed asset listings for each location to be vacated. Based upon the
asset classification, acquisition date and anticipated net proceeds, if any,
upon disposition, as determined by the Company, the assets were written down to
their estimated fair value. The fair values were determined based on the best
information available in the circumstances, including prior experience in
disposing of similar assets and discussions with potential purchasers of the
assets. Additionally, the Company anticipated and experienced a reduction in
workforce of over 1,000 employees as a result of this consolidation and its
administrative expense reduction plan. The Company completed the disposition or
sale of these assets during 1999.

(14)   WRITE DOWNS OF STRATEGIC INVESTMENTS

     The Company disposed of its 47% interest in Health Partners in October 1997
and received 2,090,109 shares of common stock of FPAM stock with a market value
of approximately $76.4. million, resulting in a pretax gain of approximately
$63.1 million. As of December 31, 1997, the market value of the FPAM stock had
dropped to approximately $38.4 million. At year-end 1997, the Company wrote down
its investment in FPAM by $38 million, thereby reducing the pretax 1997 gain on
the sale of Health Partners to approximately $25.2 million ($20.5 million after
taxes, or $.26 per share).

     During the second quarter of 1998, the Company sold 540,000 shares of FPAM
and recognized a loss of $8.1 million. In July 1998, FPAM filed for protection
under Chapter 11 of the U.S. Bankruptcy Code and the market value per share of
its common stock fell below one dollar. The Company wrote its remaining
investment in FPAM down to nominal value and recognized a loss in the second
quarter of 1998 of $30.2 million. The total 1998 recognized loss and write down
of $38.3 million, or $.49 per share, has been recognized as write downs of
strategic investments in the accompanying financial statements.

     The 1997 charges resulted from a reduction in the level of future
investment in expansion markets and, accordingly, the Company wrote down its
investments in two subsidiaries (see note 11) and one affiliate (see note 12).
These write downs have been shown as write downs of strategic investments in the
accompanying financial statements and are summarized as follows:

<TABLE>
<CAPTION>
(In thousands)                                                                                                        1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                               <C>
Compass PPA, Incorporated                                                                                         $ 23,427
Riscorp Health Plans, Inc.                                                                                           3,894
St. Augustine Health Care, Inc.                                                                                     14,297
---------------------------------------------------------------------------------------------------------------------------
    Total                                                                                                         $ 41,618
===========================================================================================================================
</TABLE>

(15)   DEFINED CONTRIBUTION PLAN

     The Company has a qualified defined contribution plan (the "Savings Plan")
that covers all employees with six months of service and at least a part-time
employment status as defined. The Savings Plan also provides that the Company
make matching contributions, up to certain limits, of the salary contributions
made by the participants. The Company's contributions to the Savings Plan were
approximately $2.1 million, $2.8 million and $3.2 million in 1999, 1998 and
1997, respectively.


                                       75
<PAGE>   76
(16)   REGULATORY AND CONTRACTUAL CAPITAL REQUIREMENTS

    Certain restricted investments at December 31, 1999 and 1998 are held on
deposit with various financial institutions to comply with federal and state
regulatory capital requirements. As of December 31, 1999, approximately $61.6
million was so restricted and is shown as restricted investments in the
accompanying balance sheet. With respect to the Company's New York subsidiaries,
the minimum amount of surplus required is based on a formula established by the
New York State Insurance Department. These statutory surplus requirements
amounted to approximately $133.3 million and $130 million at December 31, 1999
and 1998, respectively.

     In addition to the foregoing requirements, the Company's HMO and insurance
subsidiaries are subject to certain restrictions on their abilities to make
dividend payments, loans or other transfers of cash to Oxford. Such restrictions
limit the use of any cash generated by the operations of these entities to pay
obligations of Oxford and limit the Company's ability to declare and pay
dividends.

     During 1999 and 1998, the Company made cash contributions to its HMO and
insurance subsidiaries of approximately $4.5 million and $537.5 million,
respectively. The capital contributions were made to ensure that each subsidiary
had sufficient surplus under applicable regulations after giving effect to
operating results and reductions to surplus resulting from the non-admissibility
of certain assets.

(17)   CONCENTRATIONS OF CREDIT RISK

    Concentrations of credit risk with respect to premiums receivable are
limited due to the large number of employer groups comprising the Company's
customer base. As of December 31, 1999 and 1998, the Company had no significant
concentrations of credit risk. Financial instruments which potentially subject
the Company to concentrations of such credit risk consist primarily of
short-term investments in equity securities, obligations of the United States
government, certain state governmental entities and high-grade corporate bonds
and notes. These investments are managed by professional investment managers
within the guidelines established by the Board of Directors, which, as a matter
of policy, limit the amounts which may be invested in any one issuer and
prescribe certain minimum investee company criteria. The Company's commercial
and Medicare business is concentrated in New York, New Jersey and Connecticut,
with more than 80% of its tri-state premium revenues received from New York
business. As a result, changes in regulatory, market or health care provider
conditions in any of these states, particularly New York, could have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, the Company's revenue under its contracts with HCFA
represented approximately 18% of its premium revenue earned during 1999.

(18)   CONTINGENCIES

    Following the October 27, 1997 decline in the price per share of the
Company's common stock, more than fifty purported securities class action
lawsuits were filed against the Company and certain of its officers and
directors in the United States District Courts for the Southern and Eastern
Districts of New York, the District of Connecticut and the District of Arkansas.
In addition, purported shareholder derivative actions were filed against the
Company, its directors and certain of its officers in the United States District
Courts for the Southern District of New York and the District of Connecticut,
and Connecticut Superior Court. The purported securities class and derivative
actions assert claims arising out of the October 27 decline in the price per
share of the Company's common stock. The purported class actions are now all
consolidated before Judge Charles L. Brieant of the United States District Court
for the Southern District of New York. The purported federal derivative actions
have been consolidated before Judge Brieant for all purposes, and any discovery
in the Connecticut derivative actions will be coordinated with discovery in the
federal derivative actions under the supervision of Judge Brieant. The State
Board of Administration of Florida has filed an individual action against the
Company and certain of its officers and directors, which is also now pending in
the United States District Court for the Southern District of New York,
asserting claims arising from the October 27 decline in the price per share of
the Company's common stock. Additional purported securities class, shareholder
derivative, and individual actions may be filed against the Company and certain
of its officers and directors asserting claims arising from the October 27
decline in the price per share of the Company's common stock. Although the
outcome of these actions cannot be predicted at


                                       76
<PAGE>   77
this time, the Company believes that the defendants have substantial defenses to
the claims asserted in the complaints and intends to defend the actions
vigorously. In addition, the Company is currently being investigated and is
undergoing examinations by various state and federal agencies, including the
Securities and Exchange Commission, various state insurance departments, and the
New York State Attorney General. The outcome of these investigations and
examinations cannot be predicted at this time.

    In the fourth quarter of 1999, the Company acquired new insurance policies
providing additional coverage of certain legal defense costs, including
judgments and settlements, if any, incurred by the Company and individual
defendants in certain pending lawsuits and investigations, including, among
others, the securities class action pending against the Company and certain of
its directors and officers and the pending stockholder derivative actions.
Subject to the terms of the policies, the insurers have agreed to pay 90% of the
amount, if any, by which covered costs exceed $175 million, provided that the
aggregate amount of insurance under these new policies is limited to $200
million and the aggregate amount of new insurance in respect of defense costs
other than judgments and settlements, if any, is limited to $10 million. The
policies do not cover taxes, fines or penalties imposed by law or the cost to
comply with any injunctive or other nonmonetary relief or any agreement to
provide any such relief. The coverage under the new policies is in addition to
approximately $40 million of coverage remaining under preexisting insurance that
is not subject to the $175 million retention applicable to the new policies. A
nonrecurring charge of $24 million for premiums and commissions is included in
the Company's results of operations for 1999.

    In addition, several managed care organizations (not including Oxford) have
recently been sued in class action lawsuits asserting various causes of action
under RICO, ERISA and state law. These lawsuits typically assert that the
defendant health plans have employed criteria and procedures for providing care
that are inconsistent with those stated in the certificates and other
information provided to their members, and that because of these intentional
misrepresentations and omissions, a class of all plan members has been injured
by virtue of the fact that they received benefits of lesser value than the
benefits represented to and paid for by such members. The potential exists for
similar lawsuits to be filed against the Company. The financial and operational
impact that such evolving theories of recovery may have on the managed care
industry generally, or Oxford in particular, is presently unknown.

    The Company also is involved in other legal actions in the normal course of
its business, some of which seek monetary damages, including claims for punitive
damages, which may not be covered by insurance. The Company believes any
ultimate liability associated with these other legal actions would not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

(19)   FAIR VALUE OF FINANCIAL INSTRUMENTS

    The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:

    Cash and cash equivalents: The carrying amount approximates fair value based
on the short-term maturities of these instruments.

    Investments: Fair values for fixed maturity securities are based on quoted
market prices, where available. For fixed maturity securities not actively
traded, fair values are estimated using values obtained form independent pricing
services.

    Long-term debt: The carrying amount of long-term debt, including the current
portion, approximates fair value as the interest rates of outstanding debt are
similar to like borrowing arrangements at December 31, 1999.

    Preferred stock: The carrying amount of preferred stock approximates fair
value as the stated dividend rates are similar to like investments at December
31, 1999 after the impact of discounting for the value attributed to the
detachable warrants.


                                       77
<PAGE>   78
(20)   GOVERNMENT PROGRAMS

    As a contractor for Medicare programs, the Company is subject to regulations
covering operating procedures. During 1999, 1998, and 1997, the Company had
premiums earned of $750 million, $1.26 billion, and $1.24 billion, respectively,
associated with Medicare and Medicaid.

    The Company has executed an agreement with a third party to transfer a
substantial portion of the risk of providing health care and administrative
services to certain of the participants in its Medicare programs. However, the
Company remains liable to pay the cost of covered services provided to its
Medicare members.

    The laws and regulations governing risk contractors are complex and subject
to interpretation. HCFA monitors the Company's operations to ensure compliance
with the applicable laws and regulations. There can be no assurance that
administrative or systems issues or the Company's current or future provider
arrangements will not result in adverse actions by HCFA.

(21)   YEAR 2000 READINESS AND COSTS (UNAUDITED)

    The Company completed its assessment, planning, remediation and testing of
its computer programs associated with its mission critical systems that could be
affected by the "Year 2000" date issue. The Year 2000 problem was the result of
computer programs being written using two digits rather than four to define the
applicable year. The Company did not experience any significant interruption of
business operations or any other system failures or disruptions as a result of
the failure of any of its business systems or those of its material vendors as a
result of the Year 2000 issue.

    The Company is required to submit periodic reports regarding Year 2000
compliance to certain of the regulatory authorities that regulate its business.
The Company is in compliance with such Year 2000 reporting requirements. Such
regulatory authorities have also asked the Company to submit to certain audits
regarding its Year 2000 compliance.

    The Company incurred expenses of approximately $4 million in 1999 and $9.8
million in 1998 related to its Year 2000 compliance efforts. The Company does
not expect Year 2000 costs to be material in 2000.


                                       78
<PAGE>   79
    (22) QUARTERLY INFORMATION (UNAUDITED)

    Tabulated below are certain data for each quarter of 1999 and 1998.

<TABLE>
<CAPTION>
                                                                                     Quarter Ended
                                                        -----------------------------------------------------------------------
(In thousands, except membership and per share amounts)      March 31           June 30           Sept. 30            Dec. 31
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                <C>                <C>                <C>
YEAR ENDED DECEMBER 31, 1999:
    Net operating revenues                                 $ 1,030,196        $ 1,037,761        $ 1,029,937        $ 1,017,240
    Operating expenses                                       1,021,610          1,042,046            971,760            949,038
    Net income (loss)                                           14,295             (1,999)            39,834            267,810
    Net income (loss) for common shares                          3,213            (13,376)            28,331            256,272

    Per common and common equivalent share:
      Basic                                                $      0.04        $     (0.16)       $      0.35        $      3.13
      Diluted                                              $      0.04        $     (0.16)       $      0.34        $      3.05

    Membership at quarter-end                                1,691,000          1,668,700          1,629,100          1,593,700



YEAR ENDED DECEMBER 31, 1998:
    Net operating revenues                                 $ 1,218,087        $ 1,160,263        $ 1,147,134        $ 1,104,682
    Operating expenses                                       1,292,470          1,672,023          1,188,848          1,124,209
    Net loss                                                   (45,302)          (507,620)           (35,922)            (7,948)
    Net loss for common shares                                 (45,302)          (513,338)           (46,989)           (18,831)

    Per common and common equivalent share:
      Basic                                                $     (0.57)       $     (6.41)       $     (0.58)       $     (0.23)
      Diluted                                              $     (0.57)       $     (6.41)       $     (0.58)       $     (0.23)

    Membership at quarter-end                                2,095,700          2,004,700          1,924,900          1,881,400
</TABLE>

    Net operating revenues include premiums earned and third-party
administration fees, net. Operating expenses include health care services and
marketing, general administrative expenses, and restructuring charges and
write-downs of strategic investments and credits.

    Restructuring charges related to severance and operations consolidation
costs increased operating expenses by $20 million in the third quarter of 1999
(see note 13). The fourth quarter of 1999 includes $24 million in expenses
related to premiums and other costs associated with certain new insurance
coverage (see note 18) and $225 million related to reductions in deferred tax
valuation allowances (see note 4).

    Restructuring charges related to severance and operations consolidation
costs increased operating expenses by $25 million in the first quarter of 1998.
The second quarter of 1998 includes restructuring charges of $98.5 million.
These charges include a $55.7 million provision for loss on disposal of noncore
businesses and unconsolidated affiliates; a $29.3 million write-down of property
and equipment, primarily leasehold improvements; and a $13.5 million provision
for operations consolidation and severance costs (see note 13). Results for the
second quarter of 1998 also reflect a premium deficiency reserve of $51 million
for losses on government contracts (see note 2) and writedowns of strategic
investments of $38.3 million related to the writedown of the Company's
investment in FPA Medical Management, Inc. (see note 14). Results of operations
for the fourth quarter of 1998 include a net restructuring credit of $9.8
million representing a change in estimate of the restructuring charges incurred
in the second quarter of 1998 (see note 13).


                                       79
<PAGE>   80
                    INDEPENDENT AUDITORS REPORT ON SCHEDULES

    We have audited the consolidated financial statements of Oxford Health
Plans, Inc. and subsidiaries as of December 31, 1999 and 1998 and for each of
the years in the two year period ended December 31, 1999, and have issued our
report thereon dated February 10, 2000, except for the last paragraph of Notes 6
and 7 as to which the date is March 3, 2000. Our audit also included the
financial statement schedules listed in Item 14(a) of this Annual Report on Form
10-K. These schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these schedules based on our audit.

    In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.



                                             Ernst & Young LLP

New York, New York
February 10, 2000, except for the
last paragraph of Notes 6 and 7 as
to which the date is March 3, 2000.


                                       80
<PAGE>   81
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Oxford Health Plans, Inc.:

    Under date of February 23, 1998, we reported on the consolidated statements
of operations, shareholders' equity (deficit) and comprehensive earnings (loss)
and cash flows of Oxford Health Plans, Inc. and subsidiaries for the year ended
December 31, 1997, which are included in the annual report on Form 10-K. In
connection with our audit of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules in the annual report on Form 10-K. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statement schedules based on our audit.

    In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.


     KPMG LLP


Stamford, Connecticut
February 23, 1998


                                       81
<PAGE>   82
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                            CONDENSED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                                 (In thousands)


<TABLE>
<CAPTION>
Current assets:                                                         1999           1998
                                                                     -------------------------
<S>                                                                  <C>            <C>
   Cash and cash equivalents                                         $ 246,366      $ 225,248
   Investments - available-for-sale                                     13,340          4,575
   Receivables, net                                                      1,624          4,309
   Refundable income taxes                                                 --             --
   Deferred income taxes                                                36,221            --
   Other current assets                                                  3,864          5,000
---------------------------------------------------------------------------------------------
     Total current assets                                              301,415        239,132

Property and equipment, net                                             49,488        103,105
Investments in and advances to subsidiaries, net                       561,703        301,657
Deferred income taxes                                                   44,807         40,681
Other assets                                                            15,707         13,496
---------------------------------------------------------------------------------------------
     Total assets                                                    $ 973,120      $ 698,071
=============================================================================================


Current liabilities:
   Accounts payable, accrued expenses and medical claims payable     $ 161,795      $ 195,568
   Current portion of capital lease obligations                         12,467         15,938
   Deferred income taxes                                                   --               4
---------------------------------------------------------------------------------------------
     Total current liabilities                                         174,262        211,510
---------------------------------------------------------------------------------------------

Long-term debt                                                         350,000        350,000
Obligations under capital leases                                         5,787         18,850
Redeemable preferred stock                                             344,316        298,816

Shareholders' equity (deficit):
   Common stock                                                            820            805
   Additional paid-in capital                                          488,030        506,243
   Retained earnings (deficit)                                        (372,350)      (692,290)
   Accumulated other comprehensive earnings                            (17,745)         4,137
---------------------------------------------------------------------------------------------
     Total shareholders' equity (deficit)                               98,755       (181,105)
---------------------------------------------------------------------------------------------
     Total liabilities and shareholders' equity (deficit)            $ 973,120      $ 698,071
=============================================================================================
</TABLE>


                                       82
<PAGE>   83
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
                       CONDENSED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)


<TABLE>
<CAPTION>
                                                      1999          1998          1997
                                                    -------------------------------------
<S>                                                 <C>          <C>            <C>
Revenues-management fees and investment and
   Other income, net                                $566,209     $ 696,119      $ 697,426
------------------------------------------------------------------------------------------

Expenses:
   Health care services                                2,939        34,627           --
   Marketing, general and administrative             488,666       713,021        702,136
   Interest and other financing charges               40,407        43,038           --
   Restructuring charges                              19,963       113,657           --
   Write-downs of strategic investments                 --           --            41,618
------------------------------------------------------------------------------------------
     Total expenses                                  551,975       904,343        743,754
------------------------------------------------------------------------------------------

Operating earnings (loss)                             14,234      (208,224)       (46,328)

Equity in net earnings (losses) of subsidiaries      308,683      (401,160)      (265,439)
Equity in net loss of affiliate                         --            --           (1,140)
Gain on sale of affiliate                               --            --           25,168
------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                  322,917      (609,384)      (287,739)
Income tax expense (benefit)                           2,977       (12,592)         3,549
------------------------------------------------------------------------------------------
Net earnings (loss)                                 $319,940     $(596,792)     $(291,288)
==========================================================================================
</TABLE>

During 1998, the Registrant received a cash dividend from one consolidated
subsidiary aggregating $9.6 million


                                       83
<PAGE>   84
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
     SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
                       CONDENSED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                        1999             1998              1997
                                                                    -----------------------------------------------
<S>                                                                 <C>               <C>               <C>
Net cash provided (used) by operating activities                    $  50,840         $  88,212         $ (92,956)
-------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
   Capital expenditures                                                (8,987)          (34,895)          (89,846)
   Sale or maturity of available-for-sale securities                    2,600              --             275,872
   Purchase of available-for-sale investments                         (11,587)           (4,563)         (143,873)
   Acquisitions and other investments                                    --              (1,312)          (33,876)
   Other, net                                                             299            20,675            (2,437)
-------------------------------------------------------------------------------------------------------------------
     Net cash provided (used) by investing activities                 (17,675)          (20,095)            5,840
-------------------------------------------------------------------------------------------------------------------

Cash flow from financing activities:
   Proceeds from issuance of common stock                                --              10,000              --
   Proceeds from exercise of stock options                             18,186             2,655            21,264
   Proceeds of preferred stock and warrants, net of issuance
      expenses                                                           --             338,148              --
   Proceeds of notes and loans payable                                   --             550,000              --
   Redemption of notes and loans payable                                 --            (200,000)             --
   Debt issuance expenses                                                --             (11,793)             --
   Investments in and advances to subsidiaries, net                   (13,699)         (528,073)           65,953
   Payments under capital lease obligations                           (16,534)           (5,463)             --
-------------------------------------------------------------------------------------------------------------------
     Net cash provided (used) by financing activities                 (12,047)          155,474            87,217
-------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                              21,118           223,591               101
Cash and cash equivalents at beginning of year                        225,248             1,657             1,556
-------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                            $ 246,366         $ 225,248         $   1,657
===================================================================================================================
</TABLE>


                                       84
<PAGE>   85
                   OXFORD HEALTH PLANS, INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                 (In thousands)


<TABLE>
<CAPTION>
                 Column A                    Column B               Column C           Column D      Column E
----------------------------------------------------------------------------------------------------------------
                                                                   Additions
                                                            -------------------------
                                            Balance at      Charged to     Charged to                Balance at
                                           Beginning of      Cost and         Other                    End of
               Description                    Period         Expenses        Accounts  Deductions      Period
----------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>             <C>        <C>            <C>
Year Ended December 31, 1999:
   Estimated uncollectible amount of
     notes and accounts receivable          $  37,759        $    --         $    --    $27,759        $10,000
                                            ====================================================================

   Estimated uncollectible amount of
     claims advances                        $  35,000        $    --         $    --    $ 4,200        $30,800
                                            ====================================================================

Year Ended December 31, 1998:
   Estimated uncollectible amount of
     notes and accounts receivable          $   6,514        $  35,209       $    --    $ 3,964        $37,759
                                            ====================================================================

   Estimated uncollectible amount of
     claims advances                        $  10,000        $  25,000       $    --    $  --          $35,000
                                            ====================================================================

Year Ended December 31, 1997:
   Estimated uncollectible amount of
     notes and accounts receivable          $   5,117        $  15,000       $    --    $13,603        $ 6,514
                                            ====================================================================

   Estimated uncollectible amount of
     claims advances                        $    --          $  10,000       $    --    $  --          $10,000
                                            ====================================================================
</TABLE>


                                       85
<PAGE>   86
                                  EXHIBIT INDEX

EXHIBIT NO.                  DESCRIPTION OF DOCUMENT

     2            --Agreement of Plan and Merger, dated as of March 30, 1995, by
                      and among Oxford Health Plans, Inc., OHP Acquisition
                      Corporation and OakTree Health Plan, Inc., incorporated by
                      reference to the Registrant's Registration Statement on
                      Form S-3 (File No. 33-92006)

     3(a)         --Second Amended and Restated Certificate of Incorporation, as
                      amended, of the Registrant, previously filed with and
                      incorporated by reference to the Registrant's Form 10-K
                      for the year ended December 31, 1998, filed on March 19,
                      1999 (File No. 0-19442)

     3(b)         --Amended and Restated By-laws of the Registrant, incorporated
                      by reference to Exhibit 3(ii) of the Registrant's Form
                      10-Q for the quarterly period ended September 30, 1998
                      (File No. 0-19442)

     4(a)         --Form of Stock Certificate, incorporated by reference to
                      Exhibit 4 of the Registrant's Registration Statement on
                      Form S-1 (File No. 33-40539)

     4(b)         --Certificate of Designations for the Series D Cumulative
                      Preferred Stock of Oxford Health Plans, Inc.*

     4(c)         --Certificate of Designations for the Series E Cumulative
                      Preferred Stock of Oxford Health Plans, Inc., incorporated
                      by reference to Exhibit 3(a) of the Registrant's Annual
                      Report on form 10-K/A for the period ended December 31,
                      1998 (File No. 0-19442)

     10(a)        --Employment Agreement, dated as of February 23, 1998, between
                      the Registrant and Dr. Norman C. Payson, incorporated by
                      reference to Exhibit 10(t) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(b)        --Oxford Health Plans, Inc. Stock Option Agreement, dated
                      February 23, 1998, by and between Dr. Norman C. Payson and
                      the Registrant, previously filed with and incorporated by
                      reference to Exhibit 10(u) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(c)        --Amendment Number 1 to Employment Agreement, dated as of
                      December 9, 1998, by and between the Registrant and Norman
                      C. Payson, M.D., previously filed with and incorporated by
                      reference to the Registrant's Form 10-K for the year ended
                      December 31, 1998, filed on March 19, 1999 (File No.
                      0-19442)

     10(d)        --Amendment, dated April 13, 1999, to Employment Agreement
                      between Registrant and Norman C. Payson, previously filed
                      with and incorporated by reference to the Registrant's
                      report on Form 10-Q for the quarterly period ended March
                      31, 1999.

     10(e)        --Employment Agreement, dated as of December 31, 1999, between
                      the Registrant and Charles M. Schneider*

     10(f)        --Employment Agreement, dated as of June 9, 1998, between the
                      Registrant and Yon Y. Jorden, incorporated by reference to
                      Exhibit 10(c) of the Registrant's Form 10-Q for the
                      quarterly period ended June 30, 1998 (File No. 0-19442)

     10(g)        --Employment Agreement, dated as of April 1, 1998, between the
                      Registrant and Alan Muney, M.D., M.H.A., incorporated by
                      reference to Exhibit 10(d) of the Registrant's Form 10-Q
                      for the quarterly period ended June 30, 1998 (File No.
                      0-19442)

     10(h)        --Employment Agreement, dated April 13, 1998, by and between
                      the Registrant and Jon S. Richardson*

     10(i)        --Amendment No. 1, dated as of December 14, 1999, to
                      Employment Agreement by and between the Registrant and
                      Jon S. Richardson*

     10(j)        --Amendment No. 2, dated as of March 7, 2000, to Employment
                     Agreement by and between the Registrant and Jon S.
                     Richardson*


                                       86
<PAGE>   87
                            EXHIBIT INDEX (CONTINUED)


EXHIBIT NO.                  DESCRIPTION OF DOCUMENT

     10(k)        --Letter Agreement, dated September 28, 1998, between the
                      Registrant and Fred F. Nazem, incorporated by reference to
                      Exhibit 10(a) of the Registrant's Form 10-Q for the
                      quarterly period ended September 30, 1998 (File No.
                      0-19442)

     10(l)        --Letter Agreement, dated July 24, 1998, between the
                      Registrant and Benjamin Safirstein, M.D., incorporated by
                      reference to Exhibit 10(b) of the Registrant's Form 10-Q
                      for the quarterly period ended September 30, 1998 (File
                      No. 0-19442)

     10(m)        --Letter Agreement, dated October 12, 1999, to Letter
                      Agreement, dated July 24, 1998, between the Registrant and
                      Benjamin Safirstein, M.D., incorporated by reference to
                      Exhibit 10(a) of the Registrant's Form 10-Q for the
                      quarterly period ended September 30, 1999 (File No.
                      0-19442)

     10(n)        --Retirement, Consulting and Non-Competition Agreement, dated
                      as of February 23, 1998, between the Registrant and
                      Stephen F. Wiggins, incorporated by reference to Exhibit
                      10(y) of the Registrant's Annual Report on Form 10-K/A for
                      the period ended December 31, 1997 (File No. 0-19442)

     10(o)        --Employment Agreement, dated August 14, 1996, between the
                      Registrant and William M. Sullivan, incorporated by
                      reference to Exhibit 10(b) of the Registrant's Form 10-Q
                      for the quarterly period ended September 30, 1996 (File
                      No. 0-19442)

     10(p)        --Amendment, dated as of February 23, 1998, to Employment
                      Agreement between the Registrant and William M. Sullivan,
                      incorporated by reference to Exhibit 10(v) of the
                      Registrant's Annual Report on Form 10-K/A for the
                      quarterly period ended December 31, 1997 (File No.
                      0-19442)

     10(q)        --Amendment, dated June 26, 1998, to Employment Agreement
                      between the Registrant and William M. Sullivan,
                      incorporated by reference to Exhibit 10(a) of the
                      Registrant's Report on Form 10-Q for the quarterly period
                      ended June 30, 1998 (File No. 0-19442)

     10(r)        --Letter Agreement, dated November 1, 1999, between the
                      Registrant and William B. Sullivan*

     10(s)        --Employment Agreement, dated as of August 14, 1996, between
                      the Registrant and Jeffery H. Boyd, incorporated by
                      reference to Exhibit 10(c) of the Registrant's Form 10-Q
                      for the quarterly period ended September 30, 1996 (File
                      No. 0-19442)

     10(t)        --Amendment, dated as of February 23, 1998, to Employment
                      Agreement between the Registrant and Jeffery H. Boyd,
                      incorporated by reference to Exhibit 10(w) of the
                      Registrant's Annual Report on Form 10-K/A for the period
                      ended December 31, 1997 (File No. 0-19442)

     10(u)        --Amendment, dated June 23, 1998, to Employment Agreement
                      between the Registrant and Jeffery H. Boyd, incorporated
                      by reference to Exhibit 10(b) of the Registrant's Report
                      on Form 10-Q for the quarterly period ended June 30, 1998
                      (File No. 0-19442)

     10(v)        --Amendment, dated December 10, 1998, to Employment Agreement
                      between the Registrant and Jeffery H. Boyd, incorporated
                      by reference to Exhibit 10(pp) of the Registrant's Form
                      10-K for the year ended December 31, 1998, filed on March
                      19, 1999 (File No. 0-19442)

     10(w)        --Amendment, dated May 5, 1999, to Employment Agreement
                      between Registrant and Jeffery H. Boyd, previously filed
                      with and incorporated by reference to the Registrant's
                      report on Form 10-Q for the quarterly period ended March
                      31, 1999(File No. 0-19442)

     10(x)        --Employment Agreement, dated as of March 30, 1998, by and
                      between the Registrant and Marvin P. Rich, incorporated by
                      reference to Exhibit 10(z) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(y)        --Letter Agreement, dated as of July 22, 1998, by and between
                      the Registrant and Kurt B. Thompson*


                                       87
<PAGE>   88
                            EXHIBIT INDEX (CONTINUED)


EXHIBIT NO.                  DESCRIPTION OF DOCUMENT

     10(z)        --Employment Agreement, dated March 15, 2000, by and between
                      the Registrant and Kurt B. Thompson*

     10(aa)       --1991 Stock Option Plan, as amended, incorporated by
                      reference to Exhibit 10(h) of the Registrant's Annual
                      Report on Form 10-K for the year ended December 31, 1995
                      (File No. 0-19442)

     10(bb)       --Letter Agreement, dated April 13, 1990, between the
                      Registrant and Lincoln National Administrative Services
                      Corporation, incorporated by reference to Exhibit 10(p) of
                      the Registrant's Registration Statement on Form S-1 (File
                      No. 33-40539)

     10(cc)       --Incentive Compensation Plan, adopted June 7, 1991,
                      incorporated by reference to Exhibit 10(n) of the
                      Registrant's Registration Statement on Form S-1 (File No.
                      33-40539)

     10(dd)       --Oxford Health Plans, Inc. 401(k) Plan, as amended,
                      incorporated by reference to Exhibit 10(k) of the
                      Registrant's Annual Report on Form 10-K for the year ended
                      December 31, 1995 (File No. 0-19442)

     10(ee)       --Non-Employee Directors Stock Option Plan, as amended,
                      incorporated by reference to Exhibit 10(l)(ii) of the
                      Registrant's Annual Report on Form 10-K for the year ended
                      December 31, 1994 (File No. 0-19442)

     10(ff)       --Oxford Health Plans, Inc. special Salary Continuation Plan,
                      previously filed with and incorporated by reference to
                      Exhibit 10(c) of the Registrant's report on Form 10-Q for
                      the quarterly period (File No. 0-19442)

     10(gg)       --Letter Agreement, dated April 18, 1990, between the
                      Registrant and Phoenix Mutual Life Insurance Company,
                      incorporated by reference to Exhibit 10(q) of the
                      Registrant's Registration Statement on Form S-1 (File No.
                      33-40539)

     10(hh)       --Securities Purchase Agreement among Health Partners, Inc.,
                      Foxfield Ventures, Inc., the Registrant and certain
                      management investors, dated May 18, 1994, incorporated by
                      reference to Exhibit 10 of the Registrant's Form 10-Q for
                      the quarterly period ended June 30, 1994 (File No.
                      0-19442)

     10(ii)       --Agreement and Plan of Merger by and among FPA Medical
                      Management, Inc., FPA Acquisition Corp. and Health
                      Partners, Inc. dated as of July 1, 1997, incorporated by
                      reference to Exhibit 10(n) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(jj)       --Security Agreement, dated as of February 6, 1998, between
                      the Registrant and Oxford Funding, Inc., incorporated by
                      reference to Exhibit 10(p) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(kk)       --Investment Agreement, dated as of February 23, 1998, between
                      TPG Oxford LLC and the Registrant., incorporated by
                      reference to Exhibit 10(r) of the Registrant's Annual
                      Report on Form 10-K/A for the period ended December 31,
                      1997 (File No. 0-19442)

     10(ll)       --Amendment Number 1 to Investment Agreement, dated as of May
                      13, 1998 between TPG Oxford LLC and the Registrant,
                      previously filed with and incorporated by reference to the
                      Registrant's Form 10-K for the year ended December 31,
                      1998, filed on March 19, 1999 (File No. 0-19442)

     10(mm)       --Amendment Number 2 to Investment Agreement, dated as of
                      August 27, 1998, by and between TPG Partners II, L.P. and
                      the Registrant, previously filed with and incorporated by
                      reference to the Registrant's Form 10-K for the year ended
                      December 31, 1998, filed on March 19, 1999 (File No.
                      0-19442)


                                       88
<PAGE>   89
                            EXHIBIT INDEX (CONTINUED)


EXHIBIT NO.                  DESCRIPTION OF DOCUMENT

     10(nn)       --Amendment Number 3 to Investment Agreement, dated as of
                      November 19, 1998, by and between TPG Partners II, L.P.
                      and the Registrant, previously filed with and incorporated
                      by reference to the Registrant's Form 10-K for the year
                      ended December 31, 1998, filed on March 19, 1999 (File No.
                      0-19442)

     10(oo)       --Registration Rights Agreement, dated as of February 23,
                      1998, between TPG Oxford LLC and the Registrant,
                      incorporated by reference to Exhibit 10(s) of the
                      Registrant's Annual Report on Form 10-K/A for the period
                      ended December 31, 1997 (File No. 0-19442)

     10(pp)       --Share Exchange Agreement, dated as of February 13, 1999 by
                      and among TPG Partners II, L.P., TPG Investors II, L.P.,
                      TPG, Parallel II, L.P., Chase Equity Associates, L.P.,
                      Oxford Acquisition Corp. and the DLJ Entities listed
                      therein, previously filed with and incorporated by
                      reference to Exhibit 10(rr) of the Registrant's Annual
                      Report on Form 10-K/A for the fiscal year ended December
                      31, 1998 (File No. 0-19442)

     10(qq)       --Share Repurchase Agreement, dated as of February 29, 2000,
                      by and among TPG Partners II, L.P., TPG Investors II,
                      L.P., TPG, Parallel II, L.P., Chase Equity Associates,
                      L.P., Oxford Acquisition Corp. and the DLJ Entities listed
                      therein*

      10(rr)      --Purchase Agreement, dated May 7, 1998, between Registrant
                      and Donaldson, Lufkin & Jenrette Securities Corporation,
                      incorporated by reference to Exhibit 10(a) of the
                      Registrant's Form 10-Q for the quarterly period ended
                      March 31, 1998 (File No. 0-19442)

     10(ss)       --Registration Rights Agreement, dated May 13, 1998, between
                      Registrant and Donaldson, Lufkin & Jenrette Securities
                      Corporation, incorporated by reference to Exhibit 10(b) of
                      the Registrant's Form 10-Q for the quarterly period ended
                      March 31, 1998 (File No. 0-19442)

     10(tt)       --Indenture of Registrant, dated May 13, 1998, between
                      Registrant and the Chase Manhattan Bank, as Trustee,
                      including for of 11% Senior Notes, incorporated by
                      reference to Exhibit 10(c) of the Registrant's Form 10-Q
                      for the quarterly period ended March 31, 1998 (File No.
                      0-19442)

     10(uu)       --Term Loan Agreement, dated May 13, 1998, among Registrant,
                      Lenders listed therein, DLJ Capital Funding, Inc. and IBJ
                      Schroder Bank & Trust Company, including exhibits,
                      incorporated by reference to Exhibit 10(d) of the
                      Registrant's Form 10-Q for the quarterly period ended
                      March 31, 1998 (File No. 0-19442)

     10(vv)       --Oxford Health Plans, Inc. 1996 Management Incentive
                      Compensation Plan, previously filed with and incorporated
                      by reference to the Registrant's Form 10-K for the year
                      ended December 31, 1998, filed on March 19, 1999 (File No.
                      0-19442)

     16           --Letter from KPMG Peat Marwick LLP regarding change in
                      certifying accountant of Registrant, incorporated by
                      reference to Exhibit 16 of the Registrant's Form 8-K dated
                      June 2, 1998 (File No. 0-19442)

     21           --Subsidiaries of the Registrant*

     23(a)        --Consent of Ernst & Young LLP*

     23(b)        --Consent of KPMG LLP*

-----------
     *   Filed herewith.


                                       89