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                                                                  EXHIBIT 10.10

                          PURCHASE OF SERVICE CONTRACT

                                    BETWEEN

                 THE CONNECTICUT DEPARTMENT OF SOCIAL SERVICES

                                       AND

                                       MCO

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PART I: STANDARD CONNECTICUT CONTRACT TERMS

PART II: GENERAL CONTRACT TERMS FOR MCOS

1.    DEFINITIONS

2.    DELEGATIONS OF AUTHORITY

3.    FUNCTIONS AND DUTIES OF THE MCO

      3.01  Provision of Services

      3.02  Non-Discrimination

      3.03  Gag Rules

      3.04  Coordination and Continuation of Care

      3.05  Emergency Services

      3.06  Geographic Coverage

      3.07  Choice of Health Professional

      3.08  Provider Network

      3.09  Network Adequacy and Maximum Enrollment Levels

      3.10  Provider Contracts

      3.11  Provider Credentialing and Enrollment

      3.12  Specialist Providers and the Referral Process

      3.13  PCP Selection, Scheduling and Capacity

      3.14  Family Planning Access and Confidentiality

      3.15  Pharmacy Access

      3.16  Mental Health and Substance Abuse Access

      3.17  Children's Issues and EPSDT Compliance

      3.18  Special Services for Children /Reinsurance

      3.19  Prenatal Care

      3.20  Dental Care

      3.21  Other Access Features

      3.22  Pre-Existing Conditions

      3.23  Newborn Enrollment

      3.24  Acute Care Hospitalization, Nursing Home or Subacute Stay at Time of
            Enrollment or Disenrollment

      3.25  Open Enrollment

      3.26  Special Disenrollment

      3.27  Linguistic Access

      3.28  Services to Members

      3.29  Information to Potential Members

      3.30  Marketing Requirements

      3.31  Health Education

      3.32  Internal and External Quality Assurance

      3.33  Inspection of Facilities

      3.34  Examination of Records

      3.35  Medical Records

      3.36  Audit Liabilities

      3.37  Clinical Data Reporting

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      3.38  Utilization Management

      3.39  Financial Records

      3.40  Insurance

      3.41  Third Party Coverage

      3.42  Coordination of Benefits and Delivery of Services

      3.43  Passive Billing

      3.44  Subcontracting for Services

      3.45  Timely Payment of Claims

      3.46  Copayment Limits and Member Charges for Noncovered Services

      3.47  Insolvency Protection

      3.48  Acceptance of DSS Rulings

      3.49  Policy Transmittals

      3.50  Fraud and Abuse

      3.51  Children with Special Health Care Needs

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT

      4.01  Eligibility Determinations

      4.02  Populations Eligible to Enroll

      4.03  Enrollment/Disenrollment

      4.04  Default Enrollment

      4.05  Lock-In

      4.06  Capitation Payments to MCO

      4.07  Retroactive Adjustments

      4.08  Information

      4.09  Ongoing MCO monitoring

      4.10  Utilization Review and Control

5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

      5.01  Competition Not Restricted

      5.02  Nonsegregated Facilities

      5.03  Offer of Gratuities

      5.04  Employment/Affirmative Action Clause

      5.05  Confidentiality

      5.06  Independent Capacity

      5.07  Liaison

      5.08  Freedom of Information

      5.09  Waivers

      5.10  Force Majeure

      5.11  Financial Responsibilities of the MCO

      5.12  Capitalization and Reserves

      5.13  Provider Compensation

      5.14  Members Held Harmless

      5.15  Compliance with Applicable Laws, Rules and Policies

      5.16  Federal Requirements and Assurances

      5.17  Civil Rights

      5.18  Statutory Requirements

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      5.19  Disclosure of Interlocking Relationships

      5.20  DEPARTMENT's Data Files

      5.21  Changes Due to a Section 1115 or 1915(b) Freedom of Choice

      5.22  Hold Harmless

      5.23  Executive Order Number 16

6.    MCO RESPONSIBILITIES CONCERNING NOTICES OF ACTION, GRIEVANCES AND
      ADMINISTRATIVE HEARINGS

      6.01  Notices of Action

      6.02  Grievances and Administrative Hearing Process

      6.03  Expedited Review and Administrative Hearings

      6.04  Provider Appeal Process

7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

      7.01  Performance Review

      7.02  Settlement of Disputes

      7.03  Administrative Errors

      7.04  Suspension of New Enrollment

      7.05  Sanctions

      7.06  Payment Withhold, Class C Sanctions or Termination for Clause

      7.07  Emergency Services Denials

      7.08  Termination for Default

      7.09  Termination for Mutual Convenience

      7.10  Termination for the MCO Bankruptcy

      7.11  Termination for Unavailability of Funds

      7.12  Termination for Collusion in Price Determination

      7.13  Termination Obligations of Contracting Parties

      7.14  Waiver of Default

8.    OTHER PROVISIONS

      8.01  Severability

      8.02  Effective Date

      8.03  Order of Precedence

      8.04  Correction of Deficiencies

      8.05  This is not a Public Works Contract

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9.    APPENDICES

      A.    Covered Benefits HUSKY A Covered Benefits

      B.    Provider Credentialing and Enrollment Requirements

      C.    EPSDT Periodicity Schedule

      D.    DSS Marketing Guidelines

      E.    Quality Assurance Program for Managed Care

      F.    Unaudited Quarterly Financial Reports

      G.    Medicaid Managed Care Eligibility Categories

      H.    Managed Care Policy Transmittals

      I.    Capitation Payment Amounts

      J.    Physician Incentive Payments

      K.    Recategorization Chart

      L.    Non-Hyde Amendment Abortions

10.   SIGNATURES

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PART I: STANDARD CONNECTICUT CONTRACT TERMS

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PART II: GENERAL CONTRACT TERMS FOR MCOs

1. DEFINITIONS

As used throughout this contract, the following terms shall have the meanings
set forth below.

ABUSE: Provider and/or MCO practices that are inconsistent with sound fiscal,
business or medical practices and that result in an unnecessary cost to the
HUSKY A program, or the reimbursement for services that are not medically
necessary or that fail to meet professionally recognized standards for health
care, or a pattern of failing to provide medically necessary services required
by this contract. Member practices that result in unnecessary cost to the HUSKY
A program also constitute abuse.

AGENT: An entity with the authority to action behalf of the DEPARTMENT.

BENOVA: The organization contracted by the DEPARTMENT to perform certain
administrative and operational functions for the HUSKY A and B programs.
Contracted functions include HUSKY application processing, HUSKY B eligibility
determinations, passive billing and enrollment brokering.

CAPITATION RATE: The amount paid per Member by the DEPARTMENT to each Managed
Care Organization (MCO) on a monthly basis.

CAPITATION PAYMENT: The individualized monthly payment made by the DEPARTMENT to
the MCO on behalf of Members.

CHILDREN'S HEALTH COUNCIL: The Children's Health Council was established by the
Connecticut General Assembly in 1995 in order to (1) monitor and evaluate
compliance of the HUSKY A program with the requirements of the Early and
Periodic Screening, Diagnosis and Treatment Program (EPSDT); (2) develop a
coordinated health care delivery system in each region of the State and (3)
implement outreach efforts in each region of the State to ensure uniform
statewide health care access for children. The Children's Health Council is
operated by the Hartford Foundation for Public Giving, Inc. in accordance with a
contract between the DEPARTMENT and the foundation. To carry out its
responsibilities, the Children's Health Council has contracted with MAXIMUS,
Inc. to operate the Connecticut Children's Health Project.

CHILDREN WITH SPECIAL HEALTH CARE NEEDS (CSHCN): Children up to age nineteen
(19) who have, or are at elevated risk for chronic physical, developmental,
behavioral or emotional conditions, whether biologic or acquired. They require
health and related services (not educational or recreational) of a type and
amount not usually required by children of the same age. CSHCN also includes
children who are blind or disabled

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(eligible for SSI under Title XVI; in foster or other out-of-home placement; are
receiving foster care or adoption assistance; or are receiving services funded
through Section 501(a)(1)(d) of Title V.

CLEAN CLAIM: A bill for service(s) or good (s), a line item of services or all
services and/or goods for a recipient contained on one bill which can be
processed without obtaining additional information from the provider of
service(s) or a third party. A clean claim does not include a claim from a
provider who is under investigation for fraud or abuse or a claim under review
for medical necessity.

COMMISSIONER: The Commissioner of the Department of Social Services, as defined
in Section 17b-3 of the Connecticut General Statutes.

COMPLAINT: A written or oral communication from a Member expressing
dissatisfaction with some aspect of the MCO's services.

CONNECTICUT CHILDREN'S HEALTH PROJECT: The program established by the Children's
Health Council to carry out its responsibilities, especially its responsibility
to monitor and evaluate compliance of the HUSKY A program with the requirements
of the Early and Periodic Screening, Diagnosis and Treatment Program (EPSDT).

CONSULTANT: A corporation, company, organization or person or their affiliates
retained by the DEPARTMENT to provide assistance in this project or any other
project, not the MCO or subcontractor.

CONTINUOUS ELIGIBILITY (CE): For purposes of the HUSKY A program, the twelve
(12) month period of time during which a child under nineteen (19) years of age
who qualifies for medical assistance under a categorically needy coverage group
remains eligible for Medicaid despite a change in certain circumstances that
would otherwise cause the child to lose Medicaid eligibility. Changes in
household composition or income will not cause a loss of eligibility during the
continuously eligible twelve (12) month period.

CONTRACT ADMINISTRATOR: The DEPARTMENT employee responsible for fulfilling the
administrative responsibilities associated with this managed care project.

CONTRACT SERVICES: Those services which the MCO is required to provide to
Members under this contract.

DATE OF APPLICATION: The date on which a completed application for the HUSKY A
program is received by the DEPARTMENT or its agent, containing the applicant's
signature.

DAY: Except where the term business day is expressly used, all references in
this contract will be construed as calendar days.

DEPARTMENT: The Department of Social Services, State of Connecticut.

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EMERGENCY OR EMERGENCY MEDICAL CONDITION: A medical condition manifesting itself
by acute symptoms of sufficient severity (including severe pain) such that a
prudent layperson, who possesses an average knowledge of health and medicine,
could reasonably expect the absence of immediate medical attention to result in
placing the health of the individual (or with respect to a pregnant woman, the
health of the woman or her unborn child) in serious jeopardy, serious impairment
to body functions or serious dysfunction of any body organ or part.

EMERGENCY SERVICES: Inpatient and outpatient services including, but not limited
to, behavioral health and detoxification needed to evaluate or stabilize an
emergency medical condition that is found to exist using the prudent layperson
standard.

EARLY AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT (EPSDT) CASE MANAGEMENT
SERVICES: Services such as making and facilitating referrals and development and
coordination of a plan of services that will assist Members under twenty-one
(21) years of age in gaining access to needed medical, social, educational, and
other services.

EPSDT DIAGNOSTIC AND TREATMENT SERVICES: All health care, diagnostic services,
and treatment necessary to correct or ameliorate defects and physical and mental
illnesses and conditions discovered by an interperiodic or periodic EPSDT
screening examination.

EPSDT SCREENING SERVICES: Comprehensive, periodic health examinations for
Members under the age of twenty-one (21) provided in accordance with the
requirements of the federal Medicaid statute at 42 U.S.C. Section 1396d(r)(l).

EPSDT SERVICES: Comprehensive child health care services to Members under
twenty-one (21) years of age, including all medically necessary prevention,
screening, diagnosis and treatment services listed in Section 1905 (r) of the
Social Security Act.

EXTERNAL QUALITY REVIEW ORGANIZATION (EQRO): An entity responsible for
conducting reviews of the quality outcomes, timeliness of the delivery of care
and access to items and services for which the MCO is responsible under this
contract.

FORMULARY: A list of selected pharmaceuticals determined to be the most useful
and cost effective for patient care, developed by a pharmacy and therapeutics
committee at the MCO.

FQHC-SPONSORED MCO: An MCO that is more than fifty (50) percent owned by
Connecticut Federally Qualified Health Centers, certified by the Department of
Social Services to enroll Medicaid Members.

FRAUD: Intentional deception or misrepresentation, or reckless disregard or
willful blindness, by a person or entity with the Knowledge that the deception,
misrepresentation,

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disregard or blindness could result in some unauthorized benefit to himself or
some other person, including any act that constitutes fraud under applicable
federal or state law.

GRIEVANCE: A written request to the MCO from a Member for a formal review of an
MCO decision related to the denial, termination, suspension or reduction of a
good or service. The DEPARTMENT automatically treats such a request as a request
for an administrative hearing.

GUARANTEED ELIGIBILITY: Six (6) consecutive month period during which a person
remains eligible for HUSKY A services despite a change in certain circumstances
that would otherwise make the person ineligible for Medicaid. The DEPARTMENT
will assign a six (6) month period of guaranteed eligibility to eligible
individuals upon their first enrollment.

HCFA OR CMS: The Health Care Financing Administration (HCFA) also known as
Center for Medicare and Medicaid Services (CMS), a division within the United
States Department of Health and Human Services.

HEALTH EMPLOYER DATA INFORMATION SET (HEDIS): A standardized performance
measurement tool that enables users to evaluate the quality of different MCOs
based on the following categories: effectiveness of care; MCO stability; use of
services; cost of care; informed health care choices; and MCO descriptive
information.

HHS: The United States Department of Health and Human Services.

HUSKY, PART A OR HUSKY A: For purposes of this contract, HUSKY A includes all
those coverage groups previously covered in Connecticut Access, subject to
expansion of eligibility groups pursuant to Section 17b-266 of the Connecticut
General Statutes.

IN-NETWORK PROVIDERS: Providers who have contracted with the MCO to provide
services to Members.

LOCK-IN: Limitations on Member change of managed care plans for a period of
time, not to exceed twelve (12) months.

MANAGED CARE ORGANIZATION (MCO): The organization signing this agreement with
the Department of Social Services.

MARKETING: A communication from an MCO to a Member or potential Member that can
be reasonably interpreted as intended to influence the Member to enroll or
reenroll in that particular MCO or either to enroll in, or disenroll from,
another MCO.

MEDICAID: The Connecticut Medical Assistance Program operated by the Connecticut
Department of Social Services under Title XIX of the Federal Social Security
Act, and related State and Federal rules and regulations.

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MEDICAID PROGRAM PROVIDER MANUALS: Service-specific documents created by
Connecticut Medicaid to describe policies and procedures applicable to the
Medicaid program generally and that service specifically.

MEDICAL APPROPRIATENESS OR MEDICALLY APPROPRIATE: Health care that is provided
in a timely manner and meets professionally recognized standards of acceptable
medical care; is delivered in the appropriate medical setting; and is the least
costly of multiple, equally-effective alternative treatments or diagnostic
modalities.

MEDICALLY NECESSARY/MEDICAL NECESSITY: Health care provided to correct or
diminish the adverse effects of a medical condition or mental illness; to assist
an individual in attaining or maintaining an optimal level of health, to
diagnose a condition or prevent a medical condition from occurring.

MEMBER: For the purposes of HUSKY A, a Medicaid client who has been certified by
the State as eligible to enroll under this contract, and whose name appears on
the MCO enrollment information which the DEPARTMENT will transmit to the MCO
every month in accordance with an established notification schedule.

NATIONAL COMMITTEE ON QUALITY ASSURANCE(NCQA): NCQA is a not-for-profit
organization that develops and defines quality and performance measures for
managed care, thereby providing an external standard of accountability.

OUT-OF-NETWORK PROVIDER: A provider that has not contracted with the MCO.

PASSIVE BILLING: Automatic capitation payments generated by the DEPARTMENT or
its agent based on enrollment.

PEER REVIEW ORGANIZATION (PRO): A professional medical organization which
conducts peer review of medical care certified by HCFA or CMS.

POST-STABILIZATION SERVICES: Services provided subsequent to an emergency that a
treating physician views as medically necessary after an emergency medical
condition has been stabilized during an emergency room visit.

PRIMARY CARE PROVIDER (PCP): A licensed health care professional responsible for
performing or directly supervising the primary care services of Members.

PRIOR AUTHORIZATION: The process of obtaining prior approval as to the medical
necessity or appropriateness of a service or plan of treatment.

RISK: The possibility of monetary loss or gain by the MCO resulting from service
costs exceeding or being less than payments made to it by the DEPARTMENT.

ROUTINE CASES: A symptomatic situation (such as a chronic back condition) for
which the Member is seeking care, but for which treatment is neither of an
emergency nor an urgent nature.

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SUBCONTRACT: Any written agreement between the MCO and another party to fulfill
any requirements of this contract.

SUBCONTRACTOR: The party contracting with the MCO to manage or arrange for one
or more of the Medicaid services provided by the MCO pursuant to this contract.

THIRD-PARTY: Any individual, entity or program which is or may be liable to pay
all or part of the expenditures for Medicaid furnished under a State plan.

TITLE XIX: The provisions of 42 United States Code Section 1396 et seq.,
including any amendments thereto. (see Medicaid)

URGENT CASES: Illnesses or injuries of a less serious nature than those
constituting emergencies but for which treatment is required to prevent a
serious deterioration in the Member's health and for which treatment cannot be
delayed without imposing undue risk on the Members' well-being until the Member
is able to secure services from his/her regular physician(s).

VENDOR: Any party with which the MCO has subcontracted to provide administrative
services.

WELL-CARE VISITS: Routine physical examinations, immunizations and other
preventive services that are not prompted by the presence of any adverse medical
symptoms.

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2. DELEGATIONS OF AUTHORITY

The State of Connecticut Department of Social Services is the single state
agency responsible for administering the Medicaid program. No delegation by
either party in administering this contract shall relieve either party of
responsibility for carrying out the terms of this contract.

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3.    FUNCTIONS AND DUTIES OF THE MCO

The MCO agrees to the following duties:

3.01  PROVISION OF SERVICES

a.    The MCO shall provide to individuals enrolled under this contract,
      directly or through arrangements with others, all of the covered services
      described in Appendix A of this contract.

b.    The MCO shall ensure that utilization management/review and coverage
      decisions concerning acute or chronic care services to each Member are
      made on an individualized basis in accordance with the contractual
      definitions for Medical Appropriateness or Medically Appropriate and
      Medically Necessary or Medical Necessity at Part II Section 1, General
      Contract Terms for MCOs. The MCO shall also ensure that its contracts with
      network providers requires that the decisions of network providers
      affecting the delivery of acute or chronic care services to Members are
      made in accordance with the contractual definitions for Medical
      Appropriateness or Medically Appropriate and Medically Necessary and
      Medical Necessity.

c.    The MCO shall provide twenty-four (24) hour accessibility to qualified
      medical personnel for Members in need of urgent or emergency care. The MCO
      may provide such access to medical personnel through either: 1) a hotline
      staffed by physicians, physicians on-call or registered nurses; or 2) a
      PCP on-call system. Whether the MCO utilizes a hotline or PCPs on-call,
      Members shall gain access to medical personnel within thirty (30) minutes
      of their call. The MCO Member handbook and MCO taped telephone message
      shall instruct Members to go directly to an emergency room if the Member
      needs emergency care. If the Member needs urgent care and has not gained
      access to medical personnel within thirty (30) minutes, the Member shall
      be instructed to go to the emergency room. The DEPARTMENT will randomly
      monitor the availability of such access.

d.    Changes to Medicaid covered services mandated by Federal or State law, or
      adopted by amendment to the State Plan for Medicaid, subsequent to the
      signing of this contract will not affect the contract services for the
      term of this contract, unless (1) agreed to by mutual consent of the
      DEPARTMENT and the MCO, or (2) unless the change is necessary to continue
      federal financial participation, or due to action of a state or federal
      court of law. If Medicaid coverage were expanded to include new services,
      such services would be paid for via the traditional Medicaid
      fee-for-service system unless covered by mutual consent between the
      DEPARTMENT and the MCO (in which case an appropriate adjustment to the
      capitation rates would be made). If Medicaid covered services are changed
      to exclude services the DEPARTMENT may determine that such

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      services will no longer be covered under HUSKY A and the DEPARTMENT will
      propose a contract amendment to reduce the capitation rate accordingly.

      In the event that the DEPARTMENT and the MCO can not concur on a contract
      amendment concerning the change to Medicaid covered services, the
      DEPARTMENT and the MCO shall negotiate a termination agreement to
      facilitate the transition of the MCO's Members to another MCO within a
      period of no less than ninety (90) days.

3.02  NON-DISCRIMINATION

a.    The MCO shall comply with all Federal and State laws relating to
      non-discrimination and equal employment opportunity, including but not
      necessarily limited to the Americans with Disabilities Act of 1990, 42
      U.S.C. Section 12101 et seq.; 47 U.S.C. Section 225; 47 U.S.C. Section
      611; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
      Section 2000e; Title VI of the Civil Rights Act, 42 U.S.C. 2000d et seq.;
      the Civil Rights Act of 1991; Section 504 of the Rehabilitation Act, 29
      U.S.C. Section 794 et seq.; the Age Discrimination in Employment Act of
      1967, 29 U.S.C. Sections 621-634; regulations issued pursuant to those
      Acts; and the provisions of Executive Order 11246 dated September 26, 1965
      entitled "Equal Employment Opportunity" as amended by Federal Executive
      Order 11375, as supplemented in the United States Department of Labor
      Regulations (41 C.F.R. Part 60-1 et seq., Obligations of Contractors and
      Subcontractors). The MCO shall also comply with Sections 4a-60, 4a-61,
      17b-520, 31-51d, 46a-64, 46a-71, 46a-75 and 46a-81 of the Connecticut
      General Statutes.

      The MCO shall also comply with the HCFA Civil Rights Compliance Policy,
      which mandates that all Members have equal access to the best health care,
      regardless of race, color, national origin, age, sex, or disability.

      The HCFA Civil Rights Compliance Policy further mandates that the MCO
      shall ensure that its subcontractors and providers render services to
      Members in a non-discriminatory manner. The MCO shall also ensure that
      Members are not excluded from participation in or denied the benefits of
      the HUSKY programs because of prohibited discrimination.

      The MCO acknowledges that in order to achieve the civil rights goals set
      forth in the HCFA Civil Rights Compliance Policy, HCFA has committed
      itself to incorporating civil rights concerns into the culture of its
      agency and its programs and has asked all of its partners, including the
      DEPARTMENT and the MCO, to do the same. The MCO further acknowledges that
      HCFA will be including the following civil rights concerns into its
      regular program review and audit activities: collecting data on access to
      and participation of minority and disabled Members; furnishing information
      to Members, subcontractors, and providers

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      about civil rights compliance; reviewing HCFA publications, program
      regulations, and instructions to assure support for civil rights; and
      initiating orientation and training programs on civil rights. The MCO
      shall provide to the DEPARTMENT or to HCFA, upon request, any available
      data or information regarding these civil rights concerns.

      Within the resources available through the capitation rate, the MCO shall
      allocate financial resources to ensure equal access and prevent
      discrimination on the basis of race, color, national origin, age, sex, or
      disability.

b.    Unless otherwise specified by the contract, the MCO shall provide covered
      services to HUSKY A Members under this contract in the same manner as
      those services are provided to other Members of the MCO, although delivery
      sites, covered services and provider payment levels may vary. The MCO
      shall ensure that the locations of facilities and practitioners providing
      health care services to Members are sufficient in terms of geographic
      convenience to low-income areas, handicapped accessibility and proximity
      to public transportation routes, where available. The MCO and its
      providers shall not discriminate among Members of HUSKY A and other
      Members of the MCO.

3.03  GAG RULES

The MCO shall not prohibit or otherwise restrict a health care provider acting
within his or her lawful scope of practice from advising a Member, who is a
patient of the provider, about the health status of the Member or medical care
treatment for the Member's condition or disease, regardless of whether benefits
for such care or treatment are provided under this contract. This prohibition is
subject to the limitations described in 42 U.S.C. Section 1396u-2(b)(3)(B) and
(C).

3.04  COORDINATION AND CONTINUATION OF CARE

a.    The MCO shall have systems in place to provide well-managed patient care
      which satisfies the DEPARTMENT that appropriate patient care is being
      provided, including at a minimum:

      1.    Management and integration of health care through a PCP, gatekeeper
            or other means.

      2.    Systems to assure referrals for medically necessary, specialty,
            secondary and tertiary care.

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      3.    Systems to assure provision of care in emergency situations,
            including an education process to help assure that Members know
            where and how to obtain medically necessary are in emergency
            situations.

      4.    A system by which Members may obtain a covered service or services
            that the MCO does not provide or for which the MCO does not arrange
            because it would violate a religious or moral teaching of the
            religious institution or organization by which the MCO is owned,
            controlled, sponsored or affiliated.

      5.    Coordination and provision of EPSDT screening services in accordance
            with the schedules for immunizations and periodicity of well-child
            services as established by the DEPARTMENT and federal regulations.

      6.    Provide or arrange for the provision of EPSDT case management
            services for Members under twenty-one (21) years of age when the
            Member has a physical or mental health condition that makes the
            coordination of medical, social, and educational services medically
            necessary. As necessary, case management services shall include but
            not be limited to:

            a.    Assessment of the need for case management and development of
                  a plan for services;

            b.    Periodic reassessment of the need for case management and
                  review of the plan for services;

            c.    Making referrals for related medical, social, and educational
                  services;

            d.    Facilitating referrals by providing assistance in scheduling
                  appointments for health and health-related services, and
                  arranging transportation and interpreter services;

            e.    Coordinating and integrating the plan of services through
                  direct or collateral contacts with the family and those
                  agencies and providers providing services to the child;

            f.    Monitoring the quality and quantity of services being
                  provided;

            g.    Providing health education as needed; and

            h.    Advocacy necessary to minimize conflict between service
                  providers and to mobilize resources to obtain needed services.

      7.    Provide necessary coordination and case management services for
            children with special health care needs.

      8.    If notified, PCPs will participate in the review and authorization
            of Individual Education Plans for Members receiving School Based
            Child Health services and Individual Family Service Plans for
            Members receiving services from the Birth to Three program.

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3.05  EMERGENCY SERVICES

a.    The MCO shall provide all emergency services twenty-four (24) hours each
      day, seven (7) days a week or arrange for the provision of said services
      twenty-four (24) hours each day, seven (7) days a week through its
      provider network.

b.    Emergency services must be provided without regard to prior authorization
      or the emergency care provider's contractual relationship with the MCO.

c.    The MCO may not limit the number of emergency visits.

d.    The MCO must cover all services necessary to determine whether or not an
      emergency condition exists, even if it is later determined that the
      condition was not an emergency.

e.    The MCO may not retroactively deny a claim for an emergency screening
      examination because the condition, which appeared to be an emergency
      medical condition under the prudent layperson standard, turned out to be
      non-emergent in nature.

f.    If the screening examination leads to a clinical determination by the
      examining physician that an actual emergency does not exist, then the
      nature and extent of payment liability will be based on whether the Member
      had acute symptoms under the prudent layperson standard at the time of
      presentation.

g.    The determination of whether the prudent layperson standard is met must be
      made on a case-by-case basis. The only exception to this general rule is
      that the MCO may approve coverage on the basis of an ICD-9 code.

h.    Once the individual's condition is stabilized, the MCO may require prior
      authorization for a hospital admission or follow-up care.

i.    The MCO must cover post-stabilization services attendant to the primary
      presenting diagnosis that were either approved by the MCO or were
      delivered by the emergency service provider when the MCO failed to
      respond to a request for pre-approval of such services within one hour of
      the request to approve post-stabilization care, or could not be contacted
      for pre-approval.

j.    If there is a disagreement between a hospital and an MCO concerning
      whether the Member is stable enough for discharge or transfer from the
      emergency room, the judgment of the attending physician(s) actually
      caring for the Member at the treating facility prevails and is binding on
      the MCO. This subsection shall not apply to a disagreement concerning
      discharge or transfer following an inpatient admission. The MCO may
      establish arrangements with hospitals whereby the MCO may send one of its
      own physicians or may contract with appropriate

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      physicians with appropriate emergency room privileges to assume the
      attending physician's responsibilities to stabilize, treat, and transfer
      the Member.

k.    When a Member's PCP or another plan representative instructs the Member to
      seek emergency care in-network or out-of-network, the MCO is responsible
      for payment for the screening examination and for other medically
      necessary emergency services, without regard to whether the patient meets
      the prudent layperson standard described above.

l.    If a Member believes that a claim for emergency services has been
      inappropriately denied by the MCO, the Member may seek recourse through
      the MCO's grievance and the DEPARTMENT's administrative hearing process.

m.    When the MCO reimburses emergency services provided by an in-network
      provider, the rate of reimbursement will be subject to the contractual
      relationship that has been negotiated with said provider. When the MCO
      reimburses emergency services provided by an out-of-network provider
      within Connecticut, the rate of reimbursement will be no less than the
      fees established by the DEPARTMENT for the Medicaid fee-for-service
      program. When the MCO reimburses emergency services provided by an
      out-of-network provider outside of Connecticut, the MCO may negotiate a
      rate of reimbursement with said provider.

n.    The MCO may not make payment for emergency services contingent on the
      Member providing the MCO with notification either before or after
      receiving emergency services. The MCO may, however, enter into contracts
      with providers or facilities that require, as a condition of payment, the
      provider or facility to provide notification to the MCO after Members are
      present at the emergency room, assuming adequate provision is given for
      such notification.

3.06  GEOGRAPHIC COVERAGE

a.    The MCO shall serve Members statewide. The MCO shall ensure that its
      provider network includes access for each Member to PCPs,
      Obstetric/Gynecological Providers and mental health providers at a
      distance of no more than fifteen (15) miles for PCPs and
      Obstetric/Gynecological Providers and no more than twenty (20) miles for
      general dentists and mental health providers as measured by the Public
      Utility Commission. The MCO shall ensure that its provider network has
      the capacity to deliver or arrange for all the goods and services
      reimbursable under the Medicaid fee-for-service program.

b.    On a monthly basis, the MCO will provide the DEPARTMENT or its agent with
      a list of all contracted network providers. The list shall be in a format
      and contain such information as the DEPARTMENT may specify.

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PERFORMANCE MEASURE: Geographic Access. The DEPARTMENT will randomly monitor
geographic access by reviewing the mileage to the nearest town containing a PCP
for every town in which the MCO has Members.

SANCTION: In any sampling, if more than two (2) percent of Members reside in
towns beyond fifteen (15) miles of a town containing a PCP the DEPARTMENT may
impose a strike towards a Class A sanction pursuant to Section 7.05.

3.07  CHOICE OF HEALTH PROFESSIONAL

The MCO must inform each Member about the full panel of participating providers
in its network. To the extent possible and appropriate, the MCO must offer each
Member covered under this contract the opportunity to choose among participating
providers.

3.08  PROVIDER NETWORK

a.    The MCO shall maintain a provider network capable of delivering or
      arranging for the delivery of all covered health goods and services to all
      Members. In addition, the MCO's provider network shall have the capacity
      to deliver or arrange for the delivery of all the goods and services
      reimbursable under this contract regardless of whether all of the goods
      and services are provided through direct provider contracts. The MCO shall
      submit a file of their most current provider network listing to the
      DEPARTMENT or its agent. The file shall be submitted, at a minimum, once a
      month in the format specified by the DEPARTMENT.

b.    The MCO shall notify the DEPARTMENT or its agent, in a timely manner, of
      any changes made in the MCO's provider network. The monthly file submitted
      to the DEPARTMENT or its agent shall not contain any providers who are no
      longer in the MCO's network. The DEPARTMENT will randomly audit the
      provider network file for accuracy and completeness and take corrective
      action, if the provider network file fails to meet these requirements.

c.    The MCO shall not discriminate against providers with respect to
      participation, reimbursement, or indemnification for any provider who is
      acting within the scope of that provider's license or certification under
      applicable State law, solely on the basis of the provider's license or
      certification. This shall not be construed to prohibit the MCO from
      including providers only to the extent necessary to meet the needs of the
      MCO's Members or from establishing measures designed to maintain the
      quality of services and control costs, consistent with its
      responsibilities. This shall not preclude the MCO from using different
      reimbursement amounts for different specialties or for different
      practitioners in the same specialty.

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3.09  NETWORK ADEQUACY AND MAXIMUM ENROLLMENT LEVELS

a.    On a quarterly basis, except as otherwise specified by the DEPARTMENT, the
      DEPARTMENT shall evaluate the adequacy of the MCO's provider network. Such
      evaluations shall use ratios of Members to specific types of providers
      based on Medicaid fee-for-service experience in order to ensure that
      access in the MCO is at least equal to access experienced in the Medicaid
      fee-for-service program for a similar population. For each county the
      maximum ratio of Members to each provider type shall be:

      1.    adult PCPs, including general practice specialists counted at 60.8%,
            internal medicine specialists counted at 88.9%, family practice
            specialists counted at 66.9%, nurse practitioners of the appropriate
            specialties, and physician assistants, 387 Members per provider;

      2.    children's PCPs, including pediatric specialists counted at 100%,
            general practice specialists counted at 39.2%, internal medicine
            specialists counted at 11.1%, family practice specialists counted at
            33.1%, nurse practitioners of the appropriate specialties, and
            physician assistants, 301 Members per provider; obstetrics and
            gynecology providers, including obstetrics and gynecology
            specialists, nurse midwives, and nurse practitioners of the
            appropriate specialty, 835 Members per provider;

      3.    dental providers, including general and pediatric dentists counted
            at 100%, and dental hygienists counted at 50%, 486 Members per
            provider; and

      4.    behavioral health providers, including psychiatrists, psychologists,
            social workers, and psychiatric nurse practitioners, 459 Members per
            provider.

b.    In the event that the number of Members in a given county equals or
      exceeds ninety percent (90%) of the capacity determined in accordance with
      section a noted above, the DEPARTMENT shall evaluate the adequacy of the
      MCO's network on a monthly basis.

c.    Maximum Enrollment Levels: Based on the adequacy of the MCO's provider
      network the DEPARTMENT may establish a maximum HUSKY A enrollment level
      for Members in the MCO on a county-specific basis. The DEPARTMENT shall
      provide the MCO with written notification no less than thirty (30) days
      prior to the effective date of the maximum enrollment level.

d.    Subsequent to the establishment of this limit, if the MCO wishes to change
      its maximum enrollment level in a specific county, the MCO must notify the
      DEPARTMENT thirty (30) days prior to the desired effective date of the
      change. If the change is an increase, the MCO must demonstrate an
      increase in their

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<PAGE>

      provider network which would allow the MCO to serve additional Members. To
      do so the MCO must provide the DEPARTMENT with the signature pages from
      the executed provider contracts and/or signed letters of intent. The
      DEPARTMENT will not accept any other proof or documentation as evidence of
      a provider's participation in the MCO's provider network. The DEPARTMENT
      shall review the existence of additional capacity for confirmation no
      later than thirty (30) days following notice by the MCO. An increase will
      be effective the first of the month after the DEPARTMENT confirms
      additional capacity exists.

e.    In the event the DEPARTMENT deems that the MCO's provider network is not
      capable of accepting additional enrollments, the DEPARTMENT may exercise
      its rights under Section 7 of this contact, including but not limited to
      the rights under Section 7.04, Suspension of New Enrollments.

SANCTION: In the event of a suspension of enrollment due to any network
deficiencies, the MCO shall submit a corrective action plan to the DEPARTMENT.
If, subsequent to the DEPARTMENT'S approval of the corrective action plan, the
network deficiency is not remedied within the time specified in the corrective
action plan, or if the MCO does not develop a corrective action plan
satisfactory to the DEPARTMENT, the DEPARTMENT may impose a strike towards a
Class A sanction for each month said suspension is in effect, in accordance with
Section 7.05.

3.10  PROVIDER CONTRACTS

All contracts between the MCO and its in-network providers shall, at a minimum,
include each of the following provisions:

a.    MCO network providers serving the Medicaid population must meet the
      minimum requirements for participation in the Medicaid program as set
      forth in the Regulations of Connecticut State Agencies, Section
      17b-262-522 to Section 17b-262-533, as applicable;

b.    MCO Members shall be held harmless for the costs of all Medicaid-covered
      goods and services provided;

c.    Providers must provide evidence of and maintain adequate malpractice
      insurance. For physicians, the minimum malpractice coverage requirements
      are $1 million per individual episode and $3 million in the aggregate;

d.    Specific terms regarding provider reimbursement as specified in Timely
      Payment of Claims, Section 3.45 of this contract;

e.    Specific terms concerning each party's rights to terminate the contract;

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<PAGE>

f.    That any risk shifted to individual providers does not jeopardize access
      to care or appropriate service delivery;

g.    The exclusion of any provider that has been suspended from the Medicare or
      Medicaid program in any state;

h.    For PCPs, the provision of "on-call" coverage through arrangements with
      other PCPs; and

i.    That the MCOs and subcontractors require in-network behavioral health
      providers to participate in the DEPARTMENT's efforts to study access,
      quality and outcome. Upon renewal of its subcontracts and other provider
      contracts, the MCO shall include a provision that failure to participate
      shall constitute cause for termination of the in-network provider's
      contract, except that MCOs which have demonstrated to the DEPARTMENT's
      satisfaction that they have ensured provider participation in such efforts
      through means other than the provider contracts need not include this
      provision. In any event, the DEPARTMENT shall reimburse providers for
      costs above and beyond nominal costs incurred by such participation.

3.11  PROVIDER CREDENTIALING AND ENROLLMENT

a.    The MCO shall establish minimum credentialing criteria and shall formally
      re-credential all professional participating providers in their network
      at least once every two (2) years or such other time period as established
      by the NCQA. The MCO shall create and maintain a credentialing file for
      each participating provider that contains evidence that all credentialing
      requirements have been met. The file shall include copies of all
      documentation to support that credentialing criteria have been met,
      including licenses, Drug Enforcement Agency (DEA) certificates and
      provider statements regarding lack of impairment. Credentialing files
      shall be subject to inspection by the DEPARTMENT or its agent.

b.    MCO's credentialing and recredentialing criteria for professional
      providers shall include at a minimum:

      1.    Appropriate license or certification as required by Connecticut law;

      2.    Verification that providers have not been suspended or terminated
            from participation in Medicare or the Medicaid program in any state;

      3.    Verification that providers of covered services meet minimum
            requirements for Medicaid participation;

      4.    Evidence of malpractice or liability insurance, as appropriate;

      5.    Board certification or eligibility, as appropriate;

      6.    A current statement from the provider addressing:

            a.    lack of impairment due to chemical dependency/drug abuse;

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<PAGE>

            b.    physical and mental health status;

            c.    history of past or pending professional disciplinary actions,
                  sanctions, or license limitations;

            d.    revocation and suspension of hospital privileges;

            e.    a history of malpractice claims; and

      7.    Evidence of compliance with Clinical Laboratory Improvement
            Amendments of 1988 (CLIA), Public Law 100-578, 42 USC Section
            1395aa et seq. And 42 C.F.R. Part 493

c.    The MCO may require more stringent credentialing criteria. Any other
      criteria shall be in addition to the minimum criteria set forth above.

d.    Additional MCO credentialing/recredentialing criteria for PCPs shall
      include, but not be limited to:

      1.    Adherence to the principles of Ethics of the American Medical
            Association, the American Osteopathic Association or other
            appropriate professional organization;

      2.    Ability to perform or directly supervise the ambulatory primary care
            services of Members;

      3.    Membership on the medical staff with admitting privileges to at
            least one accredited general hospital an acceptable arrangement
            with a PCP with admitting privileges;

      4.    Continuing medical education credits;

      5.    A valid DEA certification; and

      6.    Assurances that any Advanced Practice Registered Nurses (APRN),
            Nurse Midwives or Physician Assistants are performing within the
            scope of their licensure.

e.    For purposes of credentialing and recredentialing, the MCO shall perform a
      check on all PCPs and other participating providers by contacting the
      National Practitioner Data Bank (NPDB). The DEPARTMENT will notify the MCO
      immediately if a provider under contract with the MCO is subsequently
      terminated or suspended from participation in the Medicare or Medicaid
      programs. Upon such notification from the DEPARTMENT or any other
      appropriate source, the MCO shall immediately act to terminate the
      provider from participation in its network.

f.    The MCO may delegate credentialing functions to a subcontractor. The MCO
      is ultimately responsible and accountable to the DEPARTMENT for compliance
      with the credentialing requirements. The MCO shall demonstrate and
      document to the DEPARTMENT the MCO's significant oversight of its
      subcontractors performing any and all provider credentialing, including
      facility or delegated credentialing. The MCO and any such entity shall be
      required to cooperate in the performance of financial, quality or other
      audits conducted by the

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      DEPARTMENT or its agent(s). Any subcontracted entity shall maintain a
      credentialing file for each in-network provider as set forth above.

g.    The MCO must adhere to the additional credentialing requirements set
      forth in Appendix B.

SANCTION: The DEPARTMENT may impose a Class B sanction pursuant to Section 7.05
if, upon completion of a performance review, it is established that a provider
in the MCO's network fails to meet the minimum credentialing criteria for
participation set forth in (a) and (b) above, and PCPs must also meet the
criteria set forth in (d).

3.12  SPECIALIST PROVIDERS AND THE REFERRAL PROCESS

The MCO shall contract with a sufficient number and mix of specialists so that
the Member population's anticipated specialty care needs can be substantially
met within the MCO's network of providers. The MCO will also be required to have
a system to refer Members to out-of-network specialists if appropriate
participating specialists are not available. The MCO shall make specialist
referrals available to its Members when it is medically necessary and medically
appropriate and shall assume all financial responsibility for any such referrals
whether they be in-network or out-of-network. The MCO must have policies and
written procedures for the coordination of care and the arrangement, tracking
and documentation of all referrals to specialty providers.

3.13  PCP SELECTION, SCHEDULING AND CAPACITY

a.    The MCO shall provide Members with the opportunity to select a PCP within
      thirty (30) days of enrollment. The MCO shall assign a Member to a PCP
      when a Member fails to choose a PCP within thirty (30) days after being
      notified to do so. The assignment must be appropriate to the Member's age,
      gender and residence.

b.    The MCO shall ensure that the PCPs in its network adhere to the following
      PCP scheduling practices:

      1.    Emergency cases shall be seen immediately or referred to an
            emergency facility;

      2.    Urgent cases shall be seen within forty-eight (48) hours of PCP
            notification;

      3.    Routine cases shall be seen within ten (10) days of PCP
            notification;

      4.    Well-care visits shall be scheduled within six (6) weeks of PCP
            notification;

      5.    EPSDT/HealthTrack comprehensive health screens and immunizations
            shall be scheduled in accordance with the DEPARTMENT's HealthTrack
            periodicity and immunization schedules;

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      6.    New Members shall receive an initial PCP appointment in a timely
            manner; (for those Members who do not access goods and services
            within the first six (6) months of enrollment, the MCO shall
            identify and remedy any access problems); and

      7.    Waiting times at PCPs are kept to a minimum.

c.    The MCO shall report quarterly on each PCP's panel size, group practice
      and hospital affiliations in a format specified by the DEPARTMENT. The
      DEPARTMENT will aggregate reports received from all MCOs for both HUSKY A
      and HUSKY B. In the event that the DEPARTMENT finds a PCP with more than
      1,200 HUSKY (combined HUSKY A and HUSKY B) panel Members, the DEPARTMENT
      will notify the MCO if the PCP is part of the MCO's network. The
      DEPARTMENT expects that the MCO will take appropriate action to ensure
      that patient access to the PCP is assured.

d.    The MCO shall maintain a record of each Member's PCP assignments for a
      period of two (2) years.

e.    The MCO shall track each Member's use of primary medical care services. In
      the event that a Member does not regularly receive primary medical care
      services from the PCP or the PCP's group other than visits to school based
      health clinics, the MCO shall contact the Member and offer to assist the
      Member in selecting a PCP.

f.    If the Member has not received any primary care services, the MCO shall
      contact the Member and offer to assist the Member in scheduling a
      well-care visit if the Member's last well-care visit was not within the
      appropriate guidelines for his or her age and gender.

PERFORMANCE MEASURE: PCP Appointment Availability. The DEPARTMENT or its agent
will routinely monitor appointment availability as measured by b(1) through
b(6) by using test cases to arrange appointments of various kinds with selected
PCPs. If less than ninety (90) percent of the sample make appointments available
within the required time, the DEPARTMENT shall require that the MCO submit a
corrective action plan, which will outline the steps that the MCO will take to
rectify the problem, within thirty (30) days.

3.14  FAMILY PLANNING ACCESS AND CONFIDENTIALITY

a.    The MCO shall notify and give each Member, including adolescents, the
      opportunity to use his or her own PCP or utilize any family planning
      service provider for family planning services without requiring a referral
      or authorization. The MCO shall make a reasonable effort to subcontract
      with all local family planning clinics and providers, including those
      funded by Title X of the Public

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      Health Services Act, and shall reimburse providers for all family planning
      services regardless of whether that provider is a participating provider.
      The MCO shall reimburse out-of-network providers of family planning
      services at least the Medicaid fee-for-service rate for the service. The
      MCO may require family planning providers to submit claims or reports in
      specified formats before reimbursing services.

b.    The MCO shall keep family planning information and records for each
      individual patient confidential, even if the patient is a minor.

c.    Family planning services which must be covered include:

      1.    reproductive health exams;

      2.    patient counseling;

      3.    patient education;

      4.    lab tests to detect the presence of conditions affecting
            reproductive health;

      5.    sterilizations;

      6.    screening, testing, and treatment of and pre and post- test
            counseling for sexually transmitted diseases and HIV; and

      7.    abortions, if the pregnancy is the result of an act of rape or
            incest or in the case where a woman suffers from a physical
            disorder, physical injury, or physical illness, including a
            life-endangering physical condition caused by or arising from the
            pregnancy itself, that would, as certified by a physician, place the
            woman in danger of death unless an abortion is performed.

d.    Pursuant to federal law ("the Hyde Amendment") and 42 C.F.R. Part 441,
      Subpart E, the DEPARTMENT may only seek federal funding for those
      abortions described in (c)(7) above. The MCO shall cover all abortions
      that fall within these circumstances. The MCO shall submit a Form W-384
      for any such abortions and comply with the DEPARTMENT's Medical Services
      Policy concerning abortions.

e.    The MCO shall also cover all other medically necessary abortions not
      covered under federal law and described in (c)(7) above. The determination
      as to whether an abortion is medically necessary shall be made by the
      Member's PCP or another physician, in consultation with the member. The
      MCO shall not require prior authorization for any such medically necessary
      abortion. The DEPARTMENT will not seek any federal funding for any
      abortions covered under this subsection. The DEPARTMENT and the MCO shall
      enter into a separate contract for abortions that do not qualify for
      federal matching funds, as described in section (d) above.

f.    The MCO shall submit a report on a quarterly report due 15 days after the
      end of the quarter for all abortions performed pursuant to section (e)
      above. The report format is attached hereto as Appendix L.

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SANCTION: If the MCO fails to provide the reports required in subsection (f),
the DEPARTMENT may impose a Class B sanction, pursuant to Section 7.05.

3.15  PHARMACY ACCESS

For purposes of this section, "prescription" shall include authorization for
legend and over the counter drugs covered by Medicaid policy.

a.    Pharmacies must be available and accessible on a statewide basis. The
      MCO shall:

      1.    Maintain a comprehensive provider network of pharmacies that will
            within available resources assure twenty four (24) hour access to
            pharmaceutical goods and services;

      2.    Have established protocols to respond to urgent requests for
            medications;

      3.    Monitor and take steps to correct excessive utilization of regulated
            substances; and

      4.    Require pharmacists to utilize the Automated Eligibility
            Verification System (AEVS) to determine client eligibility and MCO
            affiliation when there is a discrepancy between the information in
            the MCO's eligibility system and information given to the
            pharmacists by the Member, the Member's physician or other third
            party.

b.    The MCO shall require that its provider network of pharmacies offer
      medically necessary goods and services to the MCO's Members. The MCO may
      have a drug management program that includes a prescription drug
      formulary. The MCO drug formulary must include only Food and Drug
      Administration approved drug products and must be broad enough in scope to
      meet the needs of all Members. The MCO drug formulary shall consist of a
      reasonable selection of drugs which do not require prior approval for each
      specific therapeutic drug class.

c.    The MCO shall submit a copy of its formulary to the DEPARTMENT no later
      than thirty (30) days after the effective date of this contract. The MCO
      shall submit any subsequent deletions to the formulary to the DEPARTMENT
      thirty (30) days prior to making the change. The MCO shall also submit
      subsequent additions to the formulary immediately without seeking prior
      approval by the DEPARTMENT. The DEPARTMENT reserves the right to identify
      deficiencies in the content or operation of the formulary. In this
      instance, the MCO shall have thirty (30) days to address in writing the
      identified deficiencies to the DEPARTMENT's satisfaction. The MCO may
      request to meet with the DEPARTMENT prior to submission of the written
      response.

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d.    The MCO shall ensure that Members using maintenance drugs (drugs usually
      prescribed to treat long-term or chronic conditions including, but not
      limited to, diabetes, arthritis and high blood pressure) are informed in
      advance, but no less than thirty (30) days in advance of any changes to
      the prescription drug formulary related to such maintenance drugs if the
      Member using the drug will not be able to continue using the drug without
      a new authorization. If a Member requests a grievance and administrative
      hearing concerning a denial or termination that results from or relates to
      the removal of the maintenance drug from the formulary, the MCO shall
      continue to authorize the drug for that Member pending a hearing decision.

e.    The MCO shall require that its provider network of pharmacies adheres to
      the provisions of Connecticut General Statutes Section 20-619 (b) and (c)
      related to generic substitutions for Medicaid recipients.

f.    If the MCO maintains a drug formulary, the MCO shall have a prior
      authorization process to permit access, at a minimum, to all medically
      necessary and appropriate drugs covered for the Medicaid fee-for-service
      population. Medicaid pharmacy policy is set forth at Sections 174 through
      174H.IV.A.4 of the Regulations of Connecticut State Agencies. The MCO
      shall develop a timely and efficient authorization process to obtain
      information from providers on medical necessity for a non-formulary drug,
      a formulary drug requiring prior authorization or a brand name drug where
      a generic substitution is available. The MCO shall make an individualized
      determination concerning medical necessity in each instance when a
      Member's prescribing provider requests a non-formulary drug, formulary
      drug requiring prior authorization or a brand name drug in accordance with
      the provisions of (e) above. If no request for prior authorization has
      been received by the MCO or the Pharmacy Benefits Manager (PBM) prior to
      the submission of a prescription to a pharmacy, the pharmacist may contact
      the prescribing physician and inform him or her of the prior authorization
      requirement.

g.    Except as provided in subsection (j) below, in the event that a provider
      requests authorization for, or prescribes a non-formulary drug, a
      formulary drug requiring prior authorization or a brand name drug where a
      generic substitution is available prior to prescribing a prescription for
      that drug, but elects during the prior authorization process or in
      discussions with the pharmacist to prescribe a formulary, generic or
      alternate formulary drug that the provider agrees will be equally
      effective for the Member, the MCO is not required to issue a notice of

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      action and is not required to provide a temporary supply of the drug for
      which the provider initially sought authorization.

h.    In the event that a provider requests authorization, or prescribes a
      non-formulary drug, a formulary drug requiring prior authorization or a
      brand name drug where a generic substitution is available, and the
      provider and the MCO cannot reach an agreement that another drug is
      equally effective, the MCO shall issue a notice of action.

      The MCO or its PBM shall without delay authorize a thirty (30) day
      temporary supply of the drug if the provider certifies to the MCO or its
      PBM that the drug is necessary to address an urgent or emergent condition.
      The MCO is also required to authorize a thirty (30) day temporary supply
      of the drug on the day of submission of the prescription to the pharmacy
      if the MCO has been unable to contact the provider to discuss an effective
      formulary drug during normal business hours. The certification shall be in
      a manner to be specified by the MCO, subject to the DEPARTMENT's approval.
      If the original prescription was for a period less then thirty (30) days,
      the override will be for the period prescribed. If the Member, upon
      receipt of the notice of action, requests a grievance and administrative
      hearing within ten (10) days, the MCO shall continue to authorize the drug
      for the Member pending a hearing decision or other resolution of the
      dispute concerning the prescription. If the Member does not request a
      grievance and administrative hearing, the MCO is not required to authorize
      any further refills.

i.    The MCO shall, on a quarterly basis, in a format specified and approved by
      the DEPARTMENT, submit a report detailing its prior authorization process
      to the DEPARTMENT or its agent to be developed jointly between the
      DEPARTMENT and the MCOs.

j.    If the DEPARTMENT or its agent determines that there is a pattern of
      denials for requested authorization for particular drugs, or any other
      pattern suggesting that the MCO's authorization process is one that does
      not appropriately consider each Member's individualized medical needs, the
      DEPARTMENT may require notices of action in circumstances other than those
      described above and/or may require the addition of a particular drug or
      drugs to the MCO's formulary as drugs that do not require prior
      authorizations.

3.16  MENTAL HEALTH AND SUBSTANCE ABUSE ACCESS

a.    The MCO shall provide to its Members all behavioral health care services
      (mental health and substance abuse) covered by Medicaid that are medically
      necessary and medically appropriate. These services may be provided by the
      MCO through contracts with providers of services or through subcontracted
      relationships with

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      specialized behavioral health management entities. A Member will not need
      a PCP referral to obtain services; self-referral will be sufficient to
      obtain an initial service visit. The MCO may require prior authorization
      for an ongoing course of treatment. Members with mental health and
      substance abuse disorders shall not be denied coverage by the MCO for the
      initial visit, simply because they did not abide by MCO's rules (either by
      going to an out-of-network provider or going to an in-network provider
      without an appropriate referral).

b.    Notwithstanding any contractual arrangement with a specialized management
      agency, the MCO is wholly responsible to ensure that medically necessary
      and medically appropriate services are provided to its Medicaid Members.

c.    The MCO shall contract with a consultant or employ a doctoral level mental
      health professional with appropriate qualifications, credentials and
      decision making authority who will have specific responsibilities for
      exercising oversight of the delivery of behavioral health services by the
      MCO or its subcontractors. Such person shall be responsible for promoting
      efforts to better integrate and coordinate the provision of behavioral
      health care with other services. The individual shall be available by
      phone for consultation on an as needed basis, dedicated to the Connecticut
      Members, as well as have an extensive understanding of the State of
      Connecticut's Medicaid rules and regulations.

d.    In reference to services for children with psychiatric/mental health and
      substance abuse needs, the MCO and any subcontracted entity is required to
      contract with and refer Members to qualified Medicaid providers who meet
      benchmark requirements or demonstrate that equal or superior services are
      being made available through other providers. The benchmark providers are
      child guidance clinics, community mental health centers and clinics,
      family service agencies and other qualified substance abuse providers (who
      provide services in compliance with state law) with a specialization in
      serving children. Continuation of benchmark status is contingent upon
      participation in the DSS Study of Behavioral Health Outcomes. Any
      benchmark providers who refuse to participate in the study will lose this
      status.

e.    The MCO and any subcontractor entity will cooperate in the identification
      and improvement of processes working toward the development and
      standardization of administrative procedures. The MCO and any
      subcontracted entity shall take steps to promote successful provider
      -Member relationships and will monitor the effectiveness of these
      relationships.

f.    The MCO is responsible for monitoring the performance of its network
      providers and for monitoring and ensuring contract compliance. The MCO
      shall also be responsible for ensuring that its subcontractors comply with
      Medicaid policy and this contract. Such monitoring will ensure that
      providers and subcontractors observe all contractual and policy
      requirements as well as measuring performance relating to such areas as
      access to care and ensuring quality of care. The MCO

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<PAGE>

      and any subcontracted entity are required to cooperate in the performance
      of financial, quality or other audits conducted by the DEPARTMENT or its
      agent(s).

g.    The MCO and its behavioral health subcontractor are required to
      participate in the DSS Study on Behavioral Health Outcomes for children
      receiving outpatient treatment services.

SANCTION: Failure of the MCO and or its subcontractor(s) to participate in the
DEPARTMENT Study may constitute grounds for the imposition of a Class B sanction
pursuant to Section 7.05.

3.17  CHILDREN'S ISSUES AND EPSDT COMPLIANCE

In order to meet the requirements of the EPSDT program as set forth in Sections
1902(a)(43) and 1905(r) of the Social Security Act, the MCO shall:

a.    Provide EPSDT screening services in accordance with the periodicity
      schedule attached to this contract as Appendix C. Any changes in the
      periodicity schedule subsequent to the effective date of this contract
      shall be provided to the MCO sixty (60) days before the effective date of
      the change. The MCO shall not require prior authorization of EPSDT
      screening services;

b.    Provide interperiodic screening examinations when medically necessary, or
      in accordance with the provisions of Section 3.18 (5)(a), to determine the
      existence of a physical or mental illness or condition, or to assist
      Members in meeting the medical requirements for certification or
      recertification in WIC. Such interperiodic screens shall include screens
      for anemia as recommended by the Centers for Disease Control (CDC). The
      MCO shall not require prior authorization of interperiodic screening
      examinations;

c.    Provide EPSDT screening services that at a minimum, include:

      1.    A comprehensive health and developmental history (including
            assessment of both physical and mental health development and
            assessment of nutritional status);

      2.    A comprehensive unclothed or partially draped physical exam;

      3.    Appropriate immunizations as currently recommended by the
            Connecticut Department of Public Health

      4.    Laboratory tests, as set forth in the periodicity schedule at
            Appendix C

      5.    Vision and hearing screenings as set forth in the periodicity
            schedule at Appendix C;

      6.    Dental assessments as set forth in the periodicity schedule at
            Appendix C and

      7.    Health education, including anticipatory guidance.

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<PAGE>

d.    Provide all medically necessary health care, diagnostic services, and
      treatment for Members under twenty-one (21) covered under the federal
      Medicaid program and described in Section 1905(a) of the Social Security
      Act regardless of whether the health care, diagnostic services, and
      treatment are specified in the list of covered services at Appendix A of
      this contract and regardless of any limitations on the amount, duration,
      or scope of the services that would otherwise be applied.

e.    Take all necessary steps to ensure that its Members under the age of
      twenty-one (21) receive EPSDT screening services and any necessary
      diagnostic and treatment services, including, but not limited to:

      1.    Providing assistance in arranging and scheduling appointments;

      2.    Providing and arranging transportation;

      3.    Following up on missed appointments; and

      4.    Providing interpreters to Members with limited English proficiency
            and Members who are hearing and visually impaired.

f.    No later than sixty (60) days after enrollment in the plan and annually
      thereafter, use a combination of oral and written methods including
      methods for communicating with Members with limited English proficiency,
      Members who cannot read, and Members who are visually or hearing impaired,
      to:

      1.    Inform its Members about the availability of EPSDT screening,
            diagnostic and treatment services;

      2.    Inform its Members about the importance and benefits of EPSDT
            screening services;

      3.    Inform its Members about how to obtain EPSDT screening services; and

      4.    Inform its Members that assistance with scheduling appointments and
            transportation is available, and inform them how to obtain this
            assistance.

g.    Coordinate and enhance the services provided to Members under twenty-one
      (21) through the development and execution of memorandums of understanding
      (MOUs) with the following programs:

      1.    Healthy Families Connecticut;

      2.    Connecticut Community Health Initiative (CCHI);

      3.    The Special Supplemental Food Program for Women, Infants, and
            Children (WIC);

      4.    Birth-to-Three;

      5.    Head Start;

      6.    InfoLine's Maternal and Child Health Project; and

      7.    Other programs operated by the Departments of Children and Families,
            Education, Public Health, Mental Health and Addiction Services and
            Mental Retardation as designated by the DEPARTMENT.

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<PAGE>

h.    Include in the MOUs developed and executed under subsection (g) of this
      section provisions that specify how the MCO will work with the program,
      including, but not limited to:

      1.    A description of the services provided by the program;

      2.    Designation of a liaison at the MCO to work with the program on
            ensuring the provision of medically necessary and appropriate
            covered services by the MCO and the coordination of services
            provided by the MCO and the program;

      3.    Protocols for referrals to the program by the MCO;

      4.    Protocols for communication of information concerning individuals
            who are Members of the MCO who are receiving services from the
            program;

      5.    Protocols for the resolution of any issues that arise concerning the
            delivery of services to HUSKY Members who are receiving services
            from the program; and

      6.    Any other mutually agreed upon provisions.

i.    The MCOs shall require PCPs to obtain all available vaccines free of
      charge from the Department of Public Health under the Vaccines for
      Children program.

j.    Contract with the Connecticut Immunization Registry and Tracking System to
      track childhood immunizations of its Members and report the immunizations
      to the DEPARTMENT.

k.    In order to carry out the responsibilities set forth in this section, the
      MCO shall work with the Children's Health Council and the Connecticut
      Children's Health Project. The MCO shall meet with representatives of the
      Connecticut Children's Health Project on a regular basis to review the
      reports provided by the Connecticut Children's Health Project that detail
      the Members of the MCO who are due for EPSDT screening services, those who
      are overdue for EPSDT screening services, and those who have missed EPSDT
      screening services. The MCO shall work with the Connecticut Children's
      Health Project to develop a plan for ensuring that Members under
      twenty-one (21) years of age who are overdue or late for screening
      examinations receive their EPSDT screening services and that other Members
      continue to receive their examinations on a regular basis.

l.    The MCO shall attain an annual EPSDT participation ratio and an annual
      EPSDT screening ratio of at least eighty (80) percent as measured from
      April 1, 2001 to March 31, 2002. The DEPARTMENT shall determine the MCO's
      participation and screening ratio from the encounter data as reported to
      and analyzed by The Children's Health Project subject to validation by the
      DEPARTMENT or its agent(s) in accordance with the methodology established
      by HCFA or CMS for the HCFA-416 report.

SANCTION: Failure to achieve a participation and/or screening ratio of eighty
(80) percent may subject the MCO to a Class B sanction in accordance with the
provisions of Section,

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<PAGE>

7.05. However, no sanction shall apply if the MCO's participation and screening
ratios, although less than eighty (80) percent, are greater than the
participation and screening ratios for the MCO and, if applicable, its
predecessor, for the equivalent period one year earlier (April 1, 2000 to March
31, 2001) plus one half the difference between the ratios for the earlier period
and eighty (80) percent.

3.18  SPECIAL SERVICES FOR CHILDREN/REINSURANCE

1.    DISCHARGE PLANNING PROCESS AND IMPATIENT PSYCHIATRIC HOSPITAL REINSURANCE
      FOR CHILDREN

a.    The discharge planning process for children and adolescents with
      significant mental health and substance abuse disorders is of particular
      concern to the DEPARTMENT and DCF due to the potential unavailability of
      appropriate subacute or step-down placements (e.g., residential treatment
      with a clinical component, group home, specialized foster care). In order
      to protect these particularly vulnerable minors, MCOs are required to seek
      or develop alternatives to hospital-based care. MCOs are required to
      negotiate "step-down" rates with qualified institutional providers, as
      defined by the DEPARTMENT, to address the financial issues that arise in
      the discharge planning circumstances described in this section.

b.    The following provisions of this Section shall apply to all new admissions
      of children and adolescents eighteen (18) years of age and younger in
      qualified institutions.

      1.    REINSURANCE FOR ADMINISTRATIVELY NECESSARY DAYS

            On a limited basis, the MCO may authorize the admission of a child
            to a qualified institution for a one-day evaluation. If at the end
            of a twenty-four (24) hour period the MCO determines that there is
            no medical necessity for the continued admission but there is no
            immediate discharge option available, the remainder of the stay will
            qualify for 100% reinsurance by the DEPARTMENT. For the evaluation
            day, the MCO will pay the institution the rate for an acute care
            day. Beginning on day two (2) of the stay, the MCO will pay the
            institution a negotiated rate and bill the DEPARTMENT in the month
            following service delivery according to the process described below.
            Reinsurance for non-medically necessary days attendant to an
            evaluation stay may be claimed once per child per calendar year.

      2.    REINSURANCE FOR MEDICALLY NECESSARY DAYS

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<PAGE>

      Other than in the cases described above, where the length of stay in
      either a step down program or a hospital setting pursuant to a medically
      necessary admission extends beyond fifteen (15) days, the DEPARTMENT will
      provide reinsurance for the MCOs. Reinsurance shall be provided for
      medically necessary days of care provided at either an acute or a subacute
      level of care. Care provided to children admitted to subacute care
      pursuant to an observation bed stay shall be subject to the provisions of
      this section. For the purpose of this section, a medically necessary
      admission to inpatient psychiatric care for children will be defined to
      include those admissions which are court ordered, provided that there is
      consultation with the plan prior to the order regarding the appropriate
      level and setting for the care.

      The MCO may make decisions on the medical necessity of the admission and
      may evaluate the level of acuity of the child or adolescent at any time
      during the course of the stay. MCOs may redetermine the need for an acute
      level of care at any time based on changes in the patient's condition.
      However, within the first fifteen (15) days, the MCO shall provide all
      necessary acute or subacute care as part of the discharge process.

3.    THE SCHEDULE FOR REINSURANCE IS AS FOLLOWS:

<TABLE>
<CAPTION>
# of days           State's Share                   MCO's Share
<S>                 <C>                             <C>
  0-15                   0%                             100%
  16-45                 75%                              25%
  46-60                 90%                              10%
  60+                  100%                               0%
</TABLE>

      If a psychiatric inpatient stay is interrupted due to an acute medical
      condition requiring an admission to a general hospital, the reinsurance
      day count will be suspended upon discharge from the psychiatric facility
      and will resume when the Member is readmitted to the psychiatric inpatient
      facility, if the readmission to the psychiatric inpatient facility is on
      the same day as the discharge from the general hospital.

      If there is a gap of one day or more between the discharge from the
      general hospital and readmission to the psychiatric facility, the
      admission to the psychiatric inpatient facility will be treated as a new
      admission and the new inpatient day count will be reset.

4.    The MCO or its subcontractor shall incur the costs for the reinsurance and
      may bill the DEPARTMENT during the month following service delivery.
      Reinsurance claims shall be submitted to the DEPARTMENT's Division of
      Fiscal Analysis and shall be reimbursed as a percentage of the facility
      specific per diem according to the state share described above. Claims

                                       44

<PAGE>

            may be submitted by the MCO or its behavioral health subcontractor
            with prior approval by the DEPARTMENT. The DEPARTMENT reserves the
            right to review the level of payments made under the reinsurance
            program retrospectively.

            The DEPARTMENT will designate a contact person for reinsurance
            claims.

3.    RESPONSIBILITIES OF THE DEPARTMENT OF CHILDREN AND FAMILIES

a.    DCF shall approve any placement, which is deemed by the MCO to be not
      medically necessary. If the DEPARTMENT determines that reinsurance claims
      were paid for services that were administratively necessary and not
      medically necessary, the DEPARTMENT will pursue reimbursement from DCF.

b.    In cases where the hospital identifies a discharge planning difficulty for
      youth under the direct auspices of DCF who are utilizing inpatient,
      hospital-based mental health or substance abuse services, the following
      discharge planning process will apply:

      1.    As soon as the hospital identifies a discharge planning difficulty,
            the MCO must contact DCF for assistance and notify the DEPARTMENT.
            The MCO in conjunction with the hospital and DCF, must attempt to
            resolve the discharge planning immediately. Service providers, the
            MCO, DCF and the Member and family must develop an individualized
            service plan that resolves the discharge issue while effectuating
            appropriate ongoing treatment. The MCO shall consult with DCF
            regarding the appropriate state licensed treatment setting. MCOs
            have the authority to transition the patient to any qualified
            provider of this level of care. Nothing in this section shall be
            construed to imply a time limit on the overall behavioral health or
            health care benefit in Medicaid managed care.

      2.    The DEPARTMENT will designate a contact person for clinical issues
            regarding discharge planning. The MCO shall provide bi-weekly child-
            specific reports on the progress of discharge planning to the
            DEPARTMENT's designated contact person.

4.    THE FOLLOWING PROVISIONS WILL APPLY TO ADMISSIONS AT STATE FACILITIES.

a.    The discharge planning and reinsurance provisions described in this
      section shall apply to all new medically necessary and administratively
      necessary admissions at state operated facilities effective October 1,
      1998. When a child is admitted to a DCF facility, the MCO must reimburse
      the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed

                                       45

<PAGE>

      by a memorandum of understanding between the MCOs and DCF outlining the
      terms and conditions for admissions and stays at the facility.

b.    This discharge planning process and reinsurance program is not intended to
      force MCOs to continue funding the most restrictive levels of care in
      perpetuity; rather it is meant to insure the safety of children and
      adolescents and encourage the development of appropriate alternatives to
      hospital-based services.

5.    SPECIALIZED OUTPATIENT SERVICES FOR CHILDREN UNDER DCF CARE

a.    The MCO shall pay for a comprehensive multi-disciplinary examination for
      initial placement only, for each child entering DCF care, within thirty
      (30) days of placement into out-of-home care. The multi-disciplinary
      examination shall be authorized by either the child's PCP or the MCO and
      shall consist of a thorough assessment of the child's functional, medical,
      developmental, educational, and mental health status. Within each area of
      the assessment, the evaluation shall identify any additional specialized
      diagnostic and therapeutic needs. Physicians and other medical and mental
      health providers specializing in the assessment areas shall conduct the
      multi-disciplinary examination. Each multi-disciplinary examination shall
      occur at a single location. All components of the examination shall be
      performed on the same day, excluding additionally needed examinations,
      unless otherwise indicated. The provider shall report the findings and
      conclusions of the examination in a form acceptable to DCF. The report
      must be received by DCF within fifteen (15) days of the examination. The
      provider shall also provide for updates to DCF on any additional
      examinations.

b.    The providers of the MCO shall provide for training of foster parents on
      the use of special equipment or medications as needed.

c.    The MCO shall require regular collaboration between providers and DCF
      Regional Offices and Central Office medical, mental health and social work
      staff and consultants. The MCO shall a assign staff to act as liaisons to
      identify, address and resolve health care delivery issues, barriers to
      comprehensive care and other problem areas. DCF shall specify the contact
      persons by name, title and phone number who will be available for
      quarterly meetings between DCF and the MCO and shall facilitate the
      initiation of these meetings with the MCO.

d.    The MCO shall include a panel of mental health providers who shall be
      qualified to perform psychological, psychiatric and developmental
      evaluations and perform assessment and treatment of sexual abuse and
      juvenile sexual offenders. DCF shall be available for consultation in the
      identification of such providers.

e.    In addition to standard prescription coverage, the MCO shall cover
      prescriptions in compliance with DCF policy for "Placement Medications"
      which are additional prescriptions which may be needed when children are
      placed or change

                                       46

<PAGE>

      placements. The MCO shall cover "Home Visit Medications". Home Visit
      Medications are additional prescriptions, which may be needed when
      children placed in out-of-home settings leave the placement for a home
      visit. Home Visit Medications should include only those doses which will
      be needed during the home visit, plus one extra dose.

f.    The MCO shall deliver a notice of action to an identified person at the
      DCF Central Office when a service is to be reduced, denied or terminated.
      DCF will, in turn, distribute the notice of action to its appropriate
      regional and local personnel.

3.19  PRENATAL CARE

a.    In order to promote healthy birth outcomes, the MCO or its contracted
      providers shall:

      1.    Identify enrolled pregnant women as early as possible in the
            pregnancy;

      2.    Conduct prenatal risk assessments in order to identify high risk
            pregnant women, arrange for specialized prenatal care and support
            services tailored to risk status, and begin care coordination that
            will continue throughout the pregnancy and early weeks of
            postpartum;

      3.    Refer enrolled pregnant women to the WIC program;

      4.    Offer case management services for assistance with obtaining
            prenatal care appointments, transportation, WIC, and other support
            services as necessary;

      5.    Offer prenatal health education materials and/or programs aimed at
            promoting healthy birth outcomes;

      6.    Offer HIV testing and counseling and all appropriate prophylaxis and
            treatment to all enrolled pregnant women;

      7.    Refer any pregnant Member who is actively abusing drugs or alcohol
            to a behavioral health subcontractor or provider of behavioral
            health/substance abuse services and treatment; and

      8.    Educate new mothers about the importance of the postpartum visit and
            well-baby care.

PERFORMANCE MEASURE: Early access to prenatal care: Percentage of enrolled women
who had a live birth, who were continuously enrolled in the MCO for 280 days
prior to delivery who had a prenatal visit in the MCO on or between 176 to 280
days prior to delivery.

PERFORMANCE MEASURE: Adequacy of prenatal care: Percentage of women with live
births who were continuously enrolled during pregnancy who had more than eighty
(80) percent of the prenatal visits recommended by the American College of
Obstetrics and Gynecology, adjusted for gestational age at enrollment and
delivery.

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<PAGE>

3.20  DENTAL CARE

a.    The MCO shall contract with a sufficient number of dentists throughout the
      state to assure access to oral health care. The MCO shall:

      1.    Maintain an adequate dental provider network throughout the state's
            eight (8) counties including access to orthodontic services;

      2.    For the purpose of enrollment capacity a dental hygienist meeting
            the criteria of Section 20-1261 of the Connecticut General Statutes,
            as amended by PA 01-2, June, 2000 Special Session, with two (2)
            years of experience, working in an institution (other than
            hospital), a community health center, a group home, a preschool
            operated by a local board of education or head start program, or a
            school setting shall be counted as fifty (50) percent of a general
            dentist. If the MCO's provider network includes dental hygienists
            acting independently within their scope of practice to provide
            preventive services to Members, the MCO shall require that dental
            hygienists make appropriate referrals to in-network dentists for
            appropriate restorative and diagnostic services;

      3.    Implement a plan that includes a systematic approach for enhancing
            access to dental care through monitoring appointment availability,
            provision of training to providers around issues of cultural
            diversity and any other specialized programs;

      4.    To ensure that access standards are met with respect to dental
            screens and appointment availability. The MCO shall ensure that the
            scheduling of a routine dental visit is six (6) weeks;

      5.    Certify that all dentists in the MCO's network shall take Members
            and that MCO's HUSKY Members shall be assured the same access to
            providers as non-HUSKY Members. Nothing in this section shall
            preclude the implementation of limits on panel size by providers;

      6.    Implement procedures to provide all Members with the opportunity to
            choose a general dentist;

      7.    Implement specific outreach strategies to educate Members about the
            importance of regular dental care, with a focus on accessing age
            appropriate preventive care such as screenings and cleanings at
            least twice a year;

      8.    Provide for sufficient access to dental services for different age
            groups; and

                                       48

<PAGE>

      9.    Devise mechanisms to avoid unnecessary PCP visits related to dental
            problems.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members two (2) to twenty (20) years of age shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under children's dental access.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members twenty-one (21) years of age and over shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under adult dental access.

3.21  OTHER ACCESS FEATURES

a.    The MCO shall have systems in place to ensure access to medically
      necessary and medically appropriate well-care by its Members. The MCO
      shall develop procedures to identify access problems and shall take
      corrective action as problems are identified. These systems and
      initiatives shall include, but not be limited to:

      1.    Monitoring new Members to ensure that a well-care appointment is
            scheduled within six (6) months of enrollment for those whose last
            well-care visit does not fall within the recommended age and gender
            appropriate schedules;

      2.    Monitoring and ensuring that Members receive well-care visits based
            on age and gender appropriate schedules;

      3.    Contacting and counseling Members who miss scheduled appointments;

      4.    Coverage and provision of services to newborns from the time of
            birth;

      5.    Assisting Members in accessing and locating linguistically and
            culturally appropriate services, including but not limited to,
            appropriate accommodation for Members with hearing disabilities;

      6.    Assisting disabled Members in accessing and locating services and
            providers that can appropriately accommodate their needs, for
            example wheelchair access to provider's office;

      7.    Development of special initiatives, case management, care
            coordination, and outreach to Members with special or multiple
            medical needs, for example persons with AIDS or HIV infected
            individuals;

      8.    Development of goals and action plans for incremental increases in
            utilization of services such as postpartum care, adolescent health,
            dental

                                       49

<PAGE>

            care and other health care measures agreed upon between the MCO and
            the DEPARTMENT; and

      9.    Encouraging providers to offer extended business hours and weekend
            (Saturday) openings.

b.    The MCO's access systems will be assessed as part of the annual
      performance review of the MCO.

3.22  PRE-EXISTING CONDITIONS

a.    The MCO shall assume responsibility for all covered services as outlined
      in Appendix A for of each Member as of the effective date of coverage
      under the contract regardless of the new Member's health status.

b.    As outlined in Appendix K, for new Members who have transferred enrollment
      from another HUSKY MCO, coverage of services other than acute care
      hospitalization, nursing home care or care in a subacute facility shall be
      the responsibility of the MCO as of the beginning of the month during
      which enrollment becomes effective. Responsibility for acute
      hospitalization, nursing home or subacute care services at the time of
      enrollment or disenrollment is described in Section 3.24.

3.23  NEWBORN ENROLLMENT

Within six (6) months of a child's date of birth, the MCO must notify the
DEPARTMENT of newborn for which they have not received enrollment notification
from the DEPARTMENT. The MCO shall use the notification form made available by
the DEPARTMENT for this purpose. Should the MCO fail to report the child's
birth, the MCO shall reimburse the DEPARTMENT for any fee-for-service claims
paid for covered services that occurred for the newborn Members prior to
processing the newborn's enrollment into the MCO.

3.24  ACUTE CARE HOSPITALIZATION, NURSING HOME OR SUBACUTE STAY AT TIME OF
      ENROLLMENT OR DISENROLLMENT

For acute care requiring inpatient stay at a hospital, nursing home or subacute
facility, financial responsibility for covered services shall be determined as
follows:

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<PAGE>

a.    INPATIENT AT TIME OF ENROLLMENT

      Initial enrollment in HUSKY A should not commence during a recipient's
      inpatient stay at a hospital, nursing home or subacute facility unless the
      recipient is a newborn, born to a Member.

      The MCO shall notify the DEPARTMENT within sixty (60) days of the MCO's
      discovery of or from the date that the MCO receives information from which
      a determination can be made that initial enrollment will take effect
      during the course of a hospitalization. For those individuals who are
      inpatient in an MCO participating facility, the time period in which an
      MCO must notify the DEPARTMENT is limited to six (6) months from the
      enrollment effective date or sixty (60) days of discovery, whichever
      comes first. Upon timely notification to the DEPARTMENT by the MCO, the
      DEPARTMENT shall change the effective date to the first of the month after
      discharge. If the MCO fails to notify the DEPARTMENT of the inpatient
      status within the above specified time periods, the DEPARTMENT shall be
      relieved of its responsibility to change the enrollment effective date and
      the individual's initial enrollment effective date into the MCO shall be
      retained.

b.    HOSPITALIZATION AT TIME OF DISENROLLMENT

      Inpatient costs for Members who are hospitalized at a hospital at the time
      of disenrollment from the MCO shall remain the financial responsibility of
      the MCO until discharge. Individuals who are disenrolled due to
      recategorization of their Medicaid coverage to a non-managed care category
      shall revert to fee-for-service upon recategorization.

      Members who are inpatient in a subacute facility or a nursing home will
      remain the responsibility of the MCO until they are discharged from the
      MCO. If the MCO reports to DSS or its agent, any patient in a subacute
      facility or a nursing home other than for the purpose of behavioral health
      prior to the ninety (90) days from the date of admission, the DEPARTMENT
      will disenroll the Member at the end of the month, that the Member has
      been inpatient for ninety (90) days. If the MCO reports to the DEPARTMENT
      beyond ninety (90) days, the change will be effective the month end of the
      month reported to DSS or its agent.

3.25  OPEN ENROLLMENT

a.    The MCO shall conduct continuous open enrollment during which the MCO
      shall accept clients eligible for coverage under this contract in the
      order in which they are enrolled without regard to the health status of
      the client or any other factor(s).

b.    The MCO shall accept membership of newborns born to a Member upon the
      child's date of birth with the exception of newborns that are placed for
      private

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<PAGE>

      adoption or when the mother has indicated in writing that she does not
      wish Medicaid coverage for the child. The enrollment effective date for
      newborns shall be the first of the month in which the child was born.

c.    The MCO shall not discriminate in enrollment activities on the basis of
      health status or the client's need for health care services or on any
      other basis, and shall not attempt to discourage or delay enrollment with
      the MCO or encourage disenrollment from the MCO of eligible Medicaid
      clients.

d.    If the MCO discovers that a Member's new or continued enrollment was in
      error, the MCO shall notify the DEPARTMENT or its agent within sixty (60)
      days of the discovery or sixty (60) days from the date that the MCO had
      the data to determine that the enrollment was in error, whichever comes
      first. Other than the case of a newborn retroactively enrolled, failure to
      notify the DEPARTMENT or its agent within the parameters defined in this
      section and within established procedures will result in the retention of
      the Member by the MCO for the erroneous period of enrollment.

3.26  SPECIAL DISENROLLMENT

a.    The MCO may request in writing and the DEPARTMENT may approve
      disenrollment for specific persons when there is good cause. The request
      shall cite the specific event(s), date(s) and other pertinent information
      substantiating the MCO's request. Additionally, the MCO shall submit any
      other information concerning the MCO's request that the DEPARTMENT may
      require in order to make a determination in the case.

b.    Good cause is defined as a case in which a Member:

      1.    Exhibits disruptive or inappropriate behavior that is not related to
            a medical condition to the extent that the Member's continued
            enrollment seriously impairs the MCO's ability to furnish services
            to either the particular Member or others; or

      2.    Permits others to use or loans his or her membership card to others
            to obtain care or services.

c.    Extensive or expensive health care needs shall not constitute good cause.

d.    The DEPARTMENT will notify the MCO if a Member is disenrolled for cause
      from another plan pursuant to this section prior to enrollment.

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3.27  LINGUISTIC ACCESS

a.    The MCO shall take appropriate measures to ensure adequate access to
      services by Members with limited English proficiency. These measures shall
      include, but not be limited to the promulgation and implementation of
      policies on linguistic accessibility for MCO staff, network providers and
      subcontractors; the identification of a single individual at the MCO for
      ensuring compliance with linguistic accessibility policies; identification
      of persons with limited English proficiency as soon as possible following
      enrollment; provisions for translation services; and the provision of a
      Member handbook, notices of action and grievance/administrative hearing
      information in languages other than English.

b.    Member educational materials must also be available in languages other
      than English and Spanish when more than five (5) percent of the MCO's
      Members in any county served by the MCO speaks the alternative language,
      provided, however, this requirement shall not apply if the alternative
      language has no written form. The MCO may rely upon initial enrollment and
      monthly enrollment data from the DEPARTMENT's Eligibility Management
      System (EMS) to determine the percentage of Members who speak alternative
      languages. All Member educational materials must be made available in
      alternate formats to the visually impaired.

c.    The MCO shall also take appropriate measures to ensure access to services
      by persons with visual and hearing disabilities. Information concerning
      Members with visual impairments and hearing disabilities will be made
      available through the daily and monthly EMS enrollment data.

SANCTION: For each documented instance of failure to provide appropriate
linguistic accessibility to Members, the DEPARTMENT may impose a strike towards
a Class A sanction pursuant to Section 7.05.

3.28  SERVICES TO MEMBERS

a.    The MCO shall have in place an ongoing process of Member education which
      includes, but is not limited to: development of a Member handbook;
      provider directory; newsletter; and other Member educational materials.
      All written materials and correspondence to Members shall be culturally
      sensitive and written at no higher than a seventh grade reading level. All
      Member educational materials must be in both English and Spanish.

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b.    The MCO shall mail the Member handbook and provider directory to Members
      within one week of enrollment notification. The Member handbook shall
      address and explain, at a minimum, the following:

      1.  Covered services;

      2.  Restrictions on services (including limitations and services not
          covered):

      3.  Prior authorization process;

      4.  Definition of and distinction between emergency care and urgent care;

      5.  Policies on the use of emergency and urgent care services including
          a phone number which can be used for assistance in obtaining urgent
          care;

      6.  How to access care twenty-four (24) hours a day;

      7.  Assistance with appointment scheduling;

      8.  Member rights and responsibilities;

      9.  Member services, including hours of operation;

      10. Enrollment/disenrollment/plan changes;

      11. Procedures for selecting and changing PCPs;

      12. Availability of provider network directory and updates;

      13. That a Member is not liable for copayments;

      14. Limited liability for services from out-of-network providers;

      15. Access and availability standards;

      16. Special access and other MCO features of the health plan's program;

      17. Family planning services;

      18. Case management services targeted to Members as medically necessary
          and appropriate;

      19. The MCO's grievance and the DEPARTMENT's administrative hearing
          process;

      20. Procedures to request non-emergency transportation and
          transportation options;

      21. EPSDT services for children;

      22. Coordination of benefits and third party liability; and

      23. Description of drug formulary, prior approval and override process,
          if applicable.

c.    All Member educational materials must be prior approved by the DEPARTMENT.
      Educational materials include, but are not limited to: Member handbook;
      Membership card; introductory and other text language from the provider
      directory; and all communications to Members that include HUSKY A program
      information. The MCO must wait until receiving DEPARTMENT written approval
      or thirty (30) days from the date of submittal before disseminating
      educational materials to Members. The DEPARTMENT reserves the right to
      request revisions or changes in the material at any time.

d.    The MCO must provide periodic updates to the handbook or inform Members,
      as needed, of changes to the Member information discussed above. The MCO
      shall update its Member handbook to incorporate all provisions and
      requirements of this contract within six (6) weeks of the start date. The
      MCO shall distribute the

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      Member handbook within six (6) weeks of receiving the DEPARTMENT's written
      approval.

e.    The MCO shall maintain an adequately staffed Member services office to
      receive telephone calls and to meet personally with Members in order to
      answer Members' questions, respond to Members' complaints and resolve
      problems informally.

f.    The MCO shall identify to the DEPARTMENT the individual who is responsible
      for the performance of the Member Services Department.

g.    The MCO's Member Services Department shall include bilingual staff
      (Spanish and English) and translation services for non-English speaking
      Members. The MCO shall also make available translation services at
      provider sites either directly or through a contractual obligation with
      the service provider.

h.    The MCO shall require members of the Member Services Department to
      identify themselves to Members when responding to Members' questions or
      complaints. At a minimum, ninety (90) percent of all incoming calls shall
      be answered by a staff Member within the first minute and the call
      abandonment rate shall not exceed five (5) percent. The MCO shall submit
      call response and abandonment reports for the preceding six (6) month
      period to the DEPARTMENT upon request.

i.    When Members contact the Member Services Department to ask questions
      about, or complain about, the MCO's failure to respond promptly to a
      request for goods or services, or the denial, reduction, suspension or
      termination of goods or services, the MCO shall: attempt to resolve such
      concerns informally, and inform Members of the grievance and
      administrative hearing processes and, upon request, mail to them, within
      one business day, forms and instructions for filing a grievance.

j.    The MCO shall maintain a log of complaints resolved informally which shall
      be made available to the DEPARTMENT upon request and which shall include a
      short dated summary of the problem, the response and the resolution.

k.    At the time of enrollment and at least annually thereafter, the MCO shall
      inform its Members of the procedural steps for filing a grievance and
      requesting an administrative hearing.

l.    The MCO shall monitor and track PCP transfer requests and follow up on
      complaints made by Members as necessary

m.    The MCO will participate in two (2) Member surveys. The first such survey
      will be an analysis of Members with special needs as defined by the
      DEPARTMENT after consultation with the Children's Health Council, EQRO,
      and the MCO, to be

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      conducted at the DEPARTMENT's expense. The survey will be developed and
      the sample will be chosen by the Children's Health Council, with input
      from the MCOs and the DEPARTMENT. The other survey will be a NCQA Consumer
      Assessment of Health Plans Survey (CAHPS) of combined HUSKY A and B
      Members using an independent vendor, and paid for by the MCO.

n.    The MCO may provide outreach to its current Members at the time of the
      Member's renewal of eligibility. The outreach may involve special mailings
      or phone calls as reminders that the Member must complete the HUSKY
      renewal forms to ensure continued coverage.

SANCTION: If either the incoming call response or call abandonment standards set
forth in paragraph h are not met for ninety (90) percent of the days during the
six (6) month review period, the DEPARTMENT may impose a strike towards a Class
A sanction pursuant to Section 7.05.

3.29  INFORMATION TO POTENTIAL MEMBERS

The MCO shall, upon request, make the following information available to
potential Members:

      a.    the identity, locations, qualifications and availability of the
            MCO's network providers;

      b.    rights and responsibilities of Members;

      c.    grievance procedures; and

      d.    all covered items and services that are available either directly or
            indirectly or through referral and prior authorization.

3.30  MARKETING REQUIREMENTS

DSS marketing restrictions apply to providers of care as well as to the MCOs.
The MCO shall notify all its participating providers of the DEPARTMENT's
marketing restrictions. The detailed marketing guidelines are set forth in
Appendix D.

a.    PROHIBITED MARKETING ACTIVITIES

      The following activities are prohibited, in all forms of communication,
      regardless of whether they are performed by the MCO directly, by its
      contracted providers, or its subcontractors:

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      1.    Asserting or implying that a Member will lose or not qualify for
            HUSKY benefits unless he/she enrolls in the MCO, or creating other
            threatening scenarios that do not accurately depict the consequences
            of choosing a different MCO;

      2.    Discriminating (in marketing or in the course of the enrollment
            process) against any eligible individual on the basis of health
            status or need for future health care services.

      3.    Making inaccurate, misleading or exaggerated statements (e.g. about
            the nature of the eligibility or enrollment process, the positive
            attributes of the MCO, or about the disadvantages of competing
            MCOs);

      4.    Telephonic, door-to-door marketing or other cold call marketing or
            enrollment activities to prospective Members;

      5.    Failing to submit for approval marketing materials or marketing
            approaches when such approval is required by DSS (see Appendix D).
            MCOs and their providers must wait until receiving DSS written
            approval or thirty (30) days from the date of submittal before
            disseminating any such information to potential Members. DSS
            reserves the right to request revisions or changes in material at
            any time; and

      6.    Conducting any form of individual or group solicitation activity
            other than those expressly permitted under Appendix D, the DSS
            Marketing Guidelines, unless prior approval is obtained from DSS.

b.    Any type of marketing activity which has not been clearly specified as
      permissible under these guidelines should be assumed to be prohibited. The
      MCO shall contact the DEPARTMENT for guidance and approval for any
      activity not clearly permissible under these guidelines.

SANCTION: If the MCO or its providers fails to submit marketing materials for
prior approval, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

SANCTION: If the MCO or its providers engages in inappropriate marketing
activities at provider sites, the DEPARTMENT may impose a Class B or Class C
sanction pursuant to Section 7.05 as it deems appropriate.

SANCTION: If the MCO or its providers engages in cold call or door-to-door
marketing, the DEPARTMENT may impose Class C sanctions pursuant to Section 7.05.

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3.31  HEALTH EDUCATION

The MCO must routinely, but no less frequently than annually, remind and
encourage the Members to utilize benefits including physical examinations which
are available and designed to prevent illness. The MCO must also offer periodic
screening programs which in the opinion of the medical staff would effectively
identify conditions indicative of a health problem. The MCO shall keep a record
of all activities it has conducted to satisfy this requirement.

3.32  INTERNAL AND EXTERNAL QUALITY ASSURANCE

a.    The MCO is required to provide a quality level of care for all services
      that it provides and for which it contracts. These services are expected
      to be medically necessary and may be provided by participating providers.
      A Quality Assessment and Performance Improvement program shall be
      implemented by the MCO to assure the quality of care. The EQRO shall
      monitor the MCO's compliance with all requirements in this section.

b.    The MCO shall comply with federal regulations and DEPARTMENT policies and
      requirements concerning Quality Assessment and Performance Improvement and
      utilization review set forth below. The MCO will develop and implement an
      internal Quality Assessment and Performance Improvement program consistent
      with the Quality Assessment and Performance program guidelines as provided
      in Appendix E.

c.    The MCO shall comply with all applicable federal regulations concerning
      Quality Assessment and Performance Improvement.

d.    The MCO shall operate a Quality Assessment and Performance Improvement
      system which:

      1.    Is consistent with applicable federal regulations;

      2.    Provides for review by appropriate health professionals of the
            process followed in providing health services;

      3.    Provides for systematic data collection of performance and
            participant results;

      4.    Provides for interpretation of these data to the practitioners;

      5.    Provides for making needed changes;

      6.    Provides for the performance of at least one performance improvement
            project of the MCO's own choosing;

      7.    Provides for participation in at least one performance improvement
            project conducted by the EQRO; and

      8.    Has in effect mechanisms to detect both under utilization and over
            utilization of services.

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e.    The MCO shall provide descriptive information on the operation,
      performance and success of its Quality Assessment and Performance
      Improvement program to the DEPARTMENT or its agent upon request.

f.    The MCO shall maintain and operate a Quality Assessment and Performance
      Improvement program which includes at least the following elements:

      1.    A Quality Assessment and Performance Improvement plan.

      2.    A full-time Quality Assessment and Performance Improvement Director,
            who is responsible for the operation and success of the Quality
            Assessment and Performance Improvement Program. This person shall
            have adequate experience to ensure successful Quality Assessment and
            Performance Improvement, and shall be accountable for the Quality
            Assessment and Performance Improvement systems of all the MCO's
            providers, as well as the MCO's subcontractors.

      3.    The Quality Assessment and Performance Improvement Director shall
            spend an adequate percentage of time on Quality Assessment and
            Performance Improvement activities to ensure that a successful
            Quality Assessment and Performance Improvement Program will exist.
            Under the Quality Assessment and Performance Improvement program,
            there shall be access on an as-needed basis to the full compliment
            of health professions (e.g., pharmacy, physical therapy, nursing,
            etc.) and administrative staff. Oversight of the program shall be
            provided by a Quality Assessment and Performance Improvement
            committee that includes representatives from:

                  a.    a variety of medical disciplines (e.g., medicine,
                        surgery, mental health, etc.);

                  b.    administrative staff; and

                  c.    Board of Directors of the MCO.

      4.    Make available case management training for PCPs designed by the
            DEPARTMENT or its agent.

g.    The Quality Assessment and Performance Improvement committee shall be
      organized operationally within the MCO such that it can be responsible for
      all aspects of the Quality Assessment and Performance Improvement program.

h.    Quality Assessment and Performance Improvement activities shall be
      sufficiently separate from Utilization Review activities, so that Quality
      Assessment and Performance Improvement activities can be distinctly
      identified as such.

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i.    The Quality Assessment and Performance Improvement activities of the MCO's
      in-network providers and subcontractors, if separate from the MCO's
      Quality Assessment and Performance Improvement activities, shall be
      integrated into the overall MCO Quality Assessment and Performance
      Improvement program, and the MCO shall provide feedback to the in-network
      providers/subcontractors regarding the operation of any such independent
      Quality Assessment and Performance Improvement effort. The MCO shall
      remain, however, fully accountable for all Quality Assessment and
      Performance Improvement relative to its in-network providers and
      subcontractors.

j.    The Quality Assessment and Performance Improvement committee shall meet
      at least quarterly and produce written documentation of committee
      activities to be shared with the DEPARTMENT.

k.    The results of the Quality Assessment and Performance Improvement
      activities shall be reported in writing at each meeting of the Board of
      Directors.

l.    The MCO shall have a written procedure for following up on the results of
      Quality Assessment and Performance Improvement activities to determine
      success of implementation. Follow-up shall be documented in writing.

m.    Where the DEPARTMENT determines that a Quality Assessment and Performance
      Improvement plan does not meet the above requirements, the DEPARTMENT may
      provide the MCO with a model plan. The MCO agrees to modify its Quality
      Assessment and Performance Improvement plan based on negotiations with the
      DEPARTMENT.

n.    The MCO shall monitor access to and quality of health care goods and
      services for its Member population, and, at a minimum, use this mechanism
      to capture and report all of the DEPARTMENT's required utilization data.
      The MCO shall be subject to an annual medical audit by the DEPARTMENT's
      Quality Assessment and Performance Improvement contractor and shall
      provide access to the data and records requested for this purpose.

o.    To the extent permitted under state and federal law, the MCO certifies
      that all data and records requested shall, upon reasonable notice, be made
      available to the DEPARTMENT or its agent.

p.    The MCO will be an active participant in at least one of the EQRO's
      quality improvement focus studies each year.

q.    The MCO must comply with external quality review that will be implemented
      by an organization contracted by the DEPARTMENT. This may include
      participating in the design of the external review, collecting data
      including, but not limited to, encounter and medical data, and/or making
      data available to the review organization.

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r.    The MCO must conduct at least one performance improvement project that:

      1.    Focuses on one of the following areas:

            a.    Prevention and care of acute and chronic conditions;

            b.    High volume services;

            c.    Continuity and coordination of care;

            d.    Appeals, grievances and complaints;

            e.    Access to and availability of services; or

            f.    Other projects subject to DEPARTMENT approval.

      2.    Includes the measurement of performance and quality indicators that
            are:

            a.    Objective;

            b.    Clearly and unambiguously defined;

            c.    Based on current clinical knowledge or health services
                  research;

            d.    Valid and reliable;

            e.    Systematically collected; and

            f.    Capable of measuring outcomes such as changes in health status
                  or Member satisfaction or valid proxies of those outcomes.

      3.    Implements system interventions to achieve quality improvement;

      4.    Evaluates the effectiveness of the interventions;

      5.    Plans and initiates activities for increasing or sustaining
            improvement; and

      6.    Represents the entire population to which the quality indicator is
            relevant.

s.    With the approval of the DEPARTMENT, the MCO may conduct performance
      improvement projects for the combined HUSKY A and HUSKY B populations.

3.33  INSPECTION OF FACILITIES

a.    The MCO shall provide the State of Connecticut and any other legally
      authorized governmental entity, or their authorized representatives, the
      right to enter at all reasonable times the MCO's premises or other places,
      including the premises of any subcontractor, where work under this
      contract is performed to inspect, monitor or otherwise evaluate work
      performed pursuant to this contract. The MCO shall provide reasonable
      facilities and assistance for the safety and convenience of the persons
      performing those duties. The DEPARTMENT and its authorized agents will
      request access in advance in writing except in case of suspected fraud and
      abuse.

b.    In the event right of access is requested under this section, the MCO or
      subcontractor shall upon request provide and make available staff to
      assist in the audit or inspection effort, and provide adequate space on
      the premises to reasonably accommodate the State or Federal
      representatives conducting the audit or inspection effort.

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c.    The MCO shall be given ten (10) business days to respond to any findings
      of an audit before the DEPARTMENT shall finalize its findings. All
      information so obtained will be accorded confidential treatment as
      provided under applicable law.

3.34  EXAMINATION OF RECORDS

a.    The MCO shall develop and keep such records as are required by law or
      other authority or as the DEPARTMENT determines are necessary or useful
      for assuring quality performance of this contract. The DEPARTMENT shall
      have an unqualified right of access to such records in accordance with
      Part II Section 3.33.

b.    Upon non-renewal or termination of this contract, the MCO shall turn over
      or provide copies to the DEPARTMENT or to a designee of the DEPARTMENT all
      documents, files and records relating to persons receiving services and to
      the administration of this contract that the DEPARTMENT may request, in
      accordance with Part II, Section 3.33.

c.    The MCO shall provide the DEPARTMENT and its authorized agents with
      reasonable access to records the MCO maintains for the purposes of this
      contract. The DEPARTMENT and its authorized agents will request access in
      writing except in cases of suspected fraud and abuse. The MCO must make
      all requested medical records available within thirty (30) days of the
      DEPARTMENT's request. Any contract with a subcontractor must include a
      provision specifically authorizing access in accordance with the terms set
      forth in Part II, Section 3.33.

d.    The MCO shall maintain the confidentiality of patients' records in
      conformance with this contract and state and federal statutes and
      regulations, including but not limited to the Health Insurance Portability
      and Accountability Act (HIPPA), 42 U.S.C. Section 1320 d-2 et seq.

e.    The MCO, for purposes of audit or investigation, shall provide the State
      of Connecticut, the Secretary of HHS and his/her designated agent, and any
      other legally authorized governmental entity or their authorized agents
      access to all the MCO's materials and information pertinent to the
      services provided under this contract, at any time, until the expiration
      of three (3) years from the completion date of this contract as extended.

f.    The State and its authorized agents may record any information and make
      copies of any materials necessary for the audit.

g.    The MCO and its subcontractors shall retain financial records, supporting
      documents, statistical records and all other records supporting the
      services provided under this contract for a period of five (5) years from
      the completion date of this contract. The MCO shall make the records
      available at all reasonable

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      times at the MCO's general offices. The DEPARTMENT and its authorized
      agents will request access in writing except in cases of suspected fraud
      and abuse. If any litigation, claim or audit is started before the
      expiration of the six (6) year period, the records must be retained until
      all litigation, claims or audit findings involving the records have been
      resolved. The MCO must make all requested records available within thirty
      (30) days of the DEPARTMENT's request.

3.35  MEDICAL RECORDS

a.    In compliance with all state and federal law governing the privacy of
      individually identifiable health care information including the Health
      Insurance Portability and Accountability Act (HIPPA), 42 USC Sections
      1320d-2 et seq., the MCO shall establish a confidential, centralized
      record, for each Member, which includes information of all medical goods
      and services received. The MCO may delegate maintenance of the centralized
      medical record to the Member's PCP, provided however, that the record
      shall be made available upon request and reasonable notice, to the
      DEPARTMENT or its agent(s) at a centralized location. The medical record
      shall meet the DEPARTMENT's medical record requirements as defined by the
      DEPARTMENT in its regulations, and shall comply with the requirements of
      NCQA or other national accrediting body with a recognized expertise in
      managed care.

b.    The MCO shall also simultaneously maintain, with the medical record, a
      record of all contacts with each Member that the MCO will maintain in a
      computerized database and make available to the DEPARTMENT, at its
      request. Claims and encounter records will be provided to the DEPARTMENT
      in an electronic medium as specified by the DEPARTMENT, and its agent(s).
      The medical record shall demonstrate coordination of Member care; for
      example, relevant medical information from referral sources and
      out-of-network family planning providers shall be reviewed and entered
      into Members' medical records. For those MCOs that are governed under
      Connecticut General Statutes Chapter 705 Section 38a-975 et seq., known as
      the "Connecticut Insurance Information and Privacy Act", such MCO shall be
      required to observe the provisions of such Act with respect to disclosure
      of personal and privileged information as such terms are defined under the
      Act.

c.    The MCO shall not turn over or provide documents, files and records
      pertaining to a Member to another health plan unless the Member has
      changed enrollment to the other plan and the MCO has bee so notified by
      the DEPARTMENT or its agent.

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3.36  AUDIT LIABILITIES

In addition to and not in any way in limitation of the MCO's obligations
pursuant to this contract, it is understood and agreed by the MCO that the MCO
shall be held liable for any finally determined State or Federal audit
exceptions and shall return to the DEPARTMENT all payments made under the
contract to which exception has been taken or which have been disallowed because
of such an exception.

3.37  CLINICAL DATA REPORTING

a.    Utilization Reporting: The MCO shall submit reports to the DEPARTMENT in
      the areas listed below. The purpose of the reports is to assist the
      DEPARTMENT in its efforts to assess utilization and evaluate the
      performance of the HUSKY A program and of the MCO.

      Utilization reports shall cover the following areas:

      1.    Inpatient Care;

      2.    Preventive Care;

      3.    Dental Care;

      4.    Behavioral Health Care;

      5.    Other Services;

      6.    Maternal and Child Health;

      7.    EPSDT, known as HealthTrack; and

      8.    Immunization Information.

b.    The DEPARTMENT shall consult with the MCO, through a workgroup comprised
      of DEPARTMENT and MCO representatives that meets on a periodic basis, or a
      similar process, on the necessary data, methods of collecting the data and
      the format and media for new reports or changes to existing reports.

c.    The DEPARTMENT shall provide the MCO with final specifications for
      submitting all reports no less than ninety (90) days before the reports
      are due. The MCO shall submit reports on a schedule to be determined by
      the DEPARTMENT, but not more frequently than quarterly. Before the
      beginning of each calendar year, the DEPARTMENT shall provide the MCO with
      a schedule of utilization reports which shall be due that calendar year.
      Due dates for the reports shall be at the discretion of the DEPARTMENT,
      but not earlier than ninety (90) days after the end of the period that
      they cover.

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d.    For each report the DEPARTMENT shall consider using any HEDIS standards
      promulgated by the NCQA which covers the same or similar subject matter.
      The DEPARTMENT reserves the right to modify HEDIS standards, or not use
      them at all, if in the DEPARTMENT's judgment, the objectives of the HUSKY
      A program can be better served by using other methods.

e.    EPSDT (HealthTrack): The MCO shall submit to the DEPARTMENT reports on
      compliance with screening requirements of the EPSDT program sufficient to
      enable the DEPARTMENT to comply with its reporting obligations under
      federal and state requirements and to assess and evaluate the performance
      of the MCO in the screening requirements of the EPSDT program. These
      obligations include, but are not limited to, submitting reports to federal
      and state agencies.

f.    Maternal and Prenatal Care:

      The MCO shall report aggregate summary data on outcomes of maternal and
      prenatal care to the DEPARTMENT no less frequently than quarterly. Such
      data will include:

      1.    Number of deliveries during the quarter to women enrolled in the MCO
            at the time of delivery;

      2.    Number of live births;

      3.    Number of fetal deaths;

      4.    Number of very low birthweight babies, defined as weighing less than
            one thousand five hundred grams;

      5.    Number of moderately low birthweight babies, defined as weighing
            less than two thousand five hundred grams;

      6.    Number of deliveries by cesarean section;

      7.    Number of women who delivered and had no prenatal care;

      8.    Number of women with inadequate prenatal care;

      9.    Number of women with deliveries who have received a postpartum
            visit; and

      10.   For the purpose of adjusting comparisons amongst plans, aggregate
            measures of weeks of pregnancy at the time of enrollment in the
            plan.

      The report will be due within six (6) months after the last day of the
      quarter in which the deliveries occurred. The DEPARTMENT will specify the
      methodology for preparing the report, no less than ninety (90) days prior
      to the end of the quarter which is the subject of the report and after
      consultation with the MCO. If the change requires the collection of
      additional data elements not currently being captured, the DEPARTMENT will
      notify the MCO no less than ninety (90) days prior to the beginning of the
      first quarter affected by the change.

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g.    Encounter Data:

      1.    The MCO shall provide the DEPARTMENT with an electronic record of
            every encounter between a network provider and a Member within
            fifteen (15) days of the close of the month in which the specific
            encounter occurred, was paid for, or was processed whichever is
            later but no later than 180 days from the encounter. Such encounters
            shall be coded and formatted in accordance with the specifications
            outlined in the State's Encounter Submission and Reporting Guide.
            The DEPARTMENT or its agent shall analyze each month's encounter
            submission file. The DEPARTMENT or its agent will reject those
            records that contain invalid or missing data and result in a
            critical edit failures as outlined in the Encounter Submission and
            Reporting Guide.

      PERFORMANCE MEASURE: The overall volume of rejected encounters shall not
      exceed five (5) percent in any given month.

      2.    The DEPARTMENT or its agent shall also analyze the MCO's encounter
            submissions for completeness. On a quarterly basis, no less than six
            (6) months from the date of service on the encounter, the DEPARTMENT
            or its agent will compare encounter data utilization levels to the
            utilization levels in the reports specified in Sections 3.37a-f.

      PERFORMANCE MEASURE: Encounter data shall not be over or under the
      reported utilization by ten (10) percent or more.

      3.    The DEPARTMENT or its EQRO, will choose a random sample of no more
            than one hundred (100) encounters for each year. The MCO will make
            the medical records of each encounter so chosen available to the
            DEPARTMENT or EQRO at a central location upon reasonable notice. The
            EQRO shall review the medical records and report back to the
            DEPARTMENT on the extent to which the information in each field of
            the encounter record corresponds to the information contained in the
            medical record. Prior to making its report to the DEPARTMENT, the
            EQRO shall afford the MCO a reasonable opportunity to suggest
            corrections to or comment upon the EQRO's findings.

      PERFORMANCE MEASURE: The MCO shall re-submit corrected returned data
      within thirty (30) days of its return to the MCO.

SANCTION: Failure to comply with the above reporting requirements in a complete
and timely manner may result in a strike towards a Class A sanction pursuant to
Section 7.05.

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3.38  UTILIZATION MANAGEMENT

a.    The MCO and any subcontractor is required to be licensed by the
      Connecticut Department of Insurance as a utilization review company. The
      MCO may subcontract with a licensed utilization review company to perform
      some or all of the MCO's utilization management functions.

b.    If the MCO subcontracts for any portion of the utilization management
      function, the MCO shall provide a copy of any such subcontract to the
      DEPARTMENT and any such subcontracts will be subject to the provisions of
      Section 5.08 of this contract. The DEPARTMENT will review and approve the
      subcontract, subject to the provisions of Section 3.44, to ensure the
      appropriateness of the subcontractor's policies and procedures. The MCO is
      required to conduct regular and comprehensive monitoring of the
      utilization management subcontractor.

The MCO and its subcontractors shall comply with the utilization review
provisions of Connecticut General Statutes Section 38a-226c(a)(1).

3.39  FINANCIAL RECORDS

a.    Accounting: The MCO shall maintain for the purpose of this contract, an
      accounting system of procedures and practices that conforms to Generally
      Accepted Accounting Principles.

b.    The MCO shall permit audits or reviews by the DEPARTMENT or its agent(s),
      of the MCO's financial records related to the performance of this
      contract. In addition, the MCO will be required to provide Claims Aging
      Inventory Reports, Claims Turn Around Time Reports, cost, and other
      reports as outlined in sections c and d below or as otherwise directed by
      the DEPARTMENT.

c.    Reports specific to the MCO's Medicaid line of business shall be provided
      in formats developed by the DEPARTMENT. All reports described in Sections
      3.39 c (1) and 3.39 c (2) shall contain separate sections for HUSKY A and
      HUSKY B. It is anticipated that the requirements in this area will be
      modified to enable the DEPARTMENT to respond to inquiries that the
      DEPARTMENT receives regarding the financial status of the HUSKY program,
      to determine the relationship of capitation payments to actual
      appropriations for the program, and to allow for proper oversight of
      fiscal issues related to the managed care programs. The MCO will cooperate
      with the DEPARTMENT or its agent(s) to meet these objectives. The
      following is a list of required reports:

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      1.    Audited financial reports with an income statement by MCO HUSKY line
            of business. If the MCO is licensed as a health care center or
            insurance company, both the annual audited financial reports for the
            MCO and the audited financial reports per MCO HUSKY line of business
            shall be conducted and reported in accordance with C.G.S. Section
            38a - 54. If the MCO is not licensed as a health care center or
            insurance company, the annual audited financial reports for the MCO
            and the audited financial reports per MCO line of business shall be
            completed in accordance with generally accepted auditing principles.

            The MCO may elect to combine HUSKY A and HUSKY B in the audited
            financial statement. If this election is made, the MCO shall also
            submit the following: a separate unaudited income statement for
            HUSKY A and HUSKY B, which will be compared to the audited financial
            statement.

      2.    Unaudited financial reports, HUSKY line of business (formats shown
            in Appendix F). The reports shall be submitted quarterly, forty-five
            (45) days subsequent to the end of each quarter. Every line of the
            requested report must contain a dollar figure or an indication that
            said line is not applicable.

      3.    Annual and Quarterly Statements. If the MCO is licensed as a health
            care center or insurance company, the MCO is required to submit
            Annual and Quarterly Statements to the Department of Insurance in
            accordance with C.G.S. Section 38a-53. One copy of each statement
            shall be submitted to the DEPARTMENT in accordance with the
            following due dates: Annual Statements are due on March 1st and
            Quarterly Statements are due forty-five (45) days subsequent to the
            end of each quarter.

      4.    Claims Aging Inventory Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). The Claims Aging Inventory
            Report will include all HUSKY claims outstanding as of the end of
            each quarter by type of claim, claim status and aging categories. If
            a subcontractor is used to provide services and adjudicate claims or
            a vendor is used to adjudicate claims, the MCO is responsible for
            providing a Claims Aging Inventory Report in the required format for
            each current or prior subcontractor who has claims outstanding. The
            Claims Aging Inventory Reports will be submitted to the DEPARTMENT
            forty-five (45) days subsequent to the end of each quarter.

      5.    Claims Turn Around Time Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). For those claims processed
            in forty-six (46) days or more, the report shall indicate if
            interest was paid in accordance with Section 3.45 of this contract.
            If a subcontractor is used to provide services and adjudicate claims
            or a vendor is used to adjudicate claims, the MCO is responsible for
            providing a

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            Claims Turn Around Time Report in the required format for each
            current or prior subcontractor who has claims outstanding. The
            Claims Turn Around Time Report will be submitted to the DEPARTMENT
            forty-five (45) days subsequent to the end of each quarter.

d.    The MCO shall maintain accounting records in a manner which will enable
      the DEPARTMENT to easily audit and examine any books, documents, papers
      and records maintained in support of the contract. All such documents
      shall be made available to the DEPARTMENT at its request, and shall be
      clearly identifiable as pertaining to the contract.

e.    The MCO shall make available on request all financial reports required by
      the terms of any current contract with any other state agency(s) provided
      the said agency agrees that such information may be shared with the
      DEPARTMENT.

3.40  INSURANCE

a.    The MCO, its successors and assignees shall procure and maintain such
      insurance as is required by currently applicable federal and state law and
      regulation. Such insurance should include, but not be limited to, the
      following:

      1.    liability insurance (general, errors and omissions, and directors
            and officers coverage);

      2.    fidelity bonding or coverage of persons entrusted with handling of
            funds;

      3.    workers compensation; and

      4.    unemployment insurance.

b.    The MCO shall name the State of Connecticut as an additional insured party
      under any insurance, except for professional liability, workers
      compensation, unemployment insurance, and fidelity bonding maintained for
      the purposes of this contract. However, the MCO shall name the State of
      Connecticut as either a loss payee or additional insured for fidelity
      bonding coverage.

3.41  THIRD PARTY COVERAGE

The DEPARTMENT is the payer of last resort when third party resources are
available to cover the costs of medical services provided to Medicaid
recipients. Pursuant to this requirement, the MCO is required to comply with
federal and state statutes and regulations regarding third party liability. The
MCO shall be responsible for making every reasonable effort to determine the
lega1 liability of third parties to pay for services rendered to Members under
this contract. The MCO shall be responsible for identifying appropriate third
party resources, and if questions arise they shall consult with the

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DEPARTMENT. The MCO shall pursue, collect, and retain any monies from third
party payers for services to the MCO's Members under this contract, subject to
the following terms and conditions:

a.    The DEPARTMENT hereby assigns to the MCO all rights to third party
      recoveries from Medicare, health insurance, casualty insurance, workers'
      compensation, tortfeasors, or any other third parties who may be
      responsible for payment of medical costs for the MCO's Members.

      1.    The MCO will have primary responsibility for cost avoidance through
            the coordination of benefits relative to federal and private health
            insurance resources including, but not limited to Medicare,
            individual health insurance, employment-related group health
            insurance and self administered or self funded health benefit plan,
            including ERISA (Employee Retirement and Income Security Act) plans.
            The MCO shall avoid initial payments of claims, as permitted by
            federal law, where federal or private health insurance resources are
            available. When cost avoidance is not possible, the MCO may utilize
            post payment recovery. If a third party insurer requires the Member
            to pay any copayment, coinsurance or deductible, the MCO is
            responsible for making any such payments.

      2.    The MCO may assign the right of recovery to their subcontractors
            and/or network providers. Notwithstanding any such assignment of the
            right of recovery, the MCO remains responsible for the effective and
            diligent performance of third party recovery.

      3.    In pursing third party recovery, the MCO, network providers, and
            subcontractors shall seek recovery of the cost of services actually
            rendered to the Member, notwithstanding the fact that the MCO may
            pay the subcontractor on a capitated basis.

      4.    The MCO or its assignee must initiate third party recoveries within
            sixty (60) days of the date of service or within sixty (60) days
            after the end of the month in which the MCO learns of the existence
            of the liable third party. The MCO or its assignees must maintain
            dated documentation of all claims to third parties. The MCO must
            document initiation of recovery by formal communication in written
            or electronic form to the liable third party, specifically
            requesting reimbursement up to the legal limit of liability for any
            services provided to the MCO's Member covered under the State
            Medicaid Plan.

      5.    The right to pursue, collect and retain recovery from claims not
            initiated and documented within sixty (60) days as stated above,
            will revert to the DEPARTMENT and the MCO or its assignees will lose
            any right of recovery.

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      6.    When the MCO seeks recovery from a third party for care provided to
            a Member following an accident, the MCO may recover only its cost of
            care.

b.    The MCO shall maintain records of recoveries of all third party
      collections, including cost avoidance, and recovery actions. The
      DEPARTMENT will specify a schedule and format for reporting such
      collections. The amounts avoided or recovered by the MCO shall be
      considered in establishing future capitated rates paid to the MCO.

c.    The MCO shall fully cooperate with the DEPARTMENT in all third party
      recovery efforts.

d.    The DEPARTMENT shall supply the MCO with a monthly file of Members where
      third party coverage has been identified. The information shall also be
      available to the MCO and its assignees from the DEPARTMENT's Automated
      Electronic Voice Response System.

e.    The MCO shall notify the DEPARTMENT within thirty (30) days if the MCO or
      its network provider or subcontractor discovers that a Member has become
      eligible for coverage by a liable third party. The MCO shall notify the
      DEPARTMENT within thirty (30) days if the MCO or its in-network provider
      or subcontractor discovers that a Member has lost eligibility for coverage
      by a liable third party.

3.42  COORDINATION OF BENEFITS AND DELIVERY OF SERVICES

a.    The MCO shall ensure that the rules related to the coordination of
      benefits in Section 3.41 do not present any barriers to Members' access to
      the covered services under this contract.

b.    The MCO shall educate its Members on how to access services when a Member
      is covered by a third party insurer.

c.    If a third party insurer requires the Member to pay any copayment,
      coinsurance or deductible, the MCO is responsible for making these
      payments on behalf of the Member, even if the services are provided
      outside of the MCO's provider network.

d.    If a Member's third party insurer pays for only some services covered
      under this contract or for only part of a particular service, the MCO
      shall be liable up to the amount covered by Medicaid for the full extent
      of services covered under this contract, even if the services are provided
      outside of the MCO's provider

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      network. In no instance, shall Members be liable for copayments for said
      services.

e.    If a Member is covered by a third party insurer, the MCO is bound by any
      prior authorization decisions made by the third party insurer.

3.43  PASSIVE BILLING

Capitation payments to the MCO shall be based on a passive billing system. The
MCO is not required to submit claims for the capitation payment for its HUSKY A
membership. Capitation payments will be based on MCO (membership data as
reflected in the enrollment files provided by the DEPARTMENT to the MCOs. On a
monthly basis BENOVA will provide the MCO with a detailed capitation remittance
file.

3.44  SUBCONTRACTING FOR SERVICES

a.    Licensed health care facilities, group practices and licensed health care
      professionals operating within the scope of their practice may contract
      with the MCO directly or indirectly through a subcontractor who directly
      contracts with the MCO. The MCO shall be held directly accountable and
      liable for all of the contractual provisions under this contract
      regardless of whether the MCO chooses to subcontract their
      responsibilities to a third party. No subcontract shall operate to
      terminate the legal responsibility of the MCO to assure that all
      activities carried out by the subcontractor conform to the provisions of
      the contract. Subcontracts shall not terminate the legal liability of the
      MCO under this contract.

b.    The MCO may subcontract for any function, excluding Member Services,
      covered by this contract, subject to the requirements of this contract.
      All subcontracts shall be in writing, shall include any general
      requirements of this contract that are appropriate to the services being
      provided, and shall assure that all delegated duties of the MCO under this
      contract are performed. All subcontracts shall also provide for the right
      of the DEPARTMENT or other governmental entity to enter the
      subcontractor's premises to inspect, monitor or otherwise evaluate the
      work being performed as a delegated duty of this contract, as specified in
      Section 3.33, Inspection of Facilities. All subcontracts shall comply with
      42 CFR Section 434.6 (b) and (c).

c.    With the exception of subcontracts specifically excluded by the
      DEPARTMENT, all subcontracts shall include verbatim the HUSKY A
      definitions of Medical Appropriateness / Medically Appropriate and
      Medically Necessary/Medical Necessity as set forth in Part II, General
      Contract Terms for the MCOs. All subcontracts shall require the use of
      these definitions by subcontractors in all requests for approval of
      coverage of goods or services made on behalf of HUSKY

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      A Members. All subcontracts shall also provide that decisions concerning
      both acute and chronic care must be made according to these definitions.

d.    Within fifteen (15) days of the effective date of this contract, the MCO
      shall provide the DEPARTMENT with a report of those functions under this
      contract that MCO shall be providing through a subcontract and copies of
      the contracts between the MCO and the subcontractor. The report shall
      identify the names of the subcontractors, their addresses and a summary of
      the services they will be providing. If the MCO enters into any additional
      subcontracts after the MCO's initial compliance with this section, the MCO
      shall obtain the advance written approval of the DEPARTMENT. The MCO shall
      provide the DEPARTMENT with a draft of the proposed subcontract thirty
      (30) days in advance of the completion of the MCO's negotiation of such
      subcontract. In addition, amendments to any subcontract, excluding those
      of a technical nature, shall require the pre-review and approval of the
      DEPARTMENT.

e.    In accordance with JUNE SPECIAL SESSION, PUBLIC ACT NO.01-2, all
      behavioral health and dental subcontracts which include the payment of
      claims on behalf of HUSKY A Members for the provision of goods and
      services to HUSKY A Members shall require a performance bond, letter of
      credit, statement of financial reserves or payment withhold requirements.
      The performance bond, letter of credit, statement of financial reserves or
      payment withhold requirements shall be in a form mutually agreed upon by
      the MCO and the subcontractor. The amount of the performance bond shall be
      sufficient to ensure the completion of the subcontractor's claims
      processing and provider payment obligations under the subcontract in the
      event the contract between the MCO and the subcontractor is terminated.
      The MCO shall submit reports to the DEPARTMENT upon the DEPARTMENT's
      request related to any payments made from the performance bonds or any
      payment withholds.

f.    All subcontracts shall include provisions for a well-organized transition
      in the event of termination of the subcontact for any reason. Such
      provisions shall ensure that an adequate provider network will be
      maintained at all times during any such transition period and that
      continuity of care is maintained for all Members.

g.    In the event that a subcontract is terminated, the MCO shall submit a
      written transition plan to the DEPARTMENT sixty (60) days in advance of
      the scheduled termination. The transition plan shall include provisions
      concerning financial responsibility for the final settlement of provider
      claims and data reporting, which at a minimum must include a claims aging
      report prepared in accordance with Section 3.39 c (5) of this contract,
      with steps to ensure the resolution of the outstanding amounts. This plan
      shall be submitted prior to the DEPARTMENT's approval of the replacement
      subcontractor.

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h.    All subcontracts shall also include a provision that the MCO will withhold
      a portion of the final payment to the subcontractor, as a surety bond to
      ensure compliance under the terminated subcontract.

i.    The MCO shall have no right to and shall not assign, transfer or delegate
      this contract in its entirety, or any right or duty arising under this
      contract without the prior written approval of the DEPARTMENT. The
      DEPARTMENT in its discretion may grant such written approval of an
      assignment, transfer or delegation provided, however, that this paragraph
      shall not be construed to grant the MCO any right to such approval.

j.    This section shall not be construed as restricting the MCO from entering
      into contracts with participating providers to provide health care
      services to Members.

3.45  TIMELY PAYMENT OF CLAIMS

If the MCO or any subcontractor or vendor who adjudicates claims fails to pay a
clean claim within forty-five (45) days of receipt, or as otherwise stipulated
by a provider contract, the MCO, vendor or subcontractor shall pay the provider
the amount of such clean claims plus interest at the rate of fifteen (15)
percent per annum or otherwise as stipulated by a provider contract. In
accordance with Section 3.39 (c)(5), Financial Records, the MCO shall provide to
the DEPARTMENT information related to interest paid beyond the forty-five (45)
day timely filing limit or otherwise stipulated by a provider contract.

3.46  CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES

No deductibles or co-payments are permitted for HUSKY A covered services.

A provider shall be permitted to charge an eligible Member for goods or services
which are not coverable only if the Member knowingly elects to receive the goods
or services and enters into an agreement in writing to pay for such goods or
services prior to receiving them. For purposes of this section noncovered
services are services not covered under the Medicaid state plan, services which
are provided in the absence of appropriate authorization, and services which are
provided out-of-network unless otherwise specified in the contract, policy or
regulation (e.g., family planning, mental health or emergency room services).

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3.47  INSOLVENCY PROTECTION

The MCO must maintain protection against insolvency as required by the
DEPARTMENT including demonstration of adequate initial capital and ongoing
reserve contributions. The MCO must provide financial data to the DEPARTMENT in
accordance with the DEPARTMENT's required formats and timing.

3.48  ACCEPTANCE OF DSS RULINGS

In cases where there is a dispute between the MCO and an out-of-network provider
about whether a service is medically necessary, is an emergency, or is an
appropriate diagnostic test to determine whether an emergency condition exists,
the DEPARTMENT will hear appeals, filed within one year following the date of
service and make final determinations. The DEPARTMENT will accept written
comments from all parties to the dispute prior to making the decision, and order
or not order payment, as appropriate. The MCO shall accept the DEPARTMENT's
determinations regarding appeals.

3.49  POLICY TRANSMITTALS

The MCO shall comply with the provisions and requirements in the DEPARTMENT's
Managed Care Policy Transmittals as set forth in Appendix H. In addition, the
MCO shall comply with any future Managed Care Policy Transmittals issued by the
DEPARTMENT. The MCO shall comply with the Medical Services Policy as set forth
in the DEPARTMENT's provider manuals and the Regulations of Connecticut State
Agencies.

3.50  FRAUD AND ABUSE

a.    The MCO shall not knowingly take any action or fail to take action that
      could result in an unauthorized benefit to the MCO, its employees, its
      subcontractors, its vendors, or to a Member.

b.    The MCO commits to preventing, detecting, investigating, and reporting
      potential fraud and abuse occurrences, and shall assist the DEPARTMENT and
      HHS in preventing and prosecuting fraud and abuse in the HUSKY program.

c.    The MCO acknowledges that the HHS, Office of the Inspector General, has
      the authority to impose civil monetary penalties on individuals and
      entities that submit false and fraudulent claims to the HUSKY program.

d.    The MCO shall immediately notify the DEPARTMENT when it detects a
      situation of potential fraud or abuse, including, but not limited to, the
      following:

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      1.    False statements, misrepresentation, concealment, failure to
            disclose, and conversion of benefits;

      2.    Any giving or seeking of kickbacks, rebates, or similar
            remuneration;

      3.    Charging or receiving reimbursement in excess of that provided by
            the DEPARTMENT; and

      4.    False statements or misrepresentation made by a provider,
            subcontractor, or Member in order to qualify for the HUSKY program.

e.    Upon written notification of the DEPARTMENT, the MCO shall cease any
      conduct that the DEPARTMENT or its agent deems to be abusive of the HUSKY
      program, and to take any corrective actions requested by the DEPARTMENT or
      its agent.

f.    The MCO attests to the truthfulness, accuracy, and completeness of all
      data submitted to the DEPARTMENT, based on the MCO's best knowledge,
      information, and belief. This data certification requirement includes
      encounter data and also applies to the MCO's subcontractors.

g.    The MCO shall establish a fraud and abuse plan, including, but not
      necessarily limited to, the following efforts:

      1.    Conducting regular reviews and audits of operations to guard against
            fraud and abuse;

      2.    Assessing and strengthening internal controls to ensure claims are
            submitted and payments are made properly;

      3.    Educating employees, providers, and subcontractors about fraud and
            abuse and how to report it;

      4.    Effectively organizing resources to respond to complaints of fraud
            and abuse;

      5.    Establishing procedures to process fraud and abuse complaints; and

      6.    Establishing procedures for reporting information to the DEPARTMENT.

h.    The MCO shall examine publicly available data, including but not limited
      to the HCFA Medicare/Medicaid Sanction Report and the HCFA website
      (http://www.dhhs.gov.oig) to determine whether any potential or current
      employees, providers, or subcontractors have been suspended or excluded or
      terminated from the Medicare or Medicaid programs and shall comply with,
      and give effect to, any such suspension, exclusion, or termination in
      accordance with the requirements of state and federal law.

i.    The MCO must provide full and complete information on the identity of each
      person or corporation with an ownership or controlling interest, five (5)
      percent, in the managed care plan, or any subcontractor in which the MCO
      has a five (5) percent or more ownership interest.

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j.    The MCO must immediately provide full and complete information when it
      becomes aware of any employee or subcontractor who has been convicted of a
      civil or criminal offense related to that person's involvement under
      Medicare, Medicaid, or any other federal or state assistance program prior
      to entering into or renewing this contract.

SANCTION: The DEPARTMENT may impose a sanction, up to and including a Class C
sanction for the failure to comply with any provision of this section, or take
any other action set forth in Section 7 of this contract, including terminating
or refusing to renew this contract or any other Sanction or remedy allowed by
federal or state law.

3.51  CHILDREN WITH SPECIAL HEALTH CARE NEEDS

a.    The DEPARTMENT will provide to the MCO information to identify Members who
      meet the definition of children with special health care needs as set
      forth in Section 1932(a)(2)(A)(i), (iii), (iv) and (v) of the Social
      Security Act.

b.    The MCO shall conduct an assessment of these and other children identified
      by the MCO to identify medical needs and implement a plan of treatment
      based on the assessment.

c.    The MCO shall report to the DEPARTMENT, in a format specified by the
      DEPARTMENT, on quality indicators such as utilization of specialty
      services and case management to be developed jointly between the
      DEPARTMENT and the MCOs.

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT

4.01  ELIGIBILITY DETERMINATIONS

The DEPARTMENT will determine the initial and ongoing eligibility for medical
assistance of each individual enrolled under this contract in accordance with
the DEPARTMENT's continuous and guaranteed eligibility policies.

4.02  POPULATIONS ELIGIBLE TO ENROLL

Appendix G contains a list of the Medicaid groups currently eligible for managed
care enrollment. New eligibility groups may be added to the managed care
population. The DEPARTMENT will notify the MCO of any changes in the eligibility
categories to be included. Additional groups included by the DEPARTMENT may be
served at the MCO's option.

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4.03  ENROLLMENT/DISENROLLMENT

Enrollment, disenrollment and initial selection of PCP will be handled by the
DEPARTMENT through a contract with a central enrollment broker. Coverage
for new Members will be effective the first of the month and coverage for
disenrollments will terminate at the end of the month. Members remain
continuously enrolled throughout the term of this contract, except in situations
where clients change health plans, lose their Medicaid eligibility, receive
Medicare, or are recategorized into a Medicaid category not included in the
managed care initiative. Disenrollments due to loss of eligibility become
effective upon loss of eligibility and are effective on the last day of the
month. Disenrollments due to receipt of Medicare become effective the month
following the month in which DSS receives information of the existence of the
Medicare coverage. Adults receiving SSI become disenrolled from the MCO upon the
recategorizing of their Medicaid status from a family to an adult coverage group
or the month following the month in which the DEPARTMENT receives information of
the individual's receipt of SSI, whichever comes first. The DEPARTMENT will
notify the MCO of enrollments and disenrollments specific to the MCO via a daily
data file. The enrollments and disenrollments processed on any given day will be
made available to the MCO via the data file the following day (i.e. after the
daily overnight batching has been processed).

In addition to the daily data file, a full file of all the Members will be made
available on a monthly basis. Both the daily data file and the monthly full file
can be accessed by the MCO electronically via dial-up.

4.04  DEFAULT ENROLLMENT

The DEPARTMENT shall, on a rotating basis among all of the participating MCO's
and as the MCO's enrollment capacity allows, assign default Members to the MCO.

The default assignment methodology is structured to evenly distribute families
among all the participating MCOs. However, due to variability in MCO service
area and enrollment capacity, family size and loss of Medicaid eligibility, the
outcome of the default assignment may not result in an even net default
distribution among all the MCOs.

4.05  LOCK-IN

a.    Upon availability of MIS Support, the DEPARTMENT will implement a lock-in
      period of up to twelve (12) months for managed care Members. Members will
      not be allowed to change plan enrollment during the lock-in period except
      for cause. The lock-in period is subject to the following provisions and
      exceptions:

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      1.    The first ninety (90) days of enrollment into a new MCO will be
            designated as the free-look period during which time the Member may
            change plans;

      2.    The last sixty (60) days of the lock-in period will be an open
            enrollment period, during which time Members may change plans;

      3.    Plan changes made during the open enrollment period will go into
            effect on the first day of the month following the end of the
            lock-in period; and

      4.    Members who do not change plans during the open enrollment period
            will continue the enrollment in the same MCO and be assigned to a
            new twelve (12) month lock-in period.

      The process being considered for implementation of lock-in for the
      existing HUSKY A membership is as follows: lock-in will be imposed on
      approximately twenty (20) percent of the membership each month over a
      consecutive five (5) month period. Targeting for each month will be based
      on the last digit of the client ID number for the head-of-household. For
      example, families whose head-of-household has a client ID number that ends
      in 0 or 1 will be phased-in during the first month, those with 2 and 3
      will be done in the second month, etc.

b.    The following shall constitute good cause for a Member to disenroll from
      the plan during the lock-in period:

      1.    Unfavorable resolution of the MCO's internal complaint process and
      continued dissatisfaction due to repeated incidents of any of the
      following:

a.    documented long waiting times for appointments:

      1.    more than forty-five (45) days for well-care visit;

      2.    more than two (2) business days for non-urgent, symptomatic office
            visit; and

      3.    unavailability of same day office visit or same day referral to an
            emergency provider for emergency care services

b.    documented inaccessibility of health plan by phone or mail:

      1.    phone calls not answered promptly;

      2.    caller placed on hold for extended periods of time;

      3.    phone messages and letters not responded to promptly; and

      4.    repeated rude and demeaning treatment by MCO staff.

c.    Prior to pursuing the MCO's internal complaint process and without filing
      a grievance through the plan, dissatisfaction due to any of the following:

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         1.  Discriminatory treatment as documented in a complaint filed with
             the State of Connecticut Commission on Human Rights and
             Opportunities (CHRO) or the DEPARTMENT's Affirmative Action
             Division;

         2.  PCP who has served the Member's specific documentable needs (i.e.
             language or physical accessibility) left health plan and there is
             no other suitable PCP within reasonable distance to the Member; or

         3.  Member has a pending lawsuit against the MCO (verification of
             pending lawsuit must be provided).

d.    Child placed under DCF guardianship whose placement is changed to a
      location or facility not affiliated with the current health plan.

4.06  CAPITATION PAYMENTS TO MCO

a.    In full consideration of contract services rendered by the MCO, the
      DEPARTMENT agrees to pay the MCO monthly payments based on the capitation
      rates specified in Appendix I, as amended.

b.    Upon validation of client eligibility and MCO membership, the DEPARTMENT
      will pay the capitation payments in the month following the month to which
      the capitation payments apply or for retroactive enrollments, the month
      following the enrollment processing month in accordance with Connecticut
      General Statutes Section 4a-71 through 4a-72.

c.    Payment to the MCO shall be based on the enrollment data transmitted from
      the DEPARTMENT to BENOVA each month. The MCO will be responsible for
      detecting the source of any inconsistency in capitation payments. The MCO
      must notify the DEPARTMENT of any inconsistency between enrollment and
      payment data. The DEPARTMENT agrees to provide to the MCO information
      needed to determine the source of the inconsistency within sixty (60)
      working days after receiving written notice of the request to furnish such
      information. The DEPARTMENT will recoup overpayments or reimburse
      underpayments. The adjusted payment (representing reinstated recipients)
      for each month of coverage shall be included in the next monthly
      capitation payment, based on updated MCO enrollment information for that
      month of coverage.

d.    Any retrospective adjustments to prior payments will be made in the form
      of an addition to or subtraction from the current month's capitation
      payment. Positive adjustments are particularly likely for newborns,
      because the MCO may be aware of births before the DEPARTMENT.

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4.07  RETROACTIVE ADJUSTMENTS

a.    When a Member loses Medicaid eligibility and managed care enrollment but
      regains coverage within sixty (60) days, and the coverage is made
      retroactive such that the entire coverage gap is eliminated, the
      DEPARTMENT shall reinstate enrollment into the MCO retroactive to the time
      of disenrollment. The MCO will remain responsible for the cost of in-
      network covered services and the cost of emergency and family planning
      services received by the Member during this sixty (60) day period.

b.    In instances where enrollment is disputed between two (2) MCOs or the MCO
      and Medicaid fee-for-service program, the DEPARTMENT will be the final
      arbiter of Membership status and reserves the right to recover
      inappropriate capitation payments. Capitation payments for retroactive
      enrollment adjustments will be made to the MCO pursuant to rules outlined
      in Section II, 4.06d, Capitation Payments to MCO.

4.08  INFORMATION

The DEPARTMENT will make known to each MCO complete and current information
which relates to pertinent statutes, regulations, policies, procedures, and
guidelines affecting the operation of this contract. This information shall be
available either through direct transmission to the MCO by reference to public
resource files accessible to the MCO personnel.

4.09  ONGOING MCO MONITORING

a.    To ensure access and the quality of care, the DEPARTMENT or its EQRO, or
      the Children's Health Council as assigned, shall undertake plans to
      undertake monitoring activities, including but not limited to the
      following:

      1.    Analyze the MCO's access enhancement programs, financial and
            utilization data, and other reports to monitor the value the MCO is
            providing in return for the State's capitation payments. Such
            efforts shall include, but not be limited to, on-site reviews and
            audits of the MCO and its subcontractors and network providers.

      2.    Conduct regular recipient surveys of Members to address issues such
            as satisfaction with plan services to include administrative
            services, satisfaction with treatment by the plan or its providers,
            and reasons for disenrollment and access.

      3.    Review the MCO certifications on a regular basis.

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      4.    Analyze encounter data, actual medical records, correspondence,
            telephone logs and other data to make inferences about the quality
            of and access to specific services.

      5.    Sample and analyze encounter data, actual medical records,
            correspondence, telephone logs and other data to make inferences
            about the quality of and access to MCO services.

      6.    Test the availability of and access to MCO services by attempting to
            make appointments.

      7.    At its discretion, commission or conduct additional objective
            studies of the effectiveness of the MCO, as well as the availability
            of, quality of and access to its services.

4.10  UTILIZATION REVIEW AND CONTROL

The DEPARTMENT shall waive, to the extent allowed by law, any current DEPARTMENT
requirements for prior authorization, second opinions, copayment, or other
Medicaid restrictions for the provision of contract services provided by the MCO
to Members.

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5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

5.01  COMPETITION NOT RESTRICTED

In signing this contract, the MCO asserts that no attempt has been made or will
be made by the MCO to induce any other person or firm to submit or not to submit
an application for the purpose of restricting competition.

5.02  NONSEGREGATED FACILITIES

a.    The MCO certifies that it does not and will not maintain or provide for
      its employees any segregated facilities at any of its establishments; and
      that it does not permit its employees to perform their services at any
      location, under its control, where segregated facilities are maintained.
      As Contractor, the MCO agrees that a breach of this certification is a
      violation of Equal Opportunity in Federal employment. In addition,
      Contractor must comply with the Federal Executive Order 11246 entitled
      "Equal Employment Opportunity" as amended by Executive Order 11375 and as
      supplemented in the United States Department of Labor Regulations (41 CFR
      Part 30). As used in this certification, the term "segregated facilities"
      includes any waiting rooms, restaurants and other eating areas, parking
      lots, drinking fountain, recreation or entertainment areas,
      transportation, and housing facilities provided for employees which are
      segregated on the basis of race, color, religion, or national origin,
      because of habit, local custom, national origin or otherwise.

b.    The MCO further agrees, (except where it has obtained identical
      certifications from proposed subcontractors for specific time periods)
      that it will obtain identical certifications from proposed subcontractors
      which are not exempt from the provisions for Equal Employment Opportunity;
      that it will retain such certifications in its files; and that it will
      forward a copy of this clause to such proposed subcontractors (except
      where the proposed subcontractors have submitted identical certifications
      for specific time periods).

5.03  OFFER OF GRATUITIES

The MCO, its agents and employees, certify that no elected or appointed official
or employee of the DEPARTMENT has or will benefit financially or materially from
this contract. The contract may be terminated by the DEPARTMENT if it is
determined that gratuities of any kind were either offered to or received by any
of the aforementioned officials or employees of the MCO, its agent or employee.

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5.04  EMPLOYMENT/AFFIRMATIVE ACTIOIN CLAUSE

The MCO agrees to supply employment/affirmative action information as required
for agency compliance with Title VI and VII of the Civil Rights Acts of 1964 and
Connecticut General Statutes, Section 46a-68 and Section 46a-71.

5.05  CONFIDENTIALITY

a.    The MCO agrees that all material and information, and particularly
      information relative to individual applicants or recipients of assistance
      through the DEPARTMENT, provided to the Contractor by the State or
      acquired by the Contractor in performance of the contract whether verbal,
      written, recorded magnetic media, cards or otherwise shall be regarded as
      confidential information and all necessary steps shall be taken by the
      Contractor to safeguard the confidentiality of such material or
      information in conformance with federal and state statutes and
      regulations.

b.    The MCO agrees not to release any information provided by the DEPARTMENT
      or providers or any information generated by the MCO without the express
      consent of the Contract Administrator, except as specified in this
      contract and as permitted by applicable law.

5.06  INDEPENDENT CAPACITY

The MCO, its officers, employees, subcontractors, or any other agent of the
Contractor in performance of this contract will act in an independent capacity
and not as officers or employees of the State of Connecticut or of the
DEPARTMENT.

5.07  LIAISON

Both parties agree to have specifically named liaisons at all times. These
representatives of the parties will be the first contacts regarding any
questions and problems which arise during implementation and operation of the
contract.

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5.08  FREEDOM OF INFORMATION

a.    Due regard will be given for the protection of proprietary information
      contained in all applications and documents received; however, the MCO
      should be aware that all materials associated with the contract are
      subject to the terms of the Freedom of Information Act, the Privacy Act
      and all rules, regulations and interpretations resulting therefrom. It
      will not be sufficient for the MCO to merely state generally that the
      material is proprietary in nature and not therefore subject to release to
      third parties. Those particular pages of sections which the MCO believes
      to be proprietary must be specifically identified as such. Convincing
      explanation and rationale sufficient to justify each exemption from
      release consistent with Section 1-210 of the Connecticut General Statutes
      must accompany the documents. The rationale and explanation must be stated
      in terms of the prospective harm to the MCO's competitive position that
      would result if the identified material were to be released and the
      reasons why the materials are legally exempt from release pursuant to the
      above cited statue. Between the MCO and the DEPARTMENT the final
      administrative authority to release or exempt any or all material so
      identified rests with the DEPARTMENT.

b.    The MCO understands the DEPARTMENT's need for access to eligibility and
      paid claims information and is willing to provide such data relating to
      the MCO to accommodate that need. The MCO is committed to providing the
      DEPARTMENT access to all information necessary to analyze cost and
      utilization trends; to evaluate the effectiveness of Provider Networks,
      benefit design, and medical appropriateness; and to show how the HUSKY
      population compares to the MCO's enrolled population as a whole. The MCO
      and the DEPARTMENT each understand and agree that the systems, procedures
      and methodologies and practices used by the MCO, its affiliates and agents
      in connection with the underwriting, claims processing, claims payment and
      utilization monitoring functions of the MCO, together with the
      underwriting, Provider Network, claims processing, claims history and
      utilization data and information related to the MCO and its agents, may
      constitute information which is proprietary to the MCO and/or its
      affiliates (collectively, the "Proprietary Information"). Accordingly, the
      DEPARTMENT acknowledges that the MCO shall not be required to divulge
      Proprietary Information if such disclosure would jeopardize or impair its
      relationships with providers or suppliers or would materially adversely
      affect the MCO's or any of its Affiliates' ability to service the needs
      of its customers or the DEPARTMENT as provided under this Contract unless
      the DEPARTMENT determines that such information is necessary in order to
      monitor contract compliance or to fulfill Part II Sections 3.33 and 3.34
      of Part II of this contract. The DEPARTMENT agrees not to disclose
      publicly and to protect from public disclosure any proprietary or trade
      secret information provided to the DEPARTMENT by the MCO and/or its
      Affiliates' under this contract to the extent that such proprietary
      information is exempted from public disclosure under Section 1-213 of the
      Connecticut Freedom of Information Act.

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5.09  WAIVERS

Except as specifically provided in any section of this contract, no covenant,
condition, duty, obligation or undertaking contained in or made a part of the
contract shall be waived except by the written agreement of the parties, and
forbearance or indulgence in any form or manner by the DEPARTMENT or the MCO in
any regard whatsoever shall not constitute a waiver of the covenant, condition,
duty, obligation or undertaking to be kept, performed, or discharged by the
DEPARTMENT or the MCO; and not withstanding any such forbearance or indulgence,
until complete performance or satisfaction of all such covenants, conditions,
duties, obligations and undertakings, the DEPARTMENT or MCO shall have the right
to invoke any remedy available under the contract, or under law or equity.

5.10  FORCE MAJEURE

The MCO shall be excused from performance hereunder for any period that it is
prevented from providing, arranging for, or paying for services as a result of a
catastrophic occurrence or natural disaster including but not limited to an act
of war, and excluding labor disputes.

5.11  FINANCIAL RESPONSIBILITIES OF THE MCO

a.    The MCO must maintain at all times financial reserves in accordance with
      the Connecticut Health Centers Act under Section 38a-175 et seq. of the
      Connecticut General Statutes and with the requirements outlined in the
      DEPARTMENT's Request for Application.

b.    The MCO's physician incentive plans must comply with the requirements of
      1903(m)(2)(a)(x) of the Social Security Act.

c.    The DEPARTMENT reserves the right to inspect any physician incentive
      plans.

d.    If the MCO is not a federally-qualified MCO or Competitive Medical Plan,
      the MCO must complete a HCFA Section 1318 Financial Disclosure Report,
      prior to the start of the contract.

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5.12  CAPITALIZATION AND RESERVES

a.    The MCO shall comply with and maintain capitalization and reserves as
      required by the appropriate regulatory authority.

b.    If the MCO is licensed by the State of Connecticut, the MCO shall
      establish and maintain capitalization and reserves as required by the
      Connecticut Department of Insurance.

c.    If the MCO is majority-owned by federally qualified health centers (FQHCs)
      and not licensed by the State of Connecticut, the MCO will establish and
      maintain sequestered capital of $500,000 plus two (2) percent of ongoing
      annual capitation premiums.

      1.    These funds shall be placed in a restricted account for the duration
            of the FQHC plan's existence, to be accessed only in the event such
            funds are needed to meet unpaid claims liabilities.

      2.    This restricted account shall be established such that any
            withdrawals or transfers of funds will require signatures of
            authorized representatives of the FQHC plan and the DEPARTMENT.

      3.    The initial $500,000 must be deposited into the account by the
            beginning of the MCO's first enrollment period.

      4.    The MCO must make quarterly deposits into this account so that the
            account balance is equal to $500,000 plus two (2) percent of the
            premiums received during the preceding twelve (12) months.

5.13  PROVIDER COMPENSATION

a.    The MCO shall comply with HCFA's Physician Incentive Plan (PIP)
      requirements in 42 CFR 434.70. The MCO may operate a PIP only if:

      1.    no specific payment can be made directly or indirectly under a PIP
            to a physician or physician group as an inducement to reduce or
            limit medically necessary services furnished to an individual
            Member; and

      2.    the stop-loss protection, Member survey, and disclosure requirements
            of 42 C.F.R. 417.479 are met.

b.    The MCO shall disclose to the DEPARTMENT the following information on PIPs
      in sufficient detail to determine whether the incentive plan complies with
      the regulatory requirements of 42 CFR 417.479. The disclosure must
      contain:

      1.    Whether services not furnished by the physician or physician group
            are covered by the PIP. If only the services furnished by the
            physician or physician group are covered by the incentive plan,
            disclosure of other aspects of the plan need not be made.

      2.    The type of incentive arrangement (i.e. withhold, bonus,
            capitation).

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      3.    If the incentive plan involves a withhold or bonus, the percent of
            the withhold or bonus.

      4.    Proof that the physician or physician group has adequate stop-loss
            protection, including the amount and type of stop-loss protection.

      5.    The panel size and, if patients are pooled, the method used.

      6.    In the case of those MCOs that are required by 42 C.F.R. 417.479
            provision to conduct Member surveys, the survey results.

c.    The MCO shall disclose this information to the DEPARTMENT (1) prior to
      approval of its contract as required by federal regulation and (2) upon
      the contract anniversary or renewal effective date. The MCO shall provide
      the capitation data required (see (6) above) for the previous contract
      year to the DEPARTMENT three (3) months after the end of the contract
      year. The MCO will provide to the Member upon request information
      regarding whether the MCO uses a physician incentive plan that affects the
      use of referral services, the type of incentive arrangement, whether
      stop-loss protection is provided, and the survey results of any Member
      survey conducted. See Appendix J for the applicable regulations and
      disclosure forms.

d.    The DEPARTMENT may impose Class C sanctions pursuant to Section 7.05 for
      failure to comply with 42 C.F.R. 417.479

5.14  MEMBERS HELD HARMLESS

a.    The MCO shall not hold a Member liable for:

      1.    The debts of the MCO in the event of the MCO's insolvency;

      2.    The cost of Medicaid-covered services provided pursuant to this
            contract to the Member if the MCO or provider fails to receive
            payment; and/or

      3.    Payments to a provider which exceed the amount that would be owed if
            the MCO directly provided the service.

5.15  COMPLIANCE WITH APPLICABLE LAWS, RULES AND POLICIES

The MCO in performing this contract shall comply with all applicable federal and
state laws, regulations and written policies, including those pertaining to
licensing.

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5.16  FEDERAL REQUIREMENTS AND ASSURANCES

GENERAL

a.    The MCO must comply with 42 CFR 489, Subpart I and 42 CFR Sections 417-
      436(d), relating to written policies and procedures respecting advance
      directives. This requirement includes provisions to inform and distribute
      written information to adult individuals concerning policies on advance
      directives upon enrollment.

b.    The MCO shall comply with those federal requirements and assurances for
      recipients of federal grants provided in OMB Standard Form 424B (4-88)
      which are applicable to the MCO. The MCO is responsible for determining
      which requirements and assurances are applicable to the MCO. Copies of the
      form are available from the DEPARTMENT.

c.    The MCO shall provide for the compliance of any subcontractors with
      applicable federal requirements and assurances.

LOBBYING

a.    The MCO, as provided by 31 U.S.C. 1352 and 45 CFR 93.100 et seq., shall
      not pay federally appropriated funds to any person for influencing or
      attempting to influence an officer or employee of any agency, a member of
      the U.S. Congress, an officer or employee of the U.S. Congress or an
      employee of a member of the U.S. Congress in connection with the awarding
      of any federal contract, the making of any cooperative agreement or the
      extension, continuation, renewal, amendment or modification of any federal
      contract, grant, loan or cooperative agreement.

b.    The MCO shall submit to the DEPARTMENT a disclosure form as provided in 45
      CFR 93.110 and Appendix B to 45 CFR Part 93, if any funds other than
      federally appropriated funds have been paid or will be paid to any person
      for influencing or attempting to influence an officer or employee of any
      agency, a member of the U.S. Congress, an officer or employee of the U.S.
      Congress or an employee of a member of the U.S. Congress in connection
      with this contract.

BALANCED BUDGET ACT

The MCO shall comply with all applicable provisions of the Balanced Budget Act
of 1997, P.L. 105-33 (HR 2015), approved August 5, 1997.

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CLEAN AIR AND WATER ACTS

The MCO shall comply with all applicable standards, orders or regulations issued
pursuant to the Clean Air Act as amended, 42 U.S.C. 7401, et seq. and the
Federal Water Pollution Control Act as amended, 33 U.S.C. 1251 et seq.

ENERGY STANDARDS

The MCO shall comply with all applicable standards and policies relating to
energy efficiency which are contained in the state energy plan issued in
compliance with the federal Energy Policy and Conservation Act, 42 USC Sections
6231 - 6246. The MCO further covenants that no federally appropriated funds
have been paid or will be paid on behalf of the DEPARTMENT or the contractor to
any person for influencing or attempting to influence an officer or employee of
any federal agency, a member of Congress, an officer or employee of Congress, or
an employee of a member of Congress in connection with the awarding of any
federal contract, the making of any federal grant, the making of any federal
loan, the entering into of any cooperative agreement, or the extension,
continuation, renewal, amendment, or modification of any federal contract,
grant, loan, or cooperative agreement. If any funds other than federally
appropriated funds have been paid or will be paid to any person for influencing
or attempting to influence an officer or employee of any federal agency, a
member of Congress, or an employee of a member of Congress in connection with
this contract, grant, loan, or cooperative agreement, the contractor shall
complete and submit Standard Form - LLL, "Disclosure Form to Report Lobbying,"
in accordance with its instructions.

MATERNITY ACCESS AND MENTAL HEALTH PARITY

The MCO shall comply with the maternity access and mental health parity
requirements of the Public Health Services Act, Title XXVII, Subpart 2, Part A,
Section 2704, as added September 26, 1996, 42 U.S.C. Section 300gg-4, 300gg-5,
insofar as such requirements apply to providers of group health insurance.

5.17  CIVIL RIGHTS

FEDERAL AUTHORITY

The MCO shall comply with the Civil Rights Act of 1964 (42 U.S.C. Section 2000d,
et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101, et seq.), the
Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101, et seq.) and
Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Section 794, et seq.

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DISCRIMINATION

Persons may not, on the grounds of race, color, national origin, creed, sex,
religion, political ideas, marital status, age or disability be excluded from
employment in, denied participation in, denied benefits or be otherwise
subjected to discrimination under any program or activity connected with the
implementation of this contract. The MCO shall use hiring processes that foster
the employment and advancement of qualified persons with disabilities.

MERIT QUALIFICATIONS

All hiring done in connection with this contract must be on the basis of merit
qualifications genuinely related to competent performance of the particular
occupational task. The MCO, in accordance with Federal Executive Order 11246,
dated September 24, 1965 entitled "Equal Employment Opportunity", as amended by
Federal Executive Order 11375 and as supplemented in the United States
Department of Labor Regulations, 41 CFR Part 60-1, et seq., must provide for
equal employment opportunities in its employment practices.

CONFIDENTIALITY

The MCO shall, in accordance with relevant laws, regulations and policies,
protect the confidentiality of any material and information concerning an
applicant for or recipient of services funded by the DEPARTMENT. Access to
patient information, records, and data shall be limited to the purposes outlined
in 42 CFR 434.6(a)(8). All requests for data or patient records for
participation in studies, whether conducted by the MCO or outside parties, are
subject to approval by the DEPARTMENT.

5.18  STATUTORY REQUIREMENTS

a.    A State licensed MCO shall retain at all times during the period of this
      contract a valid Certificate of Authority issued by the State Commissioner
      of Insurance.

b.    The MCO shall adhere to the provisions of the Clinical Laboratory
      Improvement Amendments of 1988 (CLIA) Public Law 100-578, 42 USC Section
      1395aa et seq.

5.19  DISCLOSURE OF INTERLOCKING RELATIONSHIPS

An MCO which is not also a Federally-qualified Health Plan or a Competitive
Medical Plan under the Public Health Service Act must report on request to the
State, to the Secretary and the Inspector General of DHHS, and the Comptroller
General, a description of transactions between the MCO and parties in interest
including related parties as defined by federal and state law. Transactions that
must be reported include: (a) any

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sale, exchange, or leasing of property; (b) any furnishing for consideration of
goods, services or facilities (but not salaries paid to employees); and (c) any
loans or extensions of credit.

5.20  DEPARTMENT'S DATA FILES

a.    The DEPARTMENT's data files and data contained therein shall be and remain
      the DEPARTMENT's property and shall be returned to the DEPARTMENT by the
      MCO upon the termination of this contract at the DEPARTMENT's request,
      except that any DEPARTMENT data files no longer required by the MCO to
      render services under this contract shall be returned upon such
      determination at the DEPARTMENT's request.

b.    The DEPARTMENT's data shall not be utilized by the MCO for any purpose
      other than that of rendering services to the DEPARTMENT under this
      contract, nor shall the DEPARTMENT's data or any part thereof be
      disclosed, sold, assigned, leased or otherwise disposed of to third
      parties by the MCO unless there has been prior written DEPARTMENT
      approval. The MCO may disclose material and information to subcontractors
      and vendors, as necessary to fulfill the obligations of this contract.

c.    The DEPARTMENT shall have the right of access and use of any data files
      retained or created by the MCO for systems operation under this contract
      subject to the access procedures defined in Part II Section 3.34.

d.    The MCO shall establish and maintain at all times reasonable safeguards
      against the destruction, loss or alteration of the DEPARTMENT's data and
      any other data in the possession of the MCO necessary to the performance
      of operations under this contract.

5.21  CHANGES DUE TO A SECTION 1115 OR 1915(b) FREEDOM OF CHOICE WAIVER

The conditions of enrollment described in the contract, including but not
limited to enrollment and the right to disenrollment, an subject to change as
provided in any waiver under Section 1115 or 1915(b) of the Social Security Act
(as amended) obtained by the DEPARTMENT.

5.22  HOLD HARMLESS

The MCO agrees to indemnify, defend and hold harmless the State of Connecticut
as well as all Departments, officers, agents and employees of the State from all
claims, losses or suits accruing or resulting to any contractors,
subcontractors, laborers and any person,

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firm or corporation who may be injured or damaged through the fault of the MCO
in the performance of the contract.

The MCO, at its own expense, shall defend any claims or suits which are brought
against the DEPARTMENT or the State for the infringement of any patents,
copyrights, or other proprietary rights arising from the MCO's or the State's
use of any material or information prepared or developed by the MCO in
conjunction with the performance of this contract; provided any such use by the
State is expressly contemplated by this contract and approved by the MCO. The
State, its Departments, officers, employees, contractors, and agents shall
cooperate fully in the MCO's defense of any such claim or suit as directed by
the MCO. The MCO shall, in any such suit, satisfy any damages for infringement
assessed against the State or the DEPARTMENT, be it resolved by settlement
negotiated by the MCO, final judgment of a court with jurisdiction after
exhaustion of available appeals, consent decree, or any other manner approved by
the MCO.

5.23  EXECUTIVE ORDER NUMBER 16

This contract is subject to Executive Order No. 16 of Governor John G. Rowland
promulgated August 4, 1999 and, as such, this Agreement may be cancelled,
terminated or suspended by the State for violation of or noncompliance with said
Executive Order No. 16. The parties to this contract, as part of the
consideration hereof, agree that:

a. The MCO shall prohibit employees from bringing into the state work site,
      except as may be required as a condition of employment, any weapon or
      dangerous instrument as defined in b.

b. Weapon means any firearm, including a BB gun, whether loaded unloaded, any
      knife (excluding a small pen or pocket knife), including a switchblade or
      other knife having an automatic spring release device, a stiletto, any
      police baton or nightstick or any martial arts weapon or electronic
      defense weapon dangerous instrument means any instrument, article or
      substance that, under the circumstances, is capable of causing death or
      serious physical injury.

c. The MCO shall prohibit employees from attempting to use or threaten to use
      any such weapon or dangerous instrument in the state work site and
      employees shall be prohibited from causing or threatening to cause
      physical injury or death to any individual in the state work site.

d. The MCO shall adopt the above prohibitions as work rules, violations of which
      shall subject the employee to disciplinary action up to and including
      discharge. The MCO shall insure that all employees are aware of such work
      rules.

e. The MCO agrees that any subcontract it enters into in furtherance of the work
      to be performed hereunder shall contain the provisions (a) through (d).

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6.    MCO RESPONSIBILITIES CONCERNING NOTICES OF ACTION, GRIEVANCES AND
      ADMINISTRATIVE HEARINGS

6.01  NOTICES OF ACTION

a.    The MCO or its subcontractor (as duly authorized by the MCO) shall mail a
      notice of action to a Member when the MCO denies or partially denies
      coverage of goods or services prescribed by the Member's treating PCP, or
      other treating provider, functioning within his or her scope of practice
      as defined under state law; or the MCO reduces, suspends, or terminates
      ongoing goods or services being provided to a Member. The notice
      requirements shall apply to all categories of covered services including
      transportation to medically necessary appointments.

b.    The MCO may request additional information from a provider if additional
      information is needed for the MCO's consideration of a request for
      approval of coverage of goods or services. If the provider does not
      respond to the request for additional information within twenty (20)
      business days and the MCO still does not have adequate information to
      approve the request, a notice of action must be sent. The notice of action
      shall state that the lack of sufficient information from the provider is
      the reason for the denial.

c.    The MCO shall issue a notice of action if the MCO approves a good or
      service that is not the same type, amount, duration, frequency or
      intensity as that requested by the provider, consistent with current DSS
      policy.

d.    The MCO shall identify if the Member reads only a language other than
      English. In that case, the notice of action shall be in the Member's
      native language, if possible.

e.    Except as provided in (h) below the MCO shall mail an advance notice of
      action to a Member at least ten (10) days before the date of any action
      described in (a) above, consistent with current DSS policy.

f.    All notices related to actions described in (a) above shall clearly state
      or explain:

      1.    the action the MCO intends to take or has taken;

      2.    the reasons for the action;

      3.    the statute, regulation, the DEPARTMENT's Medical Services Policy
            section, or when there is no appropriate regulation, policy or
            statute, the HUSKY A contract provision that supports the action;

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      4.    the address and toll-free number of the MCO's Member Services
            Department;

      5.    the Member's right to challenge the action by filing a grievance and
            requesting an administrative hearing;

      6.    the procedure for filing a grievance and for requesting an
            administrative hearing;

      7.    how the Member may obtain a grievance form and, if desired,
            assistance in completing and submitting the grievance form;

      8.    that the Member will lose his or her right to challenge the action
            if he or she does not complete and file a written grievance form
            with the DEPARTMENT within sixty (60) days from the date the MCO
            mailed the initial notice of action;

      9.    that the MCO must issue a decision regarding a grievance by the date
            that the administrative hearing is scheduled, but no more than
            thirty (30) days following the date the DEPARTMENT receives it;

      10.   that, if the Member files a grievance he or she is entitled to meet
            with or speak by telephone with the MCO representative who will
            decide the grievance, and is entitled to submit additional
            documentation or written material for the MCO's consideration;

      11.   that the Member may proceed automatically to an administrative
            hearing if he or she is dissatisfied with the MCO's grievance
            decision concerning the denial of coverage of goods or services or a
            reduction, suspension, or termination of ongoing goods or services,
            or if the MCO fails to render a decision by the date the
            administrative hearing is scheduled;

      12.   that at an administrative hearing, the Member may represent himself
            or herself or use legal counsel, a relative, a friend, or other
            spokesperson;

      13.   that if the Member obtains legal counsel who will represent the
            Member during the grievance or administrative hearing process, the
            Member must direct his or her legal counsel to send written
            notification of the representation to the MCO and the DEPARTMENT;

      14.   that if the circumstances require advance notice, the Member's right
            to continuation of ongoing goods and services, provided that:

            a.    the Member files a grievance/request for administrative
                  hearing form with the DEPARTMENT within ten (10) calendar days
                  of the date the notice of action is mailed to the Member; and

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            b.    the reduction, suspension, or termination of goods or services
                  was not ordered by the Member's treating physician or PCP,
                  functioning within his or her scope of practice as defined
                  under state law;

      15.   if the circumstances are an exception to the advance notice
            requirement as set forth in (h) below, that the Member does not have
            the automatic right to continuation of ongoing goods or services. In
            these circumstances, however, the reduced, suspended, or terminated
            goods and services must be reinstated if the Member files a written
            grievance/request for administrative hearing form with the
            DEPARTMENT within ten (10) days of the date the notice is mailed to
            the Member. The right to continuation of ongoing goods or services
            applies to the scope of services previously authorized. The right to
            continuation of services does not apply to subsequent requests for
            approval that result in denial of the additional request or
            re-authorization of the request at a different level than requested.
            The MCO shall treat such requests as a new service authorization
            request and provide a denial notice; and

      16.   any other information specified by the DEPARTMENT.

g.    In the case of a child who is under the care of the Department of Children
      and Families (DCF), the MCO must send the notice of action to the
      identified person at DCF's central office.

h.    Notice of action need not be sent to the Member ten (10) days in advance
      of the action, but may be sent no later than the date of action and will
      be considered an exception to the advance notice requirement, if the
      action is based on any of the following circumstances:

      1.    denial of goods or services;

      2.    the MCO has received a clear, written statement signed by the Member
            that:

            a.    the Member no longer wishes to receive the goods or services;
                  or

            b.    the Member gives information which requires the reduction,
                  suspension, or termination of the goods or services, and the
                  Member indicates that he or she understands that this must be
                  the result of supplying that information; and

      3.    the Member has been admitted to an institution where he or she is
            ineligible for the goods or services. In this instance, the Member
            must be notified on the notice of admission that any goods or
            services being reduced, suspended, or terminated will be reevaluated
            for medical necessity upon discharge, and the Member will have the
            right to appeal any post-discharge decisions

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i.          The DEPARTMENT will provide a standardized notice of action form to
      be used by the MCO and its subcontractors. The DEPARTMENT will also
      provide a standardized grievance/administrative hearing request form to be
      used by the MCO and its subcontractors. The MCO and its subcontractors
      shall not alter the standard format of either form without prior, written
      approval of the DEPARTMENT.

SANCTION: If the DEPARTMENT determines during any audit or random monitoring
visit to the MCO or one of its subcontractors that a notice of action fails to
meet any of the criteria set forth herein, the DEPARTMENT may impose a strike
towards a Class A sanction. If the deficiencies which give rise to a Class A
sanction continue for a period in excess of ninety (90) days, the DEPARTMENT may
impose a Class B sanction.

6.02  GRIEVANCE AND ADMINISTRATIVE HEARING PROCESS

a.    The MCOs shall have a timely and organized grievance process. The
      grievance process shall be available for resolution of disputes between
      the MCO and its Members concerning the MCO's denial, reduction, suspension
      or termination of goods or services or the MCO's failure to respond to a
      request for goods and services.

b.    The MCO shall develop written policies and procedures for its grievance
      process. Those policies and procedures must be approved by the DEPARTMENT
      in writing and must include the elements specified in this contract. The
      MCO shall not be excused from providing the elements specified in this
      contract pending the DEPARTMENT's written approval of the MCO's policies
      and procedures.

c.    The MCO shall maintain a record keeping system for grievances which shall
      include a copy of the grievance, the response, the resolution and
      supporting documentation.

d.    The MCO must clearly specify in its Member handbook/packet the procedural
      steps and timeframes for filing a grievance and administrative hearing
      request, including the timeframe for maintaining benefits pending the
      conclusion of the grievance and administrative hearing process. The Member
      handbook/packet shall also list the addresses, office hours, and toll-free
      telephone numbers for the Member Services office.

e.    The MCO shall ensure that network providers and subcontractors are
      familiar with the grievance process and shall provide information on the
      process to providers and subcontractors. The MCO must ensure that
      grievance/request for administrative hearing forms are available at each
      primary care site. At a minimum, grievance assistance must include
      providing grievance/request for administrative hearing forms on request,
      assisting the Member in filling out the

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      forms upon request, and sending the completed form to the DEPARTMENT upon
      request.

f.    The MCO shall develop and make available to Members and potential Members
      appropriate foreign language versions of grievance materials, including
      but not limited to, the standard information contained in notices of
      action and grievance/request for administrative hearing forms. Such
      materials shall be made available in Spanish, English, or any other
      languages if more than five (5) percent of the MCO's Members in any county
      of the State served by the MCO speak the alternative language. Such
      foreign language materials must be approved, in writing, by the
      DEPARTMENT.

g.    A Member must file a written signed grievance in order to receive an
      administrative hearing, before the DEPARTMENT, concerning the MCO's
      denial, reduction, suspension, or termination of goods or services. The
      process for pursuing a grievance and for requesting an administrative
      hearing shall be unified. The MCO and the DEPARTMENT shall treat the
      filing of a grievance as a simultaneous request for an administrative
      hearing. The MCO shall attempt to resolve grievances at the earliest point
      possible. If the MCO is not able to render a decision by the time the
      administrative hearing is scheduled, the Member will automatically proceed
      to the administrative hearing.

h.    Grievances shall be filed by the Member, the Member's authorized
      representative, or the Member's conservator on a form approved by the
      DEPARTMENT. Grievances shall be mailed or faxed to a single address within
      the DEPARTMENT. The grievance form must state both the mailing address and
      fax number at the DEPARTMENT where the form must be sent. If the MCO or
      its subcontractor receive a grievance form directly from a Member or the
      Member's authorized representative or conservator, the MCO shall date
      stamp and fax the grievance to the appropriate fax number at the
      DEPARTMENT within two (2) business days.

i.    The DEPARTMENT will schedule an administrative hearing and notify the
      Member and MCO of the hearing date and location. If a Member is disabled,
      the hearing may be scheduled for the Member's home, if requested by the
      Member.

j.    The DEPARTMENT will date stamp and forward the grievance by fax to the MCO
      within two (2) business days of receipt. The fax to the MCO will include
      the date the Member mailed the appeal to the DEPARTMENT. The postmark on
      the envelope will be used to determine the date the appeal was mailed.

k.    The MCO's review of the grievance must be carried out by an individual or
      individuals having final decisionmaking authority. Any grievance stemming
      from an action based on a determination of medical necessity must be
      decided by one or more physicians who were not involved in making that
      medical determination.

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l.    The MCO may decide a grievance on the basis of the written documentation
      available unless the Member requests an opportunity to meet with the
      individual or individuals making that determination on behalf of the MCO
      and/or requests the opportunity to submit additional documentation or
      other written material.

m.    If the Member wishes to meet with the decisionmaker, the meeting can be
      held via the telephone or at a location accessible to the Member,
      including the Member's home if requested by a disabled Member. Subject to
      approval of the DEPARTMENT's Regional Offices, any of the DEPARTMENT's
      office locations may be available for video conferencing. The MCO must
      invite a representative of the DEPARTMENT to attend any such meeting.

n.    The MCO must mail to the Member, by certified mail, a written grievance
      decision, described below, with a copy to the DEPARTMENT, by the date of
      the DEPARTMENT's administrative hearing but no later than thirty (30) days
      from the date on which the grievance was received by the DEPARTMENT. If
      the Member is dissatisfied with the MCO's decision regarding the denial,
      reduction, suspension, or termination of goods or services, or if the MCO
      does not render a decision by the time of the administrative hearing, the
      Member may automatically proceed to the administrative hearing.

o.    The MCO's written grievance decision must include the Member's name and
      address; the provider's name and address; the MCO name and address; a
      complete description of the information or documents reviewed by the MCO;
      a complete statement of the MCO's findings and conclusions, including the
      section number and text of any contractual provision or DEPARTMENTAL
      policy provision that is relevant to the grievance decision; and a clear
      statement of the MCO disposition of the grievance.

p.    Along with its written grievance decision, the MCO must remind the Member,
      on a form approved by the DEPARTMENT, that:

      1.    if the Member is dissatisfied with the MCO's denial, reduction,
            suspension, or termination of goods or services, the DEPARTMENT has
            already reserved a time to hold an administrative hearing concerning
            that decision;

      2.    that the Member has the right to automatically proceed to the
            administrative hearing, and that the MCO must continue to maintain
            the disputed goods and services pending the administrative hearing
            decision;

      3.    if the grievance pertains to the suspension, reduction, or
            termination of goods or services which have been maintained during
            the grievance process, and the MCO's grievance decision affirms the
            suspension, reduction, or termination of goods or services, those
            goods or services will be suspended, reduced, or terminated in
            accordance with the MCO's

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            grievance decision unless the Member proceeds to an administrative
            hearing; and

      4.    if the Member fails to appear at the administrative hearing, the
            Member's reserved hearing time will be cancelled and any disputed
            goods or services that were maintained will be suspended, reduced,
            or terminated in accordance with the MCO's grievance decision.

q.    If the Member proceeds to an administrative hearing, the MCO must make its
      entire file concerning the Member and the grievance, including any
      materials considered in making its decision, available to the DEPARTMENT.

r.    If the MCO fails to issue a grievance decision by the date that an
      administrative hearing is scheduled, but no later than thirty (30) days
      following the date the grievance was received by the DEPARTMENT, an
      administrative hearing will be held as originally scheduled. At the
      hearing, the MCO must prove good cause for having failed to issue a timely
      decision regarding the grievance. Good cause for the MCO's failure to
      issue a timely decision shall include, but not be limited to, documented
      efforts to obtain additional medical records necessary for the MCO's
      decision on the grievance and the Member's refusal to sign a release for
      medical records necessary for the decision on the grievance.

      The MCO's inability to prove good cause shall constitute a sufficient
      basis for upholding the grievance, and the hearing officer, in his or her
      discretion, may uphold the grievance solely on that basis.

      If the MCO proves good cause for having failed to issue a timely grievance
      decision, the hearing officer may order a continuance of the hearing
      pending the issuance of the grievance decision by a certain date, or the
      hearing officer may proceed with the hearing.

s.    A representative of the MCO shall prepare the summary for the
      administrative hearing, subject to approval by the DEPARTMENT prior to the
      hearing, and shall present proof of all facts supporting its initial
      action if the administrative hearing proceeds in the absence of a
      grievance decision. The MCO shall submit a final, signed hearing summary
      to the DEPARTMENT no later than five (5) business days prior to the
      scheduled hearing date. The MCO's representative shall also present any
      provisions of this contract or any DEPARTMENT policies which support its
      decision.

t.    If a representative of the MCO fails to attend a scheduled session of an
      administrative hearing, the MCO's failure to attend shall constitute a
      sufficient basis for upholding the grievance, and the hearing officer, in
      his or her discretion, may close the hearing and uphold the grievance
      solely on that basis.

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u.    If the DEPARTMENT is advised that the Member does not intend to proceed to
      an administrative hearing, the DEPARTMENT will fax such notice to the MCO.

v.    The MCO must designate one primary and one back-up contact person for its
      grievance/administrative hearing process.

6.03  EXPEDITED REVIEW AND ADMINISTRATIVE HEARINGS

a.    Subject to Section 6.02 above, the grievance process must allow for
      expedited review. If the grievance contains a request for expedited
      review, it will be forwarded by fax to the MCO within one business day of
      receipt by the DEPARTMENT. The fax will include the date the Member mailed
      the appeal. The postmark on the envelope will be used to determine the
      date the appeal was mailed.

b.    The MCO must determine, within one business day of receiving the grievance
      which contains a request for an expedited review from the DEPARTMENT,
      whether to expedite the review or whether to perform a review according
      to the standard timeframes.

c.    An expedited review must be performed when the standard timeframes for
      determining a grievance could jeopardize the life or health of the Member
      or the Member's ability to regain maximum function. The MCO must expedite
      its review in all cases in which such a review is requested by the
      Member's treating physician or PCP, functioning within his or her scope of
      practice as defined under state law, or by the DEPARTMENT.

d.    Unless the Member asks to meet with the decisionmaker or to submit
      additional information, an expedited review must be completed and a
      grievance decision must be issued within a timeframe appropriate to the
      condition or situation of the Member, but no more than three (3) business
      days from the MCO's receipt of the grievance from the DEPARTMENT.

e.    If the Member asks to meet with the decisionmaker and/or submit additional
      information, the decisionmaker must offer to meet with the Member within
      three (3) business days of receiving the grievance from the DEPARTMENT,
      and the MCO must issue its decision not later than five (5) business days
      after receiving the grievance. The meeting with the Member can be held via
      the telephone or at a location accessible to the Member, and subject to
      approval of the DEPARTMENT's Regional Offices any of the DEPARTMENT's
      office locations may be available for video conferencing.

f.    The DEPARTMENT also provides expedited administrative hearings for HUSKY A
      Members if a Member's physician shows that it would put the Member's life
      at risk or pose serious risk of illness or injury to follow the regular

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      timeframes for administrative hearings. The DEPARTMENT will notify the MCO
      of the granting of any Member's request for an expedited administrative
      hearing. The MCO shall conduct its grievance review for any such hearing
      on an expedited basis.

SANCTION: If the MCO fails to provide expedited grievance reviews in appropriate
circumstances, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

6.04  PROVIDER APPEAL PROCESS

a.    The MCO shall have an internal appeal process through which a health care
      provider may appeal the MCO decision on behalf of a Member.

b.    The health care provider appeal process shall not include any appeal
      rights to the DEPARTMENT or any rights to an administrative hearing.

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7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

7.01  PERFORMANCE REVIEW

a.    A designated representative of the MCO and a designated representative of
      the DEPARTMENT shall meet on an annual basis, and as requested by either
      party, to review the performance of the MCO under this contract. The
      DEPARTMENT will keep written minutes of such meetings. In the event of any
      disagreement regarding the performance of services by the MCO under this
      contract, the designated representatives shall discuss the problem and
      shall negotiate in good faith in an effort to resolve the disagreement.

b.    In the event that no such resolution is achieved within a reasonable time,
      the matter shall be referred to the Contract Administrator as provided
      under Article 7.02, the Disputes clause of this contract. If the Contract
      Administrator determines that the MCO has failed to perform as measured
      against applicable contract provisions, the Contract Administrator may
      impose sanctions or any other penalty, set forth in this Section including
      the termination of this contract in whole or in part, as provided under
      this Section.

7.02  SETTLEMENT OF DISPUTES

Any dispute arising under the contract which is not disposed of by agreement
shall be decided by the Contract Administrator whose decision shall be final and
conclusive subject to any rights the MCO may have in a court of law. The
foregoing shall not limit any right the MCO may have to present claims under
Connecticut General Statutes Section 4-141 et seq. or successor provisions
regarding the claims commissioner, including without limitation Connecticut
General Statutes Section 4-160 regarding authorization of actions. In connection
with any appeal to the Contract Administrator under this paragraph, the MCO
shall be afforded an opportunity to be heard and to offer evidence in support of
its appeal. Pending final decision of a dispute, the MCO shall proceed
diligently with the performance of the contract in accordance with the Contract
Administrator's decision.

7.03  ADMINISTRATIVE ERRORS

The MCO shall be liable for the actual amount of any costs in excess of $5,000
incurred by the DEPARTMENT as the result of any administrative error (e.g.
submission of erroneous capitation, encounter or reinsurance data) of the MCO or
its subcontractors. The DEPARTMENT may request a refund of, or recoup from
subsequent capitation payments, the actual amount of such costs.

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7.04  SUSPENSION OF NEW ENROLLMENT

Whenever the DEPARTMENT determines that the MCO is out of compliance with this
contract, unless corrective action is taken to the satisfaction of the
DEPARTMENT, the DEPARTMENT may suspend enrollment of new Members under this
contract. The DEPARTMENT, when exercising this option, must notify the MCO in
writing of its intent to suspend new enrollment at least thirty (30) days prior
to the beginning of the suspension period. The suspension period may be for any
length of time specified by the DEPARTMENT, or may be indefinite. The suspension
period may extend up to the contract expiration date as provided under PART I.
(The DEPARTMENT may also notify existing Members of MCO non-compliance and
provide an opportunity to disenroll from the MCO and to re-enroll in another
MCO.)

7.05  SANCTIONS

It is agreed by the DEPARTMENT and the MCO that if by any means, including any
report, filing, examination, audit, survey, inspection or investigation, the MCO
is determined to be out of compliance with this contract, damage to the
DEPARTMENT may or could result. Consequently, the MCO agrees that the DEPARTMENT
may impose any of the following sanctions for noncompliance under this contract.
Unless otherwise provided in this contract, sanctions imposed under this section
shall be deducted from capitation payment or, at the discretion of the
DEPARTMENT, paid directly to the DEPARTMENT.

a. SANCTIONS FOR NONCOMPLIANCE

      1. CLASS A SANCTIONS. THREE (3) STRIKES. SANCTIONS WARRANTED AFTER THREE
         (3) OCCURRENCES

      For noncompliance of the contract which does not rise to the level
      warranting Class B sanctions as defined in subsection a(2) of this section
      or Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class A
      sanctions in any provision of this contract, the following course of
      action will be taken by the DEPARTMENT:

            Each time the MCO fails to comply with the contract on an issue
            warranting a Class A sanction, the MCO receives a strike. The MCO
            will be notified each time a strike is imposed. After the third
            strike for the same contract provision, a sanction may be imposed.
            If no specific time frame is set forth in any such contractual
            provision, the time frame is deemed to be the full length of the
            contract.

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            The MCO will be notified in writing at least thirty (30) days in
            advance of any sanction being imposed and will be given an
            opportunity to meet with the DEPARTMENT to present its position as
            to the DEPARTMENT's determination of a violation warranting a Class
            A sanction. At the DEPARTMENT's discretion, a sanction will
            thereafter be imposed. Said sanction will be no more than $2,500
            after the first three (3) strikes. The next strike for noncompliance
            of the same contractual provision will result in a sanction of no
            more than $5,000 and any subsequent strike for noncompliance of the
            same contractual provision will result in a Class A sanction of no
            more than $10,000.

      2. CLASS B SANCTIONS. SANCTIONS WARRANTED UPON SINGLE OCCURRENCE

      For noncompliance with the contract which does not warrant the imposition
      of Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class B
      sanctions in any provision of this contract, the following course of act
      on will be taken by the DEPARTMENT:

            The DEPARTMENT may impose a sanction at the DEPARTMENT's discretion
            if, after at least thirty (30) days notice to the MCO and an
            opportunity to meet with the DEPARTMENT to present the MCO's
            position as to the DEPARTMENT's determination of a violation
            warranting a Class B sanction, the DEPARTMENT determines that the
            MCO has failed to meet a performance measure which merits the
            imposition of a Class B sanction not to exceed $10,000.

      b. CLASS C SANCTIONS. SANCTIONS RELATED TO NONCOMPLIANCE POTENTIALLY
         RESULTING IN HARM TO AN INDIVIDUAL MEMBER

            (i) The DEPARTMENT may impose a Class C sanction on the MCO for
                noncompliance potentially resulting in harm to an individual
                Member, including, but not limited to, the following:

            1.    failing to substantially authorize medically necessary items
                  and services that are required (under law or under this
                  contract) to be provided to an Member covered under this
                  contract;

            2.    imposing a premium or charge on Members except as specifically
                  permitted under provisions of the approved Medicaid State
                  Plan;

            3.    discriminating among Members on the basis of their health
                  status or requirements for health care services, including
                  expulsion or refusal to re-enroll an individual, except as
                  permitted by Title XIX, or engaging in any practice that would
                  reasonably be expected to have the effect of denying or
                  discouraging enrollment with the MCO by eligible individuals
                  whose medical condition or history indicates a need for
                  substantial future medical services;

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 4.    misrepresenting or falsifying information that is furnished to the
       Secretary, the DEPARTMENT; Member, potential Member, or a health
       care provider;

 5.    failing to comply with the physician incentive requirements under
       Section 1903(m)(2)(A)(x) of the Social Security Act; and

 6.    distributing directly or through any agent or independent contractor
       marketing materials containing false or misleading information.

(ii) Class C sanctions for noncompliance with the contract under this subsection
     include the following:

 1.    withholding the next month's capitation payment to the MCO in full or
       in part;

 2.    assessment of liquidated damages:

       a.    for each determination that the MCO fails to substantially
             provide medically necessary services or fails to comply with
             the physician incentive plan requirements, not more than
             $25,000;

       b.    for each determination that the MCO discriminates among
             Members on the basis of their health status or requirements for
             health care services or engages in any practice that has the
             effect of denying or discouraging enrollment with the MCO by
             eligible individuals based on their medical condition or
             history that indicates a need for substantial future medical
             services, or the MCO misrepresents or falsifies information
             furnished to the Secretary, DEPARTMENT, Member, potential
             Member or health care provider, not more than $100,000;

       c.    for each determination that the MCO has discriminated among
             Members or engaged in any practice that has denied or
             discouraged enrollment, $15,000 for each individual not
             enrolled as a result of the practice up to a total of
             $100,000; for a determination that the MCO has imposed
             premiums or charges on Members in excess of the premiums or
             charges permitted, double the excess amount. The excess amount
             charged in such a circumstance must be deducted from the penalty
             and returned to the Member concerned;

 3.    freeze on new enrollment and/or alter the current enrollment; or

 4.    appointment of temporary management upon a finding by the DEPARTMENT
       that there is continued egregious behavior by the MCO or there is a
       substantial risk to the health of the Members. After a finding
       pursuant to this subsection, individuals enrolled with the MCO must
       be permitted to terminate enrollment without cause and the MCO
       shall be responsible for notification of such right to terminate
       enrollment. Nothing

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            in this subsection shall preclude the DEPARTMENT from proceeding
            under the termination provisions of the contract rather than
            appointing temporary management. If however, the DEPARTMENT chooses
            not to first terminate the contract and repeated violations occur,
            the DEPARTMENT must than appoint temporary management on the MCO and
            allow individuals to disenroll without cause.

    (iii) Prior to imposition of any Class C sanction, the MCO will be notified
          at least thirty (30) days in advance and provided, at a minimum, an
          opportunity to meet with the DEPARTMENT to present its position as to
          the DEPARTMENT's determination of a violation warranting a Class C
          Sanction. For any contract violation under this subsection, at the
          DEPARTMENT's discretion, the MCO may be permitted to submit a
          corrective action plan within twenty (20) days of the notice to the
          MCO of the violation. Immediate compliance (within thirty (30) days)
          under any such corrective action plan may result in the imposition of
          a lessor sanction on the MCO. If any sanction issued under this
          subsection is equivalent to termination of the contract, the MCO shall
          be offered a hearing to contest the imposition of such a sanction.

c. OTHER REMEDIES

      1.    Notwithstanding the provisions of this section, failure to provide
            required services will place the MCO in default of this contract,
            and the remedies in this section are not a substitute for other
            remedies for default which the DEPARTMENT may impose as set forth in
            this contract.

      2.    The imposition of any sanction under this section does not preclude
      the DEPARTMENT from obtaining any other legal relief to which it may be
      entitled pursuant to state or federal law.

7.06 PAYMENT WITHHOLD, CLASS C SANCTIONS OR TERMINATION FOR CAUSE

The DEPARTMENT may withhold capitation payments, impose sanctions including
Class C Sanctions set forth in Section 7.05 or terminate the contract for cause.
Cause shall include, but not be limited to: 1) use of funds and/or personnel for
purposes other than those described in the HUSKY A program and this contract and
2) if a civil action or suit in federal or state court involving allegations of
health fraud or violation of 18 U.S.C. Section 1961 et seq. is brought on
behalf of the DEPARTMENT.

                                       107
<PAGE>

7.07  EMERGENCY SERVICES DENIALS

If the MCO has a pattern of inappropriately denying payments for emergency
services as defined in Part II, Definitions, the MCO may be subject to
suspension of new enrollments, withholding of capitation payments, contract
termination, or refusal to contract in a future time period. This applies not
only to cases where the DEPARTMENT has ordered payment after appeal, but also to
cases where no appeal has been made (i.e., the DEPARTMENT is knowledgeable about
documented abuse from other sources.)

7.08 TERMINATION FOR DEFAULT

a.    The DEPARTMENT may terminate performance of work under this contract in
      whole, or in part, whenever the MCO materially defaults in performance of
      this contract and fails to cure such default or make progress satisfactory
      to the DEPARTMENT toward contract performance within a period of thirty
      (30) days (or such longer period as the DEPARTMENT may allow). Such
      termination shall be referred to herein as "Termination for Default."

b.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default,
      the notice of termination shall be deemed to have been rescinded and the
      contract reinstated for the balance of the term.

c.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default or
      that the MCO's failure to perform or make progress in performance was due
      to causes beyond control and without the error or negligence of the MCO,
      or any subcontractor, the notice of termination shall be deemed to have
      been issued as a termination for convenience pursuant to Section 7.09 and
      the rights and obligations of the parties shall be governed accordingly.

d.    In the event the DEPARTMENT terminates the contract in full or in part as
      provided in this clause, the DEPARTMENT may procure, services similar to
      those terminated, and the MCO shall be liable to the DEPARTMENT for any
      excess costs for such similar services for any calendar month for which
      the MCO has been paid to provide services to HUSKY A clients. In addition,
      the MCO shall be liable to the DEPARTMENT for administrative costs
      incurred by the DEPARTMENT in procuring such similar services. Provided,
      however, that the MCO shall not be liable for any excess costs or
      administrative costs if the failure to perform the contract arises out of
      causes beyond the control and without error or negligence of the MCO or
      any of its subcontractors.

                                       108
<PAGE>

e.    In the event of a termination for default, the MCO shall be financially
      responsible for Members in the current month at the applicable capitation
      rate.

f.    The rights and remedies of the DEPARTMENT provided in this clause shall
      not be exclusive and are in addition to any other rights and remedies
      provided by law or under this contract.

g.    In addition to the termination rights under Part I Section 8, the MCO may
      terminate this contract on ninety (90) days written notice in the event
      that the DEPARTMENT fails to (a) pay capitation claims in accordance with
      Part II Section 4.06 and Part II Section 3.01 of this contract (b) provide
      eligibility or enrollment/disenrollment information and shall fail to cure
      such default or make progress satisfactory to the MCO within a period of
      sixty (60) days of such default.

7.09  TERMINATION FOR MUTUAL CONVENIENCE

The DEPARTMENT and the MCO may terminate this contract at any time if both
parties mutually agree in writing to termination. At least sixty (60) days shall
be allowed. The effective date must be the first day of a month. The MCO shall,
upon such mutual agreement being reached, be paid at the capitation rate for
enrolled recipients through the termination of the contract.

7.10  TERMINATION FOR FINANCIAL INSTABILITY OF THE MCO

In the event of financial instability of the MCO, the DEPARTMENT shall have the
right to terminate the contract upon the same terms and conditions as a
Termination for Default.

7.11  TERMINATION FOR UNAVAILABILITY OF FUNDS

a.    The DEPARTMENT at its discretion may terminate at any time the whole or
      any part of this contract or modify the terms of the contract if federal
      or state funding for the contract or for the Medicaid program as a whole
      is reduced or terminated for any reason. Modification of the contract
      includes, but is not limited to, reduction of the rates or amounts of
      consideration, reducing services covered by the MCO, or the alteration of
      the manner of the performance in order to reduce expenditures under the
      contract. Whenever possible, the MCO will be given thirty (30) days
      notification of termination.

                                       109
<PAGE>

b.    In the event of a reduction in the appropriation from the state or federal
      budget for the Division of Health Care Financing of the Department of
      Social Services or an across-the-board budget reduction affecting the
      Department of Social Services, the DEPARTMENT may either re-negotiate this
      contract or terminate with thirty (30) days written notice. Any reduction
      in the capitation rates that is agreed upon by the parties or any
      subsequent termination of this contract by the DEPARTMENT in accordance
      with this provision shall only affect capitation payments or portions
      thereof for covered services purchased on or after the effective date of
      any such reduction or termination. Should the DEPARTMENT elect to
      renegotiate the contract, the DEPARTMENT will provide the MCO with those
      contract modifications, including capitation rate revisions, it would deem
      acceptable.

c.    The MCO shall have the right not to extend the contract if the new
      contract terms are deemed to be insufficient notwithstanding any other
      provision of this contract. The MCO shall have a minimum of sixty (60)
      days to notify the DEPARTMENT regarding its desire to accept new terms. If
      the new capitation rates and any other contract modifications are not
      established at least sixty (60) days prior to the expiration of the
      initial or extension agreement, the DEPARTMENT will reimburse the MCO at
      the higher of the new or current capitation rates for that period during
      which the new contract period had commenced and the MCO's sixty (60) day
      determination and notification period had not been completed, and the MCO
      will be held to the terms of the executed contract.

7.12  TERMINATION FOR COLLUSION IN PRICE DETERMINATION

In competitive bidding markets, the MCO has previously certified that the prices
presented in its proposal were arrived at independently, without consultation,
communication, or agreement with any other bidder for the purpose of restricting
competition; that, unless otherwise required by law, the prices quoted have not
been knowingly disclosed by the MCO, prior to bid opening, directly or
indirectly to any other bidder or to any competitor; and that no attempt has
been made by the MCO to induce any other person or firm to submit or not to
submit a proposal for the purpose of restricting competition.

In the event that such action is proven, the DEPARTMENT shall have the right to
terminate this contract upon the same terms and conditions as a Termination for
Default.

7.13  TERMINATION OBLIGATIONS OF CONTRACTING PARTIES

a.    The MCO shall be provided the opportunity for a hearing prior to any
      termination of this contract pursuant to any provision of this contract.
      The DEPARTMENT may notify Members of the MCO and permit such Members to
      disenroll immediately without cause during the hearing process.

                                       110
<PAGE>

b.    Upon contract termination, the MCO shall allow the DEPARTMENT, its agents
      and representatives full access to the MCO's facilities and records to
      arrange the orderly transfer of the contracted activities. These records
      include the information necessary for the reimbursement of any outstanding
      Medicaid claims.

c.    Where this contract is terminated due to cause or default by the MCO: 1)
      The DEPARTMENT shall be responsible for notifying all Members of the date
      of termination and process by which the Members will continue to receive
      services and 2) the MCO shall notify all providers and be responsible for
      all expenses related to notification to providers and members.

d.    If this contract is terminated for any reason other than default by the
      MCO,

      1.    The MCO shall ensure that an adequate provider network will be
            maintained at all times during the transition period and that
            continuity of care is maintained for all Members;

      2.    The MCO shall submit a written transition plan to the DEPARTMENT
            sixty (60) days in advance of the scheduled termination;

      3.    The DEPARTMENT shall be responsible for notifying all Members of the
            date of termination and progress by which the Members will continue
            to receive services;

      4.    The DEPARTMENT shall be responsible for all expenses relating to
            said notification to members;

      5.    The MCO shall notify all providers and be responsible for all
            expenses related to such notification; and

      6.    The DEPARTMENT shall withhold a portion, not to exceed $100,000, of
            the last month's capitation payment as a surety bond for a six (6)
            month period to ensure compliance under the contract.

7.14  WAIVER OF DEFAULT

Waiver of any default shall not be deemed to be a waiver of any subsequent
default. Waiver of breach of any provision of the contract shall not be deemed
to be a waiver of any other or subsequent breach and shall not be construed to
be a modification of the terms of the contract unless stated to be such in
writing, signed by an authorized representative of the DEPARTMENT, and attached
to the original contract.

                                       111
<PAGE>

8.    OTHER PROVISIONS

8.01  SEVERABILITY

If any provision of this procurement or the resultant contract is declared or
found to be illegal, unenforceable, or void, then both parties shall be relieved
of all obligations under that provision. The remainder of this procurement or
the resultant contract shall be enforced to the fullest extent permitted by law.

8.02  EFFECTIVE DATE

This contract is subject to review for form and substance by the U.S. Department
of Health and Human Services Health Care Financing Administration, the
Connecticut Attorney General's Office and the DEPARTMENT, and will not become
effective until it is approved by all of those agencies.

8.03  ORDER OF PRECEDENCE

This contract shall be read together to achieve one harmonious whole. However,
should any irreconcilable conflict arise between Part I and Part II of this
contract, Part II shall prevail.

8.04  CORRECTION OF DEFICIENCIES

This contract does not release the MCO from its obligation to correct any and
all outstanding certification deficiencies. Failure to correct all outstanding
material deficiencies may cause the MCO to be determined in Default of this
contract.

8.05  THIS IS NOT A PUBLIC WORKS CONTRACT

The DEPARTMENT and the MCO as parties to this purchase of service Contract
mutually covenant, acknowledge and agree that this contract does not constitute
and shall not be construed to constitute a public works contract. The DEPARTMENT
and the MCO's mutual agreement that this contract is not a public works contract
shall have full force and effect on Part I Section 32 and other Sections of this
contract as applicable.

                                       112
<PAGE>

                                   APPENDIX A
                            HUSKY A Covered Services

<PAGE>

                                HUSKY A CONTRACT
                                   APPENDICES

APPENDIX A        HUSKY A COVERED SERVICES

APPENDIX B        PROVIDER CREDENTIALING AND ENROLLMENT

APPENDIX C        EPSDT PERIODICITY SCHEDULE

APPENDIX D        DSS MARKETING GUIDELINES

APPENDIX E        QUALITY ASSURANCE PROGRAM

APPENDIX F        UNAUDITED QUARTERLY FINANCIAL REPORTS

APPENDIX G        MEDICAID MANAGED CARE ELIGIBILITY CATEGORIES

APPENDIX H        MANAGED CARE POLICY TRANSMITTALS

APPENDIX I        CAPITATION PAYMENT AMOUNTS

APPENDIX J        PHYSICIAN INCENTIVE PAYMENTS

APPENDIX K        RECATEGORIZATION CHART

APPENDIX L        ABORTION REPORTING

<PAGE>
08/03/01                                                                       2

<TABLE>
<CAPTION>
        BENEFIT FEATURES                       HUSKY COVERAGE
--------------------------------------------------------------------------------
<S>                          <C>                                             <C>
OUTPATIENT PHYSICIAN VISITS  $5 copay                                         *
--------------------------------------------------------------------------------
PREVENTIVE CARE              No copay                                         *
                             Periodic and well child visits, immunizations,
                             WIC evaluations as applicable, and
                             prenatal care covered in full with $5 copay on
                             other visits.
                             PERIODICITY SCHEDULE and reporting based on
                             the American Academy of Pediatrics (AAP) as
                             amended from time to time:

                             AGE CATEGORY        # OF EXAMS
                             --------------      ------------------
                             Birth to Age 1      6 exams
                             Ages 1-5            6 exams
                             Ages 6-0            1 exam every 2 yrs.
                             Ages 11-19          1 exam every yr.

                             IMMUNIZATION SCHEDULE per the Advisory
                             Committee on Immunization Practices (ACIP), as
                             amended from time to time. As of January 1,
                             2001, the schedule is as follows:

                             AGE CATEGORY        VACCINE TYPE
                             ------------        --------------------------
                             Birth               Hepatitis B-1st dose
                             l-4 mos.            Hepatitis B-2nd dose
                             2 mos.              Diphtheria, Tetanus,
                                                 Pertussis (DTP)- 1st
                                                 Dose; Haemophilus Influenza
                                                 Type B (hib)-1st dose;
                                                 Polio (OVP)-1st dose
                             4  mos.             Diphtheria, Tetanus,
                                                 Pertussis (DTP)-2nd
                                                 Dose; Haemophilus
                                                 Influenza Type B
                                                 (hib)-2nd dose; Polio
                                                 (OVP)-2nd dose
                             6 mos.              Diphtheria, Tetanus,
                                                 Pertussis (DTP)-3rd
                                                 Dose; Haemophilus
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise noted
      by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       3

<TABLE>
<S>                          <C>                                             <C>
                                                 Influenza Type B
                                                 (hib)-3rd dose
                             6-12 mos.           Hepatitis B-3rd dose;
                                                 Polio (OVP)-3rd Dose
                             12-15 mos.          Haemophilus Influenza
                                                 (hib)-3rd Dose; Measles,
                                                 Mumps, Rubella
                                                 (MMR)- 1st dose
                             12-18 mos.          Chicken Pox (Var)-
                                                 single dose;
                                                 Diphtheria, Tetanus,
                                                 Pertussis (DTP)-4th
                                                 Dose
                             4-6 yrs.            Diphtheria, Tetanus,
                                                 Pertussis (DTP)-5th
                                                 Dose; Measles,
                                                 Mumps, Rubella
                                                 (MMR)-2nd dose;
                                                 Polio (OVP)-4th
                                                 Dose.
                             11-12 yrs.          Tetanus Diphtheria (Td)

                             Influenza -- Every year beginning at 6 months
                             for children who have serious long-term health
                             problems such as heart disease, lung disease,
                             kidney disease, metabolic disease, diabetes,
                             asthma, anemia, &/or are on long-term is
                             aspirin treatment.

                             Pneumococcal -- Vaccinate children 2 years and
                             older who are at risk of pneumococcal disease
                             or its complications.
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       4

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
FAMILY PLANNING              100%
Family Planning services
include:
Reproductive health exams;
Patient counseling;
Patient education;
Lab tests to detect the
presence of conditions
affecting reproductive
health;
Screening, testing and
treatment;
Pre and post-test
counseling for sexually
transmitted disease and
HIV; abortions that are
necessary to save the
life of the mother or
if the pregnancy
resulted from rape or
incest;- and other
medically necessary
abortions as defined in
Section 3.14 of the
contract, until the MCO
and Department execute a
separate abortion
contract.
--------------------------------------------------------------------------------
Preventive Family Planning   100%                                             *
Services
--------------------------------------------------------------------------------
Oral Contraceptives          $5 copay (included in prescription drugs)        *
--------------------------------------------------------------------------------
INPATIENT PHYSICIAN          100%                                             *
--------------------------------------------------------------------------------
INPATIENT HOSPITAL           100%
--------------------------------------------------------------------------------
OUTPATIENT SURGICAL
FACILITY                     100%
--------------------------------------------------------------------------------
AMBULANCE                    100% if determined to be an emergency in
                             accordance with state law
--------------------------------------------------------------------------------
PRE-ADMISSION/CONTINUED      Arranged through provider
STAY
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise noted
      by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       5

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
PRESCRIPTION DRUG            $3 copay on generics                             *
                             $5 copay on oral contraceptives
                             $6 copay on brand names-formularies
--------------------------------------------------------------------------------
MENTAL HEALTH                100% except for the following
Inpatient                    conditions; additional limitations apply:
                             Mental retardation;
                             Learning disorders;
                             Motor skills disorders;
                             Communication disorders;
                             Caffeine-related disorders;
                             Relational problems; and
                             other conditions that may be the focus
                             of clinical attention that are not
                             defined as mental disorders in the
                             American Psychiatric Associations
                             "Diagnostic Statistical Manual of
                             Mental Disorders."
                             These limitations are:
                             60 day maximum exchangeable with
                             alternate levels of care.
--------------------------------------------------------------------------------
Outpatient                   Limited to evaluation, crisis
                             intervention, and treatment for
                             conditions which, in the judgment of
                             a physician, are subject to significant
                             improvement. $5 copay except for the
                             following conditions:
                             Mental retardation;

                             Learning disorders;
                             Motor skills disorders;
                             Communication disorders;
                             Caffeine-related disorders;
                             Relational problems; and other
                             conditions that may be the focus
                             of clinical attention that are not
                             defined as mental disorders in the
                             American  Psychiatric Associations
                             "Diagnostic & Statistical Manual of
                             Mental disorders."
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       6

<TABLE>
<S>                          <C>                                                 <C>
-----------------------------------------------------------------------------
                             For these above stated conditions, the
                             following limitations apply:
                             30 visits.
                             1-10      100%
                             11-20     $25 copay
                             21-30     Lesser of a $50 copay or 50%
                             Separate limit for substance abuse.
                             Supplemental coverage available under HUSKY
                             Plus for medically eligible children.
-----------------------------------------------------------------------------
SUBSTANCE ABUSE
Detoxification               100%
Inpatient                    100% except for the following conditions
                             additional limitations apply
                             Mental retardation;
                             Learning disorders; Motor skills disorders;
                             Communication disorders;
                             Caffeine-related disorders;
                             Relational problems; and
                             other conditions that may be the focus of clinical
                             attention that are not defined as mental disorders
                             the American Psychiatric Associations
                             in Diagnostic & Statistical Manual of Mental
                             Disorders."
                             These limitations are:
                             Drug:     60 days
                             Alcohol:  45 days
-----------------------------------------------------------------------------
Outpatient                   Services include individual and group counseling
                             and family therapy. 100% except for the following
                             conditions additional limitations apply:
                             Mental retardation;
                             Motor skills disorders;
                             Communication disorders;
                             Caffeine-related disorders;
                             Relational problems; and other
-----------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise noted
      by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       7

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
                             conditions that may be the focus of
                             clinical attention that are not defined
                             as mental disorders in the American
                             Psychiatric Associations "Diagnostic
                             & Statistical Manual of Mental
                             Disorders."
                             These limitations are:
                             60 visit per calender year.
                             Supplemental coverage available
                             under HUSKY Plus for medically
                             eligible children.
--------------------------------------------------------------------------------
SHORT TERM REHABILITATION    100%
FOR CONDITIONS WHERE
SIGNIFICANT IMPROVEMENT IS
EXPECTED WITHIN SIXTY DAYS,
INCLUDING: PHYSICAL
THERAPY, SPEECH THERAPY,
OCCUPATIONAL THERAPY AND
SKILLED NURSING CARE
(EXCLUDES PRIVATE DUTY
NURSING)
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise noted
      by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       8

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
HOME HEALTH CARE (INCLUDES   100%, excludes custodial care;
DISPOSABLE MEDICAL           homemaker care or care that may be  provided
SUPPLIES) FOR HOMEBOUND      in a medical office, hospital or skilled
MEMBERS                      nursing facility and offered to member in such
                             setting.
--------------------------------------------------------------------------------
HOSPICE                      100%, provided to members who are diagnosed as
                             having a terminal illness with a life expectancy of
                             six months or less. Covered care includes nursing
                             care, physical therapy, speech therapy and
                             occupational therapy; medical social services;
                             home health aides and homemakers; medical
                             supplies; drugs; appliances; DME; physician
                             services; short-term inpatient care, including
                             respite care and care for pain control and
                             acute and chronic symptom management; services
                             of volunteers and other benefits when ordered
                             by a physician. Limitations on short-term
                             therapies do not apply.
--------------------------------------------------------------------------------
LONG TERM REHABILITATION,    Not covered under HUSKY B.
LONG TERM PHYSICAL           Supplemental coverage available
THERAPY AND LONG TERM        under HUSKY Plus for medically
SKILLED NURSING CARE         eligible children.
--------------------------------------------------------------------------------
LAB AND X-RAY                100%
--------------------------------------------------------------------------------
PRE-ADMISSION TESTING        100%
--------------------------------------------------------------------------------
EMERGENCY CARE               100% if determined to be an emergency in           *
                             accordance with state law. $25 copay if
                             determined a non-emergency. $25 copay waived
                             if the patient is admitted.
--------------------------------------------------------------------------------
DURABLE MEDICAL              100%
EQUIPMENT (DME) MEANS        Does not include power wheelchairs
EQUIPMENT, FURNISHED BY A    for members eligible for HUSKY
SUPPLIER OR HOME HEALTH      Plus Physical; devices not medical in
AGENCY THAT: (1) CAN         nature, such as, whirlpools, saunas,
WITHSTAND REPEATED USE; (2)  elevators, vans, van lifts, hearing
IS PRIMARILY AND             aids, home convenience items (e.g.,
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       9

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
CUSTOMARILY USED TO SERVE A  air cleaners, filtration units and
MEDICAL PURPOSE; (3) IS      related apparatus, exercise bicycles
GENERALLY NOT USEFUL TO AN   and other types of exercise
INDIVIDUAL IN THE ABSENCE    equipment), insulin injectors, non-
OF AN ILLNESS OR INJURY;     rigid appliances and supplies, such as,
AND (4) IS APPROPRIATE FOR   sheets, self-help devices,
USE IN THE HOME.             experimental or investigational research
                             equipment, and items for personal comfort and
                             or usefulness to the members' household.
                             Supplemental coverage available under HUSKY
                             Plus for medically eligible children.
--------------------------------------------------------------------------------
PROSTHETICS -DEVICES         100%
WHETHER WORN ANATOMICALLY    Does not include orthopedic shoes,
OR SURGICALLY IMPLANTED,     foot orthotics, wigs or hairpieces.
WHICH REPLACE ALL OR PART    Supplemental coverage available
OF A BODY ORGAN OR           under HUSKY Plus for medically
STRUCTURE AND WHICH          eligible children.
CORRECT, STRENGTHEN OR
PROVIDE NECESSARY SUPPORT
TO THE  BODY, WILL BE
COVERED WHEN MEDICALLY
NECESSARY.
--------------------------------------------------------------------------------
EYE CARE                                                                      *
Eye Exams                    $5 copay
--------------------------------------------------------------------------------
HEARING EXAM                 $5 copay                                         *
--------------------------------------------------------------------------------
NURSE MIDWIVES               $5 copay (except for preventive                  *
                             services)
--------------------------------------------------------------------------------
NURSE PRACTITIONERS          $5 copay (except for preventive                  *
                             services)
--------------------------------------------------------------------------------
PODIATRISTS                  $5 copay                                         *
--------------------------------------------------------------------------------
CHIROPRACTORS                $5 copay                                         *
--------------------------------------------------------------------------------
NATUROPATHS                  $5 copay                                         *
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      10

<TABLE>
<S>                          <C>                                             <C>
--------------------------------------------------------------------------------
DENTAL                       100%                                             *
Dental services include:
Exams, 1 every 6 months;
X-Rays;
Fillings;
Fluoride Treatments;
Oral Surgery
</TABLE>

                                LIMITED BENEFITS

<TABLE>
<CAPTION>
       BENEFIT FEATURES                           HUSKY COVERAGE
---------------------------------------------------------------------------------------------------
<S>                          <C>
EYE CARE
Eyeglass frames and lenses   Once every 2 consecutive Continuous
or contact lenses            Eligibility (CE) periods with an allowance of
                             $100 toward the purchase of these goods. The
                             optical hardware must be provided without
                             charge under the following
                             conditions:

                             (i)   one pair of contact lenses every 2
                                   consecutive CE periods when such lenses
                                   are determined to be the primary and the
                                   best method for aiding the member
                                   vision and the lenses are not needed
                                   solely for the correction of vision;

                             (ii)  eyeglass frames and lenses
                                   and contact lenses that are determined
                                   to be medically necessary after eye
                                   surgery, the initial pair only; and

                             (iii) contact lenses, as needed, for the
                                   treatment of Keratonconus.
--------------------------------------------------------------------------------
DENTAL
Orthodontia                  $725 allowance per orthodontia case.
--------------------------------------------------------------------------------
Bridges or crowns; root      $50 allowance per procedure, per
canals; full or partial      member but no more than an
dentures; or extractions     aggregate allowance for all such
                             procedures of $250 per CE period.
--------------------------------------------------------------------------------
</TABLE>

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      11

<TABLE>
<S>                          <C>                                              <C>
--------------------------------------------------------------------------------
CONTRACEPTIVES
Intrauterine Device (IUD)    $50 allowance per member                         *
and insertion of the IUD
--------------------------------------------------------------------------------
Internally implantable       $50 allowance per member                         *
time-release devices & their
insertion
--------------------------------------------------------------------------------
Time-released contraceptive  $15 allowance per member per                     *
injections                   injection
--------------------------------------------------------------------------------
NUTRITIONAL FORMULAS         100% limited to medically necessary amino        *
                             acid modified preparations and low protein
                             modified food products for the treatment of
                             inherited metabolic diseases when ordered by a
                             participating physician
--------------------------------------------------------------------------------
</TABLE>

Annual copayments cannot exceed $600/1250 (Income Band 1/Income Band 2),
including premiums, per CE period.

                         EXCLUSIONS AND LIMITATIONS

1.    Services and/or procedures considered to be of an unproven,
      experimental, or research nature or cosmetic, social, habilitarive,
      vocational, recreational, or educational.

2.    Services in excess of those deemed medically necessary to treat the
      patient's condition.

3.    Services for a condition that is not medical in nature.

4.    Devices required by third parties, such as school or employment
      physicals, physicals for summer camp, enrollment in health, athletic,
      or similar clubs, premarital blood work or physicals, or physicals
      required by insurance companies or court ordered alcohol or drug
      abuse course.

5.    Cosmetic and reconstructive surgery is excluded, except when surgery
      is required for:

      a)    reconstructive surgery in connection with the treatment of
            malignant tumors or other destructive pathology that causes
            dysfunction;

      b)    reduction mammoplasty in females when Medically Necessary and
            breast surgery in males only in cases of suspected malignancy.
            Surgery must be necessary to achieve normal physical or bodily
            function.

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      12

6.    Routine foot care rendered:

      a)    in the examination, treatment or removal of all or part of
            corns, callosities, hypertrophy or hyperplasia of the skin or
            subcutaneous tissues of the foot;

      b)    in the cutting, trimming or other non-operative partial removal
            of toenails, except when Medically Necessary in the treatment
            of neuro-circulatory conditions.

7.    Evaluation, treatment and procedures related to, and performance of,
      sex-change operations.

8.    Surgical treatment or hospitalization for the treatment of morbid
      obesity except where prior authorized as Medically Necessary.

9.    Care, treatment, procedures, services or supplies that are primarily
      for dietary control including, but not limited to, any exercise or
      weight reduction programs, whether formal or informal, and whether or
      not recommended by an In-network Physician or an Out-of-Network
      Physician.

10.   Acupuncture biofeedback, or hypnosis.

11.   Treatment at pain clinics unless determined to be Medically
      Necessary.

12.   Ambulatory blood pressure monitoring.

13.   Any court order for testing, diagnosis, care or treatment deemed not
      Medically Necessary.

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

                                   APPENDIX B

                     PROVIDER CREDENTIALING AND ENROLLMENT

<PAGE>

                HUSKY PROVIDER CREDENTIALING AND ENROLLMENT
                                REQUIREMENTS

1.    PROVIDER CREDENTIALING AND ENROLLMENT DISTINCTION

Provider Credentialing and provider enrollment are separate and distinct
processes in the HUSKY Programs. However, credentialing and enrollment are
linked in that these requirements affect direct service providers as well
as the manner in which MCOs submit provider network information to the
Department of Social Services.

2.    CREDENTIALING DEFINITION

For the purpose of the HUSKY programs, the term Credentialing means the
requirements for provider participation specified in the contracts between
the Department of Social Services (DSS or the Department) and the MCO (Part
II, 3.11, Provider Credentialing and Enrollment). In this section of the
contract, the Department specifies the minimum criteria that the MCOs must
require for provider participation in a health plan. The MCOs must ensure
that their providers meet the Department's Credentialing requirements.

3.    OTHER SOURCES CREDENTIALING

Credentialing is sometimes used to refer to a variety of requirements or
entities, which issue credentialing standards. Examples include: the MCO's
individual credentialing requirements; the managed care subcontractor's
credentialing requirements; an accreditation organization requirements,
such as the National Committee on Quality Assurance (NCQA); the licensure
process; a trade organization or association such as the Joint Commission
on Accreditation of Health Organizations (JCAHO).

4.    DSS REQUIREMENTS AND OTHER CREDENTIALING SOURCES

DSS credentialing requirements represent the minimum criteria for provider
participation in a health plan. The Department will allow flexibility to
the MCOs to use more stringent criteria, particularly as it concerns
quality level of care for clients. While the MCOs may require additional,
more stringent criteria, the Department is concerned with the impact on
access to care. Therefore, DSS expects the MCOs to balance the need for
stringent credentialing standards with the need to assure accessibility and
continuity of care.

5.    DELEGATED CREDENTIALING

The contract between the Department and the MCOs permits the plan to
delegate credentialing of individual providers to a facility. However, the
MCO is ultimately responsible and accountable to DSS for compliance with
the Department's credentialing requirements.



<PAGE>

For the purpose of HUSKY, delegated credentialing means that the MCO
entrusts the Department's credentialing requirements to another entity.
MCOs delegate credentialing to a variety of entities depending on the
nature of the services and the type of provider.

In delegated credentialing, the MCO remains responsible to DSS to verify and
monitor compliance with the Department's credentialing requirements. The
Department views delegated credentialing as a form of subcontract, therefore,
similar oversight issues arise in the performance of the credentialing
requirements. The Department requires the plans to demonstrate and document to
DSS the plan's strong oversight of its delegated credentialing facilities. (Part
II, Section 3.41 in B 3.44 in A, Subcontracting for Services).

6.    IMPLICATIONS OF DELEGATED CREDENTIALING

In some instances, the MCO credentials the individual provider directly or
delegates credentialing of the providers to the following entities:

-     A subcontractor providing specific services (e.g., behavioral health
      or dental care);

-     A credentialing subcontractor; or

-     A facility (e.g., a freestanding clinic or hospital)

The relationship between the MCO and the delegated entity as well as the
interplay with various credentialing requirements may take any number of
configurations. Currently, the Department reiterates that the MCO may
delegate credentialing of individual providers to a facility (e.g., a
school based health center, freestanding clinic or hospital). However, the
Department emphasizes that the MCO is ultimately responsible and
accountable to DSS for compliance with all of the Department's
credentialing requirements.

7.    OVERSIGHT OF DELEGATED CREDENTIALING

The Department requires the MCO to demonstrate strong oversight of their
delegated credentialing facilities, as with any subcontact. Therefore, the
Department reiterates that these arrangements are subject to the
Department's review and approval. For the purpose of delegated
credentialing, the MCOs must provide assurances to DSS at a minimum of the
following:

-     The MCO and the delegated entity should clearly identify in detail
      each party's responsibility for credentialing of providers.

-     The Department's credentialing requirements should be clearly
      identified as well as each party's role in adhering to these
      requirements.

-     The credentialing files must be available to the plan in order to
      perform its oversight of the credentialing requirements. The
      Department must also have adequate access to credentialing files for
      the purposes of administering the managed care contracts.

(DSS/MCO Contract, Part II, Section 3.41 in B 3.44 in A Subcontracting for
Services.)

                                     2
<PAGE>

8.    PROVIDER ENROLLMENT CLARIFICATIONS

For the purpose of HUSKY, the Department refers to provider enrollment as
the process of capturing information on providers participating with MCOs
contracted by DSS to provide services to clients. This process results in a
profile of an MCO's provider network. The MCOs submit the provider network
information to DSS via the Department's agent on a continuous basis. The
Department utilizes the provider network information to facilitate the
administration of managed care contracts and the Medicaid program.

Provider enrollment information serves the following purposes:

      a)    to evaluate each MCO's service area and access to services
            which are used to establish enrollment ceiling or cap
            (currently summarized by plan submittals of provider tables);

      b)    to provide accurate information to clients for the purpose of
            client enrollment in an MCO; and

      c)    to maintain each plan's provider network information consistent
            with the provider directory.

Based on the previous discussion of credentialing, the Department
clarifies the relationship between credentialing or delegated credentialing
and provider enrollment as follows:

a)    Enrollment for purposes of cap determination.

      -     The MCO must credential and enroll individual providers when
            the providers are counted towards the member enrollment
            ceiling.

      -     DSS credentialing requirements and provider enrollment
            processes also apply to individual providers in a facility when
            the individual provider is included in the count for cap
            determination.

      -     The MCO may delegate credentialing of individual providers to a
            facility (e.g., a clinic or hospital) and enroll the facility
            as such. In this case, neither the facility nor the individual
            providers are provided in the count for cap determination.

b)    Enrollment for purposes of accurate information to clients

      -     The MCO must enroll and credential individual providers as well
            as facilities in order to maintain accurate and updated
            information on the providers participating with a health plan.
            The provider network information is used by the Department's
            enrollment broker during enrollment.

                                     3
<PAGE>

      -     The Department stresses the importance of maintaining provider
            network information accurate and up-to-date. It is crucial that
            clients should have access to provider network information
            during the MCO selection process.

c)    Enrollment for purposes of inclusion in the provider network
      directory.

      -     The MCO must credential and enroll individual providers when
            the providers are included and listed as individual providers
            in the health plan's provider directory.

      -     DSS credentialing requirements and provider enrollment
            processes also apply to individual providers in a facility when
            the individual provider is included and listed in the provider
            directory.

      -     If the MCO delegates credentialing of individual providers to a
            facility and enrolls the facility, the facility is included and
            listed in the provider directory. The facility's individual
            providers are listed in the provider directory. The facility's
            providers are not listed in the provider directory.

9.    SPECIFIC ISSUES AND DSS CREDENTIALING REQUIREMENTS

a)    Medicaid participation

The MCO or the delegated credentialing entity is responsible for the
determination and verification that the provider meets the minimum
requirements for Medicaid participation. The MCO or its subcontractors may
not delegate this provision to the Department nor require providers to
enroll or participate in fee-for-service Medicaid to fulfill the
requirement. While the Department encourages the MCO to contract with
traditional and existing Medicaid providers, Medicaid participation in
itself is not a requirement of the HUSKY contracts.

b)    Allied Health Professional Licensed Clinics or Hospitals

The Department pays freestanding clinics participating in the Medicaid
program for a variety of services. In Connecticut, clinic services include
for example, medical services, well-child care, dental care, mental health
and substance abuse services, rehabilitation services and other services.
Clinic providers must meet federal and state requirements for participation
in the Medicaid program. In accordance with Title 42 of the Code of Federal
Regulations, Part 440.90 and Section 171 of the Medical Services Policy of
the Connecticut Medical Assistance Program clinic services are provided by
or under the direction or a physician, dentist or psychiatrist.

The physician direction requirement means that the free-standing clinic's
services may be provided by the clinic's allied health professionals
whether or not the physician is physically present at the time that the
services are provided. An allied health professional

                                     4
<PAGE>

is further defined as an individual, employed in a clinic, who is qualified
by special education and training, skills, and experience in providing care
and treatment. The clinic is staffed by physicians and allied health
professionals who are directly involved in the facility's programs. The
allied health professionals provide services under the direction of a
physician who is a licensed practitioner performing within the scope of
his/her practice.

Based on the Department's definition of clinic services, the services provided
by allied health professionals are included under the terms of the contracts
between the Department and the MCOs.

As with all services, clinic services must be properly credentialed according to
the Department's requirements, including licensure and certification standards.
Allied health professionals may have licensure or certification requirements,
such as Certified Addition Counselors or Licensed Social Workers. In accordance
with the Department's definition, other allied health professions may qualify by
virtue of their skills or experience and must function under the direction of a
physician. In this case the directing physician, as opposed to the allied health
professional, is subject to the credentialing requirements as well as provider
enrollment. The MCO may credential the physician directly or may delegate
credentialing.

The Department's provisions for credentialing, delegated and provider enrollment
would remain in effect for the directing physician (please refer to Section 8,
Provider Enrollment Clarifications).

c) NCQA Standards and DSS requirements

While NCQA standards do not address credentialing of allied health
professionals, services provided by allied health professionals may qualify for
reimbursement by virtue of their skills or experience, however, the allied
health professionals must function under the direction of a physician. In this
case, the directing physician is subject to the credentialing requirements.

MAY 2001

                                     5
<PAGE>

                                   APPENDIX C
                           EPSDT PERIODICITY SCHEDULE

<PAGE>

[LOGO]           State of Connecticut
                 Department of Social Services
                 Health Care Financing Division
                 25 Sigourney Street
                 Hartford, CT 06106-5033

                                                      Policy Transmittal 2001-07
PB 2001-18                                            March 20, 2001

                                                      Contact: James Linnane
                                                               (860)424-5111

                                                      July 1, 2001
                                                      --------------
/s/ Michael P. Starkowski                             Effective Date
----------------------------------------
Michael P. Starkowski
Deputy Commissioner

TO:   PHYSICIANS, CLINICS, HOSPITALS, MANAGED CARE PLANS, NURSE PRACTITIONERS,
      HOME HEALTH AGENCIES, NURSE MIDWIVES, DENTISTS AND DENTAL HYGIENISTS

SUBJECT:   NEW EPSDT (EARLY, AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT
           SERVICES) PERIODICITY SCHEDULE AND IMMUNIZATION SCHEDULE

The Department of Social Services is revising the EPSDT Periodicity Schedule to
follow the recently issued American Academy of Pediatrics (AAP) guidelines. This
Policy Transmittal contains the EPSDT Periodicity Schedule that is to be
effective as of 7/1/2001 and a revised immunization schedule. Please replace the
enclosed pages in Chapter 8 of your Connecticut Medical Assistance Provider
Manual. Changes to the periodicity schedule include the following:

      -     A newborn hearing screening is now required by Connecticut law and
            is recommended by the AAP. Therefore, this screening is being
            changed from a subjective to objective screen on the periodicity
            schedule.

      -     Infants at high risk for tuberculosis should receive a tuberculin
            test at 12 months, 15 Months and 18 Months.

      -     Infants who have anemia at 1 year should be retested for it at 15
            and 18 Months.

      -     A hematocrit/hemoglobin test has been added at age 2 in accordance
            with AAP guidelines. The hematocrit/hemoglobin test should be
            repeated for high-risk clients and WIC clients at age 3, 4, and 5.

      -     The 3-year-old vision screening has been changed from subjective to
            objective. An asterisk has been added indicating that if the child
            is uncooperative, he or she should be rescreened within six months.

                                       1
<PAGE>

      -     Objective hearing and vision screenings have been added to the
            periodicity schedule for ages 6 and 8. Section 10-214 of the
            Connecticut General Statutes requires local or regional boards of
            education in Connecticut to provide these screenings in kindergarten
            through sixth grade. Objective hearing and vision screenings should
            be done by the Primary Care Provider (PCP) at age 6 and 8 if there
            is reason to believe that the screenings were not done at school.

      -     A note has been added that the screenings given at age 7-8 and age
            9-10 should be performed at two-year intervals.

The American Academy of Pediatrics recommends a prenatal visit to a pediatrician
for high-risk parents. Such a visit is medically necessary for the well-being of
a yet-to-be-born child and is a covered EPSDT service under Connecticut
Medicaid.

The new Recommended Childhood Immunization Schedule recommends administering
four doses of pneumococcal conjugate vaccine at age 2 months, 4 months, 6 months
and 12-15 months. The immunization schedule recommends administration of "DTaP"
not "DTP" at age 2 months, 4 months, 6 months, 15-18 months and 4-6 years.
Hepatitis A appears on the immunization schedule as recommended in some parts of
the United States, but is not a recommended vaccine in Connecticut.

A new Women, Infants and Children (WIC) Coordinators contact sheet is also
included.

POSTING INSTRUCTIONS: Holders of the Connecticut Medical Assistance Program
Provider Manual should replace the current EPSDT Periodicity Schedule,
Immunization Schedule and WIC Coordinators contact sheet with the attached
schedules and contact sheet for use effective 7/1/2001. Policy transmittals can
also be downloaded from EDS' Web site at www.ctmedicalprogram.com.

DISTRIBUTION: This policy transmittal is being distributed to holders of the
Medical Services Policy Manual by EDS, and the Medicaid Mailing List by the
Department of Social Services. Managed Care Organizations are requested to send
this information to their network providers and subcontractors.

RESPONSIBLE UNIT: DSS,HUSKY, James Linnane, Manager, Program Analysis
and-Enrollment at (860) 424-5111.

DATE ISSUED : March 20, 2001

                                       2
<PAGE>

     HEALTHTRACK/EPSDT PERIODICITY "SCHEDULE OF PREVENTIVE HEALTH SERVICES

DEPARTMENT OF SOCIAL SERVICES                                 [ILLEGIBLE] 7/1/01

<TABLE>
<CAPTION>
                                             INFANCY                                              EARLY CHILDHOOD
                                             -------                                              ---------------
[ILLEGIBLE]                                 [ILLEGIBLE]                                             [ILLEGIBLE]
-----------                                 -----------                                             -----------
<S>                          <C>    <C>    <C>       <C>          <C>      <C>      <C>         <C>    <C> <C>  <C>  <C> <C> <C>
[ILLEGIBLE]
History: Initial/Interval    X      X      X         X            X        X        X           X      X   X    X    X   X     X
Physical Examination (2)     X      X      X         X            X        X        X           X      X   X    X    X   X     X
Height/Weight                X      X      X         X            X        X        X           X      X   X    X    X   X     X
Head Circumference           X      X      X         X            X        X        X           X      X   X    X
Blood Pressure                                                                                                       X   X     X
Health Education(3)                                        SEE ATTACHED RECOMMENDATIONS
Anticipatory Guidance
Developmental/ Beh.
Assessment(4)                X      X      X         X            X        X        X           X      X   X    X    X   X     X
Immunizations(5)                                           SEE ATTACHED IMMUNIZATIONS SCHEDULE
Hereditary Metabolic         X------------->
Screening(6)
Lead Screening(7)                                                                    X------------>             X
Hematocrit /Hemoglobin                                                               X------------>  W-HR  W-HR X  W-HR W-HR W-HR
Cholesterol Screening                                                                                           HR  HR   HR   HR
Tuberculin Test                                                                                 HR    HR    HR  HR  HR   HR   HR
Hearing Screening           O      S      S          S           S         S         S           S     S     S   S   S    O*   O
Vision Screening            S      S      S          S           S         S         S           S     S     S   S   O*   O    O
Initial Dental Referral                                                                                          X--->
(9)
Evaluate Dental Fluoride                                                   X         X          X      X   X    X    X    X    X
Access
</TABLE>

KEY: X = To be performed; HR = To be performed for patients at risk; S =
Subjective, by history; O = By Objective Standardized Test (SNELLEN;
AUDIOMETRIC); < --- > = The range during which a service may be provided, * If
child uncooperative, re-screen within 6 months. W-HR = Required by WIC. Covered
for WIC clients or high risk clients.

FOOTNOTES: (1) For Newborns discharged less than 48 hours after delivery;(2)At
each visit, a complete physical examination is essential, with infant totally
unclothed, older child undressed and suitably draped; (3) Age
appropriate/patient specific health education and counselling should be part of
every visit; (4) By history and appropriate physical examination; if suspicious,
by specific objective development testing;(5)Childhood immunizations are based
on age and health history, and should be screened each visit. (6) Metabolic
Screening (e.g., thyroid, hemoglobinopathies, PK galactosemia) should be done
according to State law. Sickle Cell Screening if appropriate; (7) Further venous
blood level measurement is required for children showing elevated lead level
(greater than or equal to 10ug/deciliter of whole blood); Children aged 2-5
should be screened at annual exam if there is no record of a negative lead
screen. (9) Earlier referral should be made if problem indicated.

<PAGE>

      HEALTHTRACK/EPSDT PERIODICITY SCHEDULE OF PREVENTIVE HEALTH SERVICES

DEPARTMENT OF SOCIAL SERVICES                                 [ILLEGIBLE] 7/1/01

<TABLE>
<CAPTION>
                                              MIDDLE CHILDHOOD                                     ADOLESCENCE
                                              ----------------                                     -----------
[ILLEGIBLE]                                     [ILLEGIBLE]                                        [ILLEGIBLE]
-----------                                     -----------                                        -----------
<S>                               <C>    <C>     <C>       <C>          <C>      <C>      <C>     <C>    <C>   <C>  <C>  <C> <C> <C>
Screening Components:
History: Initial/Interval         X      X       X         X            X        X        X       X      X     X    X    X   X   X
Physical Examination (2)          X      X       X         X            X        X        X       X      X     X    X    X   X   X
Height/Weight                     X      X       X         X            X        X        X       X      X     X    X    X   X   X
Blood Pressure                    X      X       X         X            X        X        X       X      X     X    X    X   X   X
Health Education(3)                                              SEE ATTACHED RECOMMENDATIONS
Anticipatory Guidance
Developmental/ Beh.
Assessment(4)                     X      X       X         X            X        X        X       X      X     X    X    X   X   X
Immunizations(5)                                                 SEE ATTACHED IMMUNIZATION SCHEDULE
Hematocrit/Hemoglobin                                   <-----------------------------(9)---------------------------->
Urinalysis                                              <------------------------------------(10)------------------------>
Cholesterol Screening             HR    HR      HR         HR           HR      HR        HR      HR     HR   HR   HR   HR  HR   HR
Tuberculin Test                   HR    HR      HR         HR           HR      HR        HR      HR     HR   HR   HR   HR  HR   HR
Pelvic Exam/PAP Smear                                               <--------------------------------------(11-HR)
STD Screenings                                                      <--------------------------------------(12-HR)
Hearing Screening                O(8)   O(8)    O          S            O       S         S       O      S     S   O    S   S    S
Vision Screening                 O(8)   O(8)    O          S            O       S         S       O      S     S   O    S   S    S
Evaluate Dental Fluoride Access   X      X      X          X
</TABLE>

KEY: X = To be performed; HR = To be performed for patients at risk; S =
Subjective, by history; O = By Objective Standardized Test; <---> = The range
during at which a service may be provided; Appropriate provision of EPSDT
services is required through age 20, up to, but not including, the 21st
birthday. (b) Biannually, at 2 year intervals.

FOOTNOTES: (2) At each visit, a complete physical examination is essential with
infant totally undressed and older child undressed and suitably draped; (3) Age
appropriate and patient specific health education and counseling should be a
part of every visit; (4) By history and appropriate physical examination, if
suspicious, by specific objective developmental testing; (5) Childhood
immunizations are based on age and health history and should be screened each
visit. (8) State law requires screening at school. Screening should be done if
there is evidence it was not done at school. (9) Hemoglobin or Hematocrit to be
administered x1 during adolescence, annually for menstruating females that are
at risk for anemia; (10) Urinalysis to be administered x1 during adolescence,
annually for sexually active clients at risk for STD's (i.e. gonorrhea,
syphilis/serology, chlamydia, HIV, etc.); (11) All sexually active females
should have a pelvic examination and a routine pap smear annually. A pelvic
examination and routine pap smear should be offered as part of preventive health
maintenance between 18-21 years. (12) All sexually active patient should be
screened for sexually transmitted diseases(STD's)

<PAGE>

                   RECOMMENDED CHILDHOOD IMMUNIZATION SCHEDULE
                     UNITED STATES, JANUARY - DECEMBER 2001

Vaccines(1) are listed under routinely recommended ages. Bars indicate range of
  recommended ages for immunization. Any dose not given at the recommended age
    should be given as a "catch-up" immunization at any subsequent visit when
indicated and feasible. [ILLEGIBLE] indicate vaccines to be given if previously
            recommended doses were missed or given earlier than the
                            recommended minimum age.

      Information in bold has been added by the American Academy of Family
                               Physicians (AAFP).

<TABLE>
<CAPTION>
     AGE                         1        2       4         6      12       15      18       24        4-6     11-12      14-18
   VACCINE           BIRTH       MO      MOS     MOS       MOS    MOS      MOS      MOS      MOS       YRS      YRS        YRS
   -------           -----       --      ---     ---       ---    ---      ---      ---      ---       ---      ---        ---
<S>                  <C>         <C>     <C>     <C>       <C>    <C>      <C>      <C>      <C>       <C>     <C>         <C>
HEPATITIS B(2)            HEP B #1
                                       HEP B #2                        HEP B #3                                HEP B
DIPTHERIA,
 TETANUS,                               DTAP     DTAP     DTAP                 DTAP(2)                DTAP           TD
PERTUSSIS(2)
H. INFLUENZAE
  TYPE B(4)                              HIB     HIB      HIB           HIB
INACTIVATED
  POLLO [ILLEGIBLE]                      IPV     IPV                  IPV [ILLEGIBLE]                IPV [ILLEGIBLE]
PNEUMOCOCCAL
CONJUGATE [ILLEGIBLE]                    PCV     PCV      PCV          PCV
MEASLES, MUMPS,                                                        MMR                           MMR(7)     MMR
RUBELLA(7)
VARICELLA [ILLEGIBLE]                                                      VAR                                  VAR [ILLEGIBLE]
HEPATITIS A [ILLEGIBLE]                                                                       HEP A -- IN SELECTED AREAS [ILLEGIBLE]
</TABLE>

   Approved by the Advisory Committee on Immunization Practices (ACIP), the
             American Academy of Pediatrics (AAP),and the American
                      Academy of Family Physicians (AAFP).

<PAGE>

1.    This schedule indicates the recommended ages for routine administration of
      currently licensed childhood vaccines, as of 11/1/00, for children through
      18 years of age. Additional vaccines may be licensed and recommended
      during the year. Licensed combination vaccines may be used whenever any
      components of the combination are indicated and its other components are
      not contraindicated. Provides should consult the manufacturer's package
      inserts for detailed recommendations.

2.    INFANTS BORN TO HBSAG-NEGATIVE MOTHERS should receive the 1st dose of
      hepatitis B (HEP B) vaccine by age 2 months. The 2nd dose should be at
      least one month after the 1st dose. The 3rd dose should be administered at
      least 4 months after the 1st dose and at least 2 months after the 2nd
      dose, but not before 6 months of age for infants.

      INFANTS BORN TO HBSAG-POSITIVE MOTHERS should receive hepatitis B vaccine
      and 0.5 mL hepatitis B immune globulin (HBIG) within 12 hours of birth at
      separate sites. The 2nd dose is recommended at 1-2 months of age and the
      3rd dose at 6 months of age.

      INFANTS BORN TO MOTHERS WHOSE HBSAG STATUS IS UNKNOWN should receive
      hepatitis B vaccine within 12 hours of birth. Maternal blood should be
      drawn at the time of delivery to determine the mother's HBsAg status; if
      the HBsAg test is positive, the infant should receive HBIG as soon as
      possible (no later than 1 week of age).

      ALL CHILDREN AND ADOLESCENTS who have not been immunized against hepatitis
      B should begin the series during any visit. Special efforts should be
      made to immunize children who were born in or whose parents were born in
      areas of the world with moderate or high endemicity of hepatitis B virus
      infection.

3.    The 4th dose of DTaP (diphtheria and tetanus toxoids and acellular
      pertussis vaccine) may be administered as early as 12 months of age,
      provided 6 months have elapsed since the 3rd dose and the child is
      unlikely to return at age 15-18 months. Td(tetanus and diphtheria toxoids)
      is recommended at 11-12 years of age if at least 5 years have elapsed
      since the last dose of DTP, DTaP or DT. Subsequent routine Td boosters are
      recommended every 10 years.

4.    Three Haemophilus influenzae type b(Hib) conjugate vaccines are licensed
      for infant use. If PRP-OMP (PedvaxHIB(R) or ComVax(R) [Merck]) is
      administered at 2 and 4 months of age, a dose at 6 months is not required.
      Because clinical studies in infants have demonstrated that using some
      combination products may induce a lower immune response to the Hib vaccine
      component, DTaP/Hib combination products should not be used for primary
      immunization in infants at 2, 4 or 6 months of age, unless FDA-approved
      for these ages.

5.    An all-IPV schedule is recommended for routine childhood polio vaccination
      in the United State. All children should receive four doses of IPV at 2
      months, 4 months, 6-18 months, and 4-6 years of age. Oral polio vaccine
      (OPV) should be used only in selected circumstances. (See MMWR May 19,
      2000/49(RR-5);1-22).

6.    The heptavalent conjugate pneumococcal vaccine (PCV) is recommended for
      all children 2-23 months of age. It also is recommended for certain
      children 24-59 months of age. (See MMWR Oct. 6, 2000/49(RR-9);1-35). THE
      FULL AAFP CLINICAL POLICY ON PNEUMOCOCCAL CONJUGATE VACCINE IS available
      at www.aafp.org/policy/camp/24.html.

7.    The 2nd dose of measles,mumps, and rubella (MMR)vaccine is recommended
      routinely at 4-6 years of age but may be administered during any visit,
      provided at least 4 weeks have elapsed since receipt of the 1st dose and
      that both doses are administered beginning at or after 12 months of age.
      Those who have not previously received the second dose should complete the
      schedule by the 11-12 year old visit.

8.    Varicella (Var) vaccine is recommended at any visit on or after the first
      birthday for susceptible children, i.e. those who lack a reliable history
      of chickenpox (as judged by a health care provider) and who have not been
      immunized. Susceptible persons 13 years of age or older should receive 2
      doses, given at least 4 weeks apart.

9.    Hepatitis A (Hep A) is shaded to indicate its recommended use in selected
      states and/or regions, and for certain high risk groups; consult your
      local public health authority. (See MMWR Oct. 1, 1999/48(RR-12); 1-37).

For additional information about the vaccines listed above, please visit the
National Immunization Program Home Page at http://www.cdc.gov/nip/ or call the
National Immunization Hotline at 800-232-2522 (English) or 800-232-0233
(Spanish).

FULL AAFP IMMUNIZATION POLICIES CAN BE FOUND AT THE AAFP WEBSITE
WWW.AAFP.ORG/CLINICAL.
<PAGE>

                                 APPENDIX D

                          DSS MARKETING GUIDELINES

<PAGE>

A.    DETAILED MARKETING GUIDELINES

1)    GENERAL HUSKY MARKETING MATERIALS

Marketing materials are defined as all media, including brochures and
leaflets; newspaper, magazine, radio, television, billboard and yellow
pages advertisements; and presentation materials used by MCO
representatives.

The DEPARTMENT will not restrict the MCO's general communications to the
public. However, the MCO must obtain prior approval from the DEPARTMENT
prior to any written material or advertisement that is mailed to,
distributed to, or aimed at HUSKY recipients or individuals potentially
eligible for HUSKY, specifically, material that mentions Medicaid, Medical
Assistance, Title XIX, Title XXI State Children's Health Insurance Program
(SCHIP) or HUSKY. Examples of HUSKY-specific materials would be those which
are in any way targeted to HUSKY populations (such as billboards or bus
posters disproportionately located in low-income neighborhoods); those that
mention the MCO's HUSKY product name; or those that contain language or
information specifically designed to attract HUSKY enrollment.

2)    GENERAL MCO MARKETING/ADVERTISING

All MCO-specific marketing activities for the HUSKY population, as defined
above, and all marketing materials /advertising put forth by HUSKY-only MCO
require DEPARTMENT prior approval.

In determining whether to approve a particular marketing activity, the
DEPARTMENT will apply a variety of criteria, including, but not limited to:

a)    Accuracy: The content of the material must be accurate. Any
      information that is deemed inaccurate will be disallowed.

b)    Misleading references to the MCO's positive attributes: Misleading
      information will be disallowed even if it is accurate. For example,
      the MCO may seek to advertise that its health care services are free
      to its Medicaid (HUSKY A) Members. In this situation, DEPARTMENT
      would disallow the language since this could be construed by
      Members as being a particular advantage of the plan (e.g. they might
      believe they would have to pay for health services if they chose
      another MCO or remained in fee-for-service).

c)    Threatening Messages: MCOs shall not imply that the managed care
      program or the failure to join a particular MCO would endanger the
      Member's health status, personal dignity, or the opportunity to
      succeed in various aspects of their lives. MCOs are strictly
      prohibited from creating threatening implications about the State's
      mandatory assignment process for HUSKY A Members or other aspects of
      the HUSKY A or HUSKY B programs.

d)    MCO's Legitimate Strengths: MCOs may differentiate themselves by
      promoting their legitimate positive attributes.

                                     1
<PAGE>

3)    MCO ADVERTISING AT PROVIDER CARE SITES

Promotional and health education materials at care delivery sites
(including patient waiting areas) are permitted, subject to prior
DEPARTMENT content approval. MCO member services staff may provide member
services (e.g. face-to-face member education) at provider care sites,
however, face-to-face meetings, for purposes of marketing, at care delivery
sites between individual Members and MCO staff are not permitted.

4)    MCO ADVERTISING IN DEPARTMENT ELIGIBILITY OFFICES

MCOs may make their materials available at DEPARTMENT offices only through
the DEPARTMENT or its agent. This restriction applies to all eligibility
offices, including those based in hospitals. MCO marketing staff and
provider staff are not permitted to solicit Member enrollment by
positioning themselves at or near eligibility offices. Note that the only
face-to-face marketing activities allowed are those directly permitted
under items #5, #7, #11 and #12 of these guidelines. All other face-to-face
marketing activities are prohibited.

5)    PROVIDER COMMUNICATIONS WITH HUSKY PATIENTS ABOUT MCO OPTIONS

DEPARTMENT marketing restrictions apply to the MCO's participating
providers as [ILLEGIBLE] as to the MCOs. MCOs must notify all of their
participating providers of the DEPARTMENT marketing restrictions and provide
them with a copy of this document.

Each provider entity is allowed to notify its patients of the HUSKY-certified
MCOs it participates in, and to explain that the patients must enroll in one of
these MCOs if they wish to preserve their existing relationship. This must be
done through written materials prior-approved by DEPARTMENT, and must be
distributed to HUSKY patients without regard to health status. Providers must
not indicate a preference between the MCOs in which they participate.

6)    MEMBER-INITIATED TELEPHONE CONVERSATIONS WITH MCOS AND PROVIDERS

These conversations are permitted and do not require prior approval by the
DEPARTMENT, but information given to potential Members, during such
telephone conversation must be in accordance with the DEPARTMENT's marketing
guidelines. However, telephone conversations must be initiated by the
potential Member, not by the MCO staff (or provider staff). MCOs and
providers may return calls to Members and potential Members when Members
and potential Members leave a message requesting that this occur.

                                     2
<PAGE>

7)    MEMBER-INITIATED ONE-ON-ONE MEETINGS WITH MCO STAFF PRIOR TO
      ENROLLMENT

Such meetings, when requested by the Member, are permitted but may not occur
at a participating provider's care delivery site or at the Member's
residence. These meetings must occur at the MCO's offices or another
mutually-agreed upon public location. All verbal interaction with the
Member must be in compliance with the DEPARTMENT's marketing guidelines.

8)    MAILINGS BY MCO IN RESPONSE TO MEMBER REQUESTS

MCO mailings are permitted in response to Member verbal or written requests
for information. The content of such mailings must be prior-approved by the
DEPARTMENT. MCOs may include gifts of nominal value (unit cost less than
$2, e.g. magnets, pens, bags, jar grippers, etc.) in these mailings.

9)    UNSOLICITED MCO MAILINGS

MCOs are permitted to send unsolicited mailings. The content of such
mailings must be prior-approved by DEPARTMENT. In addition, the target
audiences must be prior-approved by DEPARTMENT, and the MCOs must explain
how they obtained the list of names, addresses and phone numbers.

10)   TELEMARKETING

Telemarketing is not a permitted marketing activity

11)   MCO GROUP MEETINGS HELD AT MCO

These meetings must be prior approved by the DEPARTMENT. The MCO may not
notify prospective Members until DEPARTMENT prior approval has been
obtained

12)   MCO GROUP MEETINGS HELD IN PUBLIC FACILITIES, CHURCHES, HEALTH FAIRS,
OR OTHER COMMUNITY SITES

These are permitted activities as long as DEPARTMENT approved materials are
utilized in the presentations and the DEPARTMENT's marketing guidelines are
followed. The DEPARTMENT reserves the right to monitor such meetings on an
ad hoc basis. MCOs are required to notify the DEPARTMENT sufficiently in
advance to allow DEPARTMENT representatives to attend such meetings in
order to monitor MCO activities if desired. As soon as the MCO has
scheduled these activities, the DEPARTMENT should be notified.

                                     3
<PAGE>

13)   MCO GROUP MEETINGS HELD IN PRIVATE CLUBS OR HOMES

These activities are prohibited. The only permitted group meetings are
those described under items #11 and #12.

14)   INDIVIDUAL SOLICITATION, RESIDENCES

MCO (and provider) staff are not permitted to visit potential Members at
their places of residence for purposes of explaining MCO features and
promoting enrollment. This prohibition is absolute, and applies even in
situations where the potential Member desires and/or requests a home visit.
MCO staff can visit Member homes after enrollment becomes effective, as
part of their orientation/education efforts.

15)   GIFTS, CASH INCENTIVES, OR REBATES TO POTENTIAL MEMBERS AND MEMBERS.

MCOs (and their providers) are prohibited from disseminating gift items,
except those of a nominal value (pens, key chains, magnets, etc.), to
potential Members. DEPARTMENT-approved written materials may also be
disseminated to prospective Members along with similar nominal value gifts.
MCOs may give items of nominal value (unit cost less than $2), with their
logo on it, to persons (potential Members and others) attending health
fairs, presentations at community forums organized through or other
sanctioned events, with DEPARTMENT approval. Such items would include
magnets, pens, bags, plastic band-aid dispensers, etc. Pre-approved nominal
value items may also be included with new Member information packets.

16)   GIFTS TO MEMBERS FOR SPECIFIC HEALTH-RELATED EVENTS

Gifts to Members are allowed for medically "good" behavior (e.g. baby
T-shirt showing immunization schedule once a woman completes targeted
series of prenatal visits). All such gifts, including any written materials
included with them (or on them), must be prior-approved by the DEPARTMENT.
The criteria for providing such gifts must also be prior-approved by
DEPARTMENT. MCOs must not provide gifts in any situations other than those
that have been prior-approved by DEPARTMENT. Additional DEPARTMENT prior
approval is required for all additional uses of the gift items or for new
gifts.

                                     4
<PAGE>

The DEPARTMENT may approve magnets, phone labels, and other nominal items
that reinforce a MCO's care coordination programs (e.g. through advertising
the Member Services hotline and/or the PCP office phone number). All such
items must be prior-approved by the DEPARTMENT. The criteria for
disseminating this information must also be prior-approved, although the
DEPARTMENT is likely to be amenable to the MCOs' inclusion of this
information in "welcome" packets sent to new Members.

Health education videos are also allowed, but must be prior-approved by
DEPARTMENT.

17)   PHONING BY MEMBERS FROM HEALTH CARE PROVIDER LOCATIONS

Providers may provide the use of a phone to potential HUSKY Members or
HUSKY Members subject to the following restrictions:

a) MCO or provider staff may not coach or instruct the caller;

b) Privacy must be given to the MEMBER during their phone conversation with the
HUSKY application and enrollment center.

18)   NON-ALCOHOLIC BEVERAGES AND LIGHT REFRESHMENTS FOR POTENTIAL MEMBERS
AT MEETINGS

Non-alcoholic beverages and light refreshments are permitted at DEPARTMENT
approved group meetings.

                                     5
<PAGE>

C. USE OF HUSKY NAME; HUSKY LOGO AND MANDATORY LANGUAGE REQUIREMENTS

MCOs will be allowed use of the HUSKY logo and name for use in their
marketing materials, subject to the following:

1)    must be used in conjunction with the following language unless
      alternative language has been prior approved by the DEPARTMENT.

            HUSKY GIVES FAMILIES THE FREEDOM OF CHOICE TO ENROLL IN ONE OF
            SEVERAL PARTICIPATING HEALTH PLANS. TOLL-FREE INFORMATION:
            1-877-CT-HUSKY;

2)    the above mandatory language must be placed in the vicinity of the
      HUSKY logo; and

                                     6
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                                  Permitted With
                                                                                    DEPARTMENT
Type of Marketing Activity                       Permitted     Not Permitted         Approval
------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>                <C>
1. General HUSKY marketing                                                              X
materials
------------------------------------------------------------------------------------------------
2. General, MCO                                                                         X
advertising/marketing
------------------------------------------------------------------------------------------------
3. MCO advertising in provider care                                                     X
sites
------------------------------------------------------------------------------------------------
4. MCO advertising in all                                                               X
DEPARTMENT
eligibility offices, including
hospital-based (Must be made available
only through the DEPARTMENT or its agent)
------------------------------------------------------------------------------------------------
5. Provider communications with                                                         X
Medicaid patients about MCO options
------------------------------------------------------------------------------------------------
6. Member-initiated telephone                        X
conversations with MCO and Provider staff
------------------------------------------------------------------------------------------------
7. Member-initiated one-on-one                       X
meetings with MCO staff prior to enrollment
------------------------------------------------------------------------------------------------
8. Mailings by MCO in response to                                                      X
Member requests
------------------------------------------------------------------------------------------------
9. Unsolicited MCO mailings to                                                         X
Members
------------------------------------------------------------------------------------------------
10. Telemarketing                                                    X
------------------------------------------------------------------------------------------------
11. MCO group meetings held at MCO                                                     X
------------------------------------------------------------------------------------------------
12. MCO group meetings held in public                                                  X
facilities such as churches, health fairs, WIC
program or other community sites
------------------------------------------------------------------------------------------------
13. MCO group meetings held in private                               X
clubs or homes
------------------------------------------------------------------------------------------------
</TABLE>

                                     7
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                                 PERMITTED, WITH
                                                                                    DEPARTMENT
Type of Marketing Activity                       Permitted     Not Permitted         APPROVAL
------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>                <C>
14. Individual solicitation at                                       X
residences
------------------------------------------------------------------------------------------------
15. Items of nominal value along with                                                   X
written information about the MCO or
general health education information to
potential Members or included in new
Member information packets.
------------------------------------------------------------------------------------------------
16. Gifts to Members (e.g. baby                                                         X
T-shirt showing immunization schedule) based
on specific health events unrelated to
enrollment
------------------------------------------------------------------------------------------------
17. Phoning by Members from health                  X
care provider locations
------------------------------------------------------------------------------------------------
18. Non-alcoholic beverages and                     X
light refreshments (e.g. fruit,
cookies) for potential Members at
meetings (may not mention
refreshments in advertisements for
meetings)
------------------------------------------------------------------------------------------------
</TABLE>

                                     8
<PAGE>

                                 APPENDIX E

                        QUALITY ASSURANCE PROGRAM

<PAGE>

STANDARDS FOR INTERNAL QUALITY ASSURANCE PROGRAMS FOR HEALTH PLANS

Standard I: Written QAP Description

The organization has a written description of its Quality Assurance Program
(QAP). This written description meets the following criteria:

A     Goals and objectives - There is a written description of the QA
      program with detailed goals and annually developed objectives that
      outline the program structure and design and include a timetable for
      implementation and accomplishment.

B.    Scope -

      1. The scope of the QAP is comprehensive, addressing both the quality
      of clinical care and quality of non-clinical aspects of services,
      such as and including: availability, accessibility, coordination, and
      continuity of care.

      2. The QAP methodology provides for review of the entire range of
      care provided by the organization, by assuring that all demographic
      groups, care settings (e.g. inpatient, ambulatory, [including care
      provided in private practice offices] and home care), and types of
      services (e.g. preventive, primary, specialty care and ancillary) are
      included in the scope of the review. This review should be carried
      out over multiple review periods and not on just a concurrent basis.

C.    Specific activities - The written description specifies quality of
      care studies and other activities to be undertaken over a prescribed
      period of time, and methodologies and organizational arrangements to
      be used to accomplish them. Individuals responsible for the studies
      and other activities are clearly identified and are appropriate.

D.    Continuous activity - The written description provides for continuous
      performance of the activities, including tracking of issues over
      time.

E     Provider review - The QAP provides:

      1. Review by physicians and other health professionals of the process
      followed in the provision of health services;

      2. Feedback to health professionals and HMO staff regarding
      performance and patient results.

F.    Focus on health outcomes - The QAP methodology addresses health
      outcomes to the extent consistent with existing technology.

<PAGE>

Standard II: Systematic Process of Quality Assessment and Improvement

The QAP objectively and systematically monitors and evaluates the quality
and appropriateness of care and service provided members, through quality
of care studies and related activities, and pursues opportunities for
improvement on an ongoing basis.

The QAP has written guidelines for its quality of care studies and related
activities which include:

A.    Specification of clinical or health services delivery areas to be
      monitored

      1. Monitoring and evaluation of clinical care reflects the population
      served by the MCO, in terms of age groups, disease categories, and
      special risk status.

      2. For the Medicaid population, the QAP monitors and evaluates at a
      minimum, care and services in certain priority areas of concern
      selected by the State. It is recommended that these be taken from
      among those identified by the Health Care Financing Administration's
      (HCFA's) Medicaid Bureau and jointly determined by the State and the
      Managed Care Organization (MCO).

      3. At its discretion and/or as DSS directs, the MCO's QAP also
      monitors and evaluates other aspects of care and service.

B.    Use of quality indicators

Quality indicators are measurable variables relating to a specified
clinical or health services delivery area, which are reviewed over a period
of time to monitor the process or outcomes of care delivered in that area.

      1. The MCO identifies and uses quality indicators that are
      measurable, objective, and based on current knowledge and clinical
      experience.

      2. For the priority area selected by DSS from the HCFA Medicaid
      Bureau's list of priority clinical and health service delivery areas
      of concern, the MCO monitors and evaluates quality of care through
      studies, which include, but are not limited to, the quality
      indicators also specified by the HCFA Medicaid Bureau.

      3. Methods and frequency of data collection are appropriate and
      sufficient to detect need for program change.

C.    Use of clinical care standards/practice guidelines

                                     2
<PAGE>

      1. The QAP studies and other activities monitor quality of care
      against clinical care or health services delivery standards or
      practice guidelines specified for each area identified.

      2. The clinical standards/practice guidelines are based on reasonable
      scientific evidence and are developed or reviewed by plan providers.

      3. The clinical standards/practice guidelines focus on the process
      and outcomes of health care delivery, as well as access to care.

      4. A mechanism is in place for continuously updating the
      standards/practice guidelines.

      5. The clinical standards/practice guidelines shall be included in
      provider manuals developed for use by MCO providers or otherwise
      disseminated to the providers as they are adopted.

      6. The clinical standards/practice guidelines address preventive
      health services.

      7. The clinical standards/practice guidelines are developed for the
      full spectrum of populations enrolled in the plan.

      8. The QAP shall use these clinical standards/practice guidelines to
      evaluate the quality of care provided by the MCO's providers, whether
      the providers are organized in groups, as individuals, as IPAs, or in
      combinations thereof.

D.    Analysis of clinical care and related services

      1. Appropriate clinicians monitor and evaluate quality through review
      of individual cases where there are questions about care and through
      studies analyzing patterns of clinical care and related service. For
      quality issues identified in the QAP's targeted clinical areas, the
      analysis includes the identified quality indicators and uses clinical
      care standards or practice guidelines.

      2. Multidisciplinary teams are used, where indicated, to analyze and
      address system issues.

      3. For the D.1. and D.2. above, clinical and related services
      requiring improvement are identified.

E.    Implementation of remedial/corrective actions

The QAP includes written procedures for taking appropriate remedial action
whenever, as determined under the QAP, inappropriate or substandard
services are furnished, or services that should have been furnished were
not.

                                     3
<PAGE>

These written remedial corrective action procedures include:

      1. Specification of the types of problems requiring
      remedial/corrective action.

      2. Specification of the person(s) or body responsible for making the
      final determinations regarding quality problems.

      3. Specific actions to be taken.

      4. Provision of feedback to appropriate health professionals,
      providers and staff.

      5. The schedule and accountability for implementing corrective
      actions.

      6. The approach to modify the corrective action if improvements do
      not occur.

      7. Procedures for terminating the affiliation with the physician, or
      other health professional or provider.

F.    Assessment of effectiveness of corrective actions

      1. As actions are taken to improve care, there is monitoring and
      evaluation of corrective actions to assure that appropriate changes
      have been made. In addition, changes in practice patterns are
      tracked.

      2. The MCO assures follow-up on identified issues to ensure that
      actions for improvement have been effective.

G.    Evaluation of continuity and effectiveness of the QAP

      1. The MCO conducts a regular and periodic examination of the scope
      and content of the QAP to ensure that it covers all types of services
      in all settings, as specified in standard I.B.2.

      2. At the end of each year, a written report on the QAP is prepared
      that addresses: QA studies and other activities completed, trending
      of clinical and services indicators and other performance data;
      demonstrated improvements in quality; areas of deficiency and
      recommendations for corrective action; and an evaluation of the
      overall effectiveness of the QAP

      3. There is evidence that QA activities have contributed to
      significant improvements in the care and services delivered to
      members.

Standard III: Accountability to the Governing Body

                                     4
<PAGE>

The QA committee is accountable to the governing body of the managed care
organization. The governing body should be the board of directors, or a
committee of senior management may be designated in instances in which the
board's participation with QA issues is not direct. There is evidence of a
formally designated structure, accountability at the highest levels of the
organization, and ongoing and/or continuous oversight of the QA program.
Responsibilities of the Governing Board for monitoring, evaluating, and
making improvements to care include:

A. Oversight of the QAP - There is documentation that the governing body
has approved the overall QAP and the annual QAP.

B. Oversight of entity - The Governing Body has formally designated an
accountable entity or entities within the organization to provide oversight
of QA, or has formally decided to provide such oversight as a committee of
the whole.

C. QAP progress reports - The Governing body routinely receives written
reports from the QAP describing actions taken, progress in meeting QA
objectives, and improvements made.

D. Annual QAP review - The Governing Body formally reviews on a periodic
basis (but no less frequently than annually) a written report on the QAP
that includes: studies undertaken, results, subsequent actions, and
aggregate data on utilization and quality of services rendered, to assess
the QAP's continuity, effectiveness and current acceptability.

E. Program modification - Upon receipt of regular written reports from the
QAP delineating actions taken and improvements made, the Governing Body
takes actions when appropriate and directs that the operational QAP be
modified on an ongoing basis to accommodate review findings and issues of
concern within the MCO. Minutes of the meetings of the Governing Board
demonstrate that the Board has directed and followed up on necessary
actions pertaining to QA.

Standard IV: Active QA Committee

The QAP delineates an identifiable structure responsible for performing QA
functions within the MCO. The committee or other structure has:

A. Regular meetings - The structure/committee meets on a regular basis with
specified frequency to oversee QAP activities. This frequency is sufficient
to demonstrate that the structure committee is following up on all findings
and required actions, but in no case are such meetings less frequent than
quarterly.

B. Established parameters for operating - The role, structure and function of
the structure committee are specified.

                                     5
<PAGE>

C. Documentation - There are contemporaneous records documenting the
structure's committee's activities, findings, recommendations and actions.

D. Accountability - The QAP committee is accountable to the Governing Body
and reports to it (or its designee) on a scheduled basis on activities,
findings, recommendations and actions.

E. Membership - There is active participation in the QA committee from
health plan providers, who are representative of the composition of the
health plan's providers.

Standard V: QAP Supervision

There is a designated senior executive who is responsible for program
implementation. The organization's Medical Director has substantial
involvement in QA activities.

Standard VI: Adequate Resources

The QAP has sufficient material resources, and staff with the necessary
education, experience, or training to effectively carry out its specified
activities.

Standard VII: Provider Participation in the QAP

A. Participating physicians and other providers are kept informed about the
written QA plan.

B. The MCO includes in all its provider contracts and employment
agreements, for both physicians and nonphysician providers, a requirement
securing cooperation with the QAP.

C. Contracts specify that hospitals, physicians, and other contractors will
allow the MCO access to the medical records of its members.

Standard VIII: Delegation of QAP Activities

The MCO remains accountable for all QAP functions, even if certain
functions are delegated to other entities. If the MCO delegates any QA
activities to contractors:

A. There is a written description of delegated activities; the delegate's
accountability for these activities; and the frequency of reporting to the
MCO.

B. The MCO has written procedures for monitoring the implementation of the
delegated functions and for verifying the actual quality of care being
provided.

                                     6
<PAGE>

C. There is evidence of continuous and ongoing evaluation of delegated
activities, including approval of quality improvement plans and regular
specified reports.

Standard IX: Members Rights and Responsibilities

The MCO demonstrates a commitment to treating members in a manner that
acknowledges their rights and responsibilities.

A. Written policy on members rights

The MCO has a written policy that recognizes the following rights of
members:

      1. To be treated with respect, and recognition of their dignity and
      need for privacy;

      2. To be provided with information about the MCO, its services, the
      practitioners providing care, and members' rights and
      responsibilities;

      3. To be able to choose primary care practitioners, within the limits
      of the plan network, including the right to refuse care from specific
      practitioners;

      4. To participate in decision-making regarding their health care;

      5. To voice grievances about the MCO or care provided;

      6. To formulate advance directives; and

      7. To have access to his/her medical records on accordance with
      applicable Federal and State laws.

A.    Written policy members responsibilities - The MCO has a written policy
      that addresses members' responsibility for cooperating with those
      providing health care services. This written policy addresses
      members' responsibility for:

      1. Providing, to the extent possible, information needed by
      professional staff in caring for the member; and

      2. Following instructions and guidelines given by those providing
      health care services.

C. Communication of policies to providers - A copy of the organization's
policies on members' rights and responsibilities is provided to all
participating providers.

D. Communication of policies to members - Upon enrollment, members are
provided a written statement that includes information on the following:

                                     7
<PAGE>

      1. Rights and responsibilities of members;

      2. Benefits and services included and excluded as a condition of
      membership, and how to obtain them, including a description of:

            a. any special benefit provisions (example, co-payment, higher
      deductibles, rejection of claim) that may apply to service obtained
      outside the system; and

            b. the procedures for obtaining out-of-area coverage;

      3. Provisions for after-hours and emergency coverage;

      4. The organization's policy on referrals for specialty care;

      5. Charges to members, if applicable, including:

            a. policy on payment of charges; and

            b. copayment and fees for which the member is responsible.

      6. Procedures for notifying those members affected by the termination or
      changes in any benefit services, or service delivery office/site;

      7. Procedures for appealing decisions adversely affecting the members'
      coverage, benefits, or relationship with the organization;

      8. Procedures for changing practitioners;

      9. Procedures for disenrollment; and

      10. Procedures for voicing complaints and/or grievances and for
      recommending changes in policies and services.

E. Member grievance procedures - The organization has a system(s) linked to the
QAP, for resolving members' complaints and formal grievances. This system
includes:

1. Procedures for registering and responding to complaints and grievances in a
timely fashion (organizations should establish and monitor standards for
timeliness);

2. Documentation of the substance of the complaint or grievances, and actions
taken;

3. Procedures to ensure a resolution of the compliant or grievance;

                                       8
<PAGE>

4. Aggregation and analysis of complaint and grievance data and use of the data
for quality improvement; and

5. An appeal process for grievances.

F. Member suggestions - Opportunity is provided for members to offer suggestions
for changes in policies and procedures.

G. Steps to assure accessibility of services - The MCO takes steps to promote
accessibility of services offered to members. These steps include:

      1. The points of access to primary care, specialty care and hospital
      services are identified for members;

      2. At a minimum, members are given information about:

            a. How to obtain services during regularly hours of operation

            b. How to obtain emergency and after-hours care; and

            c. How to obtain the names qualifications, and titles of the
professionals providing and/or responsible for their care.

H. Written information for members

1. Member information is written in prose that is readable and easily
understood; and

2. Written information is available, as needed, in the languages of the major
population groups served. A "major" population group is one which represents at
least 10% of plan's membership.

L Confidentiality of patient information - The MCO acts to ensure that the
confidentiality of the specified patient information and records is protected.

      1. The MCO has established in writing, and enforced, policies and
      procedures on confidentiality of medical records.

      2. The MCO ensures that patient care offices/sites have implemented
      mechanisms that guard against the unauthorized or inadvertent disclosure
      of confidential information to persons outside of the medical care
      organization.

      3. The MCO shall hold confidential all information obtained by its
      personnel about members related to their examination, care and treatment
      and shall not divulge it without the members's authorization, unless:

            a. it is required by law;

                                       9
<PAGE>

            b. it is necessary to coordinate the patient's care with physicians,
      hospitals, or other health care entities, or to coordinate insurance or
      other matters pertaining to payment; or

            c. it is necessary in compelling circumstances to protect the health
      or safety of an individual.

      4. Any release of information in response to a court order is reported to
      the patient in a timely manner; and

      5. Member records may be disclosed, whether or not authorized by the
      members, to qualified personnel for the purpose of conducting scientific
      research, but these personnel may not identify, directly or indirectly,
      any individual members in any report of the research or otherwise disclose
      participant identity in any manner.

J. Treatment of minors - The MCO has written policies regarding the appropriate
treatment of minors.

K. Assessment of member satisfaction - The MCO conducts periodic surveys of
member satisfaction with its services.

      1. The surveys include content on perceived problems in the quality,
      accessibility, and availability of care.

      2. The surveys assess at least a sample of:

      a. All Medicaid members;

      b. Medicaid member requests to change practitioners and/or facilities; and

      c. Disenrollment by Medicaid members.

      3. As a results of the surveys, the organization:

      a. Identifies and investigates sources of dissatisfaction;.

      b. Outlines action steps to follow-up on the findings; and

      c. Informs practitioners and providers of assessment results.

      3. The MCO reevaluates the effects of the above activities.

Standard X: Standards for Availability and Accessibility

The MCO has established standards for access (e.g. to routine, urgent and
emergency care; telephone appointment; advice; and member service lines).

                                       10
<PAGE>

Performance on these dimensions of access are assessed against the standards.

Standard XI:  Medical Records Standards

A. Accessibility and availability of medical records - The MCO shall include
provisions in provider contracts for appropriate access to the medical records
of its members for purposes of quality reviews conducted by the Secretary of
HHS, DSS, or agents thereof.

B. Record keeping - Medical records nay be on paper or electronic. The plan
takes steps to promote maintenance of medical records in a legible, current,
detailed, organized and comprehensive manner that permits effective patient care
and quality review as follows:

      1. Medical records standards- The MCO sets standards for medical records.
      The records reflect all aspects of patient care, including ancillary
      services. These standards shall at a minimum, include requirements for:

            a. Patient identification information - Each page or electronic file
      in the record contains the patient's name or patient ID number.

            b. Personal/biographical data - Personal/biographical data includes:
      age, sex, address; employer; home and work telephone numbers; and marital
      status.

            c. Entry date - All entries are dated.

            d. Provider identification - All entries are identified as to
            author.

            e. Legibility - The record is legible to someone other than the
            writer. A second reviewer should evaluate any record judged
            illegible by one physician reviewer.

            f. Allergies - Medication allergies and adverse reactions are
            prominently noted on the record. Absence of allergies (no known
            allergies-NKA) is noted in an easily recognizable location.

            g. Past medical history - (for patients seen 3 or more times) Past
            medical history is easily identified including serious accidents,
            operations, illnesses. For children, past medical history relates to
            prenatal care and birth.

            h. Immunizations- For pediatric records (ages 12 and under) there is
            a completed immunization record or a notation that immunizations are
            up- to-date.

                                       11
<PAGE>

            i Diagnostic information

            j. Medication information

            k. Identification of current problems - Significant illness, medical
            conditions and health maintenance concerns are identified in the
            medical record.

            l. Smoking/ETOH/substance abuse - Notation concerning cigarettes and
            alcohol use and substance abuse is present (for patients 12 years
            and over and seen three or more times). Abbreviations and symbols
            may be appropriate.

            m. Consultations, referral and specialist reports - Notes from
            consultations are in the record. Consultation, lab, and x-ray
            reports filed in the chart have the ordering physicians initials or
            other documentation signifying review. Consultation and
            significantly abnormal lab and imaging study results have an
            explicit notation in the record of follow-up plans.

            n. Emergency care

            o. Hospital discharge summaries - Discharge summaries are included
            as part of the medical record for (1) all hospital admissions which
            occur while the patient is enrolled in the MCO and (2) prior
            admissions as necessary.

            p. Advance directives - For medical records of adults, the medical
            record documents whether or not the individual has executed an
            advance directive. An advance directive is a written instruction
            such as a living will or durable power of attorney for health care
            relating to the provision of health care when the individual is
            incapacitated.

      2. Patient visit data - Documentation of individual encounters must
      provide adequate evidence of, at a minimum;

            a. History and physical examination - Appropriate subjective and
            objective information is obtained for the presenting complaints.

            b. Plan of treatment

            d. Diagnostic tests

            e. Therapies and other prescribed regimens; and

                                       12
<PAGE>

            f. Follow-up - Encounter forms or notes have a notation, when
            indicated, concerning follow-up care, call, or visit. Specific time
            to return is noted in weeks, months, or PRN. Unresolved problems
            from previous visits are addressed in subsequent visits.

            f. Referrals and results thereof; and

            g. All other aspects of patient care, including ancillary services.

      3. Record review process-

            a. The MCO has a system (record review process) to assess the
            content of medical records for legibility, organization, completion
            and conformance to its standards.

            b. The record assessment system addresses documentation of the items
            listed in B, above.

Standard XII: Utilization Review

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

B. Scope - The program has mechanisms to detect underutilization as well as
overutilization.

C. Preauthorization and concurrent review - For MCO with preauthorization or
concurrent review programs:

      1. Preauthorization and concurrent review decisions are supervised by
      qualified medical professionals;

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

      3. The reasons for decisions are clearly documented and available to the
      member.

      4. There are well-publicized and readily available appeals-mechanisms for
      both providers and patients. Notification of a denial includes a
      description of how file an appeal;

      5. Decisions and appeals are made in a timely manner as required by the
      exigencies of the situation;

                                       13
<PAGE>

      6. There are mechanisms to evaluate the effects of the program using data
      on member satisfaction, provider satisfaction or other appropriate; and

      7. If the MCO delegates responsibilities for utilization management, it
      has mechanisms to ensure that these standards are met by the delegate.

Standard XIII. Continuity of Care System

The MCO has put a basic system in place which promotes continuity of care and
case management.

Standard XIV: QAP Documentation

A. Scope - The MCO shall document that it is monitoring the quality of care
across all services and all treatment modalities, according to its written QAP.

B. Maintenance and availability of documentation - The IVICO must maintain and
make available to the State, and upon request to the Secretary of HHS, studies,
reports, appropriate, concerning the activities and corrective actions.

'Standard XV: Coordination of QA Activity with other Management Activity

The findings, conclusions, recommendations, actions taken, and results of
actions taken as a result of QA activity, are documented and reported to
appropriate individuals within the MCO and through established QA channels.

A. QA information is used in recredentialing, recontracting, and/or annual
performance evaluations.

B. QA activities are coordinated with other performance monitoring activities,
including utilization management, risk management, and resolution and monitoring
of member complaints and grievances.

C. There is a linkage between QA and other management functions of the MCO, such
as: network changes, benefit redesign, medical management systems, practice
feedback to providers, patient education and member services.

                                       14
<PAGE>

                                   APPENDIX F
                      UNAUDITED QUARTERLY FINANCIAL REPORTS

<PAGE>

                                   APPENDIX F
                      UNAUDITED QUARTERLY FINANCIAL REPORTS

<PAGE>

<TABLE>
<CAPTION>
CURRENT ASSETS:                                                                 CURRENT YEAR   PREVIOUS YEAR
---------------                                                                 ------------   -------------
<S>                                                                             <C>            <C>
1. Cash and Cash Equivalents
2. Short-term Investments
3. Premiums Receivable
4. Investment Income Receivables
5. Health Care Receivables
6. Amounts Due from Affiliates
7. Aggregate Write-Ins for Current Assets
8. TOTAL CURRENT ASSETS (Items 1 to 7)

OTHER ASSETS:
9. Restricted Cash and Other Assets
10. Long-term investments
11. Amounts Due from Affiliates
12. Aggregate Write-Ins for Other Assets
13. TOTAL OTHER ASSETS (items 9 to 12)

PROPERTY AND EQUIPMENT:
14. Land, Building and Improvements
15. Furniture and Equipment
16. Leasehold Improvements
17. Aggregate Write-Ins for Other Equipment
18. TOTAL PROPERTY (items 7 to 14)
19. TOTAL ASSETS (items 8, 13 and 18)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR CURRENT ASSETS:
701
702
703
704
705
798 Summary of remaining write-ins tor item 7 from overflow page
799 TOTALS (items 701 thru 705 plus 798) Page 2, item 7

DETAILS OF WRITE-INS AGGREGATED AT ITEM 12 FOR OTHER ASSETS
1201
1202
1203
1204
1205
1298 Summary of remaining write-ins for item 12 from overflow page
1299 TOTALS (items 1201 thru 1205 plus 1298) (Page 2, item 12)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 17 FOR OTHER EQUIPMENT
1701
1702
1703
1704
1705
1798 Summary of remaining write-ins for item 17 from overflow page
1799 TOTALS (items 1701 thru 1705 plus 1798) (Page 2, item 17)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
REVENUES:
1. Premium
2. Fee-For-Service
3. Title XVIII - Medicare
4. Title XIX O Medicaid
5. Investment
6. Aggregate Write-Ins for Other Revenues
7. TOTAL REVENUES (items 1 to 6)

EXPENSES:
8. Medical and Hospital
9. Other Professional Services
10. Outside Referrals
11. Emergency Room & Out of Area
12. Occupancy, Depreciation & Amortization
13. [ILLEGIBLE]
14. Incentive Pool and Withhold Adjustments
15. Aggregate Write-Ins for Other Medical & Hospital Expenses
16. Subtotal (items 8 to 15)
17. Reinsurance Expenses Net of Recoveries

LESS:
18. Copayments
19. COB and [ILLEGIBLE]
20. Subtotal (items 18 and 19)
21. TOTAL MEDICAL AND HOSPITAL (items 16 and 17 less 20)

Administration
22. Compensation
23. Interest Expense
24. Occupancy, Depreciation and Amortization
25. Marketing
26. Aggregate Write-Ins for Other Administration Expenses
27. TOTAL ADMINISTRATION (items 22 to 26)
28. TOTAL EXPENSES (items 21 and 27)
29. Income (LOSS) (item 21 and 27
30. Cumulative Effect of [ILLEGIBLE] Change
31. Provision for Federal Income Taxes
32. NET INCOME (item 29, less items 30 and 31)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 6 FOR OTHER REVENUES
601 Other Income
602
603
604
605
698
699 Summary of remaining write-ins for item 6 from overflow page
699 TOTALS (items 601 through 605 plus 698) (page 4, item 6)
</TABLE>

<PAGE>

           QUARTERLY CLAIMS AGING [ILLEGIBLE] AS OF _______ (DOLLARS)

<TABLE>
<CAPTION>
                                        0-30     31-45                    61-90   91-120   GREATER THAN
CLAIMS IN-PROCESS (1)                   DAYS      DAYS   [ILLEGIBLE]       DAYS    DAYS      120 DAYS     [ILLEGIBLE]
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>     <C>              <C>     <C>      <C>            <C>
Institutional (UB92)                   1,050       750                                                       1,800

Non - Institutional (HCFA 1500)        1,000     2,000                                                       3,000
------------------------------------------------------------------------------------------------------------------
Subtotal - Claims In Process           2,050     2,750       -                -        -            -        4,800
==================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60            61-90   91-120   GREATER THAN      TOTAL
UNPAID ADJUDICATED CLAIMS (2)           DAYS      DAYS    DAYS             DAYS    DAYS      120 DAYS     OUTSTANDING
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>     <C>              <C>     <C>      <C>            <C>
Institutional (UB92)                     500       250                                                         750

Non - Institutional (HCFA 1500)        1,000     2,000                                                       3,000
------------------------------------------------------------------------------------------------------------------
Subtotal - Unpaid Adjudicated Claims   1,500     2,250       -                -        -            -        3,750
==================================================================================================================
</TABLE>

      TICK MARK LEGAND

  (1) Claims in-process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (2) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

Note: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together as long In addition, alt source
      documentation used to complete this schedule should be available for
      review at the DEPARTMENT's request.

<PAGE>

  CLAIMS TURN AROUND TIME REPORT FROM_ _THROUGH ____________ (NUMBER OF CLAIMS)

<TABLE>
<CAPTION>
                                                                                                    GREATER THAN
                                                     0-30   31-[ILLEGIBLE] 46-60   61-90   91-120     120 DAYS     TOTAL [ILLEGIBLE]
                                                     ------------------------------------------------------------------------
<S>                                                  <C>    <C>            <C>     <C>     <C>      <C>            <C>
Paper Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500

                            Subtotal Paper Claims
Electronic Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                            Subtotal Electronic
-----------------------------------------------------------------------------------------------------------------------------
                              Total Claims Paid
=============================================================================================================================
</TABLE>

      Please file a claims incurred to paid triangle which would show the entire
      population of claims paid by HUSKY A & B lines of business.

      In addition, for those claims processed in excess of 45 days, include a
      list of the claims, date of service, date received, date paid, the the
      amount paid on the claim, the age of the claim when paid and amount of
      interest paid.

Note: The titles above have been identified as Medicaid, the MCO can elect to
report HUSKY A & B separately or together.

<PAGE>

<TABLE>
<CAPTION>
CURRENT ASSETS:                                                                 CURRENT YEAR   PREVIOUS YEAR
---------------                                                                 ------------   -------------
<S>                                                                             <C>            <C>
1. Cash and Cash Equivalents
2. Short-term Investments
3. Premiums Receivable
4. Investment Income Receivables
5. Health Care Receivables
6. Amounts Due from Affiliates
7. Aggregate Write-Ins for Current Assets
8. TOTAL CURRENT ASSETS (items 1 to 7)

OTHER ASSETS:
9. Restricted Cash and Other Assets
10. Long-term Investments
11. Amounts Due from Affiliates
12. Aggregate Write-Ins for Other Assets
13. TOTAL OTHER ASSETS (items 9 to 12)

PROPERTY AND EQUIPMENT:
14. Land, Building and Improvements
15. Furniture and Equipment
16. Leasehold Improvements
17. Aggregate Write-Ins for Other Equipment
18. TOTAL PROPERTY (items 7 to 14)
19. TOTAL ASSETS (items 8, 13 and 18)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR  CURRENT ASSETS
701
702
703
704
705
798 Summary of remaining write-ins for item 7 from overflow page
799 TOTALS (items 701 thru 705 plus 798) Page 2, item 7

DETAILS OF WRITE-INS AGGREGATED AT ITEM 12 FOR OTHER ASSETS
1201
1202
1203
1204
1205
1298 Summary of remaining write-ins for item 12 overflow page
1299 TOTALS (items 1201 thru 1205 plus 1298) (Page 2, item 12)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 17 FOR OTHER EQUIPMENT
1701
1702
1703
1704
1705
1798 Summary of remaining write-ins for item 17 from overflow page
1799 TOTALS (items 1701 thru 1705 plus 1798) (Page 2, item 17)
</TABLE>

<PAGE>


<TABLE>
<CAPTION>
CURRENT LIABILITIES:                                                            CURRENT YEAR   PREVIOUS YEAR
--------------------                                                            ------------   -------------
<S>                                                                             <C>            <C>
1. Accounts Payable (Schedule G)
2. Claims Payable (Reported and Unreported) (Schedule H)
3. Accrued Medical Incentive Pool (Schedule H)
4. Unearned Premiums.
6. Amounts Due to Affiliates (Schedule J)
7. Aggregate Write-Ins for Current Liabilities
8. TOTAL CURRENT LIABILITIES (items 1 to 7)

OTHER LIABILITIES:
9. Loans and Notes Payable (Schedule I)
10. Amounts Due to Affiliates (Schedule J)
11. Aggregate Write-Ins for Other Liabilities
12. TOTAL OTHER LIABILITIES (items 9 to 11)
13. TOTAL LIABILITIES (items 8 and 12)

NET WORTH:
14. Common Stock
15. Preferred Stock
16. Paid in Surplus
17. Contigency Capital
18. Surplus Notes (Schedule K)
19. Contingency Reserves
20. Retained Earnings/Fund Balance
21. Aggregate Write-Ins for Other Net Worth Items
22. TOTAL NET WORTH (Items 14 to 21)
23. TOTAL LIABILITIES AND NET WORTH (items 13 and 22)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR CURRENT LIABILITIES
701 Payroll & Related Liabilities
702 Accrued Audit & Actuarial Fees
703
704
705
798 Summary of remaining Write-ins for item 7 from overflow page
799 TOTALS (items 0701 thru 0705 plus 0798 Page 3, item 7)

DETAILS OF WRITE-INS AGGREGATE AT ITEM 11 FOR OTHER LIABILITIES
1101
1102
1103
1104
1105
1198 Summary of remaining write-ins for item 11 from overflow page
1199 TOTALS (items 1101 thru 1105 plus 1198 Page 3, Item 11)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 21 FOR OTHER NET WORTH ITEMS
2101
2102
2103
2104
2105
2198 Summary of remaining write-Ins for item 21 from overflow page
2199 TOTALS items 2101 thru 2105 plus 2198 Page 3, item 21
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
REVENUES:
1. Premium
2. Fee-For-Service
3. Title XVIII - Medicare
4. Title XIX O Medicaid
5. Investment
6. Aggregate Write-Ins for Other Revenues
7. TOTAL REVENUES (items 1 to 6)

EXPENSES:
8. Medical and Hospital
9. Other Professional Services
10. Outside Referrals
11. Emergency Room & Out of Area
12. Occupancy, Depreciation & Amortization
13. [ILLEGIBLE]
14. Incentive Pool and Withhold Adjustments
15. Aggregate Write-Ins for Other Medical & Hospital Expenses
16. Subtotal (items 8 to 15)
17. Reinsurance Expenses Net of Recoveries

LESS:
18. Copayments
19. COB and [ILLEGIBLE]
20. Subtotal (items 18 and 19)
21. TOTAL MEDICAL AND HOSPITAL (items 16 and 17 less 20)

Administration
22. Copayments
23. Interest [ILLEGIBLE]
24. Occupancy, Depreciation and Amortization
25. Marketing
26. Aggregate Write-Ins for Other Administration Expenses
27. TOTAL ADMINISTRATION (items 22 to 26)
28. TOTAL EXPENSES (items 21 and 27)
29. Income (LOSS) (item 21 and 27
30. Cumulative Effect of [ILLEGIBLE] Change
31. Provision for Federal Income Taxes
32. NET INCOME (item 29,  less items 30 and 31)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 6 FOR OTHER REVENUES
601 Other Income
602
603
604
605
698
699 Summary of remaining write-ins for item 6 from overflow [ILLEGIBLE]
699 TOTALS (items 601 through 605 plus 698) (page 4, item 6)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
DETAILS OF WRITE-INS AGGREGATED AT ITEM [ILLEGIBLE] FOR OTHER REVENUES
1501 Drugs
1502 Outpatient
1503
1504
1505
1598 Summary if remaining write-ins for item 15  from overflow page

DETAILS OF WRITE-INS AGGREGATED AT ITEM 26 FOR OTHER ADMINISTRATION EXPENSES
2601 MGMT Fee Income - SWWA
2602 MGMT Fee Expense GOHS
2603 Other Admin. Expense
2604 MGMT Fee Expense Corp.
2605 Accrued Audit & Actuarial Expense
2698 Summary of remaining, write-ins for item 26 from overflow page
[ILLEGIBLE] TOTALS (items 2601 thru 2505 plus 2598) (Page 4, item 26)
</TABLE>

<PAGE>

           QUARTERLY CLAIMS AGING INVENTORY REPORT AS OF _______ (DOLLARS)

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
CLAIMS IN-PROCESS (1)                   DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------       -----     -----   -----   -----  --------  ------------   -----------
<S>                                    <C>       <C>     <C>     <C>    <C>       <C>            <C>
Institutional (UB92)                   1,050       750                                              1,800

Non - Institutional (HCFA 1500)        1,000     2,000                                              3,000
                                       -----     -----    ----    ----    -----     ----------      -----
SUBTOTAL - CLAIMS IN PROCESS           2,050     2,750       -       -        -              -      4,800
                                       =====     =====    ====    ====    =====     ==========      =====
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120   GREATER THAN      TOTAL
UNPAID ADJUDICATED CLAIMS (2)           DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------       -----     -----   -----   -----  --------  ------------   -----------
<S>                                    <C>       <C>     <C>     <C>    <C>       <C>            <C>
Institutional (UB92)                     500       250                                                750

Non - Institutional (HCFA 1500)        1,000     2,000                                              3,000
                                       -----     -----    ----    ----    -----     ----------      -----
SUBTOTAL - UNPAID ADJUDICATED CLAIMS   1,500     2,250       -       -        -              -      3,750
                                       =====     =====    ====    ====    =====     ==========      =====
</TABLE>

      TICK MARK LEGEND

  (1) Claims in-process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (2) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

NOTE: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together as long in addition, all source
      documentation used to complete this schedule should be available for
      review at the DEPARTMENT's request.

<PAGE>

 QUARTERLY CLAIMS AGING INVENTORY REPORT AS OF _____________ (NUMBER OF CLAIMS)

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
INSTITUTIONAL CLAIMS (UB92)             DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
---------------------------             ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not
  in the system (1)                       55                                                            55
Claims in-process (2)                    350                                                           350
Unpaid Adjudicated Claims (3)            125       125                                                 250
                                         ---       ---   -----   -----   ------   ------------    --------
                              SUBTOTAL   530       125       -       -        -              -         655
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
NON - INSTITUTIONAL CLAIMS (HCFA 1500)  DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------------  ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not in
  the system (1)                          20        20                                                  40
Claims in-process (2)                     15        15                                                  30
Unpaid Adjudicated Claims (3)              5         5                                                  10
                                         ---       ---   -----   -----   ------   ------------    --------
                              SUBTOTAL    40        40       -       -        -              -          80
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
TOTAL CLAIMS                            DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
------------------------------------    ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not in
  the system (1)                          75        20                                                  95
Claims in-process (2)                    365        15                                                 380
Unpaid Adjudicated Claims (3)            130       130       -       -        -              -         260
                                         ---       ---   -----   -----   ------   ------------    --------
                          TOTAL CLAIMS   570       165       -       -        -              -         735
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

      TICK MARK LEGEND

  (1) This category would include any claim that has been received and not input
      in the system (I.e. claims in the mailroom).

  (2) Claims in process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (3) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

NOTE: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together.

<PAGE>

[ILLEGIBLE]

<TABLE>
<CAPTION>
                                                                                                     GREATER THAN
                                                             0-30   31-40   46-60   61-90  91 - 120    120 DAYS     TOTAL PAID
                                                             ----   -----   -----   -----  --------  ------------   ----------
<S>                                                          <C>    <C>     <C>     <C>     <C>      <C>            <C>
Paper Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                       SUBTOTAL PAPER CLAIMS
Electronic Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                         SUBTOTAL ELECTRONIC
                                                             ----   -----   -----   -----  --------  ------------   ----------
                           TOTAL CLAIMS PAID
                                                             ====   =====   =====   =====  ========  ============   ==========
</TABLE>

      PLEASE FILE A CLAIMS INCURRED TO PAID TRIANGLE WHICH WOULD SHOW THE ENTIRE
      POPULATION OF CLAIMS PAID BY HUSKY A & B LINES OF BUSINESS.

      IN ADDITION, FOR THOSE CLAIMS PROCESSED IN EXCESS OF 45 DAYS, INCLUDE A
      LIST OF THE CLAIMS, DATE OF SERVICE, DATE RECEIVED, DATE PAID, THE AMOUNT
      PAID ON THE CLAIM, THE AGE OF THE CLAIM WHEN PAID AND THE AMOUNT OF
      INTEREST PAID.

NOTE: THE TITLES ABOVE HAVE BEEN IDENTIFIED AS MEDICAID, THE MCO CAN ELECT TO
      REPORT HUSKY A & B SEPARATELY OR TOGETHER.

REVISED 7/6/01

<PAGE>

                                   APPENDIX G
                  MEDICAID MANAGED CARE ELIGIBILITY CATEGORIES

<PAGE>

HUSKY A MEDICAID COVERAGE GROUPS

<TABLE>
<CAPTION>
Eligibility
   Code                         Description
-----------                     -----------
<S>             <C>
    F01         Temporary Assistance to Needy Families (TANF)
    F03         Transitional Work Extension
    F04         Child Support Extension
    F05         Work Supplementation
    F07         Family Coverage (150 % FPL)
    F08         Special Child Care Deduction
    F09         Eligible for TANF except for Non-Medicaid Requirements
    F10         Newborn Coverage
    F11         Newborn Children
    F12         CN Ribicoff Children
    F13*        Children < 1, under 1859 of the Federal Poverty Level (FPL)
    F20*        Children 1-6, under 185 % of the Federal Poverty Level (FPL)
    F25         Children under 185 % of the Federal Poverty Level (FPL)
    F26         Continuous and Guaranteed Eligibility
    F95         Children under 18, 18-21, and caretaker Relatives
    P01         Pregnant Women who meet TANF Financial Requirements
    P02         Pregnant Women under 185 % of the Federal Poverty Level (FPL)
    P95         Pregnant Women Coverage
  MO1\M02       Pregnant Women Extension (Post-Partum)
  D01\D02       DCF Children
</TABLE>

* 1) The F13 and F20 coverage groups have been collapsed into the F25 coverage
group.

2) All newly granted children under 185 % of the FPL are being granted
eligibility under the F25 coverage group.

3) Already eligible children in the F13 and F20 coverage group will be
transferred to

<PAGE>

                                   APPENDIX H

                        MANAGED CARE POLICY TRANSMITTALS
<PAGE>

                                   APPENDIX H
                        MANAGED CARE POLICY TRANSMITTALS

<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                          DEPARTMENT OF SOCIAL SERVICES

                                                                 TELEPHONE
MICHAEL P. STARKOWSKI                                            (860) 424-5053
DEPUTY COMMISSIONER
                                                                 TDD/TTY
                                                                 1-800-842-4524

                         HEALTH CARE FINANCING DIVISION          FAX
                                                                 (860) 424-5057
                           MANAGED CARE ORGANIZATIONS

                                                              PB-98-35

/s/ Michael P. Starkowski                             MAY 1, 1998
-------------------------                             --------------
MICHAEL P. STARKOWSKI                                 EFFECTIVE DATE
DEPUTY COMMISSIONER

POLICY TRANSMITTAL: MS 98-02

SUBJECT: TRANSPORTATION

This policy transmittal is issued to Managed Care Organizations to establish
uniform policy regarding transportation of unescorted children to medically
necessary and medically appropriate appointments.

Effective May 1, 1998:

      1)    Children under 12 years of age shall be escorted to medically
            necessary and medically appropriate appointments. Either the child's
            parent, foster parent, caretaker, legal guardian, or the Department
            of Children and Families (DCF), as appropriate, shall be responsible
            for providing the escort.

      2)    For children between the ages of 12 to 15 years, a consent form
            signed by a parent, caretaker, or guardian shall be required in
            order for a child to be transported without an escort, unless access
            to the service without parental consent is specified by state
            statute (i.e. for family planning and mental health treatment).

      3)    For children 16 years of age and older, no consent form shall be
            required.

NOTE: THE DEPARTMENT OF SOCIAL SERVICES AND THE DEPARTMENT OF CHILDREN AND
FAMILIES, WITHIN 30 DAYS OF ISSUANCE OF THIS TRANSMITTAL, INTEND TO WORK WITH
MANAGED CARE ORGANIZATIONS TO DEVELOP A STANDARDIZED CONSENT FORM.

DISTRIBUTION: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List by the Department of Social Services. Managed Care Organizations
are requested to send this information to their network providers and
subcontractors.

RESPONSIBLE UNIT: Medical Administration Policy, Zantia McKinney, Lead Planning
Analyst, (860) 424-5135.

             25 SIGOURNEY STREET - HARTFORD, CONNECTICUT 06106-5033
                AN EQUAL OPPORTUNITY AFFIRMATIVE ACTION EMPLOYER
                     PRINTED ON RECYCLED OR RECOVERED PAPER

<PAGE>

     [CONNECTICUT DEPARTMENT
     OF SOCIAL SERVICES LOGO]       JOHN G. ROWLAND [LOGO] MICHAEL P. STARKOWSKI
                                           GOVERNOR        DEPUTY COMMISSIONER

                        (860) 424-5053 1-800-842-4524 TDD/TYY FAX (860) 424-5057

                         HEALTH CARE FINANCING DIVISION

                                                               PB-00-57

                             All Providers and MCO's

/s/ Michael P. Starkowski                             JULY 1, 2000
-------------------------                             ---------------
MICHAEL P. STARKOWSKI                                 EFFECTIVE DATE:
DEPUTY COMMISSIONER

Policy Transmittal: MS 00-08          CONTACT: MARTHA OKAFOR AT: 860 424-5032

Subject: Clarification Regarding Notices of Action and Partial Denials

This Policy Transmittal further clarifies requirements in Sections 6.1 and 6.2
of the HUSKY A contract in effect as of February 1, 1999 (the "HUSKY A
Contract"). This Policy Transmittal is based upon the guidance set forth in
David Parrella's April 18, 2000 letter to the managed care organizations
("MCOs") and replaces and supersedes the guidance in that letter.

Partial Denials

      Section 6.1 of the HUSKY A contract requires the MCO or its subcontractor
to send a notice of action whenever the MCO denies coverage of goods or
services, or reduces, suspends or terminates ongoing goods or services. A notice
of action is required whenever the MCO denies a request for goods or services -
whether the request is submitted in oral, written or electronic form, so long as
it is in a form in which the MCO accepts prior authorization requests. This
contractual requirement reflects federal Medicaid regulations and constitutional
due process obligations that require the issuance of notice in these
circumstances. A number of questions have arisen concerning what constitutes a
"denial" for purposes of the notice of action requirements. The Department
recognizes that the MCO may not be prepared to approve a request for prior
authorization as submitted because the patient and the requesting provider may
not have demonstrated that all of the requested services are medically
necessary. The MCO may not be prepared to approve the request as submitted,
notwithstanding that it may acknowledge that it has been demonstrated by the
information submitted that the patient needs some, but perhaps not all, of the
services requested by the provider.

      For example, if a provider requests 30 outpatient mental health sessions
for a member, but it has not been demonstrated to the satisfaction of the MCO
that the member

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<PAGE>

will require 30 sessions, the MCO may respond to such a request for services in
one of the following ways:

      1) If the MCO determines that the goods or services requested are not
medically necessary, the MCO may issue a denial notice to the member. The 10 day
advance notice requirement does not apply in these circumstances. The notice may
be sent at the time of the MCO's decision. Continuation of care requirements do
not apply in these circumstances. In the example described above, the MCO is
required to send a notice of action to the member denying the 30 sessions. This
option may not be used if the MCO believes that some goods or services are
medically necessary. In such situations, options 2 and 3 described below are
appropriate. This option may be appropriately used when the prior authorization
request relates to a discrete or single good or service that permits a "yes" or
"no" authorization decision or when the MCO determines that none of the
requested services are medically necessary.

      2) If the MCO determines that the requested goods or services are
medically necessary to some extent, but not for the type of services or the
scope, duration and intensity requested, the MCO may alternatively issue a
denial notice, that is, the MCO may partially approve and partially deny the
request for services. If the MCO does not approve the request as submitted, the
MCO must send a denial notice to the member at the time of the partial denial.
In the example above, the MCO could determine that the provider demonstrated
that the member needs 15 sessions, but not all 30 sessions requested. The MCO
could send a notice granting a request for 15 sessions and denying a request for
15 sessions. The member could receive the 15 undisputed sessions and could
request a grievance/fair hearing or the remaining 15 sessions. If the member
requests a hearing on the disputed 15 sessions, continuation of care
requirements would not apply.

      3) If the MCO determines that the goods or services are necessary, but
lacks sufficient information to make a final determination as to the full scope
of the request, the MCO alternatively may approve the authorization request as
submitted with notice to the provider that the MCO will review the medical
necessity for the full request at periodic intervals. In the example above, the
MCO may approve the requested 30 sessions. The notice or communication to the
provider, however, could note that approval is contingent upon demonstration of
the continuing need for the services. The MCO may inform the provider that
provision of the services is contingent upon such a demonstration at "check-in"
points - visits 10 and 20 - for example. If, prior to the 30th session, the MCO
determines that the remaining sessions are not necessary and elects to
discontinue coverage of the remaining previously approved sessions, this will
constitute a termination of services. The MCO would be required to send a 10 day
advance notice of termination and continue benefits pending a hearing decision,
up to the 30 sessions that were previously approved, if the patient requests a
hearing within the 10 day period.

      The MCOs may use the existing notice of action forms to issue notices of
partial denial. The Department is in the process of revising the model form
currently in use and will distribute the forms to the MCOs.

                                                                               2
<PAGE>

      The Department will monitor the use of these three notice options. The
Department believes that these options afford the MCOs sufficient flexibility to
respond to a request for goods or services while still allowing the MCO to
manage the care provided. The failure to issue notices of action as required by
the HUSKY A contract and in accordance with the partial denial requirements
above, may result in the imposition of Class B or Class C Sanctions.

         The HUSKY A organizations are bound by the formal and complex due
process requirements of federal Medicaid regulations. The Department recognizes
that these notice requirements may differ significantly from notice requirements
in the private sector. Nonetheless, the Department believes that the MCOs can
and must review the medical necessity of services and manage the care provided
to their Medicaid members, while at the same time, affording notice and hearing
rights that comply with federal and state law and the terms of the HUSKY A
contract.

Reasons for Denials

         The notice of action must cite to the legal authority for the MCO's
decision. If an adverse action is based upon a medical necessity determination,
the notice should cite to the medical necessity definition from the Department's
regulations. For example, a denial of physician's services on the basis of lack
of medical necessity shall cite to Regulations, Conn. Stat. Ag. Section
17b-262-338(31). The MCO should not cite internal MCO policy as a basis for a
denial, termination, suspension or reduction of services. If a good or service
is denied because it is not a covered benefit, the notice should cite to the
particular exclusion from the Department's Medical Services Policy manual, as
listed in Appendix A of the HUSKY A contract.

         If a MCO or one of its subcontractors fails to cite to the appropriate
legal basis for an authorization decision, the Department may impose Class B or
C sanctions on the MCO.

Utilization Review and Medical Necessity

         Utilization review decisions must be based upon an individual
assessment of the member and the member's medical condition. Arbitrary time
periods or arbitrary limitations on number of service visits are inconsistent
with an individualized determination of medical necessity. The MCO coverage and
utilization decisions must be consistent with the scope of covered services as
set forth in Appendix A of the HUSKY A contract. Medical necessity
determinations by the MCO must be made in accordance with the definition in the
HUSKY A contract. MCOs must employ the definition of "medical necessity" set
forth in Section EE of the definitions section of the HUSKY A contract.
Children's medical necessity decisions will be governed by the EPSDT coverage
rules (42 U.S.C. Section 1396d(r) and 42 U.S.C. Section 1396a(a)(43), as
described

                                                                               3
<PAGE>

in Section 3.17 of the HUSKY A Contract. MCOs are also responsible for ensuring
subcontractor compliance with these requirements.

Coverage for Chronic Conditions

      There is no distinction in the HUSKY A contract between acute and
long-term services. MCOs may not deny services on the basis that the goods or
services requested are for a chronic condition, rather than a service that is
short-term or acute in nature. In addition, MCOs may not adopt practices that
have the effect of denying or limiting access to medically necessary services
for chronic or long term conditions. These principles apply with equal force to
MCO subcontractors and MCOs are responsible for ensuring subcontractor
compliance.

      If a MCO or one of its subcontractors fails to issue a proper notice of
action or fails to use the medical necessity criteria a set forth in the HUSKY A
contract, the Department may impose Class B or Class C Sanctions on the MCO. If
a MCO or one of its subcontractors uses arbitrary limits in the utilization
review process, this may also result in the imposition of Class B or C
sanctions.

      Distribution: This policy transmittal is being distributed by Electronic
Data Systems to holders of the Medical Services Policy Manual and to the
Medicaid Mailing List, by the Department of Social Services. HUSKY A managed
care organizations are requested to send this information to their network
providers and subcontractors.

      Responsible Unit Medicaid Managed Care, Martha Okafor, Manager/Compliance,
at (860) 424-5032.

DATE ISSUED: JUNE 29, 2000

                                       4
<PAGE>

[CONNECTICUT DEPARTMENT OF SOCIAL SERVICES LOGO]

                        (860) 424-5053 1-800-842-4524 TDD/TTY FAX (860) 424-5057

                         HEALTH CARE FINANCING DIVISION
                                    July 1997

                                 All Providers

/s/ Michael Starkowski                                        ONGOING
----------------------                                        --------------
MICHAEL STARKOWSKI                                            EFFECTIVE DATE
DEPUTY COMMISSIONER

POLICY TRANSMITTAL: MS 97-05                                          PB-97-44

SUBJECT: Coordination and Continuation of Goods and Services

This Policy Transmittal clarifies the requirement for providing coordination and
continuation of care relative to the covered goods and services referred to in
Section 3.1 of the Health Plan Purchase of Service Contract. Those health plans
licensed by the State of Connecticut Insurance Department under Chapter 698,
698a or 670 of the Connecticut General Statutes are also bound by Public Act 97-
99, An Act Concerning Managed Care, as the provisions of the Act, upon the date
they are effective, may apply to the requirements of coordination and
continuation of goods and services addressed in this transmittal.

Specifically addressed in this transmittal is the coordination and continuity of
goods and services provided to: (1) a Medical Assistance Program client who is
in the process of transitioning into a health plan; or (2) a client who is an
established member of a health plan.

The Department of Social Services defines goods and services as medical care or
items which are furnished to a client to meet a medical necessity in accordance
with applicable statutes, regulations, or policy governing the Medical
Assistance Program.

(a)   COORDINATION AND CONTINUATION OF GOODS AND SERVICES FOR HEALTH PLAN
      MEMBERS

      Section 3.2 of the Health Plan Purchase of Service Contract requires that
      a Connecticut Access Health Plan shall have a system in place to provide
      well-managed patient care. Section 3.2 focuses on the coordination and
      continuation of care provided by a health plan for its members. For the
      purposes of this transmittal, coordination and continuation of goods and
      services includes:

      -     a health plan member who is receiving ongoing goods and services
            from a fee-for-service system (FFS) provider at the time of
            transitioning into the health plan;

      -     a health plan member who is receiving ongoing goods and services
            under one health plan at the time of transitioning into another
            health plan; and

                                       1
                             JOBS FIRST INITIATIVE
     Call us at 1-800-392-2122 if you have an employment position to fill.
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<PAGE>

                  available in the health plan's provider network, the health
                  plan shall continue to provide the care through the member's
                  FFS or outgoing health plan provider until such time an
                  appropriate specialist is available in the plan's provider
                  network.

                  In other words, until the health plan can make arrangements to
                  effect the smooth transition of the care to an appropriate
                  network provider, care shall continue to be provided by the
                  out-of-network provider beyond the member's effective date of
                  enrollment into the new health plan.

      (2)   Maintaining Continuity of Care for Established (Non-Transitioning)
            Health Plan Members Currently Receiving Ongoing Goods and Services

            Health plans shall not reduce, suspend, or eliminate the ongoing
            goods and services an established member (non-transitioning) is
            currently receiving from the member's health plan until the plan has
            completed a review of medical necessity and met the requirements of
            Section (d) below.

(d)   REQUIREMENTS FOR THE NOTICE OF ACTION AND NOTIFICATION OF THE GRIEVANCE
      PROCESS TO TRANSITIONING AND ESTABLISHED HEALTH PLAN MEMBERS

      In order for the health plans to be in compliance with Section 6.1 of the
      Health Plan Purchase of Service Contract concerning grievance procedures
      and Section (c) above, the following requirements shall be met by the
      health plans with regard to the right of transitioning and established
      health plan members to appeal an adverse decision by the health plan
      concerning the goods and services they are receiving.

      (1)   Notice of Action

            The health plan, or its subcontractor (as duly authorized by the
            health plan), shall mail an initial notice of action to the member
            regarding the results of the initial review of medical necessity,
            provided for in Section (c)(1) and (c)(2) above, at least 10
            calendar days before the date of any action to reduce, suspend, or
            terminate the goods and services. The health plan shall allow an
            additional 2 days for mail delivery time beyond the 10 days to allow
            for receipt of the notice by the member. The health plan shall
            identify if the member is Spanish speaking only. In this case, the
            notice of action shall be in Spanish.

            The initial notice of action shall clearly explain the member's
            right to:

            (A)   file a grievance with the health plan using the grievance
                  process established by the health plan in accordance with
                  Section 6.1 of the Health Plan Purchase of Service Contract;

            (B)   request a fair hearing in writing to the Department as
                  provided for under Section 6.2 of the contract, and that the
                  request must be made within 60 days from the date the health
                  plan initial Notice of Action is mailed to the member;

            (C)   continuation of ongoing goods and services if the appeal to
                  the plan or the Department is made on or before 10 calendar
                  days from the date the notice is received by the member. (See
                  subsection (c)(2) and (d)(5) below).

                                        3

<PAGE>

                  Division renders a decision in the matter. (See (d)(5) below
                  concerning documentation and tracking of the ten day
                  requirement.)

      (3)   In accordance with Section 6.1 of the Health Plan Purchase of
            Service Contract, the grievance process within the health plan shall
            be concluded within 30 days of receipt.

      (4)   Decisions by the Department's Administrative Hearing and Appeals
            Division concerning fair hearings shall be made within 90 days of
            receipt of a fair hearings request. It is the responsibility of the
            health plan to assign a staff person to attend the fair hearing to
            present their views. Failure on the part of the health plan to
            attend the hearing would cause the hearing to be decided in favor of
            the member.

      (5)   Documentation Requirements

            (A)   It shall be the responsibility of the health plan to document
                  in its grievance recordkeeping system required by Section 6.1
                  of the Health Plan Purchase of Service Contract: (i) the date
                  the initial notice of action is mailed to the member; (ii) the
                  date the member files a grievance resulting from the notice of
                  action; and (iii) the date the Department receives the
                  member's request for a fair hearing resulting from the notice
                  of action.

            (B)   It shall be the responsibility of the health plan to track the
                  time period for determination of continuation of services.

            (C)   In case of a dispute involving a request for continuation of
                  services or a fair hearing request, the health plan shall have
                  a system in place to verify the actual date the initial Notice
                  of Action is mailed to the member.

(e)   MAINTAINING CONTINUITY OF CARE FOR A TRANSITIONING HEALTH PLAN MEMBER
      RECEIVING GOODS NOT SUBJECT TO SECTION (c) ABOVE

      (1)   The following goods, which are not deemed ongoing goods as defined
            in section (c) above, are included in this section: durable medical
            equipment; prosthetic or orthotic devices; hearing aids; dentures;
            orthodontics; and eyeglasses. The goods covered in this section may
            involve the purchase, repair, or modification of such goods.

      (2)   Goods requiring prior authorization under the FFS system or the
            outgoing health plan

            (A)   The new health plan shall be responsible for payment of goods
                  covered in this section for a member who is transitioning into
                  the health plan from either the FFS system or another health
                  plan and who has a written authorization for such goods
                  subject to paragraph (C) of this section.

            (B)   The new health plan shall not deny, reduce, terminate, or
                  suspend such goods. The goods shall be provided by the new
                  health plan according to the terms of the authorization, i.e.,
                  the amount or duration of goods.

            (C)   Payment shall be the responsibility of the new health plan
                  when the goods were approved under the terms of a written
                  prior authorization either given by the Department to a
                  fee-for-service provider (see subsection (4) below) or by the
                  outgoing health plan to one of its providers, and:

                                        5

<PAGE>

            only.

            Therefore, when a client joins a health plan, the prior
            authorization by the Department for goods and services provided
            after the effective date of enrollment into a health plan is no
            longer valid, except when such goods meet the requirements of
            Section (d)(2) above. The Department also extends this rationale to
            the goods authorized by an outgoing health plan.

(f)   MAINTAINING CONTINUITY OF CARE FOR TRANSITIONING HEALTH PLAN MEMBERS WHO
      ARE HOSPITALIZED

      The following continuity of care requirements shall be followed for health
      plan members who are hospitalized.

      (1)   The admitting health plan shall be responsible for payment of a
            hospital stay for a member who transitions into another health plan
            or returns to the FFS system while hospitalized. Payment shall be
            the responsibility of the admitting health plan when the effective
            date of disenrollment from the admitting health plan occurs during
            the period of hospitalization. The admitting health plan shall be
            responsible for covering the hospital stay until the member is
            discharged. This applies to fully capitated health plans only. The
            hospital stay refers to the financial arrangement made between the
            admitting health plan and the hospital to cover certain inpatient
            services.

            The services related to the Inpatient stay but performed and billed
            separately from the hospital's charges, as for example, the services
            of the attending physician or a specialist, would be the
            responsibility of the new health plan or FFS system, whichever
            applies, beginning with the effective date of enrollment of the
            member into the new health plan It is important for the outgoing
            health plan and the member's new health plan to coordinate the
            inpatient related services received by the hospitalized member.

            It is equally necessary, in situations involving the discharge of a
            member who is transitioned into a new health plan while
            hospitalized, for the discharge planning to be coordinated with the
            member's new health plan This means that the admitting health plan
            and the hospital should Involve the member's new health plan in the
            planning process, especially in situations involving planned
            transfers to another inpatient facility, e.g., transfer to a
            psychiatric hospital, or transfer to a stepdown ambulatory program,
            such as a partial hospital program. Health plans should refer to
            Appendix K of the Request For Application (RFA) for current
            requirements concerning the discharge planning process for children
            who are hospitalized with significant mental health or substance
            abuse needs.

      (2)   A health plan member who was admitted to an inpatient facility under
            the FFS system, and whose effective date of enrollment in a health
            plan for the first time occurs during the period of hospitalization,
            is exempted from such enrollment until the 1st of the month
            following discharge from inpatient care.

Distribution: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List by the Department of Social Services. Health Plans are requested to
send this information to their network providers and subcontractors.

Responsible Unit: Medical Administration Policy Ray MacDonald, Medicaid Policy
Consultant, (860) 424-5134, or Martha Okafor, Lead Planning Analyst,
860-424-5229

                                                            ISSUED: JULY 9, 1997

                                        7
<PAGE>

[LOGO]                             [ILLEGIBLE]
                          DEPARTMENT OF SOCIAL SERVICES

                                                                 TELEPHONE
MICHAEL P. STARKOWSKI                                            (860) 424-5053
DEPUTY COMMISSIONER
                                                                 TDD/TTY
                                                                 1-800-842-4524

                         HEALTH CARE FINANCING DIVISION          FAX
                                                                 (860) 424-5057

                                  February 1998

                                  All Providers

/s/ Michael P. Starkowski                             Immediately
-------------------------                             -----------
Michael P. Starkowski                                 Effective Date
Deputy Commissioner

Policy Transmittal:       MS 98-01                            PB 98-29

Subject:       Clarification Regarding Notices of Action and Coordination and
               Continuation of Goods and Services

This Policy Transmittal further clarifies the requirements of Section 6.1 and
6.2 of the Health Plan Purchase of Service Contract regarding requirements for
the notice of action and notification of the grievance process to transitioning
and established health plan members previously addressed in Policy Transmittal
MS 97-05(d) and addresses questions regarding payment for goods not subject to
Section (c) of Policy Transmittal MS 97-05.

(a)   Notice of Action

      (1)   The health plan, or its subcontractor (as duly authorized by the
            health plan) shall mail an initial notice of action to the member
            regarding the results of the initial review of medical necessity,
            provided for in Section (c)(1) and (c)(2) of Policy Transmittal MS
            97-05, at least 10 calendar days before the date of any action to
            reduce, suspend, or terminate the goods or services. The health plan
            shall identify if the member is Spanish speaking only. In this case,
            the notice of action shall be in Spanish.

            The health plan is not required to allow an additional 2 days for
            mail delivery beyond the 10 days specified above.

      (2)   In addition to providing a notice of action to the member when
            ongoing goods or services are reduced, suspended, or terminated, the
            health plan must also provide a notice of action promptly whenever
            the plan denies coverage of goods or services prescribed by the
            treating physician or primary care provider.

              25 SIGOURNEY STREET-HARTFORD, CONNECTICUT 06106-5033
               AN EQUAL OPPORTUNITY / AFFIRMATIVE ACTION EMPLOYER
                     PRINTED ON RECYCLED OR RECOVERED PAPER

<PAGE>
      (3)   All notices of action shall clearly state or explain:

            (A)   what action the health plan intends to take;

            (B)   the reasons for the intended action;

            (C)   a citation to the statute, regulation, policy section, or
                  managed care contract provision which supports the intended
                  action;

            (D)   the member's right to file a grievance with the health plan
                  using the grievance process established by the health plan in
                  accordance with Section 6.1 of the Health Plan Purchase of
                  Service Contract;

            (E)   (i)   the member's right to request, in writing, a fair
                        hearing from the Department;

                  (ii)  that a written request for a fair hearing must be made
                        to the Department within 60 days from the date the
                        health plan mailed the initial notice of action to the
                        member;

                  (iii) that, at a fair hearing, the member may represent
                        himself or herself or use legal counsel, a relative, a
                        friend, or other spokesperson;

                  (iv)  that filing a grievance with the health plan does not
                        preclude the member from requesting a fair hearing from
                        the Department;

                  (v)   that filing a grievance with the health plan does not
                        automatically preserve the member's right to request a
                        fair hearing; and

            (F)   the member's right to continuation of ongoing goods or
                  services:

                  (i)   provided the reduction, suspension, or termination of
                        goods or services was not ordered by the member's
                        treating physician or primary care provider, functioning
                        within his or her respective scope of practice, as
                        defined under state law, and

                  (ii)  provided the member files a formal grievance with the
                        health plan or files a written request for a fair
                        hearing with the Department within 10 calendar days of
                        the date the notice is mailed to the member.

      (4)   In the case of a child under the care of the Department of Children
            and Families (DCF) the health plan is required to send the notice of
            action to the child's DCF social worker and a copy to the child's
            foster parent.

(b)   Exception From Advance Notice

      (1)   Notice of action may be mailed to a member no later than the date of
            action if a reduction, suspension, or termination of goods or
            services is prescribed by

<PAGE>

            the member's treating physician or primary care provider,
            functioning within his or her scope of practice, as defined under
            state law.

      (2)   In the foregoing situation, although notice of action is required,
            goods or services may be reduced, suspended, or terminated, in
            accordance with the order of the treating physician or primary care
            provider, functioning within his or her respective scope of
            practice, as defined under state law, as of the date of action.

(c)   Payment for Goods Received by Members not Subject to Policy Transmittal MS
      97-05(c)

      (1)   For goods which are not deemed ongoing goods as defined in Policy
            Transmittal MS 97-05(e), the health plan which authorizes the goods
            shall pay for the goods, even if the member has transitioned into
            another health plan or fee-for-service Medicaid by the time the
            goods are delivered.

      (2)   In situations where prior authorization has been given by the
            Department to a fee-for-service provider prior to a member
            transitioning into a health plan, and the goods are delivered after
            the member has transitioned into a health plan, the new health plan
            shall pay the provider whom the Department authorized to supply the
            goods.

(d)   Delegation of Responsibility to Issue Notice of Action

      The Connecticut Access managed care contracts permit health plans to
      delegate to subcontractors the responsibility for providing notices of
      action to members. Please note, however, that it remains the health plan's
      responsibility to ensure that all notice requirements are met.

(e)   Standardized Notice of Action

      Following issuance of this policy transmittal, it is the Department's
      intent to work with health plans to develop a standardized notice of
      action. However, plans are not relieved of their obligation to comply with
      each of the terms of this policy transmittal in the interim while this
      standard notice is being developed.

DISTRIBUTION: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List, by the Department of Social Services. Health Plans are requested
to sent this information to their network providers and subcontractors.

RESPONSIBLE UNIT: Medical Administration policy, J. Michelle Fitzpatrick, Ph.D.,
Supervisor, (860) 424-5126.

<PAGE>

                                   APPENDIX I

                           CAPITATION PAYMENT AMOUNTS

<PAGE>

                         SUMMARY DESCRIPTION OF BENEFITS

A.    COVERED SERVICES INCLUDED IN THE CAPITATION PAYMENT

1.    Hospital Inpatient Care (acute care hospitals) - Medically necessary and
      medically appropriate hospital inpatient acute care, procedures, and
      services, as authorized by the responsible physician(s) or dentist, and
      covered under Department of Social Services (DSS) policies and
      regulations.

      a.    Administratively Necessary Days (ANDs) are covered when a nursing
            home placement delay is due to unavailability of beds. However, a
            patient is required to accept the first available, medically
            appropriate bed.

      b.    Organ transplants are covered if they are of demonstrated
            therapeutic value, medically necessary and medically appropriate,
            and likely to result in the prolongation and the improvement in the
            quality of life of the applicant. The DSS Transplant Advisory
            Committee has developed, and continues to develop, medical criteria
            relating to particular organ transplant procedures. These criteria
            are available for use by health plans. The criteria are guidelines.
            However, a final decision to deny a transplant request is not to be
            rendered without considering the medical opinion of a qualified
            organ transplantation expert(s) in the community.

      c.    Mental health and substance abuse services in a general hospital
            psychiatric unit are covered--regardless of the age of the
            individual.

2.    Psychiatric (mental health/substance abuse) Facility Inpatient Care

      a.    Medically necessary psychiatric hospital care, procedures, and
            services as covered under DSS policy and regulation.

      b.    Some psychiatric hospitals may qualify as an Institution for Mental
            Diseases (IMD). An IMD is defined as a facility of more than sixteen
            (16) beds that is primarily engaged in providing diagnosis,
            treatment, or care of persons with mental diseases. Medically IMD
            necessary care is only covered for individuals under age 21 and 65
            years of age or older. IMD services for individuals aged 21 through
            64 are noncovered services (see Section C.1 of this summary
            overview).

3.    Freestanding Alcohol Treatment Center Inpatient Care

      a.    Services must be provided by a program holding a current and active
            license to operate a Private Freestanding Facility for the Care and
            Treatment of Substance Abusive or Dependent Persons.

      b.    Services under the Medicaid program shall be for alcohol
            detoxification and shall be limited to: a) the acute and evaluation
            phase of the treatment program and b) a ten (10) day period for each
            occurrence. Acute treatment and evaluation provides medical
            management of detoxification and assessment of the individual's
            total situation in an inpatient milieu for

                                        4

<PAGE>

            the purpose of formulating and implementing a plan of care in
            addition to detoxification.

      c.    Services must predominately focus on the medical and/or
            psychological management of alcohol abuse and other medical or
            psychological conditions which impact upon or are related to alcohol
            abuse. Treatment and care shall be provided under the direction of a
            physician within the scope of accepted medical practice.

4.    Chronic Disease Hospital Inpatient Care - Such medically necessary care,
      procedures, and services as covered under DSS policy and regulation.

5.    Nursing Facility (Skilled Nursing and Intermediate Care) Inpatient Care -
      Such medically necessary care is covered while the patient remains in a
      managed care coverage group. For coverage in nursing homes which are
      characterized as, institutions for mental disease' see Section CA of this
      summary overview.

6.    Intermediate Care Facility (Mentally Retarded) Inpatient Care - Such
      medically necessary care is covered while the patient remains in a managed
      care coverage group.

7.    Christian Science Sanitoria Service - Such medically necessary care is
      covered while the patient remains in a managed care coverage group.

8.    Hospital Outpatient Care (General Hospital, Psychiatric Hospital, and
      Chronic Disease Hospital) - Preventive, diagnostic, therapeutic,
      rehabilitative, or palliative medical services provided to an outpatient
      by or under the direction of a physician or dentist in a licensed
      hospital facility.

9.    Physician Services - Primary and Specialty services provided by a licensed
      physician or doctor of osteopathy and performed within the scope of
      practice of medicine or osteopathy as defined by State law.

10.   Psychologist Services - Clinical, diagnostic, and remedial services
      personally performed by a psychologist. Services include: a) counseling
      and psychotherapy to individuals who are experiencing problems of a mental
      or behavioral nature and b) measuring and testing of personality,
      aptitudes, emotions, and attitudes.

11.   Nurse-Midwifery Services - Services provided by a licensed, certified
      nurse--midwife which are related to the care, and to the management of the
      care, of essentially normal mothers and newborns (only throughout the
      maternity cycle) and well woman gynecological care, including family
      planning services.

12.   Nurse Practitioner Services - Services which are provided by a licensed
      Advanced Practice Registered Nurse (APRN) and which are within his or her
      scope of practice as defined by State law.

13.   Chiropractor Services - Manual manipulation of the spine performed by a
      licensed chiropractor within the scope of chiropractic practice.
      Noncovered services:

                                       5
<PAGE>

      a.    Prescription or administration of any medicine or drug or the
            performance of any surgery;

      b.    X-rays furnished by a chiropractor.

      c.    Manipulation of other parts of the body (e.g., shoulder, arm, knee,
            etc.) even when for subluxation of the spine; and

      d.    Lab work ordered by a chiropractor.

14.   Naturopathic Services - Services provided by a licensed naturopath which
      conform to accepted methods of diagnosis and treatment and which are
      within the scope of naturopathic practice.

15.   Podiatrist Services - Services provided by a licensed podiatrist which
      conform to accepted methods of diagnosis and treatment and which are
      within the scope of podiatric practice.

      a.    Limitations of Coverage

            i.    Orthotic and/or corrective arch supports for recipients under
                  five years of age; and

            ii.   Orthotic and/or corrective arch supports only once every two
                  (2) years.

      b.    Noncovered Services

            i.    Services of assistants at surgery;

            ii.   Simplified tests requiring minimal time or equipment and
                  employing materials nominal in cost such as Clinitest,
                  testape, Hematest, Bumintest, Dextrostix, nonphotolitric
                  hemogloblin, etc.;

            iii.  Simple foot hygiene; and

            iv.   Repairs to devices judged to be necessitated by willful or
                  malicious abuse on the part of the patient.

16.   Laboratory Services - Laboratory services: a) ordered by a duly licensed
      physician or other licensed practitioner of the healing arts; and b)
      performed in a laboratory which is certified according to the applicable
      provisions of the Clinical Laboratory Improvement Amendments of 1988
      (CLIA) and meets all applicable licensing, accreditation and certification
      requirements for the specific services and procedures it provides.

17.   Outpatient Medical Rehabilitation Services - Medically necessary and
      medically appropriate outpatient rehabilitation services provided by a
      licensed or certified practitioner. Such services include: physical
      therapy, occupational therapy, speech therapy, audiology, inhalation
      therapy, social services, psychological services, traumatic brain injury
      (T.B.I.) day treatment, neuropsychological evaluation,
      electonystagmography, and early childhood intervention services.

      a.    Limitations include:

                                        6
<PAGE>

            i.    Sheltered workshop services for individuals who are primarily
                  developmentally disabled are covered only if their need for
                  this type of program stems from an etiology readily
                  identifiable as medical or psychological in origin;

            ii.   T.B.I. treatment programs are limited to individuals who have
                  sustained injury from interaction of any external forces
                  resulting in the central nervous system (brain) dysfunctions.
                  Developmental impairment primarily contributing to brain
                  dysfunction is not included. The impairment must be readily
                  identifiable as having been sustained through injury;

            iii.  The T.B.I. program is primarily a medical rehabilitation
                  program, however, vocational, social, and educational services
                  may be covered only when these services are: a) related to the
                  individual's injury, b) are reasonable and necessary for the
                  diagnosis or treatment of the injury, and c) are a part of the
                  recipient's written individual plan of care; and

            iv.   Programs relating to the learning of basic living skills, or
                  other activities of daily living, are limited to individuals
                  who have lost or had impaired functions of daily living and
                  require retraining to maximize restoration of these skills.

      b.    Noncovered Services include:

            i.    Services which are related solely to specific employment
                  opportunities, work skills, work settings, and/or academic
                  skills and are not reasonable or necessary for the diagnosis
                  or treatment of an illness or injury;

            ii.   Speech services involving nondiagnostic, nontherapeutic,
                  routine, repetitive, and reinforced procedures or services for
                  the patient's general good and welfare; and

            iii.  Services ordinarily covered are not covered if an individual's
                  expected restoration potential would be insignificant in
                  relation to the extent and duration of rehabilitation services
                  required to achieve such potential.

18.   Vision Care - Services performed by a licensed ophthalmologist,
      optometrist, or optician which conform to accepted methods of diagnosis
      and treatment.

      Limitations of Coverage

            i.    Contact lenses are covered when such lenses provide better
                  management of a visual or ocular condition than can be
                  achieved with spectacle lenses, including, but not limited to
                  the diagnosis of Unilateral Aphakia, Keratoconus, Coeal
                  Transplant, and High Anisometropia;

            ii.   Prescription sunglasses are covered when light sensitivity
                  which will hinder driving or seriously handicap the outdoor
                  activity of a patient is evident;

            iii.  Trifocals are covered when the patient has a special need due
                  to job training program or extenuating circumstances;

            iv.   Extended wear contact lenses are covered for aphakia and for
                  members whose coordination or physical condition make daily
                  usage of contact lenses impossible;

            v.    Oversize lens are covered only when needed for physiological
                  reasons, and not for cosmetic reasons; and

                                        7

<PAGE>

      vi.   A spare pair of eyeglasses is not covered.

19.   Dental Care - Services performed by a licensed dentist or dental hygienist
which conform to accepted methods of diagnosis and treatment.

The categories of covered services are as follows:

      a.    Diagnostic Services

            i.    Home visits;

            ii.   Radiographs: a) intraoral, complete series; b) bitewing films;
                  and c) periapical films; and

            iii.  Oral examinations: a) initial oral exam; b) periodic oral
                  exam; and c) emergency oral exam.

      b.    Preventive Services

            i.    Prophylaxis;

            ii.   Fluoride treatment for children under 21;

            iii.  Space maintainers;

            iv.   Night guards; and

            v.    Pit and fissure sealants for children ages 5 through 16. Prior
                  authorization is required for children under 5 and persons
                  over 16.

      c.    Restorative Services - limited to the restoration of carious
            permanent, and primary teeth.

            i.    Fillings; and

            ii.   Crowns.

      d.    Endodontics

            i.    Root canal therapy and/or abicoectomy; and

            ii.   Apexification.

      e.    Prosthodontics - removable, complete, and partial prostheses;

      f.    Dental Surgery;

      g.    Edodontia (extractions);

      h.    Orthodontics under the Early Periodic Screening, Diagnosis and
            Treatment (EPSDT) program;

      i.    Alveolectomy (alveoplasty);

      j.    Patient Management - in connection with dental services to
            individuals with cognitive disabilities;

      k.    General Surgical Anesthesia;

      l.    Prosthodontics with use on a regular basis;

      m.    Removable, complete and partial denture prostheses only; and

      n.    Replacement of existing dentures, only once in any five (5) years.

                                        8

<PAGE>

      o.    Relining or rebasing existing dentures - Two (2) year period.

      p.    Denture labeling, for patients in long-term care facilities only.

The categories of noncovered services are as follows:

      a.    Fixed Bridges

      b.    Periodontia

      c.    Implants

      d.    Transplants

      e.    Cosmetic Dentistry

      f.    Vestibuloplasty

      g.    Unilateral Removable Appliances

      h.    Partial dentures where there are at least eight (8) posterior teeth
            in occlusion and no missing anterior teeth.

      i.    Restorative procedures to deciduous teeth nearing exfoliation.

20.   Durable Medical Equipment - equipment which: a) can stand repeated use; b)
      is primarily and customarily used to serve a medical purpose; c) is
      generally not useful to a person in the absence of an illness or injury;
      and d) excludes items that are disposable.

      Equipment covered includes: wheelchairs and accessories, walking aids,
            bathroom equipment (e.g., commode and safety equipment), hospital
            beds and accessories, inhalation therapy equipment (e.g., IPPR
            machines, suction machines, nebulizers, and related equipment),
            enteral/parenteral therapy equipment, and the repair and replacement
            of durable medical equipment (DME) and related equipment.

21.   Orthotic and Prosthetic Devices - Mechanical appliances and devices for
      the purpose of providing artificial replacement of missing parts, and/or
      prevention or correction of disorders in involving physical deformities
      and impairments.

      a.    Devices covered include: braces, corsets, collars, arch supports,
            footplates, orthopedic shoes, orthopedic prostheses, hearing aids
            (including batteries, earmolds, and cords).

      b.    Limitations: i) orthotic and/or corrective arch supports are not
            provided for recipients under five years of age; ii) Metatarsus
            Adductus Shoes are limited to a congenital metatarsus adductus
            condition and are limited to children through age four as medically
            necessary.

22.   Oxygen Therapy - oxygen, equipment, supplies, and services related to the
      delivery of oxygen.

                                       9
<PAGE>

23.   Respiratory Therapy - services include: intermittent positive pressure
      breathing, ultrasonography, aerosol, sputum induction, percussion and
      postural drainage, arterial puncture, and withdrawal of blood for
      diagnosis.

24.   Dialysis - hemodialysis and peritoneal dialysis services are covered,
      including the treatment of end stage renal disease.

25.   School-Based Clinics - services provided at a facility: a) located on the
      grounds of a public school; b) serving enrolled recipients on a scheduled
      basis or for an emergency situation; and c) licensed as an outpatient
      medical facility to provide comprehensive care.

      a.    Covered services include: health assessments; family planning
            services; diagnosis and/or treatment of illness or injuries;
            laboratory testing (performed by the School-Based Health Clinic);
            follow-up visits; EPSDT services; one-on-one health education,
            medical social work services, and nutritional counseling; and mental
            health and substance abuse services including diagnostic
            assessments, individual, group, and family therapy or counseling.

      b.    Noncovered services include: mandated school health screenings,
            simple intervention of a health problem such as nonmedical personnel
            could render, visits where the presenting health problem does not
            require a health or mental health assessment/evaluation, visits for
            the sole purpose of administering or monitoring medications,
            services which are not part of the written individual plan of care,
            and visits for mental health or substance abuse determined by the
            clinic to be beyond the scope of the clinic.

26.   Family Planning and Abortion - medically approved diagnostic procedures,
      treatment, counseling, drugs, supplies, or devices which are prescribed or
      furnished by a provider to individuals of child bearing age for the
      purpose of enabling such individuals to freely determine the number and
      spacing of their children.

      Noncovered services include: a) sterilizations for patients who are under
      age twenty-one (21), mentally incompetent, or institutionalized; and b)
      hysterectomies performed solely for the purpose of rendering an individual
      permanently incapable of reproducing.

27.   Ambulatory Surgery - Services include preoperative examinations, operating
      and recovery room services, and all required drugs and medicine.

28.   Early and Periodic Screening, Diagnostic and Treatment (EPSDT) Services
      (Health Track Services)- Comprehensive child health care services to
      recipients under twenty-one (21) years of age, including all medically
      necessary prevention, screening, diagnosis, and treatment services listed
      in Section 1905(r) of the Social Security Act.

      EPSDT Covered Services are described below:

      a.    Initial and Periodic Comprehensive Health Screenings - includes the
            following services provided at the intervals recommended in the
            Periodicity Schedule consistent with the standards of the American
            Academy of Pediatrics and Center for Disease Control:

            i.    a comprehensive health and developmental history, including
                  assessment of both physical and mental health development and
                  nutritional assessments;

            ii.   a comprehensive unclothed physical examination;

                                       10
<PAGE>

            iii.  appropriate immunizations according to age and health history,
                  unless medically contraindicated at the time;

            iv.   appropriate laboratory tests (including blood lead level
                  assessments appropriate for age and risk factors);

            v.    health education (including anticipatory guidance and risk
                  assessment);

            vi.   diagnosis and treatment of problems found during the
                  screening;

            vii.  vision screenings - an objective vision screening is indicated
                  beginning at three years of age as indicated in accordance
                  with the Periodicity Schedule;

            viii. hearing screenings - an objective hearing screening is
                  indicated beginning at four years of age according to the
                  Periodicity Schedule; and

            ix.   dental screenings are recommended in the Periodicity Schedule,
                  for example, an initial direct referral to a dentist beginning
                  at age two.

      b.    Dental Services - includes those dental services provided by or
            under the direction of a dentist, in addition to the dental
            screening, that are recommended in the Periodicity Schedule. Dental
            services also include relief of pain and infections, restoration of
            teeth, and maintenance of dental health.

      c.    Administration and Medical Interpretation of Developmental Tests -
            objective standardized tests, recognized by the Connecticut
            Birth-To-Three Council, for further diagnosis and treatment of
            problems found during a periodic comprehensive health screen or
            interperiodic encounter. Such tests include, but are not limited to,
            the Battelle, the Mullen, and the Bayley.

      d.    Case Management Services - The following services are determined to
            be necessary when a child evidences a need for such services as a
            result of a periodic comprehensive health screening or interperiodic
            encounter:

            i.    Initial case management assessment and periodic reassessment,
                  including development of the plan of services and revision as
                  necessary.

            ii.   Ongoing case management, including, at a minimum:

                  A)    assistance in implementing the plan of services, which
                        includes: facilitating referrals, providing assistance
                        in scheduling needed health or health-related services,
                        and helping to identify and link with the child's health
                        and social service providers. Particularly, the case
                        management provider shall identify the child's health
                        home or, if necessary, participate in linking the child
                        with a quality health home, and encourage continuity of
                        care;

                  B)    monitoring the delivery of and facilitating access to a
                        periodic comprehensive health screening at the intervals
                        recommended in the Periodicity Schedule, and other
                        screening, diagnosis, and treatment services. Such
                        activities also include follow-up on missed
                        appointments, and, if necessary, assistance with
                        arranging medical transportation, child care, and
                        interpreter services;

                  C)    coordinating and integrating the plan of services, as
                        necessary, through direct or collateral contacts with
                        the family and members of their team of direct service
                        providers, as appropriate;

                                       11
<PAGE>

                  D)    monitoring the quality and quantity of needed services
                        that are being provided, and evaluating outcomes and
                        assessing future needs which might support changes in
                        the plan of services, including completing a quarterly
                        progress note;

                  E)    providing health education, as needed, and in
                        coordinating with a direct service provider interpreting
                        and reinforcing the service provider's recommendations
                        for the health of the child; and

                  F)    providing client advocacy to ensure the smooth flow of
                        information between the child, the child's
                        representative, providers, and agencies, to minimize
                        conflict between service providers, and to mobilize
                        resources to obtain needed services.

      e.    Interperiodic Encounters

            i.    An encounter or visit to determine if there is a problem, or
                  to treat a problem that was not evident at the time of the
                  regularly scheduled periodic comprehensive screening but needs
                  to be addressed before the next periodic comprehensive
                  screening;

            ii.   Any screening, in addition to the screenings recommended in
                  the Periodicity Schedule, to determine the existence of
                  suspected physical, mental, or developmental conditions;

            iii.  An encounter or follow-up visit in the case of a child whose
                  physical, mental, or developmental illness or condition has
                  already been diagnosed prior to the child being Medicaid
                  eligible (e.g., a pre-existing condition), but needs to be
                  addressed before the next scheduled screening interval
                  recommended in the Periodicity Schedule, if there are
                  indications that the illness or condition may have become more
                  severe or changed sufficiently so that further examination is
                  medically necessary; and

            iv.   An encounter necessary to provide immunizations, vision,
                  and/or hearing screenings (e.g., which had been deemed
                  medically contraindicated at the time of the periodic
                  comprehensive health screening).

      f.    Personal Care Services - services for a child who has a diagnosed
            disability and is judged to be able to benefit from one (1) or more
            personal care service activities as the result of a periodic
            comprehensive health screen or interperiodic encounter performed by
            a primary care provider.

            i.    Covered personal care services include all tasks to assist a
                  child with major life activities of self-care and instrumental
                  activities as identified in the personal care services plan of
                  care:

                  A)    covered major life activities include, but are not
                        limited to, dressing, bathing, eating, and personal
                        health care maintenance; and

                  B)    covered instrumental activities include, but are not
                        limited to, cooking, cleaning, travel, and shopping.

            ii.   The following services are not covered:

                                       12
<PAGE>

                  A)    personal care services provided to an individual who
                        does not reside at home;

                  B)    personal care services provided by a family member;

                  C)    home health services which duplicate personal care
                        services (e.g., home health aide services are not
                        covered when personal care services are appropriate);

                  D)    transportation of the personal attendant to and from the
                        child's home to provide services;

                  E)    acute health care services which are covered under other
                        DSS regulations;

                  F)    personal care services when the child is eligible for or
                        receiving comparable services from another agency or
                        program; and

                  G)    personal care services for the care or assistance that
                        would routinely be given to a child in the absence of a
                        disability.

      g.    EPSDT Special Services - other medically necessary and medically
            appropriate health care, diagnostic services, treatment, or other
            measures necessary to correct or ameliorate disabilities and
            physical and mental illnesses and conditions discovered as a result
            of a periodic comprehensive health screening or interperiodic
            encounter, whether or not the good or service is included in the
            Connecticut Medicaid Program State Plan as a good or service
            available to all other Medicaid recipients. Such services include,
            but are not limited to, medically necessary and medically
            appropriate over-the-counter drugs and personal care services.

      h.    All medically necessary diagnosis and treatment services available
            to all Medicaid recipients under the Connecticut Medical Assistance
            Program.

29.   Diagnostic Services - Medical procedures (e.g., radiology, cardiology,
      EEG, and ultrasound procedures) or supplies recommended by a physician or
      other licensed practitioner of the healing arts, within the scope of
      his/her practice under State law, to enable the identification of the
      existence, nature, or extent of illness, injury, or other health
      deviation.

30.   Home Health Care - Medically necessary home health services ordered by the
      licensed practitioner and provided by a licensed home health agency on a
      part-time or intermittent basis to members who reside at home, as defined
      by Departmental policy, for the purpose of enabling the patient to remain
      at home or to provide a less costly alternative to institutional care.

31.   Mental Health/Substance Abuse Services - Medically necessary outpatient
      Mental Health and Substance Abuse services provided by a licensed
      psychiatrist (or under the supervision of a licensed psychiatrist) or
      other licensed or certified mental health practitioner. Such services must
      be provided within the scope of the practitioner's license/certification.

      a.    Covered services include:

            i.    Initial evaluation (diagnostic);

            ii.   Mental health and substance abuse treatment services:

                                       13
<PAGE>

                  A)    Individual psychotherapy;

                  B)    Group psychotherapy;

                  C)    Family therapy;

                  D)    Specialized treatment, such as methadone maintenance and
                        outpatient detoxification; and

                  E)    Partial hospitalization.

            iii.  Physical/neurological exams in connection with evaluation of
                  mental illness;

            iv.   Parent interview/group - Children's Mental Health Services;

            v.    Psychological testing - performed by licensed psychologists
                  only; and

            vi.   Neuropsychological evaluation performed by a qualified
                  neuropsychologist.

      b.    Noncovered services: Hypnosis or electroshock therapy, unless
      personally performed by a licensed practicing physician (M.D.).

32.   Medical Transportation Services

      a.    Emergency and Nonemergency Ambulance Service is covered when: Q the
            patient's condition requires medical attention during transit; or
            ii) the patient's diagnosis indicates that the patient's condition
            might deteriorate in transit to the point where medical attention
            would be needed; or iii) the patient's condition requires hand
            and/or feet restraints; or iv) the ambulance is responding to an
            emergency; or v) no alternative less expensive means of
            transportation is available. Ambulance trips to an emergency room,
            regardless of the outcome, nor ambulance trips in response to a 911
            call, cannot be subject to prior authorization.

      b.    Air Transportation - when a medical condition or time constraint
            dictates its use.

      c.    Critical Care Helicopter - when a medical condition or time
            constraint dictates its use.

      d.    Other Nonambulance Transportation [Livery, Invalid Coach, Commercial
            Carrier, Taxi, Private Transportation, Service bus ('Dial-a-Ride"
            type service), etc.] - when needed to obtain necessary medical
            services covered by Medicaid, and when it is not available from
            volunteer organizations, other agencies, personal resources, etc. To
            administer this benefit, DSS currently employs the following
            limitations on services:

            i.    requirement of prior authorization;

            ii.   requirement of the use of the nearest appropriate provider of
                  medical services when a determination has been made that
                  traveling further distances provides no medical benefit to the
                  patient; and

            iii.  requirement of the use of the least expensive appropriate
                  method of transportation, depending on the availability of the
                  service and the physical and medical circumstances of the
                  patient.

                                       14
<PAGE>

      e.    Transportation for relatives or foster parents of a Medicaid
            recipient - only under the following circumstances:

i. the person needs to be present at and during the medical service being
provided to the patient (for example, in parent/child situations); and

ii. the person needs to be trained by hospital staff to provide unpaid health
care in the home to the patient, and without this health care being provided
the patient would not be able to return home.

vii.  Children under twelve (12) years of age shall be escorted to medical
      appointments. Either the child's parent, foster parent, caretaker, legal
      guardian or the Department of Children and Families (DCF), as
      appropriate, shall be responsible for providing the escort.

viii. For children between the ages of twelve (12) to fifteen (15) years, a
      consent form signed by a parent, caretaker or guardian shall be required
      in order for a child to be transported without parental consent as
      specified by state statute (i.e., for family planning and mental health
      treatment).

ix.   For children sixteen (16) years or older, no consent form shall be
      required.

      f.    Out-of-State Transportation Services - when out-of-state- medical
            services are needed because of the following:

            i.    a medical emergency;

            ii.   the patient's health would be endangered ff. required to
                  travel to Connecticut; and

            iii.  needed medical services are not available in Connecticut.

33.   Medical Surgical Supplies - those items which are prescribed by a
      physician to meet the needs or requirements of a specific medical and/or
      surgical treatment. They are generally disposable and not reusable.

      a.    Covered services include: gauze pads, surgical dressing material,
            splints, tracheotomy tube, diabetic supplies, elastic hosiery,
            sterile gloves, incontinence supplies, thermometers, blood pressure
            kit (aneroid type including stethoscope, but limited to use in the
            home for patient's diagnosed to have complicated cardiac conditions
            and labile hypertension), enteral/parenteral feeding therapy
            supplies including solutions and manufacturing materials,

      b.    Items considered first aid supplies such as, bandages, solutions,
            vaseline, etc., are not covered services.

34.   Pharmacy Services

      a.    Covered services

      i. Drugs prescribed by a licensed authorized practitioner. The MCO may use
      a prescription drug formulary which is described in Section 3.15, Pharmacy
      Access of the contract.

                                       15

<PAGE>

 ii.  Over-The-Counter (OTC) Drugs on the State of Connecticut's OTC Formulary,
      including liquid generic antacids, birth control products, calcium
      preparations, diabetic- related products, electrolyte replacement
      products, heratinics, nutritional supplements and vitamins (prenatal,
      pediatric, high potency).

iii.  b.    Noncovered Services

i. Drugs included in the Food and Drug Administration's Drug Efficacy Study
Implementation Program;

ii.   Alcoholic liquors;

iii.  Items used for personal care and hygiene or cosmetic purposes;

iv.   Drugs solely used to promote fertility;

x.    Drugs not directly related to the patient's diagnosis, when diagnosis is
      required by the DEPARTMENT to be written on the prescription;

xi.   Any vaccines and/or biologicals which can be obtained free of charge from
      the CT. State Department of Health Services. The DEPARTMENT will notify
      pharmacists of such vaccines or biologicals;

xii.  Any drugs used in the treatment of obesity unless caused by a medical
      condition;

xiii. Controlled substances dispensed to HUSKY members which are in excess of
      the product manufacturer's recommendation for safe and effective use for
      which there is no documentation of medical justification in the pharmacy's
      file; and,

xiv.  drugs used to promote smoking cessation.

35. Emergency Services - such inpatient and outpatient services in and out of
    the health plan's service area are covered services.

36. Dental Hygienist Services - Services which are provided by a licensed
    dental hygienist and which are within his or her scope of practice as
    defined by State Law.

B. COVERED SERVICES NOT INCLUDED IN THE CAPITATION PAYMENT

1. School-Based Child Health Services - Medically necessary special education
   related diagnostic and treatment services provided to children by or on
   behalf of school districts pursuant to the Individuals with Disabilities
   Education Act (IDEA) and Connecticut General Statutes (CGS). Diagnostic
   services must be ordered by a Planning and Placement Team and treatment
   services must be prescribed in a child's Individualized Education Program
   (IEP)--and verified by a physician's signature.

2. Connecticut Birth to Three Program Services - The Connecticut Birth to
   Three Program, pursuant to the Individuals with Disabilities Education Act
   (IDEA) and Connecticut General Statutes (CGS), provides a range of early
   intervention services for eligible children from birth to three years of age
   with

                                       16

<PAGE>

      developmental delays and disabilities. Eligibility of children is
      determined by Department of Mental Retardation (DMR) staff or entities
      with which DMR contracts. Services are authorized in an Individualized
      Family Service Plan (IFSP) and verified by a physician's signature.

3.    Inpatient Department of Children and Families (DCF). Operated Psychiatric
      Facilities - The discharge planning and reinsurance provisions described
      in Section 3.18 (Special Services for children) shall apply to all new
      medically necessary and administratively necessary admissions at DCF
      operated facilities effective October 1, 1998. When a child is admitted to
      a DCF facility, the child will remain enrolled in the MCO and the MCO must
      reimburse the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admission and stays at the facility.

C. NONCOVERED SERVICES

1.    Institutions for Mental Disease (IMD) - The federal definition of an IMD
      is a hospital, nursing facility, freestanding alcohol treatment center, or
      other institution of more than sixteen (16) beds that is primarily engaged
      in providing diagnosis, treatment, or care of persons with mental
      diseases.

      a.    IMD Exclusion - Medicaid does not cover IMD services (i.e., these
            services are excluded). States, rather than the Federal Government,
            have principle responsibility for funding inpatient psychiatric
            services; therefore, State funding of IMI)s is not through the
            Medicaid program.

      b.    Exceptions - certain individuals are not part of the IMD exclusion
            (i.e., they are covered by Medicaid for services in IMDs):

            i.    inpatient psychiatric services for individuals under age 21;

            ii.   individuals 65 years of age or older who are in hospitals or
                  nursing facilities that are IMDs.

2.    Services and/or procedures considered to be of an unproven, experimental,
      or research nature or cosmetic, social, habilitative, vocational,
      recreational, or educational.

3.    Services in excess of those deemed medically necessary to treat the
      patient's condition.

4.    Services not directly related to the patient's diagnosis, symptoms, or
      medical history.

5.    Any services or items furnished for which the provider does not usually
      charge.

6.    Medical services or procedures in the treatment of obesity, including
      gastric stapling. When obesity is caused by an illness (hypothyroidism,
      Cushing's disease, hypothalamic lesions) or aggravates an illness (cardiac
      and respiratory diseases, diabetes, hypertension) services in connection
      with the treatment of obesity could be covered services.

                                       17
<PAGE>

7.    Services related to transsexual surgery or for a procedure which is
      performed as part of the process of preparing an individual for
      transsexual surgery, such as hormone therapy and electrolysis.

8.    Services for a condition that is not medical in nature.

9.    Routine physical examinations requested by third parties, such as
      employers or insurance companies.

10.   Drugs that the Food and Drug Administration (FDA) has proposed to withdraw
      from the market in a notice of opportunity for hearing.

11.   Tattooing or tattoo removal.

12.   Punch graft hair transplants.

13.   Tuboplasty and sterilization reversal.

14.   Implantation of nuclear-powered pacemaker.

15.   Nuclear powered pacemakers.

16.   Inpatient charges related to autopsy.

17.   All services or procedures of a plastic or cosmetic nature performed for
      reconstructive purposes, including but not limited to lipectomy, hair
      transplant, rhinoplasty, dermabrasion, and chernabrasion.

18.   Drugs solely used to promote fertility.

19.   Drugs used to promote smoking cessation.

20.   Services which are not within the scope of a practitioner's practice under
      state law.

                                       18

<PAGE>

                                   APPENDIX J
                          PHYSICIAN INCENTIVE PAYMENTS

<PAGE>

                                                                     Page 1 of 1

Physician Incentive Plan Disclosure Guidance

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                         PHYSICIAN INCENTIVE PLAN (PIP)
                               REGULATION GUIDANCE

OVERVIEW AND GENERAL INFORMATION

      -     Overview of Physician Incentive Regulation, revised 10/2000

      -     August 5, 1999 Memo: Survey Update

      -     Guidance on Disclosure of Physician Incentive Plan Information to
            Beneficiaries revised 10/2000

      -     Compilation of PIP Questions and Answers revised 10/2000

      -     Glossary of Terms revised 10/2000

COMPLIANCE FORMS AND INSTRUCTIONS

      -     December 22, 2000 memo: Physician Incentive Plan Regulation
            Requirements for 2001

      -     Managed Care Organization (MCO) Disclosure Compliance Package (1)
            for Medicare+Choice Applicants, revised 10/2000; and (2) Data
            Summary Form, Worksheet and Instructions for providers who contract
            with Managed Care Organizations, revised 10/2000

[LOGO] Return to Medicare Managed Care Homepage

Last Updated January 30, 2001

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            [HCFA LOGO] [DEPARTMENT OF HEALTH & HUMAN SERVICES LOGO]

http:/www.hcfa.gov/medicare/physincp/pip-info.htm


<PAGE>

Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 5

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               OVERVIEW OF THE PHYSICIAN INCENTIVE PLAN REGULATION

                     FOR MEDICARE MANAGED CARE ORGANIZATIONS

LEGAL BACKGROUND

Legislative action to regulate physician incentive plans (PIP) was first enacted
in the Omnibus Budget Reconciliation Acts (OBRA) of 1986 and 1987. In 1990,
these laws were superseded by a new OBRA. Statutory authority for this
regulation can be found in sections 1876(I)(8) of the Social Security Act (the
Act). These portions of the statute are elaborated by regulation in 42 CFR Parts
417.

Legislation at Section 1852 of the Act created a new Medicare + Choice Program.
Medicare regulations, Part 422, of June 26, 1998, with the final rule in July
2000, include requirements for PIP disclosure at sections 42 CFR 422.208/210.

1.    DISCLOSURE REQUIREMENTS

      Disclosure to the Health Care Financing Administration

      A PIP is defined as "any compensation to pay a physician or physician
      group that may directly or indirectly have the effect of reducing or
      limiting services furnished to any plan enrollee.@ The compensation
      arrangements negotiated between subcontractors of an MCO (e.g.,
      physician-hospital organizations, IPAs) and a physician or group are of
      particular importance, given that the compensation arrangements with which
      a physician is most familiar will have the greatest potential to affect
      the physician=s referral behavior. For this reason, all subcontracting
      tiers of the MCO=s arrangements are subject to the regulation and must be
      disclosed to HCFA. Documents are available on HCFA's web site for an MCO's
      use in obtaining data from subcontracting providers.

      Note that PIP rules differentiate between physician groups and
      intermediate entities.@ Examples of intermediate entities include
      individual practice associations (IPAs) that contract with one or more
      physician groups, as well as physician-hospital organizations. IPAs that
      contract only with individual physicians and not with physician groups are
      considered physician groups under this rule.

      In order to determine compliance with the law, the information requested
      includes the following for each medical group and physician providing
      health services to the MCO=s Medicare enrollees:

      whether any risk is transferred to the provider

      whether risk is transferred to the provide for referral services

      what method is used to transfer risk

      what percent of the total potential payment to the provider is at risk for
      referrals

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Physician Incentive Plan Regulation Disclosure Requirements          Page 2 of 5

      what is the number of patients included in the same risk arrangement

      if the number of patients is 25,000 or fewer, what is the type and amount
      of stop-loss insurance

      At the time of application, each organization must report physician
      incentive arrangements using the HCFA PIP Disclosure Form (OMB No.
      0938-0700). The disclosure form and instructions are available at HCFA=s
      web site. The hard copy disclosure form is required to be in the
      application.

      After approval of a Medicare contract, electronic disclosure is required
      for organizations with a Medicare managed care contract as of January 1 of
      any year. Organizations should refer to HCFA=s web site for the most
      recent information on disclosure requirements, including annual disclosure
      dates, method of electronic disclosure, instructions for aggregating and
      entering disclosure data and a PIP Questions & Answers document. The
      Questions and Answers is an extensive document that provides operational
      guidance on preparing PIP disclosures. There are also forms that the MCO
      may use to obtain information about incentive arrangements from their
      medical contractors.

      HCFA's web site is: WWW.hcfa.gov/medicare/physincp/pip-info.html

      Disclosure to Beneficiaries

      At Medicare beneficiaries= request, MCOs must provide information
      indicating whether the MCO or any of its contractors or subcontractors use
      a PIP that may affect the use of referral services, the type of incentive
      arrangement(s) used, and whether stop-loss protection is provided. If the
      MCO is required to conduct a survey, it must also provide beneficiary
      requestors with a summary of survey results. (See Guidance on Disclosure
      of Physician Incentive Regulation Information to Beneficiaries on HCFA's
      web site.)

2.    SUBSTANTIAL FINANCIAL RISK (SFR):

Determination of SFR:

The amount of referral risk can be determined by using the following formula:

Amount at risk for referral services

I Referral Risk = Maximum potential payments

The amount at risk for referral services is the difference between the maximum
potential referral payments and the minimum potential referral payments. Bonuses
unrelated to utilization (e.g., quality bonuses such as those related to member
satisfaction or open physician panels) should not be counted towards referral
payments. Maximum potential payments is defined as the maximum anticipated total
payments that the physician/group could receive. If there is no specific dollar
or percentage amount noted in the incentive arrangement, then the PIP should be
considered as potentially putting 100% of the potential payments at risk for
referral services.

The SFR threshold is set at 25% of "potential payments" for covered services,
regardless of the frequency of assessment (i.e. collection) or distribution of
payments. SFR is present when the 25% threshold is exceeded. However, if the
pool of patients that are included in the risk arrangement exceeds 25,000, the
arrangement is not considered to be at SFR because the risk is spread over so
many lives. See pooling rules below.

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Physician Incentive Plan Regulation Disclosure Requirements          Page 3 of 5

The following incentive arrangements should be considered as SFR:

            (a) Withholds greater than 25 percent of potential payments.

            (b) Withholds less than 25 percent of potential payments if the
            physician or physician group is potentially liable for amounts
            exceeding 25 percent of potential payments.

            (c) Bonuses that are greater than 33 percent of potential payments
            minus the bonus.

            (d) Withholds plus bonuses if the withholds plus bonuses equal more
            than 25 percent of potential payments. The threshold bonus
            percentage for a particular withhold percentage may be calculated
            using the formula -- Withhold %=0.75 (Bonus %)+25%.

            (e) Capitation, arrangements, if the difference between the maximum
            potential payments and the minimum potential payments is more than
            25 percent of the maximum potential payments; or the maximum and
            minimum potential payments are not clearly explained in the
            physician's or physician group's contract.

            (f) Any other incentive arrangements that have the potential to hold
            a physician or physician group liable for more than 25 percent of
            potential payments.

Requirements if SFR is determined:

            A. Stop Loss Protection

Stop-loss protection must be in place to protect physicians and/or physician
groups to whom substantial financial risk has been transferred. Either aggregate
or per patient stop-loss may be acquired. Aggregate insurance is excess loss
coverage that accumulates based on total costs of the entire population for
which they are at risk and which provides reimbursement after the expected total
cost exceeds a pre-determined level. Individual insurance is where a specific
provider excess loss accumulates based on per member per year claims.

The rule specifies that if aggregate stop loss is provided, it must cover 90% of
the cost of referral services that exceed 25% of potential payments. Physicians
and groups can be liable for only 10%. If per patient stop-loss is acquired, it
must be determined based on the physician or physician group=s patient panel
size and cover 90% of the referral costs which exceed the following per patient
limits:

<TABLE>
<CAPTION>
                     Combined
                  Institutional &
                   Professional      Institutional     Professional
   Panel Size       Deductible        Deductible        Deductible
   ----------       ----------        ----------        ----------
<S>               <C>                <C>               <C>
1-1000                $  6,000*        $ 10,000*          $ 3,000*
1,001 - 5000          $ 30,000         $ 40,000           $10,000
5,001 - 8,000         $ 40,000         $ 60,000           $15,000
8,001 - 10,000        $ 75,000         $100,000           $20,000
10,001 - 25,000       $150,000         $200,000           $25,000
> 25,000                 none              none              none
</TABLE>

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Physician Incentive Plan Regulation Disclosure Requirements          Page 4 of 5

* The asterisks in this table indicate that, in these situations, stop-loss
insurance would be impractical. Not only would the premiums be Prohibitively
expensive, but the protections for patients would likely not be adequate for
panels of fewer than 500 patients. MCOs and physician groups clearly should not
be putting physicians at financial risk for panel sizes this small. It is our
understanding that doing so is not common. For completeness, however, we do show
what the limits would be in these circumstances.

The institutional and professional stop loss limits above represent the
actuarial equivalents of the combined institutional and professional deductible.
The physician group or MCO may choose to purchase whatever type is best suited
to cover the referral risk in the incentive arrangement.

B. Pooling Criteria

To determine the Patient Panel Size in the above chart, you may pool according
to the specific criteria below. Any entity that meets all five criteria required
for the pooling of risk is allowed to pool that risk in order to determine the
amount of stop loss required by the regulation:

            (i) Pooling of patients is otherwise consistent with the relevant
            contracts governing the compensation arrangements for the physician
            or group;

            (ii) The physician or group is at risk or referral services with
            respect to each of the categories of patients being pooled;

            (iii) The terms of the compensation arrangements permit the
            physician or group to spread the risk across the categories of
            patients being pooled (i.e., payments must be held in a common risk
            pool);

            (iv) The distribution of payments to physicians from the risk pool
            is not calculated separately by patient category (either by MCO or
            by Medicaid, Medicare, or commercial); and

            (v) The terms of the risk borne by the physician or group are
            comparable for all categories of patients being pooled.

            C. Surveys

When substantial financial risk exists for providers or provider groups under
contract with an M+C organization, the organization must conduct periodic
surveys of current and former enrollees.

HCFA=s national administration of the Consumer Assessments of Health Plans Study
(CAHPS) is well established for enrollees and disenrollees. Therefore, HCFA has
determined that Medicare MCOs who are or will be included in CAHPS no longer
need to conduct independent surveys for meeting PIP requirements. HCFA will
consider such MCOs with medical groups or physicians at substantial financial
risk to be in compliance with the survey mandate. Organizations now meet the
survey disclosure requirement of the regulations by giving Medicare enrollees a
copy of the CAHPS enrollment survey results available on the Internet. Further,
these MCOs no longer need to submit survey summaries to HCFA.

      3. ENFORCEMENT

As described in 42 CFR section 417.500 and 422.208(i), HCFA may apply
intermediate sanctions or the Office of Inspector General may apply civil money
penalties if HCFA determines that a Medicare plan fails to comply with the
requirements of this rule.

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       GUIDANCE ON SURVEYS REQUIRED BY THE PHYSICIAN INCENTIVE REGULATION

The Physician Incentive Regulation requires that MCOs conduct a customer
satisfaction survey of both enrollees and disenrollees (1) if any physicians or
physician groups in the MCO's network are placed at substantial financial risk
for referral services, as defined by the regulation. If a survey is required, it
must be conducted within one year of the MCO's compliance date for disclosure.
That date is the date on or after 1/1/97 on which the MCO contract either renews
or is made effective as a new contract. As long as physicians or physician
groups are placed at substantial financial risk for referral services, surveys
must be conducted annually thereafter.

      (1) - There are two separate populations which will require both different
      survey instruments and separate sampling strategies.

The survey must include either all current Medicare/Medicaid enrollees in the
MCO and those who have disenrolled in the past twelve months, or a sample of
these same enrollees/disenrollees. It must be designed in accordance with
commonly accepted principles of survey design, implementation, and analysis. The
survey must address enrollees/disenrollees satisfaction with the quality of
services provided and their degree of access to the services. This document is
intended to provide you with some guidance regarding the selection and
administration of surveys that will satisfy the requirement.

BACKGROUND -- CUSTOMER SATISFACTION SURVEYS -- THEIR CURRENT STATE

There are numerous consumer satisfaction instruments currently in use by MCOs,
states, business coalitions, and other organizations. Industry, the government,
and consumer groups are in agreement that it would be highly desirable to
consolidate support behind one instrument that everyone could use to survey
their customers, so that the results obtained could be compared and the need for
MCOs and other entities to field separate surveys in response to different
demands could be eliminated. However, while much progress has been made towards
the achievement of that goal, it will probably not be realized for at least
another year or two Therefore, until such agreement is reached, it will be
necessary for you to choose your own survey(s). This letter is intended to
assist you in the selection process.

SELECTING A SURVEY - GETTING STARTED

When considering the selection of an instrument, it is also important to
evaluate the resources you have to actually conduct a survey. If you do not have
sufficient skilled personnel, computer capacity, and other resources needed to
conduct a mail, telephone, or in person survey and analyze and report the
results, you will have to hire an outside contractor to perform these tasks.
Consultation with some of the contact persons listed on the attached reference
guide and learning about their experiences may assist you in making a decision
about the most appropriate method of implementation.

THE "CAHPS" SURVEYS. In addition to perusing the reference guide, it is
important for you to be aware of a major national initiative already well
underway to develop a set of standardized consumer satisfaction instruments,
user manuals, and recommended report formats. This effort is sponsored by the
Agency for Health Care Policy and Research (AHCPR) through their Consumer
Assessments of Health Plans Study (CAHPS) process. CAHPS is a five year project,
funding three grantees, RAND, Research Triangle Institute and Harvard, in a
cooperative arrangement designed to produce a set of

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

      consumer satisfaction instruments that will be capable of yielding
      comparable data for the commercial, Medicare, Medicaid, chronically
      ill/disabled, and child populations. The surveys, accompanying manuals,
      and report formats will be available to the public in early spring of
      1997.

      The CAHPS instrument will satisfy the requirement for a customer
      satisfaction survey of enrollees. Unfortunately, a planned CAHPS
      disenrollment module will not be available until 1999. Until then, each
      MCO is responsible for developing its own disenrollee survey. While this
      survey does not require HCFA approval, routine HCFA monitoring will
      include validating the questions and sampling methodology before the
      findings can be marketed to enrollees.

      As of the 1997 contract year, all MEDICARE contracting MCOs whose
      contracts were in effect on or before 1/1/96 will be required to
      participate in an independent administration of the Medicare version of
      the CAHPS survey sponsored by HCFA. HCFA will not make the same
      requirement of Medicaid MCOs with respect to the use of the Medicaid
      version of CAHPS, but individual States have the authority to do so. You
      may obtain a set of the draft instruments (which are currently being field
      tested) from AHCPR by calling 1-800-358-9295. Request document number
      96R114.

      SURVEYING ENROLLEES AND DISENROLLEES

      As mentioned earlier, the regulation requires that both enrollees and
      disenrollees be surveyed. Because they are two separate populations,
      different instruments and sampling strategies must be employed. Just as
      there is no current national standard for enrollee satisfaction surveys,
      neither is there one for disenrollees, although individual MCOs have
      frequently surveyed their disenrollees. It is important to recognize that
      different questions are asked of the two groups, and that therefore, the
      same survey cannot be used for both populations. Most surveys of enrollees
      ask for ratings or reports of their recent experiences in the MCO, while
      surveys of disenrollees focus on what circumstances contributed to their
      decision to leave the MCO.

      In addition, the sampling strategies for the two populations differ.
      Enrollees are those who are still getting their care from the MCO and are
      often defined as those who have been continuously enrolled in a MCO for
      six months or longer. By contrast, disenrollees are those who have left
      the MCO and are defined by both the length of time that has elapsed since
      they left and the length of time they were enrolled in the MCO. Different
      reasons for disenrollment are associated with these factors: how soon
      disenrollees are surveyed after they have left a MCO (e.g., several weeks,
      several months, or a year or more) will affect the quality of their recall
      and influence their answers; those who spent only a brief period of time
      in the MCO before leaving ("rapid" disenrollers) often have different
      reasons for leaving than do those who were enrolled for a year or more
      before leaving. The Physician Incentive Regulation specifies that
      disenrollees must be surveyed within one year of leaving the MCO.
      Beneficiaries who were disenrolled due to loss of Medicaid eligibility or
      relocation out of the MCO's service area do not need to be surveyed.

      DISSEMINATION OF SATISFACTION RESULTS TO CONSUMERS

      The regulation says that MCOs that are required to conduct a survey must
      provide a summary of the survey results to any beneficiary who requests
      the information. Distribution of satisfaction information to consumers is
      a relatively recent development, and both experience and research on how
      best to present such information is limited. Employers and other
      purchasers, who have been in the forefront of such information efforts and
      have the most experience, only began in the last three to five years.
      Frequently, satisfaction information has been presented in a "report card"
      format and disseminated through the workplace, sent by direct mail to the
      consumer, or displayed in newspapers (Minnesota presented their results in
      the Minneapolis-Star Tribune) or magazines (Health Pages). The state of
      Massachusetts has conducted cutting-edge research to determine how best to
      present the results of comparative performance measures, including
      satisfaction surveys, to their Medicaid population, and is in the midst of
      an initiative to provide that information in a consumer friendly format.
      Again, one of the best ways to determine how to successfully present the
      results of these

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

      surveys is to consult with state, private employer, or MCO counterparts
      who have already attempted to distribute the results of satisfaction
      surveys to their customers.

      MCOs will be expected to compile, analyze and summarize survey data within
      a reasonable period of time after conducting the survey. Generally, this
      would mean summary survey results should be available to beneficiaries and
      provided to regulators within four months of conducting the survey.

      FUTURE STRATEGIES -- A FINAL NOTE

      At present, most consumer satisfaction surveys require a random sample of
      enrollees within a MCO, so that at best, MCO to MCO comparisons can be
      made. MCO participation in the administration of customer satisfaction
      surveys at the MCO level appears to meet the letter of the regulation's
      requirement for MCOs to perform satisfaction surveys when physicians or
      physician groups are placed at substantial financial risk for referrals.
      However, in order to determine whether access and quality of care are
      truly affected by differing risk arrangements, it is necessary to obtain a
      statistically valid sample of beneficiaries in those physician groups
      whose incentive arrangements put them at substantial financial risk and
      compare them to beneficiaries served by groups that are not at substantial
      financial risk. Because the current sampling strategy for most consumer
      satisfaction surveys is at the MCO level, they cannot provide this needed
      level of specificity. Thus, HCFA is considering both methods to accurately
      identify those physician groups at substantial financial risk and the
      development of sampling strategies that will permit the needed data to be
      collected so that the relevant comparisons can be made. HCFA is
      considering whether MCOs should be required, in future years, to sample at
      the physician group level in order to properly deal with the concerns this
      regulation addresses. For now, MCOs are required to sample at the market
      level, rather than sample from a nationwide or regional base of
      enrollees/disenrollees.

      In conjunction with the CAHPS survey effort, HCFA will assess each
      Medicare MCO's contract service area to determine whether sampling,
      collecting, and reporting of data should be conducted on the basis of the
      MCO's contract service area, or by Metropolitan Statistical Area (MSA).
      The MSA approach will apply in cases where an MCO's service area includes
      more than one "market area" (i.e., covers more than one major community or
      city) or covers multiple states. HCFA expects to notify Medicare MCOs as
      to whether the MSA approach is warranted by the end of 1997. Medicare MCOs
      should conduct the disenrollee survey needed for the physician incentive
      regulation according to the same method (contract service area or MSA)
      determined necessary for the purposes of the CAHPS survey. Medicaid MCOs
      are encouraged to contact their State Medicaid Agency contacts if they are
      unsure as to whether the MSA approach is needed for their conduct of the
      physician incentive enrollee and disenrollee surveys.

      [LOGO] Return to Physician Incentive Plan Information Page

      [LOGO] Return to Medicare Managed Care Homepage

Last Updated December 14, 1998
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              [HCFA LOGO] [DEPARTMENT OF HEALTH & HUMAN SERVICES]

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

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Physician Incentive Plan Regulation Disclosure Requirements

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GUIDANCE ON DISCLOSURE OF PHYSICIAN INCENTIVE PLAN INFORMATION TO MEDICARE
BENEFICIARIES

Managed Care Organizations (MCOs) are required to provide information on the
incentive arrangements affecting the MCO's physicians to any person receiving
Medicare (i.e., a "beneficiary") who requests the information. Therefore, MCOs
must make the following pieces of information available, upon request, to
current, previous, and prospective enrollees:

      1.    Whether the MCO's contracts or subcontracts include physician
            incentive plans that affect the use of referral services.

      2.    Information on the type of incentive arrangements used.

      3.    Whether stop-loss protection is provide for physicians or physician
            groups.

      4.    If the MCO is required by the regulation to conduct a customer
            satisfaction survey, a summary of the survey results.

HCFA's Regional Offices (ROs) will review Medicare MCO materials related to this
regulation as part of their usual responsibilities for pre-approving beneficiary
materials. The ROs have received initial guidance regarding the review of
materials related to this regulation and will continue to receive technical
assistance in this area from core Central Office staff assigned to the
implementation of this regulation. These efforts are being undertaken so as to
balance MCOs' desire for flexibility in the crafting of beneficiary information,
while still assuring that materials are compliant with the regulation and
consistent nationwide.

HCFA's national administration of the Consumer Assessments of Health Plans Study
(CAHPS) is well established and includes both enrollees and disenrollees.
Therefore, HCFA has determined that the Medicare MCOs who will be included in
CAHPS no longer need to conduct independent surveys for meeting PIP
requirements. HCFA will consider all such Medicare MCOs with medical groups or
physicians at substantial financial risk to be in compliance with the survey
mandate in 42 CFR 422.208/210.

Medicare MCOs can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results
available on the Internet.

The remainder of this document offers guidance on how your MCO may best provide
information required by this regulation to beneficiaries who request it.

                    ***************************************

SUGGESTED LANGUAGE FOR THE ANNUAL NOTICE AND FOR PRE-ENROLLMENT MATERIALS SUCH
AS THE MEMBER HANDBOOK: If you are considering enrolling in our plan, you are
entitled to ask if the plan has special financial arrangements with our
physicians that can affect the use of referrals and other services that you
might need. To get this information, call our Member Services Department at
(telephone number) and request information about our physician payment
arrangements. [Note to MCOs: MCOs may note in any materials that the information
required to be available for beneficiaries and provided to regulators may not
yet be collected by the MCO due to the fact that Federal guidance as to how
MCOs' should comply with the regulation was only recently received.]

SUGGESTED LANGUAGE FOR THE EVIDENCE OF COVERAGE: You are entitled to ask if we
have special financial arrangements with our physicians that can affect the use
of referrals and other services that

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<PAGE>

                                                                     Page 2 of 3

Physician Incentive Plan Regulation Disclosure Requirements

 you might need. To get this information, call our Member Services Department at
 (telephone number) and request information about our physician payment
 arrangements.

 SUGGESTED RESPONSE TO REQUEST FROM BENEFICIARY: HCFA requires us to give our
 members important information about the contractual relationships we have with
 our physicians. These contractual relationships include the way we pay
 physicians and could affect your use of referrals and other services that you
 might need. To understand these arrangements, we need to define several words.
 [Note to MCOs: You do not need to include any terms that are not used in the
 incentive plans of your physicians.]

      1.    DISCOUNTED FEE FOR SERVICE Physicians are paid a pre-determined
            amount for each service they provide. Both the physicians and the
            HMO agree on this amount each year. This amount may be different
            than the amount the physician usually receives from other payers.

      2.    CAPITATION. Physicians are paid a fixed amount of money each
            month to provide specific services to the members they see. This
            capitation payment may be divided into separate amounts for the
            services they provide directly to their patients, services provided
            by referral physicians, and for hospital and other types of
            services.

      3.    BONUS. At the beginning of each year, both physicians and the HMO
            agree on a goal for the amount of services or cost of services
            patients will use. At the end of the year, the HMO pays physicians
            an extra amount of money if patient care cost less money or patients
            used fewer services than the budgeted goal agreed to at the
            beginning of the year.

      4.    WITHHOLD. At the beginning of each year, both physicians and the HMO
            agree on a goal for the amount of services or the cost of services
            their patients will use. However, the HMO keeps a portion of this
            payment. At the end of the year, if physicians overspend or exceed
            this budgeted goal, the HMO keeps the amount of money it withheld.
            If physicians underspend or use fewer services than budgeted, the
            HMO gives the withheld amount of money back to the physicians.

      5.    STOP-LOSS INSURANCE. Special insurance for physicians that protects
            them from very large financial losses. HCFA requires physicians to
            have this insurance if more than 25 percent of their pay could be
            lost if they refer patients for more than the HMO budgeted goal.
            [Note to MCOs: MCO should note here or elsewhere in the notice
            whether or not stop-loss protection is provided to your physicians
            and physician groups if required by the regulation.]

 We have several different types of contractual an arrangements with our
 physicians. Your physician is paid according to one or more of the following
 types of arrangements. [Note to MCOs: The following are some examples of
 arrangements frequently used in the contracts or subcontracts of MCOs. You
 should provide general descriptions on a representative sample of arrangements
 used in your contracts and subcontracts. This set of descriptions can then be
 used for all beneficiaries requesting physician incentive plan information. You
 are not expected to provide specific information on the incentives faced by a
 given beneficiary's physician.]

      -     ARRANGEMENT A. We pay our physicians a salary. At the end of the
            year, physicians can get a bonus if their patients used fewer
            referral services than the budgeted goal.

      -     ARRANGEMENT B. We pay our physicians a capitation for primary care.
            We withhold separate amounts for referral and for hospital services.
            At the end of the year, physicians can get these amounts paid to
            them if their patients used fewer referral services and spent fewer
            days in the hospital than the budgeted goals.

      -     ARRANGEMENT C. We pay our physicians discounted fee-for service. We
            withhold a separate amount for referral services. At the end of the
            year, physicians can get this amount paid to them if their patients
            used fewer referral services than the budgeted goal. We also pay
            physicians a bonus if their patients spent fewer days in the
            hospital than the budgeted goal.

 [IF AN ARRANGEMENT WITH A PHYSICIAN GROUP OR PHYSICIAN IS AT SUBSTANTIAL RISK,
 INCLUDE A STATEMENT ABOUT SURVEYS]

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                                                                     Page 3 of 3

Physician Incentive Plan Regulation Disclosure Requirements

 The Health Care Financing Administration conducts an annual study of Medicare
 members called the Consumer Assessments of Health Plans Study (CAHPS) of both
 enrollees and disenrollees of (Your MCO's name). You can request information
 about the results of this survey by contacting our Member Services Department
 at (telephone number). We will send you the results of the survey as soon as we
 receive it from HCFA.

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 15, 2000

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</TABLE>

                 [HCFA LOGO]                            [DEPARTMENT OF
                                                         HEALTH & HUMAN
                                                         SERVICES LOGO]

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<PAGE>

Health Care Financing Administration                                Page 1 of 12

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                      HEALTH CARE FINANCING ADMINISTRATION

                       PHYSICIAN INCENTIVE PLAN REGULATION

                     FOR MEDICARE MANAGED CARE ORGANIZATIONS

                              QUESTIONS AND ANSWERS

                       COMPILATION OF 1996, 1997 AND 1998

                              UPDATED OCTOBER 2000

                                Table of Contents

      You may link directly to any of the following question topics or scroll
      down through the complete listing.

            -     Substantial Financial Risk

            -     Stop Loss Protection

            -     Disclosure

            -     Survey

            -     Miscellaneous

                    ****************************************

               PHYSICIAN INCENTIVE PLAN REQUIREMENTS FOR MEDICARE

     COMPILATION OF 1996 AND 1997 QUESTIONS AND ANSWERS, UPDATED AUGUST 2000

The PIP requirements apply to the M+C Organizations, Section 1876 Cost and
Closed Cost Healthplans, Social HMOs, Medicare Choices, Evercare and other
demonstrations where the PIP requirement is not waived.

SUBSTANTIAL FINANCIAL RISK

DEFINITION:

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<PAGE>

Health Care Financing Administration                                Page 2 of 12

Substantial financial risk is set at greater than 25% of potential payments for
covered services. The term "potential payments" means the maximum anticipated
total payments that the physician or physician group could receive if the use or
cost of referral services were low enough. If the cost of referrals exceeds the
25% level, the financial arrangement is considered to put the physician or group
at substantial financial risk.

For example, a doctor contracts with an MCO and that MCO holds back a certain
amount of the doctor's pay (e.g., $6 per member per month). The MCO will give
the doctor the $6 per member per month only if the cost of referral services
falls below a targeted level. Those six dollars are considered to be "at risk"
for referral services. The amount is equal to the difference between the maximum
potential referral payment and the minimum potential referral payment (but does
not include any bonus payment unrelated to referral services). The six dollars
is put into the numerator of the risk equation.

The denominator of the risk equation is equal to the maximum potential payment
that the doctor could receive which is the sum of the MCO payment for directly
provided services, referral services and administration. Therefore, if the same
doctor receives $24 per member per month for the primary care services he
provides, and is subject to the $6 withhold, the risk equation is as follows:

Risk level: 6/24 = 25% Not at substantial financial risk.

If risk is substantial (>25%), in addition to stop-loss insurance the MCO must
conduct a survey of patient satisfaction that includes information from current
enrollees and recent disenrollees.

Note: If a physician group's patient panel is more than 25,000 patients, then
that physician group and the group's physicians are not considered to be at
substantial financial risk. The group's arrangements do not trigger the need for
a beneficiary survey, and the group and the group's physicians are not required
by the regulation to have stop-loss protection. For the purpose of making this
determination, the patients of the group can be pooled across MCOs and across
Medicare, Medicaid, and commercial enrollees if specific criteria are met. See
Stop-loss Protection (SLP) Questions 6-17 below for additional clarification on
pooling issues.

QUESTIONS AND ANSWERS:

SFR QUESTION 1: For purposes of calculating substantial financial risk, are
ancillary services considered referral services?

            ANSWER: If the physician group performs the ancillary services, then
            the services are not referral services. If the physician group
            refers patients to other providers (including independent
            contractors to the group) to perform the ancillary services, then
            the services are referral services.

SFR QUESTION 2: How does the regulation affect provider groups that are licensed
in a state and are allowed to accept full risk?

            ANSWER. The regulation does not prohibit groups from accepting full
            risk for all health services. It requires appropriate parties to
            ensure that adequate stop-loss is in place and that beneficiary
            surveys be conducted when the 25 percent threshold is exceeded.

SFR QUESTION 3: If a physician is paid straight capitation (i.e., the
compensation arrangement calls for no withholds or bonuses), and that capitation
covers services that the physician does not provide, would the physician be at
substantial financial risk?

            ANSWER: Yes, this compensation arrangement would require a finding
            of substantial financial risk, because the risk is not limited. If a
            capitation arrangement places no limit on the referral risk, it
            essentially requires a finding of 100% risk (with potentially
            greater risk).

SFR QUESTION 4: Does the determination of risk apply only to Medicare covered
benefits, or if the MCO provides additional benefits at its own expense, should
these be included in the determination?

            ANSWER. All payments related to referral services furnished to
            enrolled Medicare beneficiaries are to be included in the risk
            determination, even if those services are not Medicare covered
            services.

SFR QUESTION 5: Will HCFA include quality bonuses in the denominator of the
equation for substantial financial risk?

            ANSWER. No. The regulation does not include quality bonuses as a
            factor in the substantial financial risk

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<PAGE>

Health Care Financing Administration                                Page 3 of 12

            calculation. A bonus based upon quality and/or access should not be
            counted in either the numerator (amount at risk) or the denominator
            (maximum potential payments).

SFR QUESTION 6: Would a physician be at substantial financial risk if his/her
MCO's annual payment to him/her for services and administration total $100,000
and the organization withholds 25 percent (or $25,000) to cover deficits in the
referral or inpatient hospital pool? Assume the MCO does not hold the physician
liable for referral costs that exceed the withhold.

            ANSWER: No. The physician is not at substantial financial risk
            because s/he is not at risk for more than 25 percent of payments.

SFR QUESTION 7: Please clarify how substantial financial risk is determined when
various risk arrangements are used. a. Say an MCO pays its doctors $100 per
member per month and puts $24 at risk through a withhold, then the same doctors
are part of a physician-hospital risk pool where they can get $50 if utilization
goals are met. Is the risk seen as 24/100, 50/50, 74/150, or something else?

b. Assume that an MCO pays its physicians based on a fee schedule with
risk-sharing arrangements that do not trigger SFR. Also assume that the MCO
subcontracts with a disease management company to manage cases of patients with
a certain disease. The disease management company pays the physicians in a
variety of different ways, some of which put the physicians at risk for referral
services. For purposes of SFR analysis, should each source of payment (MCO and
disease management company) be analyzed separately?

            ANSWERS:

            a. The risk is 74/150 and therefore the doctors are at substantial
            financial risk. The ratio is arrived at by adding the amount at risk
            for referral services (the sum of the withhold and hospital pool
            bonuses [24 + 50]) then dividing by the sum of the maximum potential
            payment [100 + 50].

            b. No. The payments from both the MCO and the disease management
            company must be analyzed together to arrive at a single analysis of
            SFR for these patients of the MCO.

SFR QUESTION 8: If a contractor capitates a physician group comprised of
physicians (e.g., psychiatrists) and non-physicians (e.g., other mental health
providers), would the calculation to determine substantial financial risk
assumed by the group change if the group is comprised exclusively of physicians?

            ANSWER: No. As long as physicians are part of the group and the
            contracted services include physician services, the calculation of
            the amount of risk transferred to the physicians remains the same.
            However, non-physician services can be calculated as part of the
            costs analyzed in the substantial financial risk equation.

SFR QUESTION 9: Would a physician be at substantial financial risk in the
following example? An MCO's annual payments to this physician total $100,000 and
the MCO imposes a 20 percent withhold ($20,000) for referrals. In addition, the
MCO holds the physician liable for up to $5,000 of any referral costs not
covered by the withhold. The physician's referrals total $35,000, exceeding the
withhold by $15,000; however, the MCO does not hold its physicians liable for
amounts over 25 percent of payments (or $25,000).

            ANSWER: No, the physician is not at substantial financial risk
            because the risk is limited to $25,000, which is the maximum
            liability imposed by the MCO based on written contractual
            provisions.

SFR QUESTION 10: Is a physician at substantial financial risk if his/her
payments from the MCO total $75,000, s/he does not exceed utilization targets
for referral and inpatient hospital services, but s/he is eligible for a $25,000
bonus (33 percent of $75,000).

            ANSWER: No, because this physician's bonus did not exceed the limit
            of 33 percent of potential payments, not counting the bonus itself
            (in other words, 25 percent of the potential payments if you
            included the bonus as part of the potential payments).

SFR QUESTION 11: What if an MCO has the following arrangement: A physician is
not permitted to keep any savings from the referral account. Then if referrals
cost less than $100,000, the physician must return the remainder of the referral
account to the MCO. If referral costs are more than $100,000, s/he may be liable
for up to 25 percent of the capitation for his/her own services. The contract
clearly states the following:

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Health Care Financing Administration                                Page 4 of 12

            If referrals exceed $125,000, the physician will receive no less
            than $75,000. If referrals are less than $100,000, the physician
            will receive no more than $100,000.

Question: Is this physician at substantial financial risk?

            ANSWER: No. The difference between the maximum potential payments
            ($100,000) and the minimum potential payments ($75,000) is no more
            than 25 percent of the maximum potential payments (the difference is
            $25,000). Therefore the physician is not at substantial financial
            risk.

SFR QUESTION 12: Must a plan that places its physicians at SFR disclose to HCFA
the exact percentage for which the physicians are at risk? Is it sufficient for
the MCO to simply check the box that acknowledges that SFR has been triggered,
but not specify the exact percentage over the threshold?

            ANSWER: MCOs and their subcontracting providers are expected to
            disclose a reasonable estimate of the percentage for which the
            physician, physician group, or intermediate entity in question is at
            risk for referrals. If a reasonable percentage estimate cannot be
            determined, the disclosure should specify "100%."

SFR QUESTION 13: What if the MCO has a performance history of three or five
years and can show that its physicians have not lost more than 25% of the
capitated amount?

            ANSWER: Regarding the use of past history as a means of predicting
            future behavior, such experience is no guarantee of future referral
            behavior or the future health care needs and costs of the current
            enrollees served. If historical performance shows that physicians
            have never lost more than 25% of the capitated amount, the MCO can
            modify its physician contracts to contractually limit risk to that
            historical amount (25%) and hence avoid a determination of SFR and
            the need for stop-loss insurance and surveys.

SFR QUESTION 14: Consider the following scenario: An MCO enters into a capitated
contract with a physician group for all professional services. Under the
contract the physician group has the option to provide the professional services
or subcontract with qualified specialists for such services. The physician
group's patient panel is less than 25,000. Does the MCO contract place the
physician group at substantial financial risk?

            ANSWER: Yes. The option to subcontract for specialist services means
            that the physician group is potentially at risk for services not
            directly provided by the group.

SFR QUESTION 15: If the physician group in SFR Question 16 decides to
subcontract for certain services, are the physician specialist subcontractors
subject to regulation under the PIP rule?

            ANSWER: Yes.

SFR QUESTION 16: What should be considered a referral service when determining
substantial financial risk for referrals? Should such things as pharmaceuticals
and DME be considered referral services?

            ANSWER: Any service that a physician does not provide him or
            herself, or that is not provided by another member of the
            physician's group, should be considered a referral service. Whether
            or not such referrals contribute to the financial risk borne by the
            physician will depend on whether his or her compensation
            arrangements are such that referrals for those services or supplies
            could impact upon the physician's income.

SFR QUESTION 17: When calculating SFR, should MCOs use the theoretical potential
payment, or the probable potential payment?

            ANSWER: The theoretical payment should be used, based on the terms
            of the physician's contract.

STOP LOSS PROTECTION

DEFINITION:

Organizations whose contracts or subcontracts place physicians or physician
groups at substantial financial risk must ensure that those providers have
either aggregate or per-patient stop-loss protection as appropriate for their
patient panel

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<PAGE>

Health Care Financing Administration                                Page 5 of 12

The aggregate stop-loss protection requires coverage of at least 90% of the
costs of referral services that exceed 25% of potential payments. The
per-patient stop-loss protection requires coverage of 90% of the costs of
referral services that exceed specified per-patient limits.

QUESTIONS AND ANSWERS:

SLP QUESTION 1: What does stop-loss protection mean?

            ANSWER: Stop-loss is a type of insurance coverage designed to limit
            the amount of financial loss experienced by a health care provider.
            An MCO or physician group normally buys this insurance so that, if
            the liabilities of the MCO or group exceed what is expected based on
            prior experience, the insurer will "stop" further losses by paying
            the liabilities which exceed either a total dollar (aggregate)
            amount, or a per patient amount.

SLP QUESTION 2: Is the MCO required to provide stop-loss protection to
physicians or physicians groups at substantial financial risk?

            ANSWER:

            The MCO does not itself need to provide the stop-loss protection.
            However, the MCO must assure that stop-loss is in effect and
            disclose the stop-loss type and amounts for any contractor or
            subcontractor that exceeds the 25% risk threshold and is required to
            have stop-loss protection.

SLP QUESTION 3: Does stop-loss protection apply only to referral services?

            ANSWER: Generally, stop-loss protection applies to the costs of all
            services furnished by a physician or physician group. For the
            purposes of this regulation, however, stop-loss coverage must cover
            at least 90% of the costs of referral services above the substantial
            financial risk threshold. The physician or physician group is liable
            for no more than 10% of the remaining referral costs above the
            threshold.

SLP QUESTION 4: If a MCO or physician group chooses to obtain per-patient
stop-loss protection for the purposes of this regulation, what are the
appropriate per-patient stop-loss deductibles, or attachment points, that are
required?

            ANSWER: HCFA allows the provision of either a combined deductible
            that includes inpatient and professional services or separate limits
            for professional and institutional services. Based on actuarial
            analyses and consultation with experts knowledgeable about t
            stop-loss insurance practices, these limits are indicated in the
            following table:

<TABLE>
<CAPTION>
                   Combined Institutional
                       & Professional        Institutional    Professional
   Panel Size            Deductible            Deductible      Deductible
   ----------            ----------            ----------      ----------
<S>                <C>                       <C>              <C>
1-1000                    $   6,000*            $ 10,000*       $ 3,000*
1,001 - 5000              $  30,000             $ 40,000        $10,000
5,001 - 8,000             $  40,000             $ 60,000        $15,000
8,001 - 10,000            $  75,000             $100,000        $20,000
10,001 - 25,000           $ 150,000             $200,000        $25,000
> 25,000                     none                 none            none
</TABLE>

* NOTE REGARDING SMALL PATIENT PANELS: THE ASTERISKS IN THIS TABLE INDICATE
THAT, IN THESE SITUATIONS, STOP-LOSS INSURANCE WOULD BE IMPRACTICAL. NOT ONLY
WOULD THE PREMIUMS BE PROHIBITIVELY EXPENSIVE, BUT THE PROTECTION FOR PATIENTS
WOULD LIKELY NOT BE ADEQUATE FOR PANELS OF FEWER THAN 500 PATIENTS. MCOS AND
PHYSICIAN GROUPS CLEARLY SHOULD NOT BE PUTTING PHYSICIANS AT FINANCIAL RISK FOR
PANEL SIZES THIS SMALL. IT IS OUR UNDERSTANDING THAT DOING SO IS NOT COMMON. FOR
COMPLETENESS, HOWEVER, WE DO SHOW WHAT THE LIMITS WOULD BE IN THESE
CIRCUMSTANCES.

SLP QUESTION 5: Does aggregate stop loss take panel size into account?

<PAGE>

Health Care Financing Administration                                Page 6 of 12

            ANSWER: Yes. To the extent that aggregate stop-loss limits require
            coverage of 90% of the costs of referral services that exceed 25% of
            potential payments, those limits reflect payments based on panel
            size.

SLP QUESTION 6: Under what circumstances is pooling permissible for purposes of
determining the appropriate stop loss limit?

            ANSWER: The Medicare, Medicaid and commercial enrollees of one or
            more MCOs served by a physician group may be pooled as long as
            certain criteria are met. The pooling of patients calculation may be
            applicable as following examples show. The calculation may show that
            the physician group serves more than 25,000 patients and, therefore,
            stop-loss protection is not needed. Or the calculation may show that
            the physician group serves 25,000 or fewer patients, in which case
            stop-loss is required if the incentive arrangements put the group at
            substantial financial risk. If per patient (as opposed to aggregate)
            protection is obtained, it must be for the single combined or
            separate professional and institutional limits shown above. The
            group's pooled patient panel size would determine the required level
            of stop-loss.

            Pooling of patients is allowed only if all of the following five
            criteria are met:

      -     Pooling is otherwise consistent with the relevant contracts
            governing the compensation arrangements for the physician or
            physician group.

      -     The physician or physician group is at risk for referral services
            with respect to each of the categories of patients being pooled.

      -     The terms of the compensation arrangements permit the physician or
            physician group to spread the risk across the categories of patients
            being pooled.

      -     The distribution of payments to the physicians from the risk pool is
            not calculated separately by patient category.

      -     The terms of the risk borne by the physician or physician group are
            comparable for all categories of patients being pooled.

SLP QUESTION 7: If the capitation rate or fee-for-service schedule is different
among three lines of business due to the expected differences in health care
needs and resultant costs for the Medicare, Medicaid and commercial populations,
does this mean these patients cannot be pooled?

            ANSWER: Specific criteria must be met in order to pool patients
            across product lines and/or across MCOs. See SLP Question 6 above.

SLP QUESTION 8: Stop Loss Requirements By Contracting Level -- HCFA has said
that arrangements between HMOs and PHOs are not subject to the stop-loss
arrangements because the PHO is not a physician group. Is the answer still the
same if we look at a contract between an HMO and an IPA where the IPA is not a
"physician group" because some (but not all) of its contracts are with physician
groups and not individual physicians? Our principle interest is the stop-loss
arrangement requirements.

            ANSWER: In this case, the IPA, like the PHO, is defined as an
            Intermediate Entity. The Intermediate Entity itself is not subject
            to stop-loss, however those physicians who are individually
            contracted with the IPA would need to be protected by stop-loss, if
            they are put at SFR by incentive arrangements. Stop-loss coverage is
            required for physician groups at SFR, physicians at SFR, and for
            physicians in groups that are at SFR.

SLP QUESTION 9: Pooling by Entities Other than Physician Groups -- Can a managed
care organization pool the patient lives served by some or all of its
subcontracted physicians for the purposes of determining the level of stop loss
protection necessary? If so, can an IPA, PHO, or other "intermediate entity"
under the regulation pool the patient lives served by their physicians?

            ANSWER: Any entity that meets all five criteria required for the
            pooling of risk is allowed to pool that risk in order to determine
            the amount of stop-loss required by the regulation. We would point
            out, however, that unrelated entities or physicians being pooled are
            typically covered by the same reinsurance arrangement.

SLP QUESTION 10: Consider the following example: Otherwise unaffiliated primary
care physicians are organized into pools of doctors or "PODs" and risk pool
withholds and bonuses are distributed based on the overall performance of the
POD. PCPs will be paid on a fee-for-service basis with a withhold of 20 percent.
PCPs would have no further downside financial risk beyond the 20 percent
withhold. A budget is established for each POD based on all expected medical

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expenses. If the POD's expenses are less than budgeted expenses, the withholds
are returned and any additional surpluses are distributed to the PCPs in that
POD based on a formula. The formula for distributions of withholds and bonuses
to PCPs in the POD would be based on the same methodology for all PCPs within
their respective PODs. In this example, would HCFA agree that any individual POD
meets the criteria for pooling and, therefore, the level of stop loss protection
that must be provided may be determined based on the size of the POD's patient
panel?

            ANSWER: As long as all five conditions in the regulation related to
            pooling are met (see SLP Question 6 above), then the patients in the
            POD meeting those pooling conditions can be pooled. Thus, a POD
            could be considered for pooling purposes, even if that POD is not a
            legal entity unto itself.

SLP QUESTION 11: Consider this scenario: A PHO contracts with many physician
groups. The groups get a percent of premium revenue from the PHO. Each group
shares risk separately. However, the PHO purchases stop loss for all of the
groups. The stop-loss reinsurance payments (recoveries) are credited to the
group where the patient is assigned. Can the PHO pool patients covered under all
the groups in determining the amount of stop loss to purchase?

            ANSWER: No. The stop loss amounts need to be based on each group's
            patient panel size because the groups are managing the risk within
            each group, rather than sharing it across all the groups. In this
            example, the referral risk is not commonly pooled across the groups,
            even though it is reinsured across all groups. Each group will
            retain the revenue from the percent of premium it received dependent
            upon the experience and reinsurance recoveries attributable to that
            particular group.

SLP QUESTION 12: What if separate risk pools are combined at the end of the year
for distribution purposes? If the surplus in one offsets the deficit in another,
could we say that the risk is commonly pooled?

            ANSWER: If the surplus in one pool, or part of the pool, offsets the
            deficit in another pool, or part of the same pool, then the risk
            would not be considered truly pooled according to the regulation.
            Basically, the lives can be pooled if the physician is not going to
            get separate checks based on different patient categories, or if
            there is not a separate accounting by patient category showing how
            the experience of the different patients contributed to the outcome
            of the single check.

SLP QUESTION 13: What is meant by the pooling condition that incentive
arrangements be "comparable for all categories of patients being pooled"? For
example, can patients be pooled by the group when the extent of risk borne by
the group is greater with one MCO than with another? Say the same physician
group contracts with two MCOs where both arrangements are fee-for-service with a
withhold. Based on SFR calculations, 28% of the total maximum payment from MCO A
is at risk for referrals, while 33% of the same group's maximum payment from MCO
B is at risk for referrals. Can the group pool the patients of MCOs A and B for
the purpose of determining the appropriate amount of stop-loss to acquire?

            ANSWER: Yes, the extent of risk in these two MCO contracts with the
            physician group would be considered comparable. However, HCFA
            prefers not to set a hard and fast definition of what is comparable
            given the rapid and complex development of payment arrangements
            under managed care. MCOs are expected to use their best judgment in
            determining whether arrangements are to be considered comparable.

SLP QUESTION 14: If a physician is at SFR, is stop loss protection needed to
cover all the physician's patients (including commercial enrollees), or only for
Medicare beneficiaries.

            ANSWER: Stop-loss must cover 90% of the risk the physician
            experiences for referral costs for Medicare patients that exceed the
            risk threshold. Commercial and Medicaid patients may be "pooled"
            with Medicare patients in order to determine the amount of stop-loss
            required for the latter patients without necessitating that the
            commercial patients be covered by the same level of stop-loss
            coverage. This is because the referral risk attributable to the
            Medicare patients is lessened by the fact that the physicians are
            also serving Medicaid and commercial patients under similar risk
            arrangements.

SLP QUESTION 15: If separate policies are in place for institutional and
professional stop loss coverage by the same group, do the "combined" or
"individual" stop-loss limits apply?

            ANSWER: If a group has separate policies for institutional and
            professional, then the stop loss needs to be in compliance with
            those separate limits for each part of the policy. (E.g., if patient
            panel is 1500, the group would need a $40,000 institutional
            deductible and a $10,000 professional services deductible.)

SLP QUESTION 16: Can a group that contracts with both an MCO with a Medicare
contract and another MCO without a Medicare contract pool patients from both
MCOs in order to meet stop-loss requirements?

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            ANSWER: Yes, as long as the five pooling conditions cited in the
            regulation are met. See SLP Question 6 above.

SLP QUESTION 17: For subcontractors with PIPs where substantial financial risk
exists and stop-loss coverage is required, what responsibility does the MCO have
for validating that stop-loss coverage is in place, outside of completion of the
summary charts based on information provided by the subcontractor?

            ANSWER: Since the MCO contracting with HCFA may face intermediate
            sanctions and civil money penalties for non-compliance by any
            contracting provider within its network, the MCO would be wise to
            validate information submitted to it by a subcontractor regarding
            which the MCO has any question. As part of monitoring related to
            this regulation, HCFA expects to sample for validity information
            submitted by MCOs and their subcontractors.

SLP QUESTION 18: When is an IPA required to have stop-loss coverage for itself?

            Answer: The regulation specifies that the MCO must provide proof
            that the physician or physician group has adequate stop-loss, if the
            group and/or the physicians are at SFR. The regulation further
            specifies that an IPA is a physician group only if it is composed of
            individual physicians. If an IPA contracts with one or more
            physician groups then it is an intermediate entity. The IPA is
            exempt from a stop-loss requirement if it contracts with at least
            one physician group. As a practical matter, most IPAs purchase
            stop-loss for themselves as an organization as well as for their
            physicians. The regulation only requires that the physician groups
            and the individual physicians are covered by stop-loss if at SFR.

SLP QUESTION 19: Does stop-loss that is purchased for a physician group also
cover the individual physicians if they are also at SFR.

            ANSWER: Not necessarily. The regulation specifies that both the
            physician group and individual physicians in that group must be
            covered by stop-loss, if they are both at SFR. However, it is
            possible that the policy that the group purchases covers only the
            group's financial risk.

SLP QUESTION 20: What if a multi-specialty group is not placed at SFR, but the
primary care physicians within that group are at SFR.

            ANSWER: In that case only the primary care physicians would need to
            be covered by stop-loss.

SLP QUESTION 21: If a physician group contracts with one or more other physician
groups, does the stop-loss requirement of the primary physician group apply to
the subcontracting groups?

            ANSWER: No, stop-loss requirements of one group cannot be extended
            to a subcontracting level. For example:

      -     A physician group has greater than 25,000 patients that meet pooling
            criteria and therefore has no stop-loss requirement.

      -     This group contracts with another physician group, which has 25,000
            or fewer patients and bears risk for referrals above 25%.

            In this case, the first group is exempt from stop-loss requirements;
            however, the second group must comply with stop-loss requirements
            and the MCO must comply with survey requirements.

DISCLOSURE '

DISCLOSURE QUESTION 1: If no provider is placed at risk or at risk for
referrals, or if an MCO agrees to provide stop-loss and to conduct surveys, must
the MCO still disclose the information to HCFA as required by the regulation?

            ANSWER: Yes, pursuant to the regulation, MCOs must still disclose
            the information. This information serves many purposes. It will be
            used to monitor compliance, evaluate the impact of the regulation
            and to ensure the delivery of high quality health care. In enacting
            this legislation Congress clearly intended MCOs to disclose at least
            some information about the nature of the MCO's physician incentive
            compensation arrangements and the extent to which physicians are
            being placed at substantial risk by the arrangements.

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DISCLOSURE QUESTION 2: It seems that the information disclosed pursuant to the
regulation is proprietary and should be protected under the Freedom of
Information Act (FOIA). What information is proprietary?

            ANSWER: For information submitted to HCFA, a precise determination
            of what is proprietary information cannot be made until we have
            reviewed specific FOIA requests. At that time, the FOIA office will
            request that the plan involved specify what it feels is proprietary
            and the office will then determine what is proprietary. An MCO may,
            if it so desires, designate the information as proprietary at the
            time of submission. Requests will be evaluated on a case-by-case
            basis, balancing the needs of the party to protect proprietary
            information against the public interest in disclosing information
            that will serve the goals of the regulation.

DISCLOSURE QUESTION 3: Will disclosure to beneficiaries of financial incentives
information be required at the time of their enrollment? Also, will MCOs be
allowed broad discretion to decide how the information is presented?

            ANSWER: MCOs will be required to publish in the evidence of coverage
            (EOC) notices, or such other notice as approved by the applicable
            HCFA Regional Office, that beneficiaries can request summary
            information on the MCO's physician incentive plans. These EOC
            notices are available upon enrollment. The nature of the disclosure
            to beneficiaries will be general, as opposed to providing
            physician-specific financial incentives information. Materials must
            convey information about the types of incentives used in contracts
            affecting physicians in the MCO's network. MCOs will not be required
            to disclose the details of the particular incentive arrangement for
            a specific physician. MCOs will be allowed some discretion in
            crafting language to convey the required information to
            beneficiaries. A separate document of recommended language for
            beneficiary materials is available from HCFA.

DISCLOSURE QUESTION 4: For purposes of the disclosure requirement (42CFR
422.210(b), 42 CFR 417.479(h)(3)) who does the term "beneficiaries" include?

            ANSWER: The term refers to persons receiving Medicare benefits. It
            includes potential enrollees, current enrollees, and disenrollees of
            MCOs contracting with the Medicare.

DISCLOSURE QUESTION 5: What about Pools of Doctors (PODs) (i.e., groups of
independent physicians who are aggregated into a single risk pool by an MCO or
PHO) that aren't actually private corporations like a physician group or an IPA?
Example 1: Would they need to report if the POD includes PCPs only sharing risk
for their own services? Example 2: What about if the POD includes PCPs and
specialists sharing risk for their services as a POD?

Example 3: Finally, would PODs need to report if comprised of PCPs, specialists,
hospital and ancillary services?

            ANSWER: In all three instances, some reporting would need to occur,
            but the extent of the disclosure would vary. In the first two
            examples, the MCO would simply report that the POD was not at risk
            for services it did not provide. In the third example, disclosure
            would need to detail the types of risk arrangements used (e.g.,
            capitation, withhold, bonus), the percent of total potential income
            at risk for referrals, and if that percentage exceeded 25%,
            information about stop-loss protection.

DISCLOSURE QUESTION 6: If a subcontractor refuses to provide data on individual
physician incentive arrangements, what action is the MCO expected to take? What
action will HCFA or the State take?

            ANSWER: The MCO should try with due diligence to collect the
            required data from subcontractors. Some MCOs may need to enforce the
            terms of their contracts which require subcontractor compliance with
            all Federal and State laws. MCOs not in compliance with this
            regulation may face intermediate sanctions (e.g., freezing of
            enrollment, suspension of marketing) and civil monetary penalties.
            It is HCFA's expectation that providers will recognize the steps
            that have been taken to address proprietary concerns and will submit
            the required information to the MCOs with whom they contract.

DISCLOSURE QUESTION 7: One can expect that the patient panel size of any given
provider group will likely change over the course of a contract. Should
providers or the MCO report such changes to HCFA and should stop-loss protection
be altered to reflect such changes? What about multi-year contracts?

            ANSWER: We expect PIP disclosure to be accurate on a "snap-shot"
            basis, i.e., it should accurately reflect physician incentive
            arrangements as of January 1 of each disclosure year. An average
            panel size should be projected for the year starting January 1. If
            there are phased-in incentive arrangements or other changes during
            the year, stop-loss protections should be adjusted so that the MCO
            remains in compliance with PIP rules at all times, even though HCFA
            does not request interim disclosures. Regarding multi-year
            contracts,

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            we would expect the annual disclosures for ensuing years to reflect
            significant changes, if any, in the arrangements.

DISCLOSURE QUESTION 8: How will Medicare beneficiaries learn that they can
request information from the MCO regarding PIPs, etc.? Also, who should accept
beneficiary complaints regarding this disclosure?

            ANSWER: It is the responsibility of MCOs to notify current and
            prospective enrollees of their right to certain information related
            to physician compensation arrangements. The MCO's Evidence of
            Coverage, Annual Notice to Medicare members, marketing materials,
            and/or other formal means of communication should be used to
            communicate that the following pieces of information are available
            to beneficiaries upon request: (1) if the MCO has a PIP that covers
            referral services; (2) the type of incentive arrangement; (3)
            whether stop-loss protection is provided; and (4) a summary of
            survey results, if conduct of a survey is required of the MCO.

            Should a beneficiary have a complaint regarding disclosure, the
            beneficiary should first attempt to resolve the problem through
            contact with the MCO's membership services department. If that is
            unsuccessful, the beneficiary can pursue the complaint through the
            MCO's internal grievance process. Additionally, the beneficiary can
            contact the HCFA Medicare Regional Office.

DISCLOSURE QUESTION 9: If a beneficiary wants to know the incentive arrangement
of an individual physician, is the MCO required to disclose it?

            ANSWER: The MCO is only required to provide a summary statement or
            letter outlining all of the incentive arrangements in place
            throughout the MCO. However, there is nothing in federal statute or
            regulation to prevent a MCO or individual physician from providing
            physician-specific information to a beneficiary who requests it.

DISCLOSURE QUESTION 10: The HCFA guidance package on the regulation, dated
December 27, 1996, says that marketing material must be reviewed by ROs. If an
MCO uses the exact language in HCFA's guidance paper on beneficiary disclosure,
must it still be reviewed by the RO?

            ANSWER: Yes. The RO is still responsible or ensuring that the MCO is
            providing accurate information to its enrollees. Use of the HCFA
            model language cannot address the MCO-specific incentive information
            which each RO must review, but it will expedite the RO's review of
            how that information is phrased for optimal beneficiary
            understanding.

DISCLOSURE QUESTION 11: Will disclosure need to be repeated annually, even if
there is no change?

            ANSWER: Yes, annual disclosure is required. However, if arrangements
            with providers are substantially the same as the previous disclosure
            year, new Worksheets need not be completed so long as the previous
            documents will be available to regulators and the MCO has assurances
            from its providers that the arrangements are substantially the same.

DISCLOSURE QUESTION 12: Is PIP disclosure required for applicants for
Medicare+Choice contracts?

            ANSWER: Yes, compliance with PIP is required before HCFA contracts
            with an MCO. The M+C application should include completed PIP
            disclosure forms in hard copy in the documents part. This is the
            only time that hard copy is acceptable. All contractors who have had
            a HCFA Medicare contract as of January 1 of any year must disclose
            electronically and will receive instructions from HCFA. MCOs who
            contract after January 1 will not disclose until the following year,
            but must be in compliance with PIP at all times. PIP forms,
            instructions, worksheets and any updates are in HCFA's web site at:
            www.hcfa.gov/medicare/physincp/pip-info.htm.

DISCLOSURE QUESTION 13: When an MCO makes its disclosure electronically, should
it send a hard copy of a signature page to HCFA?

            ANSWER: No, a signature page is not required.

SURVEY

SURVEY QUESTION 1: Will HCFA facilitate the survey requirement by using such
items as a standard survey questionnaire,

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detailed instructions on survey design and/or a comparative report card?

            ANSWER. Yes, HCFA issued a memo in August 1999 that stated the
            following:

            HCFA's national administration of the Consumer Assessments of Health
            Plans Study (CAHPS) is well established and will include both
            enrollees and disenrollees, starting in 2000. Therefore, HCFA has
            determined that these Medicare Managed Care Organizations (MCOs) no
            longer need to conduct independent surveys for meeting PIP
            requirements. HCFA will consider all such Medicare MCOs with
            physician groups or physicians at substantial financial risk to be
            in compliance with the survey mandate in 42 CFR 422.208(h) and 42
            CFR 417.179(g)(1).

            Organizations can now meet the survey disclosure requirement of the
            regulations by giving Medicare enrollees a copy of the CAHPS
            enrollment and disenrollment survey results when they are available
            on the Internet. Further, these MCOs will no longer need to submit
            survey summaries to HCFA.

MISCELLANEOUS

MISC. QUESTION 1: Why was Congress concerned about physician incentive plans?

            ANSWER: Congress was concerned about under-use of referral for
            medically necessary services due to physician incentive arrangements
            to control costs. The regulations implement the Federal law and
            provide protection to Medicare beneficiaries so that they have
            access to necessary and appropriate care.

MISC. QUESTION 2: How is a withhold different from capitation?

            ANSWER: Capitation means a set dollar payment per patient per unit
            of time (usually per month) that is paid to a physician or physician
            group to cover a specified set of services and administrative costs
            without regard to the actual number of services provided. The
            services covered may include the physician's own services, referral
            services, or all medical services. A withhold is the percentage of
            payments or set dollar amounts that is held back from a physician or
            physician group's capitation or fee-for-service payments. This
            amount may or may not be returned to the physician/group, depending
            on specific predetermined factors.

MISC. QUESTION 3: Do the PIP regulations apply to ancillary providers who
contract with both physicians and non-physicians? (e.g., mental health plans) If
yes, would the PIP regulations apply to all providers employed by the ancillary
provider, or just physicians?

            ANSWER: The PIP regulation applies only to physicians. If an
            ancillary provider employs 100 health professionals, for instance,
            but only 20 of them are physicians, then the PIP regulation applies
            only to those 20 physicians.

MISC. QUESTION 4: Are dentists or groups of dentists considered physicians for
purposes of the PIP regulation? What is the definition of "physician" for
purposes of the physician incentive regulation?

            ANSWER: Dentists may be considered physicians for purposes of the
            PIP regulation. The term "physician" is defined for purposes of
            Title XVIII (Medicare) at 1861(r). "Physicians" include doctors of
            medicine, doctors of osteopathy, doctors of dental surgery or dental
            medicine, doctors of podiatric medicine, doctors of optometry and
            chiropractors. For purposes of the Social Security Act, the
            definition of "physician" is limited to instances when "limited
            practice" providers actually provide services covered under the Act
            based on State authority to perform such services. For instance,
            under the Act, chiropractors are defined as "physicians" only in so
            far as they provide manual manipulation of the spine to correct a
            subluxation demonstrated by X-ray. For purposes of the PIP
            regulation, "physician" is similarly defined. In so far as "limited
            practice" providers such as dentists are providing services covered
            under an MCO's ACR (Medicare risk plans), or under an MCO's cost
            report (Medicare cost plans), the "limited practice" provider is a
            "physician" for purposes of the PIP regulation.

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Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 2

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                            PHYSICIAN INCENTIVE PLAN

                                GLOSSARY OF TERMS

Bonus means a payment a physician or entity receives beyond any salary,
fee-for-service payments, capitation or returned withhold. Bonuses and other
compensation that are not based on referral or utilization levels (such as
bonuses based solely on quality of care, patient satisfaction or physician
participation on a committee) are not considered in the calculation of
substantial financial risk.

Capitation means a set dollar payment per patient per unit of time (usually per
month) that is paid to cover a specified set of services and administrative
costs without regard to the actual number of services provided. The services
covered may include a physician's own services, referral services or all medical
services. The set dollar payment may be a percent of the premium that the
managed care organization collects for a beneficiary; the capitation received
from HCFA would be considered a premium for this purpose.

Panel size means the number of patients served by a physician or physician
group.

Physician group means a partnership, association, corporation, individual
practice association (IPA), or other group that distributes income from the
practice among members. An IPA is considered to be a physician group only if it
is composed of individual physicians and has no subcontracts with other
physician groups.

Intermediate entities are entities that contract with one or more physician
groups or other affiliations of physician groups and physicians. An IPA is
considered to be an intermediate entity if it contracts with one or more
physician groups in addition to contracting with individual physicians.

Physician incentive plan means any compensation arrangement at any contracting
level between an MCO and a physician or physician group that may directly or
indirectly have the effect of reducing or limiting services furnished to
Medicare or Medicaid enrollees in the MCO. MCOs must disclose physician
incentive plans between the MCO itself and individual physicians and groups and,
also, between groups or intermediate entities (e.g., certain IPAs,
Physician-Hospital Organizations) and individual physicians and groups.

Potential payments means the maximum payments possible to physicians or
physician groups including payments for services they furnish directly and
additional payments based on use and costs of referral services, such as
withholds, bonuses capitation, or any other compensation to the physician or
physician group. Payments based on committee participation, patient satisfaction
or other quality of care factors should not be included in the potential payment
calculations.

Referral services means any specialty, inpatient, outpatient or laboratory
services that are ordered or arranged, but not furnished directly.

Certain situations may exist that should be considered referral services for
purposes of determining if a physician/group is at substantial financial risk.
For example, an MCO may require a physician group/physician to authorize
"retroactive" referrals for emergency care received outside the MCO's network.
If the physician group/physician's payment from the MCO can be affected by the
utilization of emergency care, such as a bonus if emergence referrals are low,
then these emergency services are considered referral services and need to be
included in the calculation of substantial financial risk.

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Physician Incentive Plan Regulation Disclosure Requirements          Page 2 of 2

Also, if a physician group contracts with an individual physician or another
group to provide services that the initial group cannot provide itself, any
services referred to the contracted physician group/physician should be
considered referral services.

Substantial financial risk means an incentive arrangement that places the
physician or physician group at risk for amounts beyond the risk threshold, if
the risk is based on the use or costs of referral services. The risk threshold
is 25%.

However, if the patient panel is greater than 25,000 patients, then the
physician group is not considered to be at substantial financial risk because
the risk is spread over the large number of patients. Stop loss and beneficiary
surveys would not be required.

Withhold means a percentage of payment or set dollar amounts that are deducted
from the payment to the physician group/physician that may or may not be
returned depending on specific predetermined factors.

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 15, 2000

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                [HCFA LOGO] [DEPARTMENT OF HEALTH & HUMAN SERVICES LOGO]

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Physician Incentive Plan Survey Requirements                         Page 1 of 2

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DATE:      August 5, 1999

NOTE TO:   Medicare Contracting Managed Care Organizations Who are Subject to
           Physician Incentive Plan Disclosure Requirements

FROM:      Director, Health Plan Purchasing & Administration, CHPP
           Health Care Financing Administration

SUBJECT:   Physician Incentive Plan Survey Requirements

We are pleased to inform you of a new determination regarding your survey
requirements under the Physician Incentive Plan (PIP) regulation.

FOR '1876 COST AND CLOSED COST HEALTHPLAN, M+C ORGANIZATIONS, SOCIAL HMOS AND
MEDICARE CHOICES*: HCFA=s national administration of the Consumer Assessments of
Health Plans Study (CAHPS) is well established and will include both enrollees
and disenrollees, starting in 1999. Therefore, HCFA has determined that these
Medicare Managed Care Organizations (MCOs) no longer need to conduct independent
surveys for meeting PIP requirements. HCFA will consider all such Medicare MCOs
with medical groups or physicians at substantial financial risk to be in
compliance with the survey mandate in 42 CFR 422.208/210.

Organizations can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results
available on the Internet. HCFA anticipates that the disenrollment survey
results will be available Spring 2000. Further, these MCOs will no longer need
to submit survey summaries to HCFA.

FOR EVERCARE, PACE OR OTHER DEMONSTRATIONS*: These MCOs are required to disclose
under PIP but are not included in CAHPS. Therefore, they must conduct customer
satisfaction surveys of both enrollees and disenrollees if any physician or
physician group in an MCO=s network is placed at substantial risk for referral
services, as defined by regulation. MCOs who had a contract with HCFA on or
before January 1, 1999 will be required to submit a summary of each survey to
HCFA by March 31, 2000 and provide beneficiaries a summary upon their request.
We will provide further guidance at a later date.

If you have questions about the PIP survey requirements, you may call Sylvia
Hendel at 410-786-1126, Eric Nevins at 410-786-1162, or Frank Szeflinski at
303-844-5738.

                                      /s/

                                 Gary A. Bailey

------------------

*     For CAHPS requirements, see HCFA Operational Policy Letter 99.078,
      Reporting Requirements for Medicare Managed Care Organizations in 1999:
      HEDIS, HOS, CAHPS.

[LOGO] Return to Physician Incentive Plan Homepage

http://www.hcfa.gov/medicare/physincp/survplcy.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 1 of 5

                           MEDICARE + CHOICE APPLICANT

                PHYSICIAN INCENTIVE PLAN DISCLOSURE INSTRUCTIONS

GENERAL INSTRUCTIONS FOR SUBMISSION: Hard copy Physician Incentive Plan (PIP)
Disclosure is required only for new applicants for Medicare+Choice Contracts,
except for Private Fee For Service Plans or non-network Medicare Savings Account
Plans. Organizations that already hold a Medicare contract with HCFA must
disclose electronically PIP guidance, an extensive QS & AS, and all forms are
available at HCFA's web site:

                   www.hcfa.gov/medicare/physincp/pip-info.htm

A hard copy disclosure must be included in the completed application, as
directed within the application form. The disclosure should represent physician
incentive arrangements for providers within the Managed Care Organization's
(MCO) network at the time the application is submitted. A Medicare PIP
disclosure includes:

            The disclosure COVER SHEET - This sheet should be the first page of
            the PIP submission.

            PIP DISCLOSURE FORM - This form may be duplicated as necessary to
            capture all of the arrangements in effect amongst the applicant's
            provider contractors and subcontractors down to the level of
            physicians.

USING THE HCFA PIP PROVIDER WORKSHEET: The PIP Worksheet may be used as a guide
in determining if there is substantial financial risk in any provider
arrangement and to assist the MCO in entering data on the disclosure form. MCOs
may modify the Worksheet for their internal use as long as the necessary
information is captured that will document the data upon audit by regulators.
Generally, a separate Worksheet should be used or each type of contractual
relationship. Reproduce as many of these forms as needed. Do not submit the
Worksheets, but retain them and any other supporting information for review by
regulators.

The MCOs should analyze the data from different providers to determine whether
information from the same type of contracting entity can be aggregated for
disclosure to regulators.

MCOs need to determine if they have received all information from their
contractors down to the level of physicians, even if the providers bear no risk
or there is no substantial financial risk.

      -     An intermediate entity should report its direct contracts with
            physicians as well as arrangements with its physician groups and
            the physician groups' physicians. Even if there is no substantial
            financial risk in any contractual arrangement, the lower levels must
            be disclosed.

      -     A physician group should report arrangements with its physicians,
            even if there is no substantial financial risk between the MCO and
            the physician group.

Enter the information from the Worksheet on the appropriate lines on the
Disclosure Form after indicating the specific contractual relationship being
disclosed.

USING THE PIP DISCLOSURE FORM FOR M+C APPLICANTS: At the top of the Disclosure
Form, print the name of the MCO, give the Medicare contract number, and the
reporting year.

Nine contractual relationships are listed. Disclose one type of relationship on
each Form you complete. Submit as many Forms as you need to represent all of the
arrangements that serve the MCO's Medicare enrollees.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 2 of 5

            (1) MCO to physician group

            (2) MCO to intermediate entity

            (3) MCO to individual physician

            (4) Intermediate entity to physician group

            (5) Intermediate entity to physician

            (6) Physician group to physician group

            (7) Physician group to physician

            (8) Physician to physician

            (9) Intermediate entity to intermediate entity

Each submission from an MCO must include contractual relationships (1), (2) or
(3), but MCOs may have multiple arrangements and need all three. Then the MCO
must disclose the subcontracting arrangements to the level of the physician. All
disclosures relating to one hierarchy of contracts should be stapled together.
The hierarchies are:

SELECTION OF: (1) MCO TO PHYSICIAN GROUP REQUIRES A DISCLOSURE OF:

                  (7) Physician group to physician OR (6) Physician group to
                  physician group

                  If (6) is selected, you MUST have (7) to disclose incentives
                  to physicians

                  There can be selection of: (8) Physician to physician [this is
                  not required]

SELECTION OF: (2) MCO TO INTERMEDIATE ENTITY REQUIRES DISCLOSURE OF:

                  (4) Intermediate entity to physician group OR

                  (5) Intermediate entity to physician OR

                  (9) Intermediate entity to intermediate entity

                  The intermediate entity can have multiple contracting
                  arrangements.

                  If (4) is selected, you MUST have (7) to disclose incentives
                  to physicians

                  If (9) is selected, you MUST have (4) or (5) to disclose
                  incentives to subcontractors

                  There can be selection of: (8) Physician to physician [this is
                  not required]

SELECTION OF: (3) MCO TO INDIVIDUAL PHYSICIAN DOES NOT REQUIRE ANY SUBCONTRACT.

                  There can be selection of: (8) Physician to physician [this is
                  not required]

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 3 of 5

Single or aggregate disclosure: The Disclosure Form may reflect a single
incentive arrangement if that is a unique arrangement. However, MCOs should
aggregate information on one Form for contractual arrangements that are
substantially the same and the stop-loss requirements are the same.

            For example, if an MCO contracts with 100 physician groups under a
            very similar capitation payment that does not pass referral risk to
            the groups, the MCO should check category one on the Disclosure Form
            and disclose all 100 on one Form. If 55 physician groups do not pass
            risk to their doctors and these 55 groups have a total of 450
            physicians under this no risk compensation, then the MCO should
            check category 7 on a new Disclosure Form and disclose all 450 on
            the Form. Similarly, the MCO should disclose the physician
            group-physician incentive arrangements for the other 45 groups,
            aggregating those physicians who are placed at substantially the
            same risk and who have the same stop loss requirements, if the risk
            exceeds the SFR cutoff. Staple together all the forms that relate to
            the 100 physician groups.

Entering the information: After checking the relationship you are disclosing,
follow the directions below.

  1.  ON LINE 1.A., give the name or identifier of a single provider (e.g., the
      intermediate entity, physician group, or individual physician) or the
      providers who are aggregated for the disclosure. The provider named or
      identified is the party who receives payment under the provider contract
      to which the Disclosure Form applies. The purpose here is to allow the
      user to be able to identify the provider(s) after entering the data.

      ON LINE 1.B., give the number of aggregated providers whose arrangements
      are being disclosed. (See the discussion above.) Do not send lists of
      provider names. For example, if #1 is selected, then give the number of
      physician groups.

      LINE 1.C. asks for disclosure of Federally Qualified Health Centers and
      Rural Health Clinics (FQHC/RHCs). Please distinguish FQHC/RHCs by using a
      separate Disclosure Form to report each FQHC/RHC, however you may
      aggregate those with substantially the same incentive arrangements. If the
      MCO is owned or controlled by a consortium of FQHC/RHCs or has FQHC/RHCs
      in its network, be sure to indicate this on the cover sheet.

      LINE 1.D. applies only to physicians of physician groups (selection of #7
      contracting type) and asks for a breakout of the number of physicians who
      are members of the group and those who independently contract with the
      group. Members are typically owners, partners, or employees of the
      physician group.

      If either arrangement with providers that are intermediate entities (IE)
      is selected on the Disclosure Form (either #2 or #9), complete items 1.A -
      1.C only since stop loss requirements do not apply to intermediate
      entities (IE). However, fully complete disclosures for IE's relationships
      with provider groups and their physicians (#4 and #7) and IE with
      individual physicians (#5) because stop loss requirements apply to these
      levels.

  2.  QUESTION 2 identifies whether the incentive arrangement transfers any
      risk. A capitation payment is considered a transfer of risk for his
      question, even if the capitation is for services provided only by the
      contracting physician or physician group. [This information is found in
      the Worksheet.]

      Check "yes" or "no" as applicable. If "no" is checked, then this
      disclosure is complete. If "yes" is checked, identify the type of risk
      transfer then go to Question 3.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 4 of 5

      Risk transfer choices are: "capitation, bonus, withhold, percent of
      premium or other." Check the appropriate choice or choices; more than one
      choice should be checked if the arrangement has features of each type of
      risk-sharing.

      A choice of "Other" is provided if a combination of the four types of risk
      arrangement does not define the arrangement. For the purpose of this
      Disclosure Form, the obligation for the provider to fund deficits is
      considered as a "withhold." A bonus for low utilization of referral
      services is considered to be risk transference.

3.    QUESTION 3 identifies whether risk is transferred for referrals. [This
      information is in the Worksheet.] Check "yes" or "no" as applicable. A
      bonus for low utilization of hospital, specialist or other services is
      considered to be a risk for referral services. If "no" is checked, then
      this disclosure is complete. If "yes" is checked, go to Question 4 to
      identify the type of risk transfer.

4.    QUESTION 4 identifies the type of risk-sharing arrangement. [This
      information is found in the Worksheet.] See #2 above for instructions on
      identifying risk arrangements.

      The risk-sharing arrangement may be described briefly on the Disclosure
      Form, particularly if 'other' is selected. [This information should be
      available in the Worksheet from the contractors.]

5.    The percentage of risk ATTRIBUTABLE TO REFERRALS ONLY should be stated in
      QUESTION 5. This percentage corresponds to the "% Of Total Compensation At
      Risk For Referrals" from the Worksheet. If the percentage is equal to or
      below 25 %, the arrangement is not considered to be at substantial
      financial risk and this disclosure is complete. Percent of premium is
      treated as capitation for this calculation. If above 25 percent, proceed
      to Question 6.

6.    Information for QUESTION 6, about the number of patients, is found in the
      Worksheet. Specific criteria must be met before pooling is allowed, as
      stated in regulations. Any entity that meets all five criteria (below)
      required for the pooling of risk will be allowed to pool that risk in
      order to determine the amount of stop-loss required by the regulation. If
      the number of patients is 25,000 or fewer, then go to Question 7. If
      greater than 25,000, the disclosure is complete.

      (1) Pooling of patients is otherwise consistent with the relevant
      contracts governing the compensation arrangements for the physician or
      group (i.e., no contracts can require risk be segmented by MCO or patient
      category);

      (2) The physician or group is at risk for referral services with respect
      to each of the categories of patients being pooled;

      (3) The terms of the compensation arrangements permit the physician or
      group to spread the risk across the categories of patients being pooled
      (i.e., payments must be held in a common risk pool);

      (4) The distribution of payments to physicians from the risk pool is not
      calculated separately by patient category (either by MCO or by Medicaid,
      Medicare, or commercial); and

      (5) The terms of the risk borne by the physician or group are comparable
      for all categories of patients being pooled.

      Note that pooling and stop-loss requirements applicable to a group cannot
      be extended to a subcontracting level. For example:

            -     A physician group has greater than 25,000 patients that meet
                  pooling criteria.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm

<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 5 of 5

            -     This group contracts with another physician group, which has
                  25,000 or fewer patients and bears risk for referrals above
                  25%.

                              The first group is exempt from stop-loss
                              requirements; the second group must comply with
                              stop-loss requirements and the MCO must comply
                              with survey requirements.

            1.    For QUESTION 7, note the type and the levels or thresholds of
                  the stop-loss insurance if stop-loss coverage for the
                  physician group or physician is required.

                        Check the type of stop-loss, aggregate, individual per
                        patient, or other coverage. * If individual, give the
                        threshold (deductible) as a dollar amount. If aggregate
                        or other briefly describe the stop-loss coverage. If
                        there are arrangements that merit explanation, describe
                        the coverage (if needed, attach a sheet for additional
                        space).

                        A description should include whether the coverage is:

                        (1) Combined (professional and institutional);

                        (2) Broken down into institutional, professional and
                        other components;

                        (3) The deductible, co-insurance percentage, maximum
                        liability/pay-out by the policy;

                        (4) Whether the stop-loss coverage applies to all costs
                        or only the cost of referral services; and

                        (5) Any other key features of the coverage.

                        This information is found in the Worksheet.

                        If providers can be aggregated because of the similarity
                        of risk arrangements, the MCO should sort the providers
                        by stop loss requirements and then use a separate
                        Disclosure Form for each requirement. For example: 100
                        groups exceed the 25% risk threshold; 50 have a patient
                        pool exceeding 25,000 (under a very similar risk
                        arrangement); 25 have a patient pool of between 1,001
                        and 5,000 (under a very similar risk arrangement); and
                        another 25 of these groups have a patient pool of
                        between 8,001 and 10,000. The MCO should use three
                        Disclosure Forms to represent the groups that aggregate
                        into three stop loss requirements.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm

<PAGE>

                                   COVER SHEET

          MANAGED CARE ORGANIZATION (MCO) DISCLOSURE COMPLIANCE PACKAGE
                    UNDER THE PHYSICIAN INCENTIVE REGULATION
            SUBMITTED TO HEALTH CARE FINANCING ADMINISTRATION (HCFA)

                       FOR THE MEDICARE + CHOICE APPLICANT

NAME OF MCO _________________________________________________________________

MEDICARE CONTRACT #H ____________     PIP applies to Medicare+Choice applicants
                                      (except for PFFS and non-network MSA)

MCO IS OWNED/CONTROLLED BY A FEDERALLY QUALIFIED HEALTH CENTER OR RURAL HEALTH
CLINIC (FQHC/RHC) OR CONSORTIUM OF FQHC/RHCS OR INCLUDES FQHC/RHCS IN ITS
NETWORK:

                           YES___________; NO _______

PRINTED NAME OF MCO CONTACT PERSON __________________________________________

PHONE # ______________________

THIS REPRESENTS OUR ORGANIZATION'S DISCLOSURE COMPLIANCE PACKAGE SUBMITTED TO
HCFA OR SMA. I CERTIFY THAT THE INFORMATION MADE IN THIS DISCLOSURE IS TRUE,
COMPLETE AND CURRENT TO THE BEST OF MY KNOWLEDGE, INFORMATION AND BELIEF AND IS
MADE IN GOOD FAITH.

PRINTED NAME OF CEO _________________________________________________________

SIGNATURE OF CEO __________________________________ DATE: ___________________

NOTE: PLEASE INCLUDE THIS COVER SHEET AS THE FIRST PAGE OF THE MCO DISCLOSURE
      COMPLIANCE PACKAGE.

HCFA PIP Disclosure Form for M+C Applicants -revised 10/2000             Page 1

<PAGE>

                                                               OMB No. 0938-0700
          PHYSICIAN INCENTIVE PLAN DISCLOSURE FORM FOR M+C APPLICANTS

Managed Care Organization (MCO) Name: ______________________________________
Medicare Contract Number: H_________       Reporting year: __________

Note: Disclosure is required even if risk or substantial risk is not being
transferred or panel exceeds 25,000.

CHECK ONE - Use this Disclosure Form to disclose the incentive arrangement
between the first party (in the list below) that contracts with a second party
(underlined on list below) for services to the MCO's Medicare (or Medicaid)
enrollees. BE SURE TO DISCLOSE SUBCONTRACTING ARRANGEMENTS DOWN TO PHYSICIAN
LEVELS.

- Repeat forms as many times as needed to capture the various levels of
contractual relationships.(1)

- For simplicity, "provider" is used here to refer to the second party. See
instructions for completing this Form under "Single or aggregate disclosure" for
aggregating either the first or SECOND PARTY.(2)

- The HCFA Provider Data Worksheet can be the basis for this summary form. ALL
FORMS and instructions are available at:
www.hcfa.gov/medicare/physincp/pip-info.htm

(1) ____ MCO to physician group       (2) ____ MCO to intermediate entity

(3) ____ MCO to individual physician  (4) ____ Intermediate entity to physician
                                               group

(5) ____ Intermediate entity to       (6) ____ Physician group to physician
         physician                             group

(7) ____ Physician group to physician (8) ____ Physician to physician

(9) ____ Intermediate entity to intermediate entity

1.    PROVIDER(S) NAMED OR COUNTED SHOULD BE THE UNDERLINED PROVIDER IN THE LINE
      CHECKED ABOVE.

      A.    Name or Identifier of Provider:_____________________________

            Use the actual name or any identifier for the entity or aggregated
            entities disclosed on this chart.

      B.    Number of Providers in the category selected:_____________
            Give # of providers who are aggregated on this form; e.g., if this
            form is for physician groups, category #1, then give the # of
            physician groups; groups can be aggregated if risk arrangements are
            substantially the same and stop loss requirements are the same.

1.C.        Is provider an FQHC/RHC? Yes______; No______

            If providers are aggregated, see instructions for disclosing FQHCs.

1.D.        If #7 above is selected, give number of physicians who are:

            Members (e.g. owners, employees) of the group #_____; Contracted
            with the group # _______ These numbers must equal the number of
            physicians given in I.B.

NOTE: If either #2 or #9 is checked above, this form is complete since stop loss
requirements do not apply to intermediate entities (IE). However, be sure to
complete disclosures for the IE's relationships with provider groups and their
physicians (#4 and #7) and with individual physicians (#5) because stop loss
requirements apply to these levels.

2.    Is risk transferred to the provider? Yes_____; No_____

      Note: A bonus for low utilization of referral services is considered to be
      risk transference.

      If YES, check all the risk transfer methods with the provider and go to
      question 3.

      Capitation______; Bonus______; Withhold ______; Percent of Premium______;
      Other_______

      Note: Consider the obligation for the provider to fund deficits as a
      "withhold". Describe briefly:

HCFA PIP Disclosure Form for M+C Applicants -revised 10/2000             Page 2

<PAGE>

PIP disclosure: MCO Name_______________________________

3.   Is risk transferred for referrals? Yes _______; No ______

      Note: A bonus for low utilization of hospital, specialist or other
      services is considered to be at risk for referral services.

      If NO, this chart is finished. If YES, proceed to next question.

4.    Check all the referral risk transfer methods with the provider and go to
      question 5.

      Capitation_____; Bonus______; Withhold _____; Percent of Premium____;
      Other______

      Note: Consider the obligation for the provider to fund deficits as a
      "withhold". If needed, describe briefly:

5.    What percent of the total potential payment is at risk for referrals:
      _________%

      If above 25% proceed to question 6; if 25% or below you have completed
      this disclosure.

6.    Number of MCO patients served by the provider or the number of pooled
      patients, if patients can be pooled (see criteria for pooling in the
      instructions). Check one category:

      A __ 1-1,000; B __ 1,001-5,000; C __ 5,001-8,000; D __ 8,001-10,000;
      E __ 10,001-25,000; F __ 25,000+

      If number is 25,000 or below, answer #7. If the number exceeds 25,000, you
      have completed this disclosure.

7.    State the type and amount of stop loss insuring the physician group and/or
      physician:

      Aggregate Insurance is excess loss coverage that accumulates based on
      total costs of the entire population for which they are at risk and which
      reimburses after the expected total cost exceeds a pre-determined level.
      Individual insurance is where a specific provider excess loss accumulates
      based on per member per year claims.

      Type: Aggregate______; Individual ____; Other______[describe below if
      aggregate or other]

      If individual [based on costs per patient], enter threshold/deductible
      amount: [enter only one amount] Threshold: Professional $___________;
      Institutional $________; Combined $_____________

      Describe if needed:

      PUBLIC REPORTING BURDEN (FOR MANAGED CARE ORGANIZATIONS) "According to the
      Paperwork Reduction Act of 1995, no persons are required to respond to a
      collection of information unless it displays a valid OMB control number.
      The valid OMB control number for this information collection is 0938-0700.
      The time required to complete this information collection is estimated to
      average 100 hours per response, including the time to review instructions,
      search existing data resources, gather the data needed, and complete and
      review the information collection. If you have any comments concerning the
      accuracy of the time estimate(s) or suggestions for improving this form,
      please write to: HCFA, 7500 Security Boulevard, N2-14-26, Baltimore,
      Maryland 21244-1850 and to the Office of the Information and Regulatory
      Affairs, Office of Management and Budget, Washington, D.C. 20503."

-------------------------

            (1)For example, if #1 for the MCO to physician group is checked on
            one form, then use a separate form and check #7 to disclose the
            physician group's arrangement with its physicians.

            (2)You must correctly represent the hierarchy of contracting and
            subcontracting relationships. For example, if you select # 1, you
            should aggregate all physician groups you contract with that have
            substantially the same incentive arrangements and stop-loss
            requirements. Then, on a separate form, you should select #7 to
            enter the physician group-physician arrangements only for the
            physicians associated with those provider groups. These related
            disclosures should be stapled together.

10/2000HCFA PIP Disclosure Form -revised 10/2000                          Page 3

<PAGE>

 THE ENTITY COMPLETING THE WORKSHEET SHOULD RETAIN IT AND HAVE IT AVAILABLE FOR
 REGULATORS IN THE EVENT OF AN AUDIT.

                                  [ILLEGIBLE]

NOTE: EACH WORKSHEET SHOULD REFLECT A SINGLE INCENTIVE ARRANGEMENT OR AN
      AGGREGATE OF MULTIPLE ARRANGEMENTS THAT ARE THE SAME OR SIMILAR.

      THE WORKSHEET SHOULD BE COMPLETED FOR THE CONTRACTUAL ARRANGEMENTS THAT
      WILL BE IN EFFECT ON JANUARY 1 OF THE DISCLOSURE YEAR. ANNUAL DISCLOSURE
      IS REQUIRED EVEN IF RISK IS NOT TRANSFERRED TO PROVIDERS OR PATIENT POOL
      EXCEEDS 25,000.

                              General Information

Disclosure year:_________

 ______________________________________________________________________________
 (Print name of entity completing this Worksheet - the first entity in the line
 checked below)

 This Worksheet is being completed to describe the incentive arrangement between
 (check one below):

(1) NA Managed Care Organization (MCO) to physician group*

(2) NA MCO to intermediate entity*

(3) NA MCO to individual physician

(4) ___ Intermediate entity to physician group*

(5) ___ Intermediate entity to physician

(6) ___ Physician group to physician group*

(7) ___ Physician group to physician

(8) ___ Physician to physician

(9) ___ Intermediate entity to intermediate entity*

["NOTE: DISCLOSURE IS REQUIRED DOWN TO THE LEVEL OF ARRANGEMENTS WITH
PHYSICIANS. USE SEPARATE WORKSHEETS FOR EACH LEVEL.]

Specify parties to contract:____________________________________________________
                            (the first entity in the line checked above)

and_____________________________________________________________________________
        (the entity underlined in the line checked above)

[NOTE: IF WORKSHEET COVERS MULTIPLE CONTRACTS, NAME PARTIES ON A SEPARATE
ATTACHMENT.]

For the purposes of the regulation, the following definitions should be used:

INTERMEDIATE ENTITY -- a physician-hospital organization ("PHO"), integrated
delivery system, or individual practice association ["IPA"] that subcontracts
with physician groups or with another IPA.

PHYSICIAN CROUP -- a partnership, association, corporation, or other group that
distributes income from the practice among members, or an IPA that contracts
with individual physicians.

NOTE: IF #9 IS CHECKED ABOVE, STOP LOSS REQUIREMENTS DO NOT APPLY TO
INTERMEDIATE ENTITIES (IE). THEREFORE, SUCH ENTITIES MAY SKIP TO THE END OF THE
WORKSHEET AND COMPLETE THE SIGNATURE AND DATE INFORMATION. HOWEVER, BE SURE TO
COMPLETE DISCLOSURES FOR IE's RELATIONSHIPS WITH PROVIDER GROUPS AND THEIR
PHYSICIANS (#4 AND #7) AND WITH INDIVIDUAL PHYSICIANS (#5) BECAUSE STOP LOSS
REQUIREMENTS APPLY TO THESE LEVELS.

HCFA PIP Provider Worksheet - 10/2000                                     Page 1
<PAGE>
          [ILLEGIBLE] Physician Incentive Plan Information [ILLEGIBLE]

                                                          MEDICARE      MEDICAID

   2) Does the payment arrangement transfer risk?

                                                          YES______      _______
                                                          NO_______      _______

      If risk is transferred, what method is used:
      capitation___; bonus_____; withhold____; percent of premium___; other_____
      Fee-for-service arrangements without withholds or bonuses do not transfer
      risk.

   3) Does the physician incentive plan (e.g., capitation, % of premium,
      withholds, or bonuses) cover services not furnished by the physician or
      physician group? If YES, proceed to next question.

                                                          YES______      _______
                                                          NO_______      _______

   (Note: Bonuses or withhold arrangements based on utilization or cost factors
   are included in these compensation arrangements. Incentives based: solely on
   quality or access factors are not included.)

IF RESPONSE TO 2 OR 3 IS NO, GO TO LAST PAGE AND ENTER INFORMATION ABOUT PERSON
COMPLETING WORKSHEET.

   4) If risk is transferred for referrals, what method is used:
      capitation___; bonus_____; withhold____; percent of premium___; other_____
      Fee-for-service arrangements without withholds or bonuses do not transfer
      risk.

   Percent of premium is similar to capitation. If the payment based on % of
   premium covers referral services without any limit on the costs for referral
   services, then the entire payment or 100% is at risk for referrals. In the
   workboxes below, consider % of premium as capitation.

   5) If you answered Question 4, please fill in the percentage(s) where
   indicated and applicable. Note: If the contract does not limit the amount of
   risk for referral services to a set percentage, insert '100' as the
   percentage. Maximum compensation is defined as the maximum dollar amount
   that a physician or physician group might receive for either direct or
   referral services, or their administration. It does not include bonuses that
   are not related to referral levels.

   MAXIMUM COMPENSATION MEANS MAXIMUM POSSIBLE THEORETICAL COMPENSATION WITHOUT
   REGARD TO HISTORICAL EXPERIENCE.

   MEDICARE ARRANGEMENTS:        Maximum compensation = maximum $ amount
   that might be received.

   line 1___Withhold ___% Withhold [where percent of withhold =
                                             maximum possible withhold $$
                                             maximum compensation $$]
   line 2___Bonus    *____% Bonus [where percent of bonus =
                                             maximum   possible bonus $$
                                             maximum compensation $$]

   * Note: Do not include bonuses based on quality or access in either the
   calculation of maximum possible bonus or the maximum compensation.

   line 3___Capitation __% Capitation [when percent of capitation
                              = maximum capitation $ entity is
                                potentially liable for referral services
                                maximum compensation $$ ]

                       __% Of Total Compensation At Risk For Referrals (add
                           lines 1,2 & 3)

   THIS % IS TRANSFERRED TO QUESTION 5 ON THE PIP DISCLOSURE FORM; IF 25% OR
   LOSS. SKIP TO LAST PAGE AND COMPLETE INFORMATION ABOUT PERSON COMPLETING
   FORM.

   IF % OF TOTAL COMPENSATION AT RISK FOR REFERRALS EXCEEDS 25%, THIS IS
   SUBSTANTIAL FINANCIAL RISK AND YOU MOST PROCEED TO QUESTION 6.

HCFA PIP Provider Worksheet - 10/2000                                     Page 2

<PAGE>

Physician Group Member Panel Size: Estimated members for contract year being
disclosed.

(6)   State the total members served under the incentive arrangement(s) to which
      this Worksheet applies by patient type (e.g. Medicare, Medicaid, and
      commercial. Note: A physician group can pool to arrive at the total number
      of MCO members to which this Worksheet applies if the criteria described
      below are met. If pooling is used, attach an explanation of how it was
      done to the Worksheet.

      Total Commercial members      ___________________
      Total Medicare members        ___________________
      Total Medicaid members        ___________________
      TOTAL

IF THE TOTAL MEMBER PANEL SIZE FOR COMMERCIAL, MEDICARE AND/OR MEDICAID EXCEEDS
25.000. GO TO LAST PAGE AND ENTER INFORMATION ABOUT PERSON COMPLETING WORKSHEET.

Pooling Criteria:

(1) Pooling of patients is otherwise consistent with the relevant contracts
    governing the compensation arrangements for the physician or group (i.e., no
    contracts can require that risk be segmented by MCO or patient category);

(2) The physician or group is at risk for referral services with respect to each
    of the categories of patients being pooled;

(3) The terms of the compensation arrangements permit the physician or group to
    spread the risk across the categories of patients being pooled (i.e.,
    payments must be held in a common risk pool);

(4) The distribution of payments to physicians from the risk pool is not
    calculated separately by patient category (either by MCO or by Medicaid,
    Medicare, or commercial); and

(5) The terms of the risk borne by the physician or group are comparable for all
    categories of patients being pooled. Note that pooling and stop-loss
    requirements applicable to a group cannot be extended to a subcontracting
    level. For example:

      --A physician group has greater than 25,000 patents that meet pooling
      criteria.

      -- This group contracts with another physician group, which has 25,000 or
      fewer patients and bears risk for referrals above 25%.

      The first group is exempt from stop-loss requirements; the second group
      must comply with stop-loss requirements and the MCO must comply with
      survey requirements.

      STOP-LOSS INFORMATION: FILL TO IF % OF TOTAL COMPENSATION AT RISK FOR
      REFERRAL IS > 25%

If incentive arrangements place either a physician or physician group at
substantial financial risk, there must be aggregate or per patient stop-loss
protection.

Aggregate stop-loss protection must cover 90% of the costs of referral services
that exceed 25% of potential payments.

Individual per patient coverage may be either combined coverage or separate
coverage for institutional and professional services. Per patient stop-loss
protection must cover at least 90% of the referral costs that: exceed the
following threshold, or attachment point, amounts in the chart below:

<TABLE>
<CAPTION>
                   Combined Institutionals    Institutionals          Professional
Panel Size         Professional Deductible     Deductible               Deductible
----------------   -----------------------    -------------           ------------
<S>                <C>                        <C>                     <C>
1-1000                 $  6,000                  $ 10,000               $  3.000
1,001-5000             $ 30.000                  $ 40.000               $ 10.000
5,001 - 8.000          $ 40.000                  $ 60.000               $ 15,000
8,001 - 10.000         $ 75,000                  $100,000               $ 20,000
10,001 - 25.000        $150.000                  $200.000               $ 22,500
> 25,000                 NONE                      NONE                   NONE
</TABLE>

HCFA PIP Provider Worksheet - 10/2000                                     Page 3
<PAGE>

Name of carrier/entity(s) through which stop-loss is provided: Is this
carrier/entity:

________________________________________________   ____ stop-loss carrier
________________________________________________   ____ MCO
                                                   ___  intermediate entity
                                                   ____ physician

                                                   ____ stop-loss carrier
                                                   ____ MCO
                                                   ____ intermediate entity
                                                   ____ physician

7.) NOTE: This data is needed for ques. 7 of the PIP Disclosure Form if the
      group or physician is at substantial financial risk and the patient pool
      is 25,000 or less.

   Describe stop-loss coverage that covers the incentive arrangement(s) that is
   being reported on this Worksheet, for:

<TABLE>
<S>                                 <C>    <C>                   <C>
(A) PROFESSIONAL SERVICES:                 MEDICARE              MEDICAID
       Deductible                          ______________        _______________
       Co-insurance percent                ______________        _______________
       Maximum liability                   ______________        _______________

  DOES THIS COVER (CHECK ONE BELOW):

       Individual Physicians        YES    ______________        _______________
                                    NO     ______________        _______________
       Physician Group(s)           YES    ______________        _______________
                                    NO     ______________        _______________

  Is this slop-loss coverage:

       Individual per patient       YES    ______________        _______________
                                    NO     ______________        _______________
       Aggregate                    YES    ______________        _______________
                                    NO     ______________        _______________
</TABLE>

For professional services, describe the services or nature of costs covered
under the stop-loss, including any exclusions, variations in coverage amounts,
and whether the stop-loss coverage applies to all costs or only referral costs.
(If additional space is required for this response, attach additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

<TABLE>
<S>                                 <C>   <C>                   <C>
(B) HOSPITAL/INSTITUTIONAL SERVICES:      MEDICARE              MEDICAID
          Deductible                      ______________        _______________
          Co-insurance percent            ______________        _______________
          Maximum liability               ______________        _______________
    DOES THIS COVER (CHECK ONE BELOW):

          Individual Physicians     YES   ______________        _______________
                                    NO    ______________        _______________
          Physician Group(s)        YES   ______________        _______________
                                    NO    ______________        _______________

    Is this stop-loss coverage:

          Per patient               YES   ______________        _______________
                                    NO    ______________        _______________
          Aggregate                 YES   ______________        _______________
                                    NO    ______________        _______________
</TABLE>

HCFA PIP Provider Worksheet - 10/2000                                     Page 4
<PAGE>

For hospital/institutional services, describe the services or nature of costs
covered under the stop-loss, including any exclusions, variations in coverage
amounts, and whether the stop-loss coverage applies to all costs or only
referral costs. (If additional space is required for this response, attach
additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

(C) COMBINED (PROFESSIONAL AND INSTITUTIONAL):

<TABLE>
<S>                                <C>    <C>                   <C>
                                          MEDICARE              MEDICAID
      Deductible                          ______________        _______________
      Co-insurance percent                ______________        _______________
      Maximum liability                   ______________        _______________
DOES THIS COVER (CHECK ONE BELOW):

       Individual Physicians       YES    ______________        _______________
                                   NO     ______________        _______________
       Physician Group(s)          YES    ______________        _______________
                                   NO     ______________        _______________
Is this stop-loss coverage:

       Per patient                 YES    ______________        _______________
                                   NO     ______________        _______________
       Aggregate                   YES    ______________        _______________
                                   NO     ______________        _______________
</TABLE>

For combined forms of stop-loss, describe the services or nature of costs
covered under the stop-loss, to all costs or only referral costs. (If additional
space is required for this response, attach additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

                         DATE AND SIGNATURE INFORMATION

Printed name and title of person who completed the Worksheet:

Name of organization/employer of person listed above:___________________________

Telephone:_____________________________

I certify that the information made in this disclosure is true, complete and
current to the best of my knowledge and belief and is made in good faith.

________________________________________________________________________________
                Signature                                          Date

THE ENTITY COMPLETING THE WORKSHEET SHOULD RETAIN IT AND HAVE IT AVAILABLE FOR
REGULATORS IN THE EVENT OF AN AUDIT.

HCFA PIP Provider Worksheet - 10/2000                                     Page 5

<PAGE>
[ILLEGIBLE]

<TABLE>
<S>       <C>            <C>                 <C>               <C>         <C>
HCFA      BENEFICIARIES  PLANS & PROVIDERS       STATES        RESEARCHERS STUDENTS
-----------------------------------------------------------------------------------
MEDICARE     MEDICAID         CHIP           CUSTOMER SERVICE     FAQS      SEARCH
</TABLE>

                                           DEPARTMENT OF HEALTH & HUMAN SERVICES
                                            HEALTH CARE FINANCING ADMINISTRATION
                                           Center for Health Plans and Providers
                                                     Medicare Managed Care Group
                                               7500 Security Boulevard, C4-23-07
                                                        Baltimore, MD 21244-1850
                                                              Fax (410) 786-8933

<TABLE>
<S>         <C>
NOTE TO:    Medicare Contracting Managed Care Organizations Who are Subject to
            Physician Incentive Plan Disclosure Requirements

DATE:       December 22, 2000

FROM:       Acting Director, Medicare Managed Care Group, CHPP

SUBJECT:    Physician Incentive Plan Regulation Requirements for 2001
            Survey Requirements for 2000
</TABLE>

We are pleased to provide information on preparing your annual Physician
Incentive Plan (PIP)(1) disclosure for 2001. Most of the Medicare Managed Care
Organizations (MCOs) will be disclosing for the fifth year, so it is important
to note the changes in the 2001 disclosure.

The PIP database for 2000 includes disclosures from 299 MCOs who reported 8,092
arrangements. Using this information, we notified the MCOs who did not disclose,
whose disclosures were incomplete and those where the stop-loss did not meet
regulatory requirements. We appreciate the responses from the MCOs and trust
that compliance will be at a high level in the new disclosure year.

2001 DISCLOSURE REQUIREMENTS: Annual PIP disclosure is mandated for MCOs that
have Medicare contracts with the Health Care Financing Administration (HCFA) on
January 1, 2001. Most Medicare+Choice (M+C) organizations, demonstrations and
all Section 1876 Cost organizations are required to comply with the PIP
regulations. M+C organizations that are Private Fee For Service or Medical
Savings Account Plans and Section 1833 Health Care Prepayment Plans are not
subject to PIP.

Disclosure is required even if there are no incentive arrangements, the
arrangements carry low levels of risk, or the arrangements are the same as
previously reported to HCFA.

There are newly revised summary data forms for providers, worksheets and
instructions designed

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Requirements for 2001 Survey     Page 2 of 4
Requirements for 2000

specifically to assist your contractors in giving you information about the
incentive arrangements with subcontractors. These new forms and worksheets
are available at HCFA's web site, www.hcfa.gov/medicare/physincp/pip-info.htm.
You may elect to use them as you prepare your data for electronic disclosure to
HCFA. Be sure to maintain the documentation from your contractors so that it
will be available to regulators for verification of your data.

If arrangements with providers have not changed from the previous disclosure
year, you may request assurances from the providers that the arrangements are
substantially the same and enter the same information as last year. Again,
maintain the earlier documents and the assurances so they will be available to
regulators for verification.

MCOs must disclose the PIP arrangements that are effective January 1,2001. The
final date for submitting the completed disclosure to HCFA's contractor is APRIL
30, 2001. Medicare contractors who do not comply by this date are subject to
sanctions.

DISCLOSURE METHOD: The electronic submission is the same as last year, which
required the downloading of software and uploading of data via the Health Plan
Management System (HPMS). You will again access the HPMS through the Medicare
Data Communications Network (MDCN). Instructions for MDCN connectivity were
released in Operational Policy Letters 99.92 and 99.101. The PIP Data Entry
software will be available on the HPMS beginning January 16,2001. This site will
also include detailed instructions for entering PIP data on each screen and
submitting your disclosure electronically.

ENTERING DATA: Before you start entering data you should review the information
you receive from or about contracting and subcontracting providers who render
services to your Medicare enrollees to ensure that the information is complete
and accurate. We also suggest that you read the instructions for data entry to
become familiar with each data entry screen before you begin entering data.

An advantage of the electronic data entry is that it allows you to enter a
specific hierarchy of providers. For example, you should aggregate all medical
groups you contract with that have substantially the same incentive arrangements
and stop-loss requirements. Then you must enter the medical group-physician
arrangements only for the physicians associated with those provider groups, but
you should aggregate the physicians who have substantially the same arrangements
with the groups. The software will guide you to enter the various hierarchies of
contractual relationships within physician groups or intermediate entities.

Aggregation can save you much time in entering disclosure information. The large
number of disclosed arrangements for 1999 and 2000 included many arrangements
that could have been aggregated. We found many multiple entries by MCOs of their
direct contracts with physicians where they entered each physician separately
rather than using one entry that indicated the number of physicians who had
substantially the same arrangement.

The software is designed to inform you if an entry is incomplete and allows you
to add the additional information and edit your entries. Therefore, we urge you
to start your data entry early in 2001 so that you will have time to correct or
add data before the deadline for submission.

CHANGES IN DATA ENTRY FOR 2001: When you download and install the PIP software,
a screen will inform you of the changes. These changes are the result of
industry feedback as well as HCFA's experience with two years of electronic
disclosure. Two modifications are described below.

There is a change in the data entry related to aggregation - we now ask for the
name or 'identifier' of a provider or an aggregate of providers. This change
will allow you to name an aggregation of providers so that they can be
identified more easily. For example, if you have aggregated 12 physician groups
because they have substantially the same incentive arrangements and stop-loss
requirements, you may identify them as 'Group Red' (you can choose any
alpha/numeric identifier).

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Requirements for 2001            Page 3 of 4
[ILLEGIBLE]


You then enter "12" for the number of groups you are disclosing for that
arrangement. The advantage to this change is that if we need to contact you
about 'Group Red', you will know the group of providers to which we are
referring.

Another change is in the disclosing of stop-loss insurance amounts. You can now
enter only one amount for the individual stop-loss threshold. If the insurance
includes both professional and institutional, please select the threshold that
most closely applies to the type of risk being disclosed.

SURVEY REQUIREMENTS: The PIP Regulation requires that MCOs conduct customer
satisfaction surveys of both enrollees and disenrollees if any physician or
physician group in an MCO's network is placed at substantial risk for referral
services, as defined by regulation. Please follow the guidance below for
specific survey requirements that are dependent on an MCO's inclusion in HCFA's
national survey effort.

For [ILLEGIBLE] 876 Cost and Closed Cost Healthplans, M+C Organizations, Social
HMOs and Medicare Choices: HCFA's national administration of the Consumer
Assessments of Health Plans Study (CAHPS) is well established for enrollees and
how includes disenrollees. Therefore, HCFA has determined that these Medicare
MCOs no longer need to conduct independent surveys in order to satisfy PEP
requirements. HCFA will consider all MCOs participating in the nationally
administered CAHPS survey to be in compliance with the survey mandate in 42 CFR
422.208/210(2)

Organizations can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results,
which are available on the Internet. Further, these MCOs will no longer need to
submit survey summaries to HCFA.

QUESTIONS: If you have questions about the PIP disclosure requirements, you may
call Sylvia Hendel at 410-786-1126, Eric Nevins at 410-786-1162 or Frank
Szeflinski at 303-844-5738. Questions about technical aspects of the disclosure
should be directed to Fu Associates at 800-220-2028. Questions about the MDCN
should be directed to Don Freeburger at 410-786-4586.

Thank you for your continued cooperation in complying with the PIP requirements.

                                   Sincerely,

                                       /s/

                                 Gary A. Bailey

                                 Acting Director

                           Medicare Managed Care Group

----------
   (1) See regulations at 42 CFR 417.479 dated March 27,1996 and December
   31, 1996. Also see 42 CFR

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>



Physician Incentive Plan Regulation Requirements for 2001 Survey     Page 4 of 4
Requirements for 2000

      422.208/210 final rule dated June 29, 2000.

      [2] For CAHPS requirements, see HCFA Operational Policy Letter 99.110,
      Reporting Requirements for Medicare Managed Care Organizations in 2000:
      HEDIS, HOS, and CAHPS, dated December 22, 1999. Also see any subsequent
      reporting requirements in Operational Policy Letters for 2001.

[LOGO] Return to Physician Incentive Plan Homepage

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 28, 2000

<TABLE>
<S>       <C>            <C>                <C>                <C>            <C>
HCFA      BENEFICIARIES  PLANS & PROVIDERS       STATES        RESEARCHERS    STUDENTS
--------------------------------------------------------------------------------------
MEDICARE     MEDICAID          CHIP         CUSTOMER SERVICE       FAQs        SEARCH
</TABLE>

                       [HCFA LOGO]                       [DEPARTMENT OF HEALTH
                                                          & HUMAN SERVICES LOGO]

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 2

<TABLE>
<S>       <C>             <C>                <C>                  <C>            <C>
HCFA      BENEFICIARIES   PLANS & PROVIDERS       STATES          RESEARCHERS    STUDENTS
-----------------------------------------------------------------------------------------
MEDICARE     MEDICAID           CHIP         CUSTOMER SERVICE         FAQs         SEARCH
</TABLE>

                         MANAGED CARE ORGANIZATION (MCO)
             PHYSICIAN INCENTIVE PLAN DISCLOSURE COMPLIANCE PACKAGE

THE FOLLOWING DOCUMENTS WILL ASSIST IN COMPLETING THE DISCLOSURE REQUIREMENTS:

                PIP DISCLOSURE FOR THE MEDICARE+CHOICE APPLICANT

              NOTE: THESE DOCUMENTS ARE REVISED AS OF OCTOBER 2000

      -     Physician Incentive Plan Disclosure Form for Medicare+Choice
            Applicants Instructions - for completing the disclosure form -
            downloadable only - Word (34,000 bytes) or PDF - revised 10/2000

      -     Disclosure Form for M+C Applicants : this form is required in the
            application for a M+C contract - downloadable only - Word (17,000
            bytes) or PDF - revised 10/2000

          REPORTING PACKAGE FOR PROVIDERS OF MANAGED CARE ORGANIZATIONS

                             WHO CONTRACT WITH HCFA

              NOTE: THESE DOCUMENTS ARE REVISED AS OF OCTOBER 2000

      -     HCFA PIP Summary Data Form for Providers: this form is for a
            provider to transmit incentive information to Managed Care
            Organizations, downloadable only - Word (17,000 bytes) or PDF -
            revised 10/2000

      -     Instructions for Providers for the HCFA PIP Summary Data Form: this
            document gives instructions for completing the Summary Data Form -
            downloadable only - Word (34,000 bytes) or PDF - revised 10/2000
            provinstructions.doc - Word - 53,000 bytes, revised 10/2000

      -     Physician Incentive Plan Worksheet for Providers: this form assists
            the provider in detailing data and calculating amount of risk that
            is needed on the Summary Data Form; it is designed to crosswalk
            with the Form - downloadable only - Word (32,000 bytes) or PDF -
            revised 10/2000

      -     Instructions for the PIP Worksheet for Providers: this gives
            instructions for completing the worksheet - downloadable only - Word
            (15,000 bytes) or PDF - revised 10/2000

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 18, 2000

<TABLE>
<S>       <C>             <C>                <C>                  <C>            <C>
HCFA      BENEFICIARIES   PLANS & PROVIDERS       STATES          RESEARCHERS    STUDENTS
-----------------------------------------------------------------------------------------
MEDICARE     MEDICAID           CHIP         CUSTOMER SERVICE         FAQs         SEARCH
</TABLE>

                       [HCFA LOGO]                       [DEPARTMENT OF HEALTH
                                                          & HUMAN SERVICES LOGO]

http://www.hcfa.gov/medicare/physincp/disclose.htm
<PAGE>

                                  APPENDIX - K
                             RECATEGORIZATION CHART

<PAGE>

                                   HUSKY A & B
                 Inpatient /Eligibility Recategorization Changes

<TABLE>
<CAPTION>
Description                                         Admitting MCO         New/Continued MCO      Responsible Entity     Reinsurance
-----------                                         -------------         -----------------      ------------------     -----------
<S>                                                 <C>                   <C>                    <C>                    <C>
HUSKY A, different MCO                                   A1                       A2                     A1                 Yes
HUSKY A to FFS                                           A1                      FFS                    FFS                 N.A.
HUSKY A to HUSKY B, same MCO                             A1                       B1                     A1                  No
HUSKY A to HUSKY B, different MCO                        A1                       B2                     A1                  No
HUSKY B, different MCO                                   B1                       B2                     B1                 N.A.
HUSKY A to disenrolled due to loss of
 eligibility                                             A1                   (infinity)                 A1                  NO
(out of Program)
HUSKY B to disenrolled due to loss of
eligibility
(Out of Program)                                         B1                   (infinity)                 B1                 N.A.
HUSKY B to A (same MCO, different coverage)              B1                       A1                     A1                 Yes
HUSKY B to A (different MCO, different coverage)         B1                       A2                     A2                 Yes
A1 = HUSKY A, MCO #1
A2 = HUSKY A, MCO #2
B1 = HUSKY B, MCO #1
B2 = HUSKY B, MCO #2
(infinity) = Disenrolled due to loss of elig.
</TABLE>

<PAGE>

                                   APPENDIX J

                             RECATEGORIZATION CHART

<PAGE>

                                   APPENDIX L

                               ABORTION REPORTING

<PAGE>

HYDE AMENDMENT CRITERIA

This report shall include all abortions, which do not meet the HYDE Amendment
criteria, which are paid by the MCO during the quarter (e.g. July 1 - September
30). These reports shall be submitted bye the 15th of the month following the
end of the quarter (e.g. October 15). The reports shall be submitted in hard
copy, signed by the COO or designee, as well as electronically to LEE VOGHEL,
Division of Fiscal Analysis.

PROCEDURE_CODE is one of the following:

<TABLE>
<S>     <C>      <C>      <C>      <C>     <C>      <C>      <C>      <C>      <C>     <C>      <C>
69.01   69.51    69.93    74.91     75.0   0940Y    3131Y    59100    59105    59106   59800    59801
29810   59811    59840    59841    59850   59851    59852    59855    59856    59857   59866
</TABLE>

AND

PRIMARY DIAGNOSIS in not one of the following:
'632    634*     636*     637*     638*

OR

PROCEDURE_CODE is one of the following:

<TABLE>
<S>     <C>      <C>      <C>      <C>     <C>    <C>     <C>      <C>      <C>
00940   03140    03150    59200    59812   59820   59821  59830    S0190    S0191
S0199   69.02    69.52    69.59     72.7   72.71  '72.79  96.49
</TABLE>

AND

PRIMARY DIAGNOSIS is between 635 And 635.99.

<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                          DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   2

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001 - 6/30/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendment 1 is
hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1 IS FURTHER AMENDED TO
      EXTEND THE CONTRACT END DATE FOR A PERIOD OF NINE (9) MONTHS THROUGH JUNE
      30, 2003.

2.    APPENDIX I WHICH SETS FORTH THE CAPITATION RATES TO BE PAID BY THE
      DEPARTMENT IN FULL CONSIDERATION OF THE CONTRACT SERVICES RENDERED BY THE
      MCO IS REPLACED WITH APPENDIX I - AMENDED ATTACHED HERETO AND INCORPORATED
      HEREIN.

3.    THE EFFECTIVE DATE OF APPENDIX I - AMENDED IS JULY 1, 2002. THE DEPARTMENT
      SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2002 TO REFLECT THE AMENDED CAPITATION RATES.

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

                            ACCEPTANCES AND APPROVALS

CONTRACTOR                                 DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT              DEPARTMENT OF SOCIAL SERVICES

/s/ Todd S. Farha                 9/30/02
------------------------------    -------  ------------------------------  ----
Signature (Authorized Official)   Date     Signature (Authorized Official) Date

<TABLE>
<S>                               <C>                 <C>                               <C>
Todd S. Farha                     CEO/President       MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
-------------------------------   -----------------   -------------------------------   -------------------
Typed Name (Authorized Official)  Title               Typed Name (Authorized Official)  Title
</TABLE>

OFFICE OF THE ATTORNEY GENERAL
--------------------------------------------------------------------------------
Attorney General (as to form)                                     Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:______________________

<PAGE>

                    CONNECTICUT DEPARTMENT OF SOCIAL SERVICES

                       AUTHORIZATION OF SIGNATURE DOCUMENT

I, Todd S. Farha, Chief Executive Officer/ President of First Choice Health
Plans of Connecticut, Inc., a corporation organized under the laws of the State
of Connecticut, hereby certify that the following is a full and true copy of a
resolution adopted at a meeting of the Board of Director of said company, duly
held on the 30th day of September, 2002:

      "RESOLVED that the Chief Executive Officer/President is hereby authorized
      to make, execute and approve on behalf of this company, any and all
      contracts and amendments and to execute and approve on behalf of this
      company, other instruments, a part of or incident to such contracts and
      amendments effective until otherwise ordered by the Board of Directors".

and I do further certify that the above resolution has not been in anyway
altered, amended or repealed, and is now in full force and effect. IN WITNESS
WHEREOF, I have hereunto set my hand and affixed the corporate seal of said
company this 30th day of September, 2002.

                                        /s/ Todd S.Farha
                                        ----------------------------
                                                Signature

                                        Chief Executive Officer/President
                                        -----------------------------------
                                                       Title

<PAGE>

[LOGO]                           STATE OF CONNECTICUT
                             DEPARTMENT OF SOCIAL SERVICES

                                  CONTRACT AMENDMENT

AMENDMENT NUMBER:   3

CONTRACT #:         093-MED-FCHP-1                    [[ILLEGIBLE] OF SOCIAL
                                                  SERVICES CONTRACTS/[ILLEGIBLE]
CONTRACT PERIOD:    08/11/2001-7/31/2003               JUN 30 [ILLEGIBLE]]

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for
the provision of services under the HUSKY A program as amended by Amendments 1
and 2 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1 AND 2 IS FURTHER AMENDED
      TO EXTEND THE CONTRACT END DATE FOR A PERIOD OF ONE (1) MONTH THROUGH JULY
      31, 2003.

2.    PART I AS AMENDED BY AMENDMENTS 1 AND 2 IS FURTHER AMENDED TO ADD A NEW
      SECTION 37 FOR COMPLIANCE PROVISIONS RELATED TO THE HEALTH INSURANCE
      PORTABILITY AND PRIVACY ACT OF 1996 ("HIPAA") AS SET FORTH ON PAGES 3
      THROUGH 8 OF THIS AMENDMENT.

3.    APPENDIX I AS AMENDED BY AMENDMENT 2 IS HEREBY FURTHER AMENDED TO EXTEND
      THE EFFECTIVE DATE OF THE CAPITATION RATES FOR A PERIOD OF ONE (1) MONTH
      FROM 6/30/03 TO 7/31/03. IF, THROUGH THE PASSAGE OF A BUDGET FOR STATE
      FISCAL YEAR ("SFY") 2004 THE CAPITATION RATES ARE TO BE REVISED EFFECTIVE
      JULY 1, 2003, THE DEPARTMENT SHALL, IN THE NEXT AMENDMENT TO THIS
      CONTRACT, AMEND THE CAPITATION RATES TO REFLECT SUCH REVISIONS AND SHALL
      MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED CAPITATION RATES.

                              HIPAA ACKNOWLEDGMENT

THE CONTRACTOR HEREIN IS A BUSINESS ASSOCIATE UNDER HIPAA:

CONTRACTOR                                   DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                DEPARTMENT OF SOCIAL SERVICES

<TABLE>
<S>                                <C>      <C>                                 <C>
/s/ Todd S. Farha                  6/26/03  /s/ Michael P. Starkowski           6/30/03
------------------------------     -------  ---------------------------------   -------
Signature (Authorized Official)    Date     Signature (Authorized Official)     Date
</TABLE>

<TABLE>
<S>                                <C>                          <C>                               <C>
Todd S. Farha                      Cheif Executive Officer      MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
--------------------------------   --------------------------   -------------------------------   --------------------
Typed Name (Authorized Official)   Title                        Typed Name (Authorized Official)  Title
</TABLE>

   [APPROVED
  JUN 25 2003
   WELLCARE
LEGAL SERVICES]
<PAGE>

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

CONTRACTOR                                     DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                  DEPARTMENT OF SOCIAL SERVICES

<TABLE>
<S>                                  <C>            <C>                                    <C>
/s/ Todd S. Farha                    6/26/03        /s/ Michael P. Starkowski              6/30/03
---------------------------------    ---------      ------------------------------         -------
 Signature (Authorized Official)     Date           Signature (Authorized Official)        Date
</TABLE>

<TABLE>
<S>                               <C>                       <C>                               <C>
/s/ Todd S. Farha                 Chief Executive officer   MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
--------------------------------  -----------------------   -------------------------------   ---------------------
Typed Name (Authorized Official)  Title                     Typed Name (Authorized Official)  Title
</TABLE>

   [APPROVED
  JUN 25 2003
   WELLCARE
LEGAL SERVICES]

OFFICE OF THE ATTORNEY GENERAL

________________________________________________________________________________
Attorney General (as to form)                               Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

<PAGE>

HIPAA Section for Purchase of Services Contracts. Part. 3/26/03

(insert Section # here for Part I) HIPAA PROVISIONS

(a.) IF THE CONTRACTOR IS A BUSINESS ASSOCIATE UNDER HIPAA, THE CONTRACTOR MUST
COMPLY WITH ALL TERMS AND CONDITIONS OF THIS SECTION OF THE CONTRACT. IF THE
CONTRACTOR IS NOT A BUSINESS ASSOCIATE UNDER HIPAA, THIS SECTION OF THE CONTRACT
DOES NOT APPLY TO THE CONTRACTOR FOR THIS CONTRACT.

(b.) The Contractor is required to safeguard the use, publication and disclosure
of information on all applicants for, and all clients who receive, services
under the contract in accordance "with all applicable federal and state law
regarding confidentiality, which includes but is not limited to the requirements
of the Health Insurance Portability and Privacy Act of 1996 ("HIPAA"), more
specifically with the Privacy Rule at 45 C.F.R. Part 160 and Part 164, subparts
A and E; and

(c.) The State of Connecticut Department named on page 1 of this Contract
(hereinafter "DEPARTMENT") is a "covered entity" as that term is defined in 45
C.F.R. Section 160.103; and

(d.) The Contractor, on behalf of the Department, performs functions that
involve the use or disclosure of "individually identifiable health information,"
as that term is defined in 45 C.F.R. Section 160.103 ; and

(e.) The Contractor is a "business associate" of the Department, as that term is
defined in 45 C.F.R. Section 160.103; and

(f.) The Contractor and the Department agree to the following in order to secure
compliance with the Health Insurance Portability and Privacy Act of 1996
("HIPAA"), more specifically with the Privacy Rule at 45 C.F.R. Part 160 and
Part 164, subparts A and E:

I.    DEFINITIONS

      A. BUSINESS ASSOCIATE. "Business Associate" shall mean the Contractor.

      B. COVERED ENTITY. "Covered Entity" shall mean the Department of the State
      of Connecticut named on page 1 of this Contract.

      C. DESIGNATED RECORD SET. "Designated Record Set" shall have the same
      meaning as the term "designated record set" in 45 C.F.R. Section 164.501.

      D. INDIVIDUAL. "Individual" shall have the same meaning as the term
      "individual"' in 45 C.F.R. 164.501 and shall include a person who
      qualifies as a personal representative as defined in 45 C.F.R. Section
      164.502(g).

<PAGE>

      E. PRIVACY RULE. "Privacy Rule" shall mean the Standards for Privacy of
      Individually Identifiable Health Information at 45 C.F.R. part 160 and
      parts 164, subparts A and E.

      F. PROTECTED HEALTH INFORMATION. "Protected Health Information" or "PHI"
      shall have the same meaning as the term "protected health information" in
      45 C.F.R. Section 164.501, limited to information created or received by
      the Business Associate from or on behalf of the Covered Entity.

      G. REQUIRED BY LAW. "Required by Law" shall have the same meaning as the
      term "required by law" in 45 C.F.R. Section 164.501.

      H. SECRETARY. "Secretary" shall mean the Secretary of the Department of
      Health and Human Services or his designee.

      I. MORE STRINGENT. "More stringent" shall have the same meaning as the
      term "more stringent" in 45 C.F.R. Section 160.103.

      J. SECTION OF CONTRACT. "(T)his Section of the Contract" refers to the
      HIPAA Provisions stated herein, in their entirety.

II.   OBLIGATIONS AND ACTIVITIES OF BUSINESS ASSOCIATE

      A. Business Associate agrees not to use or disclose PHI other than as
      permitted or required by this Section of the Contract or as Required by
      Law

      B. Business Associate agrees to use appropriate safeguards to prevent use
      or disclosure of PHI other than as provided for in this Section of the
      Contract.

      C. Business Associate agrees to mitigate, to the extent practicable, any
      harmful effect that is known to the Business Associate of a use or
      disclosure of PHI by Business Associate in violation of this Section of
      the Contract.

      D. Business Associate agrees to report to Covered Entity any use or
      disclosure of PHI not provided for by this Section of the Contract of
      which it becomes aware.

      E. Business Associate agrees to insure that any agent, including a
      subcontractor, to whom it provides PHI received from, or created or
      received by Business Associate, on behalf of the Covered Entity, agrees to
      the same restrictions and conditions that apply through this Section of
      the Contract to Business Associate with respect to such information.

      F. Business Associate agrees to provide access, at the request of the
      Covered Entity, and in the time and manner a agreed to by the parties, to
      PHI in a

                                       2
<PAGE>

      Designated Record Set, to Covered Entity or, as directed by Covered
      Entity, to an Individual in order to meet the requirements under 45 C.F.R.
      Section 164.524.

      G. Business Associate agrees to make any amendments to PHI in a Designated
      Record Set that the Covered Entity directs or agrees to pursuant to 45
      C.F.R. Section 164.526 at the request of the Covered Entity, and in the
      time and manner agreed to by the parties.

      H. Business Associate agrees to make internal practices, books, and
      records, including policies and procedures and PHI, relating to the use
      and disclosure of PHI received from, or created or received by, Business
      Associate on behalf of Covered Entity, available to Covered Entity or to
      the Secretary in a time and manner agreed to by the parties or designated
      by the Secretary, for purposes of the Secretary determining Covered
      Entity's compliance with the Privacy Rule.

      I. Business Associate agrees to document such disclosures of PHI and
      information related to such disclosures as would be required for Covered
      Entity to respond to a request by an Individual for an accounting of
      disclosures of PHI in accordance with 45 C.F.R. Section 164.528.

      J. Business Associate agrees to provide to Covered Entity, in a time and
      manner agreed to by the parties, information collected in accordance with
      paragraph I of this Section of the Contract, to permit Covered Entity to
      respond to a request by an Individual for an accounting of disclosures of
      PHI in accordance with 45 C.F.R. Section 164.528.

      K. Business Associate agrees to comply with any state law that is more
      stringent than the Privacy Rule.

III.  PERMITTED USES AND DISCLOSURES BY BUSINESS ASSOCIATE

      A. GENERAL USE AND DISCLOSURE PROVISIONS: Except as otherwise limited in
      this Addendum, Business Associate may use or disclose PHI to perform
      functions, activities, or services for, or on behalf of, Covered Entity as
      specified in this Contract, provided that such use or disclosure would not
      violate the Privacy Rule if done by Covered Entity or the minimum
      necessary policies and procedures of the Covered Entity.

      B. SPECIFIC USE AND DISCLOSURE PROVISIONS:

            1. Except as otherwise limited in this Section of the Contract,
         Business Associate may use PHI for the proper management and
         administration of Business Associate or to carry out the legal
         responsibilities of Business Associate.

                                       3
<PAGE>

            2. Except as otherwise limited in this Section of the Contract,
         Business Associate may disclose PHI for the proper management and
         administration of Business Associate, provided that disclosures are
         Required by Law, or Business Associate obtains reasonable assurances
         from the person to whom the information is disclosed that it will
         remain confidential and used or further disclosed only as Required by
         Law or for the purpose for which it was disclosed to the person, and
         the person notifies Business Associate of any instances of which it is
         aware in which the confidentiality of the information has been
         breached.

            3. Except as otherwise limited in this Section of the Contract,
         Business Associate may use PHI to provide Data Aggregation services to
         Covered Entity as permitted by 45 C.F.R. Section 154.514(e)(2)(i)(B).

IV.   OBLIGATIONS OF COVERED ENTITY

      A. Covered Entity shall notify Business Associate of any limitations in
      its notice of privacy practices of Covered Entity, in accordance with 45
      C.F.R. 164.520, or to the extent that such limitation may affect Business
      Associate's use or disclosure of PHI.

      B. Covered Entity shall notify Business Associate of any changes in, or
      revocation of, permission by Individual to use or disclose PHI, to the
      extent that such changes may affect Business Associate's use or disclosure
      of PHI.

      C. Covered Entity shall notify Business Associate of any restriction to
      the use or disclosure of PHI that Covered Entity has agreed to in
      accordance with 45 C.F.R. Section 164.522, to the extent that such
      restriction may affect Business Associate's use or disclosure of PHI.

V.    PERMISSIBLE REQUESTS BY COVERED ENTITY

      Covered Entity shall not request Business Associate to use or disclose PHI
      in any manner that would not be permissible under the Privacy Rule if done
      by the Covered Entity, except that Business Associate may use and disclose
      PHI for data aggregation, and management and administrative activities of
      Business Associate, as permitted under this Addendum.

VI.   TERM AND TERMINATION

      A. TERM. The Term of this Section of the Contract shall be effective as of
      the date the Contract is effective and shall terminate when all of the PHI
      provided by Covered Entity to Business Associate, or created or received
      by Business Associate on behalf of Covered Entity, is destroyed or
      returned to Covered Entity, or, if it is infeasible to return or destroy
      PHI, protections are extended to such information, in accordance with the
      termination provisions in this Section.

                                       4
<PAGE>

      B. TERMINATION FOR CAUSE. Upon Covered Entity's knowledge of a material
      breach by Business Associate, Covered Entity shall either:

         1. Provide an opportunity for Business Associate to cure the breach or
         end the violation and terminate the Contract if Business Associate does
         not cure the breach or end the violation within the time specified by
         the Covered Entity; or

         2. Immediately terminate the Contract if Business Associate has
         breached a material term of his Section of the Contract and cure is not
         possible; or

         3. If neither termination nor cure is feasible, Covered Entity shall
         report the violation to the Secretary.

      C. EFFECT OF TERMINATION.

         1. Except as provided in paragraph (2) of this subsection C, upon
         termination of this Contract, for any reason, Business Associate shall
         return or destroy all PHI received from Covered Entity, or created or
         received by Business Associate on behalf of Covered Entity. This
         provision shall apply to PHI that is in the possession of
         subcontractors or agents of Business Associate. Business Associate
         shall retain no copies of the PHI.

         2. In the event that Business Associate determines that returning or
         destroying the PHI is infeasible, Business Associate shall provide to
         Covered Entity notification of the conditions that make return or
         destruction infeasible. Upon documentation by Business Associate that
         return of destruction of PHI is infeasible, Business Associate shall
         extend the protections of this Section of the Contract to such PHI and
         limit further uses and disclosures of PHI to those purposes that make
         return or destruction infeasible, for as long as Business Associate
         maintains such PHI. Infeasibility of the return or destruction of PHI
         includes, but is not limited to, requirements under state or federal
         law that the Business Associate maintains or preserves the PHI or
         copies thereof.

VII.  MISCELLANEOUS PROVISIONS

      A. REGULATORY REFERENCES. A reference in this Section of the Contract to a
      section in the Privacy Rule means the section as in effect or as amended.

      B. AMENDMENT. The Parties agree to take such action as in necessary to
      amend this Section of the Contract from time to time as is necessary for
      Covered

                                       5
<PAGE>

      Entity to comply with requirements of the Privacy Rule and the Health
      Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191.

      C. SURVIVAL. The respective rights and obligations of Business Associate
      under Section VI, Subsection C of this Section of the Contract shall
      survive the termination of this Contract.

      D. EFFECT ON CONTRACT Except as specifically required to implement the
      purposes of this Section of the Contract, all other terms of the contract
      shall remain in force and effect.

      E. CONSTRUCTION. This Section of the Contract shall be construed as
      broadly as necessary to implement and comply with the Privacy Standard.
      Any ambiguity in this Section of the Contract shall be resolved in favor
      of a meaning that complies, and is consistent with, the Privacy Standard.

      F. DISCLAIMER. Covered Entity makes no warranty or representation that
      compliance with this Section of the Contract will be adequate or
      satisfactory for Business Associate's own purposes. Covered Entity shall
      not be liable to Business Associate for any claim, loss or damage related
      to or arising from the unauthorized use or disclosure of PHI by Business
      Associate or any of its officers, directors, employees, contractors or
      agents, or any third party to whom Business Associate has disclosed PHI
      pursuant to paragraph II D of this Addendum. Business Associate is solely
      responsible for all decisions made, and actions taken, by Business
      Associate regarding the safeguarding, use and disclosure of PHI within its
      possession, custody or control.

      G. INDEMNIFICATION. The Business Associate shall indemnify and hold the
      Covered Entity harmless from and against all claims, liabilities,
      judgments, fines, assessments, penalties, awards, or other expenses, of
      any kind or nature whatsoever, including, without limitation, attorney's
      fees, expert witness fees, and costs of investigation, litigation or
      dispute resolution, relating to or arising out of any violation by the
      Business Associate and its agents, including subcontractors, of any
      obligation of Business Associate and its agents, including subcontractors,
      under this Section of the Contract.

                                       6
<PAGE>

THIS MUST BE INSERTED INTO EACH PURCHASE OF SERVICES CONTRACT ON THE SIGNATURE
PAGE:

THE CONTRACTOR HEREIN IS / IS NOT A BUSINESS ASSOCIATE UNDER HIPAA*:
--------------------------------------------------------------------------------
                                 (circle one**)

/S/ Todd S. Farha
---------------------------------------        ---------------------------------
AUTHORIZED SIGNATORY FOR THE CONTRACTOR        AUTHORIZED SIGNATORY FOR
                                               (AGENCY ABBREVIATION)

TODD S. FARHA, CHIEF EXECUTIVE OFFICER
-------------------------------------          ---------------------------------
(TYPED NAME AND TITLE)                         (TYPED NAME AND TITLE)

6/26/03
-------------------------------------          ---------------------------------
DATE                                           DATE

[APPROVED
JUN 25 2003
WELLCARE
LEGAL SERVICES]

* Per/ Part I, Section (whatever section of Part I this ends up to be ...) of
this contract

** Department must make this determination before Contract is signed.

                                       7
<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                         DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   4

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001 - 8/12/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT. the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2
and 3 is hereby further amended as follows:

1. PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2 AND 3 IS FURTHER AMENDED
   TO EXTEND THE CONTRACT END DATE FOR A PERIOD OF TWELVE (12) DAYS THROUGH
   AUGUST 12, 2003. THE PURPOSE OF THIS EXTENSION IS TO PERMIT TIME FOR THE
   CENTERS FOR MEDICAID AND MEDICARE SERVICES TO REVIEW THE CONTRACT TERMS TO
   BECOME EFFECTIVE AUGUST 13, 2003.

2. APPENDIX I AS AMENDED BY AMENDMENT 2 IS HEREBY FURTHER AMENDED TO EXTEND THE
   EFFECTIVE DATE OF THE CAPITATION RATES FOR A PERIOD OF TWELVE (12) DAYS FROM
   7/31/03 TO 8/12/03. IF, THROUGH THE PASSAGE OF A BUDGET FOR STATE FISCAL YEAR
   ("SFY") 2004 THe CAPITATION RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003,
   THE DEPARTMENT SHALL, IN THE NEXT AMENDMENT TO THIS CONTRACT, AMEND THE
   CAPITATION RATES TO REFLECT SUCH REVISIONS AND SHALL MAKE ANY NECESSARY
   ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003
   TO REFLECT THE REVISED CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

FIRSTCHOICE HEALTH PLAN OF CT              DEPARTMENT OF SOCIAL SERVICES

/s/ Todd S. Farha                7/24/03
--------------------------------  -------  -----------------------------    ----
Signature (Authorized Official)   Date     Signature (Authorized Official)  Date

                         CHIEF EXECUTIVE                               DEPUTY
TODD S. FARHA                OFFICER       MICHAEL P. STARKOWSKI    COMMISSIONER
-----------------------  ---------------   ----------------------   ------------
Typed Name               Title             Typed Name               Title
(Authorized Official)                      (Authorized Official)

--------------------------------------------------------------------------------
Attorney General (as to form)                                Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:__________________

<PAGE>

                               APPENDIX - Amended

PLAN NAME:
FIRSTCHOICE
CAPITATION RATES
07/01/02-08/12/03

<TABLE>
<CAPTION>
                             FAIRFIELD    HARTFORD   LITCHFIELD   MIDDLESEX    NEW HAVEN      NEW LONDON     TOLLAND        WINDHAM
                             ---------    --------   ----------   ---------    ---------      ----------     -------        -------
<S>                          <C>          <C>        <C>          <C>          <C>            <C>            <C>            <C>
UNDER ONE                     $536.44     $606.89     $605.12      $717.18      $602.97        $600.00       $724.78        $581.51
AGES 1 TO 14                  $102.32     $110.46     $110.15      $130.10      $109.79        $109.23       $131.46        $107.71
MALE -AGES 15 TO 39           $127.22     $138.42     $138.03      $162.52      $137.60        $136.94       $164.18        $135.18
FEMALE - AGES 15 TO 39        $207.77     $231.48     $230.81      $273.76      $230.00        $228.84       $276.70        $223.07
MALE - AGES 40 AND OVER       $227.33     $254.24     $253.48      $301.18      $252.59        $251.31       $304.41        $244.68
FEMALE - AGES 40 AND OVER     $218.52     $244.15     $243.42      $289.20      $242.55        $241.32       $292.32        $235.04
</TABLE>

                                  PAGE 1 of 1
                                Effective 7/1/02
<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                         DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   5

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001-9/30/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2, 3
and 4 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3 AND 4 IS FURTHER
      AMENDED TO EXTEND THE CONTRACT END DATE FROM AUGUST 12, 2003 TO SEPTEMBER
      30, 2003.

2.    PART II "GENERAL CONTRACT TERMS FOR MCOs" IS DELETED IN ITS ENTIRETY AND
      REPLACED WITH PART II "GENERAL CONTRACT TERMS FOR MCOs" DATED AUGUST 13,
      2003 PAGES 1 THROUGH 115 ATTACHED HERETO AND INCORPORATED HEREIN BY
      REFERENCE.

3.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOs" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 ATTACHED HERETO AND INCORPORATED
      HEREIN BY REFERENCE SHALL TERMINATE ON THE DATE THAT THIS AMENDMENT
      EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT AMENDMENT TO EXTEND THE
      EFFECTIVE DATE OF THE CONTRACT.

4.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THEY SHALL NEGOTIATE
      A REIMBURSEMENT PROCESS IN THE EVENT OF A COURT DECISION REQUIRING FUTURE
      RE-ENROLLMENT OF AND HUSKY ADULT WITH INCOME ABOVE ONE HUNDRED PERCENT
      (100%) OF THE FEDERAL POVERTY LIMIT WHO CURRENTLY QUALIFIES FOR HUSKY
      SOLELY ON THE BASIS OF THE INJUNCTION PENDING APPEAL IN RABIN v. DSS.

5.    APPENDIX A IS DELETED IN ITS ENTIRETY AND REPLACED WITH APPENDIX A DATED
      AUGUST 13, 2003 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

6.    APPENDIX G IS DELETED IN ITS ENTIRETY AND REPLACED WITH APPENDIX G DATED
      AUGUST 13, 2003 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

7.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 8/12/03 TO SEPTEMBER 30, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

8.    A NEW APPENDIX L (TEMPLATES FOR PHARMACY REPORTS) DATED AUGUST 13, 2003
      ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

<PAGE>

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

CONTRACTOR                                   DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                DEPARTMENT OF SOCIAL SERVICES

/s/: Todd S. Farha        8/11/03    /S/: Michael P. Starkowski       8/12/03
-----------------------   -------    -----------------------------    -------
Signature                 Date       Signature (Authorized Official)  Date
(Authorized Official)

                        CHIEF EXECUTIVE                             DEPUTY
TODD S.FARHA                OFFICER      MICHAEL P.STARKOWSKI    COMMISSIONER
----------------------  ---------------  ----------------------  ------------
Typed Name              Title            Typed Name              Title
(Authorized Official)                    (Authorized Official)

[APPROVED
AUG 11 2003
WELLCARE
LEGAL SERVICES]

OFFICE OF THE ATTORNEY GENERAL

--------------------------------------------------------------------------------
Attorney General (as to form)                              Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________
<PAGE>

                       ASSISTANT SECRETARY'S CERTIFICATE

      I, David Smith , the duly elected Assistant Secretary of FirstChoice
HealthPlans of Connecticut, Inc., a corporation organized under the laws of the
State of Connecticut (the "Corporation"), do hereby certify that the following
is a full and true copy of a resolution adopted at a meeting of the Board of
Directors of said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto executed the Assistant Secretary's
Certificate this 11th day of August 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/: David Smith
                                    --------------------------
                                    By: David Smith, Assistant Secretary

<PAGE>

August 13, 2003

PART I: STANDARD CONNECTICUT CONTRACT TERMS

PART II: GENERAL CONTRACT TERMS FOR MCOS

1.    DEFINITIONS

2.    DELEGATIONS OF AUTHORITY

3.    FUNCTIONS AND DUTIES OF THE MCO
      3.01  Provision of Services
      3.02  Non-Discrimination
      3.03  Member Rights
      3.04  Gag Rules
      3.05  Coordination and Continuation of Care
      3.06  Emergency Services
      3.07  Geographic Coverage
      3.08  Choice of Health Professional
      3.09  Provider Network
      3.10  Network Adequacy and Maximum Enrollment Levels
      3.11  Provider Contracts
      3.12  Provider Credentialing and Enrollment
      3.13  Second Opinions, Specialist Providers and the Referral Process
      3.14  PCP Selection, Scheduling and Capacity
      3.15  Women's Health, Family Planning Access and Confidentiality
      3.16  Pharmacy Access
      3.17  Mental Health and Substance Abuse Access
      3.18  Children's Issues and EPSDT Compliance
      3.19  Special Services for Children/Reinsurance
      3.20  Prenatal Care
      3.21  Dental Care
      3.22  Other Access Features
      3.23  Pre-Existing Conditions
      3.24  Newborn Enrollment
      3.25  Acute Care Hospitalization, Nursing Home or Subacute Stay at Time of
            Enrollment or Disenrollment
      3.26  Open Enrollment
      3.27  Special Disenrollment
      3.28  Linguistic Access
      3.29  Services to Members
      3.30  Information to Potential Members
      3.31  Marketing Requirements
      3.32  Health Education
      3.33  Internal and External Quality Assurance
      3.34  Inspection of Facilities
      3.35  Examination of Records
      3.36  Medical Records
      3.37  Audit Liabilities

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August 13 2003

      3.38  Clinical Data Reporting
      3.39  Utilization Management
      3.40  Financial Records
      3.41  Insurance
      3.42  Third Party Coverage
      3.43  Coordination of Benefits and Delivery of Services
      3.44  Passive Billing
      3.45  Subcontracting for Services
      3.46  Timely Payment of Claims
      3.47  Copayment Limits and Member Charges for Noncovered Services
      3.48  Insolvency Protection
      3.49  Acceptance of DSS Rulings
      3.50  Policy Transmittals
      3.51  Fraud and Abuse
      3.52  Persons with Special Health Care Needs

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT
      4.01  Eligibility Determinations
      4.02  Populations Eligible to Enroll
      4.03  Enrollment/Disenrollment
      4.04  Default Enrollment
      4.05  Lock-In
      4.06  Capitation Payments to MCO
      4.07  Retroactive Adjustments
      4.08  Information
      4.09  Ongoing MCO Monitoring
      4.10  Utilization Review and Control

5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS
      5.01  Competition Not Restricted
      5.02  Nonsegregated Facilities
      5.03  Offer of Gratuities
      5.04  Employment/Affirmative Action Clause
      5.05  Confidentiality
      5.06  Independent Capacity
      5.07  Liaison
      5.08  Freedom of Information
      5.09  Waivers
      5.10  Force Majeure
      5.11  Financial Responsibilities of the MCO
      5.12  Capitalization and Reserves
      5.13  Provider Compensation
      5.14  Members Held Harmless
      5.15  Compliance with Applicable Laws, Rules and Policies
      5.16  Advance Directives
      5.17  Federal Requirements and Assurances

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August 13 2003

      5.18  Civil Rights
      5.19  Statutory Requirements
      5.20  Disclosure of Interlocking Relationships
      5.21  DEPARTMENT'S Data Files
      5.22  Changes Due to a Section 1115 or 1915(b) Freedom of Choice
      5.23  Hold Harmless
      5.24  Executive Order Number 16

6.    GRIEVANCE SYSTEM AND PROVIDER DENIALS
      6.01  Grievances
      6.02  Notices of Action and Continuation of Services
      6.03  Appeals and Administrative Hearing Processes
      6.04  Expedited Appeals and Administrative Hearings
      6.05  Provider Appeal Process

7.    CORRECTIVE ACTION AND CONTRACT TERMINATION
      7.01  Performance Review
      7.02  Settlement of Disputes
      7.03  Administrative Errors
      7.04  Suspension of New Enrollment
      7.05  Monetary Sanctions
      7.06  Temporary Management
      7.07  Payment Withhold, Class C Sanctions or Termination for Clause
      7.08  Emergency Services Denials
      7.09  Termination for Default
      7.10  Termination for Mutual Convenience
      7.11  Termination for the MCO Bankruptcy
      7.12  Termination for Unavailability of Funds
      7.13  Termination for Collusion in Price Determination
      7.14  Termination Obligations of Contracting Parties
      7.15  Waiver of Default

8.    OTHER PROVISIONS
      8.01  Severability
      8.02  Effective Date
      8.03  Order of Precedence
      8.04  Correction of Deficiencies
      8.05  This is not a Public Works Contract

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9.    APPENDICES
      A. Covered Benefits HUSKY A Covered Benefits
      B. Provider Credentialing and Enrollment Requirements
      C. EPSDT Periodicity Schedule
      D. DSS Marketing Guidelines
      E. Quality Assurance Program for Managed Care
      F. Unaudited Quarterly Financial Reports
      G. Medicaid Managed Care Eligibility Categories
      H. Managed Care Policy Transmittals
      I. Capitation Payment Amounts
      J. Physician Incentive Payments
      K. Recategorization Chart
      L. Quarterly Pharmacy Report
      M. Non-Hyde Amendment Abortions

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August 13 2003

PART I: STANDARD CONNECTICUT CONTRACT TERMS

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August 13, 2003

PART II: GENERAL CONTRACT TERMS FOR MCOs

1.    DEFINITIONS

As used throughout this contract, the following terms shall have the meanings
set forth below.

ABUSE: Provider and/or MCO practices that are inconsistent with sound fiscal,
business or medical practices and that result in an unnecessary cost to the
HUSKY A program, or the reimbursement for services that are not medically
necessary or that fail to meet professionally recognized standards for health
care, or a pattern of failing to provide medically necessary services required
by this contract. Member practices that result in unnecessary cost to the HUSKY
A program also constitute abuse.

ACS OR ACS STATE HEALTHCARE: The organization contracted by the DEPARTMENT to
perform certain administrative and operational functions for the HUSKY A and B
programs. Contracted functions include HUSKY application processing, HUSKY B
eligibility determinations, passive billing and enrollment brokering.

ACTION: The denial or limited authorization of a requested service, including
the type or level of service; the reduction, suspension, or termination of a
previously authorized service; the denial, in whole or in part, of payment for a
service; the failure to provide services in a timely manner, as defined by the
DEPARTMENT; the failure of an MCO to act within the timeframes for authorization
decisions set forth in this Contract.

ADVANCE DIRECTIVE: A written instruction, such as a living will or durable power
of attorney for health care, recognized under Connecticut law, relating to the
provision of health care when the individual is incapacitated.

AGENT: An entity with the authority to act on behalf of the DEPARTMENT.

APPEAL: A request to the MCO from a Member for a formal review of an MCO action.

CAPITATION RATE: The amount paid per Member by the DEPARTMENT to each Managed
Care Organization (MCO) on a monthly basis.

CAPITATION PAYMENT: The individualized monthly payment made by the DEPARTMENT
to the MCO on behalf of Members.

CMS: Centers for Medicare & Medicaid Services (CMS), a division within the
United States Department of Health and Human Services. This division was
formerly known as HCFA, the Health Care Financing Administration.

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CLEAN CLAIM: A bill for service(s) or good(s), a line item of services or all
services and/or goods for a recipient contained on one bill which can be proces-
sed without obtaining additional information from the provider of service(s)or a
third party. A clean claim does not include a claim from a provider who is under
investigation for fraud or abuse or a claim under review for medical necessity.

COLD CALL MARKETING: Any unsolicited personal contact by the MCO with a
potential Member for the purpose of marketing.

COMMISSIONER: The Commissioner of the Department of Social Services, as defined
in Section 17b-3 of the Connecticut General Statutes.

CONSULTANT: A corporation, company, organization or person or their affiliates
retained by the DEPARTMENT to provide assistance in this project or any other
project, not the MCO or subcontractor.

CONTRACT ADMINISTRATOR: The DEPARTMENT employee responsible for fulfilling the
administrative responsibilities associated with this managed care project.

CONTRACT SERVICES: Those services which the MCO is required to provide to
Members under this contract.

DATE OF APPLICATION: The date on which a completed application for the HUSKY A
program is received by the DEPARTMENT or its agent, containing the applicant's
signature.

DAY: Except where the term business days is expressly used, all references in
this contract will be construed as calendar days.

DEPARTMENT OR DSS: The Department of Social Services, State of Connecticut.

EMERGENCY OR EMERGENCY MEDICAL CONDITION: A medical condition manifesting itself
by acute symptoms of sufficient severity (including severe pain) such that a
prudent layperson, who possesses an average knowledge of health and medicine,
could reasonably expect the absence of immediate medical attention to result in
placing the health of the individual (or with respect to a pregnant woman, the
health of the woman or her unborn child) in serious jeopardy, serious impairment
to body functions or serious dysfunction of any body organ or part.

EMERGENCY SERVICES: Covered inpatient and outpatient services that are: 1)
furnished by a provider that is qualified to furnish Medicaid services; and 2)
needed to evaluate or stabilize an emergency medical condition. Such services
shall include, but not be limited

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August 13 2003

to, behavioral health and detoxification needed to evaluate or stabilize an
emergency medical condition that is found to exist using the prudent layperson
standard.

EARLY AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT (EPSDT) CASE MANAGEMENT
SERVICES: Services such as making and facilitating referrals and development
and coordination of a plan of services that will assist Members under twenty-one
(21) years of age in gaining access to needed medical, social, educational, and
other services.

EPSDT DIAGNOSTIC AND TREATMENT SERVICES: All health care, diagnostic services,
and treatment necessary to correct or ameliorate defects and physical and mental
illnesses and conditions discovered by an interperiodic or periodic EPSDT
screening examination.

EPSDT SCREENING SERVICES: Comprehensive, periodic health examinations for
Members under the age of twenty-one (21) provided in accordance with the
requirements of the federal Medicaid statute at 42 U.S.C. Section 1396d(r)(l).

EPSDT SERVICES: Comprehensive child health care services to Members under
twenty-one (21) years of age, including all medically necessary prevention,
screening, diagnosis and treatment services listed in Section 1905(r) of the
Social Security Act.

EXTERNAL QUALITY REVIEW ORGANIZATION (EQRO): An entity responsible for
conducting reviews of the quality outcomes, timeliness of the delivery of care
and access to items and services for which the MCO is responsible under this
contract.

FORMULARY: A list of selected pharmaceuticals determined to be the most useful
and cost effective for patient care, developed by a pharmacy and therapeutics
committee at the MCO.

FQHC-SPONSORED MCO: An MCO that is more than fifty (50) percent owned by
Connecticut Federally Qualified Health Centers, certified by the Department of
Social Services to enroll Medicaid Members.

FRAUD: Intentional deception or misrepresentation, or reckless disregard or
willful blindness, by a person or entity with the knowledge that the deception,
misrepresentation, disregard or blindness could result in some unauthorized
benefit to himself or some other person, including any act that constitutes
fraud under applicable federal or state law.

GRIEVANCE: An expression of dissatisfaction about the MCO on any matter other
than an "action" as defined herein. Possible subjects for grievances include,
but are not limited to, the quality of care or services provided by the MCO and
aspects of interpersonal relationships such as rudeness of a provider or an MCO
employee, or failure to respect a Member's rights.

HEALTH EMPLOYER DATA INFORMATION SET (HEDIS): A standardized performance
measurement tool that enables users to evaluate the quality of different MCOs
based on

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the following categories: effectiveness of care; MCO stability; use of services;
cost of care; informed health care choices; and MCO descriptive information.

HHS: The United States Department of Health and Human Services.

HUSKY, PART A OR HUSKY A: For purposes of this contract, HUSKY A includes all
those coverage groups previously covered in Connecticut Access, subject to
expansion of eligibility groups pursuant to Section 17b-266 of the Connecticut
General Statutes.

IN-NETWORK PROVIDERS OR NETWORK PROVIDERS: Providers who have contracted with
the MCO to provide services to Members.

LOCK-IN: Limitations on Member changes of managed care plans for a period of
time, not to exceed twelve (12) months.

MANAGED CARE ORGANIZATION (MCO): The organization signing this agreement with
the Department of Social Services.

MARKETING: Any communication from an MCO to a Medicaid recipient who is not
enrolled in that entity, that can be reasonably interpreted as intended to
influence the recipient to enroll or reenroll in that particular MCO or either
to not enroll in, or disenroll from, another MCO.

MARKETING MATERIALS: Any materials produced in any medium, by or on behalf
of an MCO that can reasonably be interpreted as intended to market to potential
Members.

MEDICAID: The Connecticut Medical Assistance Program operated by the Connecticut
Department of Social Services under Title XIX of the Federal Social Security
Act, and related State and Federal rules and regulations.

MEDICAID PROGRAM PROVIDER MANUALS: Service-specific documents created by
Connecticut Medicaid to describe policies and procedures applicable to the
Medicaid program generally and that service specifically.

MEDICAL APPROPRIATENESS OR MEDICALLY APPROPRIATE: Health care that is provided
in a timely manner and meets professionally recognized standards of acceptable
medical care; is delivered in the appropriate medical setting; and is the least
costly of multiple, equally-effective alternative treatments or diagnostic
modalities.

MEDICALLY NECESSARY/MEDICAL NECESSITY: Health care provided to correct or
diminish the adverse effects of a medical condition or mental illness; to assist
an individual in attaining or maintaining an optimal level of health, to
diagnose a condition or prevent a medical condition from occurring.

MEMBER: For the purposes of HUSKY A, a Medicaid client who has been certified by
the State as eligible to enroll under this contract, and whose name appears on
the MCO

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August 13 2003

enrollment information which the DEPARTMENT will transmit to the MCO every month
in accordance with an established notification schedule.

NATIONAL COMMITTEE FOR QUALITY ASSURANCE (NCQA): NCQA is a not-for-profit
organization that develops and defines quality and performance measures for
managed care, thereby providing an external standard of accountability.

OUT-OF-NETWORK PROVIDER: A provider that has not contracted with the MCO.

PASSIVE BILLING: Automatic capitation payments generated by the DEPARTMENT or
its agent based on enrollment.

PEER REVIEW ORGANIZATION (PRO): A professional medical organization which
conducts peer review of medical care certified by HCFA or CMS.

PHARMACY BENEFITS MANAGER (PBM): An entity which, through an arrangement with
the MCO, is responsible for managing or arranging for one or more of the
Medicaid pharmacy services provided by the MCO pursuant to this contract.

PHARMACY LOCK-IN: An optional MCO program, subject to approval by the
DEPARTMENT, to restrict certain Members to a specific pharmacy in order to
monitor services and reduce unnecessary or inappropriate utilization.

POST-STABILIZATION SERVICES: Covered services related to an emergency medical
condition that are provided after a Member is stabilized in order to maintain
the stabilized condition, or under the circumstances described in 42 CFR
422.114(3), to improve or resolve the Member's condition.

POTENTIAL MEMBER: A Medicaid recipient who is subject to enrollment in a managed
care organization but is not yet a Member of a specific MCO.

PRIMARY CARE PROVIDER (PCP): A licensed health care professional responsible for
performing or directly supervising the primary care services of Members.

PRIOR AUTHORIZATION: The process of obtaining prior approval as to the medical
necessity or appropriateness of a service or plan of treatment.

RISK: The possibility of monetary loss or gain by the MCO resulting from service
costs exceeding or being less than payments made to it by the DEPARTMENT.

ROUTINE CASES: A symptomatic situation (such as a chronic back condition) for
which the Member is seeking care, but for which treatment is neither of an
emergency nor an urgent nature.

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August 13 2003

SUBCONTRACT: Any written agreement between the MCO and another party to fulfill
any requirements of this contract, except a written agreement between the MCO
and a vendor.

SUBCONTRACTOR: The party contracting with the MCO to manage or arrange for one
or more of the Medicaid services provided by the MCO pursuant to this contract,
but excluding services provided by a vendor.

THIRD-PARTY: Any individual, entity or program which is or may be liable to pay
all or part of the expenditures for Medicaid furnished under a State plan.

TITLE XIX: The provisions of 42 United States Code Section 1396 et seq.,
including any amendments thereto. (see Medicaid)

URGENT CASES: Illnesses or injuries of a less serious nature than those
constituting emergencies but for which treatment is required to prevent a
serious deterioration in the Member's health and for which treatment cannot be
delayed without imposing undue risk on the Members' well-being until the Member
is able to secure services from his/her regular physician(s).

VENDOR: Any party with which the MCO has subcontracted to provide
administrative services.

WELL-CARE VISITS: Routine physical examinations, immunizations and other
preventive services that are not prompted by the presence of any adverse medical
symptoms.

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August 13 2003

2.    DELEGATIONS OF AUTHORITY

The State of Connecticut Department of Social Services is the single state
agency responsible for administering the Medicaid program. No delegation by
either party in administering this contract shall relieve either party of
responsibility for carrying out the terms of this contract.

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August 13 2003

3.    FUNCTIONS AND DUTIES OF THE MCO

The MCO agrees to the following duties:

3.01  PROVISION OF SERVICES

a.    The MCO shall provide to individuals enrolled under this contract,
      directly or through arrangements with others, all of the covered services
      described in Appendix A of this contract.

b.    The MCO shall ensure that the services provided to Members are sufficient
      in amount, duration and scope to reasonably be expected to achieve the
      purpose for which the service is provided. The services provided under
      this contract shall be in an amount, duration and scope that is no less
      than the amount, duration and scope of services for fee-for-service Medi-
      caid clients. The MCO shall not arbitrarily deny or reduce the amount
      duration or scope of a required service solely because of the Member's
      diagnosis, type of illness or medical condition.

c.    The MCO shall ensure that utilization management/review and coverage
      decisions concerning acute or chronic care services to each Member are
      made on an individualized basis in accordance with the contractual
      definitions for Medical Appropriateness or Medically Appropriate and
      Medically Necessary or Medical Necessity at Part II Section 1, General
      Contract Terms for MCOs. The MCO shall also ensure that its contracts with
      network providers require that the decisions of network providers
      affecting the delivery of acute or chronic care services to Members are
      made in accordance with the contractual definitions for Medical
      Appropriateness or Medically Appropriate and Medically Necessary and
      Medical Necessity.

d.    The MCO shall provide twenty-four (24) hour, seven (7) day a week
      accessibility to qualified medical personnel for Members in need of urgent
      or emergency care. The MCO may provide such access to medical personnel
      through either: 1) a hotline staffed by physicians, physicians on-call or
      registered nurses; or 2) a PCP on-call system. Whether the MCO utilizes a
      hotline or PCPs on-call, Members shall gain access to medical personnel
      within thirty (30) minutes of their call. The MCO Member handbook and MCO
      taped telephone message shall instruct Members to go directly to an
      emergency room if the Member needs emergency care. If the Member needs
      urgent care and has not gained access to medical personnel within thirty
      (30) minutes, the Member shall be instructed to go to the emergency room.
      The DEPARTMENT will randomly monitor the availability of such access.

e.    Changes to Medicaid covered services mandated by Federal or State law, or
      adopted by amendment to the State Plan for Medicaid, subsequent to the
      signing of this contract will not affect the contract services for the
      term of this contract, unless (1) agreed to by mutual consent of the
      DEPARTMENT and the MCO, or

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August 13 2003

      (2) unless the change is necessary to continue federal financial
      participation, or due to action of a state or federal court of law. If
      Medicaid coverage were expanded to include new services, such services
      would be paid for via the traditional Medicaid fee-for-service system
      unless covered by mutual consent between the DEPARTMENT and the MCO (in
      which case an appropriate adjustment to the capitation rates would be
      made). If Medicaid covered services are changed to exclude services, the
      DEPARTMENT may determine that such services will no longer be covered
      under HUSKY A and the DEPARTMENT will propose a contract amendment to
      reduce the capitation rate accordingly.

      In the event that the DEPARTMENT and the MCO are unable to agree on a
      contract amendment concerning the change to Medicaid covered services, the
      DEPARTMENT and the MCO shall negotiate a termination agreement to
      facilitate the transition of the MCO's Members to another MCO within a
      period of no less than ninety (90) days.

f.    Any change regarding the provision of covered services that will become
      effective during the term of this Contract shall be implemented by the MCO
      within sixty (60) days of receiving notice of the change from the
      DEPARTMENT, unless earlier compliance is required by law.

3.02  NON-DISCRIMINATION

a.    The MCO shall comply with all Federal and State laws relating to
      non-discrimination and equal employment opportunity, including but not
      necessarily limited to the Americans with Disabilities Act of 1990, 42
      U.S.C. Section 12101 et seq.; 47 U.S.C. Section 225; 47 U.S.C. Section
      611; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
      Section 2000e; Title IX of the Education Amendments of 1972; Title VI of
      the Civil Rights Act, 42 U.S.C. 2000d et seq.; the Civil Rights Act of
      1991; Section 504 of the Rehabilitation Act, 29 U.S.C. Section 794 et
      seq.; the Age Discrimination in Employment Act of 1975, 29 U.S.C. Sections
      621-634; regulations issued pursuant to those Acts; and the provisions of
      Executive Order 11246 dated September 26, 1965 entitled "Equal Employment
      Opportunity" as amended by Federal Executive Order 11375, as supplemented
      in the United States Department of Labor Regulations (41 CFR Part 60-1 et
      seq., Obligations of Contractors and Subcontractors). The MCO shall also
      comply with Sections 4a-60, 4a-61, 31-51d, 46a-64, 46a-71, 46a-75 and
      46a-81 of the Connecticut General Statutes.

      The MCO shall also comply with the HCFA Civil Rights Compliance Policy,
      which mandates that all Members have equal access to the best health care,
      regardless of race, color, national origin, age, sex, or disability.

      The HCFA Civil Rights Compliance Policy further mandates that the MCO
      shall ensure that its subcontractors and providers render services to
      Members in a non-discriminatory manner. The MCO shall also ensure that
      Members are not

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August 13 2003

      excluded from participation in or denied the benefits of the HUSKY
      programs because of prohibited discrimination.

      The MCO acknowledges that in order to achieve the civil rights goals set
      forth in the HCFA Civil Rights Compliance Policy, CMS has committed itself
      to incorporating civil rights concerns into the culture of its agency and
      its programs and has asked all of its partners, including the DEPARTMENT
      and the MCO, to do the same. The MCO further acknowledges that CMS will be
      including the following civil rights concerns into its regular program
      review and audit activities: collecting data on access to and
      participation of minority and disabled Members; furnishing information to
      Members, subcontractors, and providers about civil rights compliance;
      reviewing HCFA publications, program regulations, and instructions to
      assure support for civil rights; and initiating orientation and training
      programs on civil rights. The MCO shall provide to the DEPARTMENT or to
      CMS, upon request, any available data or information regarding these civil
      rights concerns.

      Within the resources available through the capitation rate, the MCO shall
      allocate financial resources to ensure equal access and prevent
      discrimination on the basis of race, color, national origin, age, sex, or
      disability.

b.    Unless otherwise specified by the contract, the MCO shall provide covered
      services to HUSKY A Members under this contract in the same manner as
      those services are provided to other Members of the MCO, although delivery
      sites, covered services and provider payment levels may vary. The MCO
      shall ensure that the locations of facilities and practitioners providing
      health care services to Members are sufficient in terms of geographic
      convenience to low-income areas, handicapped accessibility and proximity
      to public transportation routes, where available. The MCO and its
      providers shall not discriminate among Members of  HUSKY A and other
      Members of the MCO. The MCO shall ensure that its network providers offer
      hours of operation that are no less than those offered to the MCO's
      commercial members or comparable to Medicaid fee-for-service, if the
      provider serves only Medicaid Members.

c.    Nothing in this section shall preclude the implementation of a pharmacy
      lock-in program by the MCO, if such program is approved by the DEPARTMENT.

3.03  MEMBER RIGHTS

The MCO shall have written policies regarding member rights. The MCO must comply
with all applicable state and federal laws pertaining to member rights and
privacy. The MCO shall further ensure that the MCO's employees, subcontractors
and network providers consider and respect those rights when providing services
to Members.

Member rights include, but are not limited to, the following:

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August 13 2003

      1.    the right to be treated with respect and due consideration for the
            Member's dignity and privacy;

      2.    the right to receive information on treatment options and
            alternatives in a manner appropriate to the Member's condition and
            ability to understand;

      3.    the right to participate in treatment decisions, including the right
            to refuse treatment;

      4.    the right to be free from any form of restraint or seclusion as a
            means of coercion, discipline, retaliation or convenience;

      5.    the right to receive a copy of his or her medical records,
            including, if the HIPAA privacy rule applies, the right to request
            that the records be amended or corrected as allowed in 45 CFR part
            164; and

      6.    freedom to exercise the rights describe herein without any adverse
            affect on the Member's treatment by the DEPARTMENT, the MCO or the
            MCO's subcontractors or network providers.

3.04  GAG RULES

Subject to the limitations described in 42 U.S.C. Section 1396u-2(b)(3)(B) and
(C), the MCO shall not prohibit or otherwise restrict a health care provider
acting within his or her lawful scope of practice from advising or advocating on
behalf of a Member, who is a patient of the provider, for the following:

      1.    the Member's health status, medical care, or treatment options,
            including any alternative treatment that may be self-administered;

      2.    any information the Member needs in order to decide among relevant
            treatment options;

      3.    the risks, benefits and consequences of treatment of nontreatment;

      4.    the Member's right to participate in decisions regarding his or her
            health care, including, the right to refuse treatment, and to
            express preferences about future treatment decisions

This prohibition applies regardless of whether benefits for such care or
treatment are provided under this contract.

3.05  COORDINATION AND CONTINUATION OF CARE

a.    The MCO shall have systems in place to provide well-managed patient care
      which satisfies the DEPARTMENT that appropriate patient care is being
      provided, including at a minimum:

      1.    Management and integration of health care through a PCP, gatekeeper
            or other means.

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      2.    Systems to assure referrals for medically necessary specialty,
            secondary and tertiary care.

      3.    Systems to assure provision of care in emergency situations,
            including an education process to help assure that Members know
            where and how to obtain medically necessary care in emergency
            situations.

      4.    A system by which Members may obtain a covered service or services
            that the MCO does not provide or for which the MCO does not arrange
            because it would violate a religious or moral teaching of the
            religious institution or organization by which the MCO is owned,
            controlled, sponsored or affiliated.

      5.    Coordination and provision of EPSDT screening services in accordance
            with the schedules for immunizations and periodicity of well-child
            services as established by the DEPARTMENT and federal regulations.

      6.    Provide or arrange for the provision of EPSDT case management
            services for Members under twenty-one (21) years of age when the
            Member has a physical or mental health condition that makes the
            coordination of medical, social, and educational services medically
            necessary. As necessary, case management services shall include but
            not be limited to:

            a.    Assessment of the need for case management and development of
                  a plan for services;

            b.    Periodic reassessment of the need for case management and
                  review of the plan for services;

            c.    Making referrals for related medical, social, and educational
                  services;

            d.    Facilitating referrals by providing assistance in scheduling
                  appointments for health and health-related services, and
                  arranging transportation and interpreter services;

            e.    Coordinating and integrating the plan of services through
                  direct or collateral contacts with the family and those
                  agencies and providers providing services to the child;

            f.    Monitoring the quality and quantity of services being
                  provided;

            g.    Providing health education as needed; and

            h.    Advocacy necessary to minimize conflict between service
                  providers and to mobilize resources to obtain needed services.

      7.    Provide necessary coordination and case management services for
            children with special health care needs.

      8.    If notified, PCPs will participate in the review and authorization
            of Individual Education Plans for Members receiving School Based
            Child

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            Health services and Individual Family Service Plans for Members
            receiving services from the Birth to Three program.

3.06  EMERGENCY SERVICES

a.    The MCO shall provide all emergency services twenty-four (24) hours each
      day, seven (7) days a week or arrange for the provision of said services
      twenty-four (24) hours each day, seven (7) days a week through its
      provider network.

b.    The MCO shall cover and pay for emergency services without regard to prior
      authorization and regardless of whether the provider that furnishes the
      services has a contract with the MCO.

c.    The MCO shall not limit the number of emergency visits.

d.    The MCO shall cover all services necessary to determine whether or not an
      emergency condition exists, even if it is later determined that the
      condition was not an emergency medical condition.

e.    The MCO shall not retroactively deny a claim for an emergency screening
      examination because the condition, which appeared to be an emergency
      medical condition under the prudent layperson standard, turned out to be
      non-emergent in nature.

f.    If the screening examination leads to a clinical determination by the
      examining physician that an actual emergency does not exist, then the
      nature and extent of payment liability will be based on whether the Member
      had acute symptoms under the prudent layperson standard at the time of
      presentation.

g.    The MCO shall not base its determinations on what constitutes an emergency
      medical condition on a list of diagnoses or symptoms. The determination of
      whether the prudent layperson standard is met shall be made on a
      case-by-case basis. However, the MCO may determine that the emergency
      medical condition definition is met, based on a list such as ICD-9 codes.

h.    Once the individual's condition is stabilized, the MCO may require prior
      authorization for a hospital admission or follow-up care.

i.    The MCO shall cover post-stabilization services obtained either within or
      outside the MCO's provider network, under the following circumstances;

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      1.    the services were pre-approved by the MCO;

      2.    the services were not pre-approved by the MCO, but administered to
            maintain the Member's stabilized condition within one hour of a
            request to the MCO for pre-approval of further post-stabilization
            care services.

j.    The MCO shall cover post stabilization services that were obtained either
      within or outside the MCO's provider network and not pre-approved, but
      administered to maintain, improve or resolve the Member's stabilized
      condition in the following circumstances:

      1.    The MCO does not respond to a request for pre-approval of such
            services within one hour;

      2.    The MCO cannot be contacted; or

      3.    The MCO and the treating physician cannot reach an agreement
            concerning the Member's care and an MCO physician is not available
            for consultation. In this circumstance, the MCO must give the
            treating physician the opportunity to consult with an MCO physician
            and the treating physician may continue with care of the patient
            until an MCO physician is reached or one of the following criteria
            are met:

            i.    An MCO physician with privileges at the treating hospital
                  assumes responsibility for the Member's care;

            ii.   an MCO physician assumes responsibility for the member's care
                  through transfer;

            iii.  The MCO and the treating physician reach an agreement
                  concerning the Member's care.

k.    If there is a disagreement between a hospital or other treating facility
      and an MCO concerning whether the Member is stable enough for discharge or
      transfer from the emergency room, the judgment of the attending
      physician(s) or the provider actually treating the Member prevails and is
      binding on the MCO. This subsection shall not apply to a disagreement
      concerning discharge or transfer following an inpatient admission. The MCO
      may establish arrangements with hospitals whereby the MCO may send one of
      its own physicians or may contract with appropriate physicians with
      appropriate emergency room privileges to assume the attending physician's
      responsibilities to stabilize, treat, and transfer the Member.

l.    When a Member's PCP or another MCO representative instructs the Member to
      seek emergency care in-network or out-of-network, the MCO is responsible
      for payment for the screening examination and for other medically
      necessary emergency services, without regard to whether the Member's
      condition meets the emergency medical condition definition.

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m.    If a Member believes that a claim for emergency services has been
      inappropriately denied by the MCO, the Member may seek recourse through
      the MCO's appeal and the DEPARTMENT's administrative hearing processes.

n.    When the MCO reimburses emergency services provided by an in-network
      provider, the rate of reimbursement will be subject to the contractual
      relationship that has been negotiated with said provider. When the MCO
      reimburses emergency services provided by an out-of-network provider
      within Connecticut, the rate of reimbursement will be no less than the
      fees established by the DEPARTMENT for the Medicaid fee-for-service
      program. When the MCO reimburses emergency services provided by an
      out-of-network provider outside of Connecticut, the MCO may negotiate a
      rate of reimbursement with said provider.

o.    The MCO may not make payment for emergency services contingent upon the
      Member providing the MCO with notification either before or after
      receiving emergency services. The MCO may, however, enter into contracts
      with providers or facilities that require, as a condition of payment, the
      provider or facility to provide notification to the MCO after Members are
      present at the emergency room, assuming adequate provision is given for
      such notification.

3.07  GEOGRAPHIC COVERAGE

a.    The MCO shall serve Members statewide. The MCO shall ensure that its
      provider network includes access for each Member to PCPs,
      Obstetric/Gynecological Providers and mental health providers at a
      distance of no more than fifteen (15) miles for PCPs and
      Obstetric/Gynecological Providers and no more than twenty (20) miles for
      general dentists and mental health providers as measured by the Public
      Utility Commission. The MCO shall ensure that its provider network has the
      capacity to deliver or arrange for all the goods and services reimbursable
      under the Medicaid fee-for-service program.

b.    On a monthly basis, the MCO shall provide the DEPARTMENT or its agent with
      a list of all contracted network providers. The list shall be in a format
      and contain such information as the DEPARTMENT may specify.

PERFORMANCE MEASURE: Geographic Access. The DEPARTMENT will randomly monitor
geographic access by reviewing the mileage to the nearest town containing a PCP
for every town in which the MCO has Members.

SANCTION: In any sampling, if more than two (2) percent of Members reside in
towns beyond fifteen (15) miles of a town containing a PCP the DEPARTMENT may
impose a strike towards a Class A sanction pursuant to Section 7.05.

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3.08  CHOICE OF HEALTH PROFESSIONAL

The MCO must inform each Member about the full panel of participating providers
in its network. To the extent possible and appropriate, the MCO must offer each
Member covered under this contract the opportunity to choose among
participating providers.

3.09  PROVIDER NETWORK

a.    The MCO shall maintain a provider network capable of delivering or
      arranging for the delivery of all covered health goods and services to all
      Members. In addition, the MCO's provider network shall have the capacity
      to deliver or arrange for the delivery of all the goods and services
      reimbursable under this contract regardless of whether all of the goods
      and services are provided through direct provider contracts. The MCO shall
      submit a file of their most current provider network listing to the
      DEPARTMENT or its agent. The file shall be submitted, at a minimum, once a
      month in the format specified by the DEPARTMENT.

b.    In establishing and maintaining its provider network, the MCO shall
      consider the following:

      1.    anticipated enrollment;

      2.    expected utilization of services, taking into consideration the
            characteristics and health care needs of the specific Medicaid
            populations in the MCO;

      3.    the number and types (in terms of training, experience, and
            specialization) of providers required to furnish the contracted
            Medicaid services;

      4.    the numbers of network providers who are not accepting new Medicaid
            patients;

      5.    the geographic location of providers and Medicaid Members,
            considering distance, travel time, the means of transportation
            ordinarily used by Medicaid members, and whether the location
            provider physical access for Members with disabilities.

c.    The MCO shall notify the DEPARTMENT or its agent, in a timely manner, of
      any changes made in the MCO's provider network. The monthly file submitted
      to the DEPARTMENT or its agent shall not contain any providers who are no
      longer in the MCO's network. The DEPARTMENT will randomly audit the
      provider network file for accuracy and completeness and take corrective
      action, if the provider network file fails to meet these requirements.

d.    If the MCO declines to include a provider or group of provider in its
      network, the MCO shall give the affected provider(s) written notice of the
      reason for its decision.

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e.    The MCO shall not discriminate against providers with respect to
      participation, reimbursement, or indemnification for any provider who is
      acting within the scope of that provider's license or certification under
      applicable State law, solely on the basis of the provider's license or
      certification. This shall not be construed to prohibit the MCO from
      including providers only to the extent necessary to meet the needs of the
      MCO's Members or from establishing measures designed to maintain the
      quality of services and control costs, consistent with its
      responsibilities. This shall not preclude the MCO from using different
      reimbursement amounts for different specialties or for different
      practitioners in the same specialty.

f.    The MCO's provider selection policies and procedures shall not
      discriminate against particular providers that serve high-risk populations
      or specialize in conditions that require costly treatment.

g.    The MCO shall not employ or contract with any provider excluded from
      participation in a Federal health care program under either Section 1128
      or 1128A of the Social Security Act.

3.10  NETWORK ADEQUACY AND MAXIMUM ENROLLMENT LEVELS

a.    On a quarterly basis, except as otherwise specified by the DEPARTMENT, the
      DEPARTMENT shall evaluate the adequacy of the MCO's provider network. Such
      evaluations shall use ratios of Members to specific types of providers
      based on Medicaid fee-for-service experience in order to ensure that
      access in the MCO is at least equal to access experienced in the Medicaid
      fee-for-service program for a similar population. For each county the
      maximum ratio of Members to each provider type shall be:

      1.    adult PCPs, including general practice specialists counted at 60.8%,
            internal medicine specialists counted at 88.9%, family practice
            specialists counted at 66.9%, nurse practitioners of the appropriate
            specialties, and physician assistants, 387 Members per provider;

      2.    children's PCPs, including pediatric specialists counted at 100%,
            general practice specialists counted at 39.2%, internal medicine
            specialists counted at 11.1%, family practice specialists counted at
            33.1%, nurse practitioners of the appropriate specialties, and
            physician assistants, 301 Members per provider; obstetrics and
            gynecology providers, including obstetrics and gynecology
            specialists, nurse midwives, and nurse practitioners of the
            appropriate specialty, 835 Members per provider;

      3.    dental providers, including general and pediatric dentists counted
            at 100%, and dental hygienists counted at 50%, 486 Members per
            provider; and

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      4.    behavioral health providers, including psychiatrists, psychologists,
            social workers, and psychiatric nurse practitioners, 459 Members per
            provider.

b.    In the event that the number of Members in a given county equals or
      exceeds ninety percent (90%) of the capacity determined in accordance with
      section a noted above, the DEPARTMENT shall evaluate the adequacy of the
      MCO's network on a monthly basis.

c.    Maximum Enrollment Levels: Based on the adequacy of the MCO's provider
      network the DEPARTMENT may establish a maximum HUSKY A enrollment level
      for Members in the MCO on a county-specific basis. The DEPARTMENT shall
      provide the MCO with written notification no less than thirty (30) days
      prior to the effective date of the maximum enrollment level.

d.    Subsequent to the establishment of this limit, if the MCO wishes to change
      its maximum enrollment level in a specific county, the MCO must notify the
      DEPARTMENT thirty (30) days prior to the desired effective date of the
      change. If the change is an increase, the MCO must demonstrate an increase
      in their provider network which would allow the MCO to serve additional
      Members. To do so the MCO must provide the DEPARTMENT with the signature
      pages from the executed provider contracts and/or signed letters of
      intent. The DEPARTMENT will not accept any other proof or documentation as
      evidence of a provider's participation in the MCO's provider network. The
      DEPARTMENT shall review the existence of additional capacity for
      confirmation no later than thirty (30) days following notice by the MCO.
      An increase will be effective the first of the month after the DEPARTMENT
      confirms additional capacity exists.

e.    In the event the DEPARTMENT deems that the MCO's provider network is not
      capable of accepting additional enrollments, the DEPARTMENT may exercise
      its rights under Section 7 of this contract, including but not limited to
      the rights under Section 7.04, Suspension of New Enrollments.

SANCTION: In the event of a suspension of enrollment due to any network
deficiencies, the MCO shall submit a corrective action plan to the DEPARTMENT.
If, subsequent to the DEPARTMENT's approval of the corrective action plan, the
network deficiency is not remedied within the time specified in the corrective
action plan, or if the MCO does not develop a corrective action plan
satisfactory to the DEPARTMENT, the DEPARTMENT may impose a strike towards a
Class A sanction for each month said suspension is in effect, in accordance with
Section 7.05.

3.11  PROVIDER CONTRACTS

All contracts between the MCO and its in-network providers shall, at a minimum,
include each of the following provisions:

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a.    MCO network providers serving the Medicaid population must meet the
      minimum requirements for participation in the Medicaid program as set
      forth in the Regulations of Connecticut State Agencies, Section
      17b-262-522 to Section 17b-262-533, as applicable;

b.    MCO Members shall be held harmless for the costs of all Medicaid-covered
      goods and services provided;

c.    Providers must provide evidence of and maintain adequate malpractice
      insurance. For physicians, the minimum malpractice coverage requirements
      are $1 million per individual episode and $3 million in the aggregate;

d.    Specific terms regarding provider reimbursement as specified in Timely
      Payment of Claims, Section 3.46 of this contract;

e.    Specific terms concerning each party's rights to terminate the contract;

f.    That any risk shifted to individual providers does not jeopardize access
      to care or appropriate service delivery;

g.    The exclusion of any provider that has been suspended from the Medicare or
      Medicaid program in any state;

h.    For PCPs, the provision of "on-call" coverage through arrangements with
      other PCPs; and

i.    That the MCOs and subcontractors require in-network behavioral health
      providers to participate in the DEPARTMENT's efforts to study access,
      quality and outcome. Upon renewal of its subcontracts and other provider
      contracts, the MCO shall include a provision that failure to participate
      shall constitute cause for termination of the in-network provider's
      contract, except that MCOs which have demonstrated to the DEPARTMENT's
      satisfaction that they have ensured provider participation in such efforts
      through means other than the provider contracts need not include this
      provision. In any event, the DEPARTMENT shall reimburse providers for
      costs above and beyond nominal costs incurred by such participation.

The MCO shall not adjust or change its reimbursements to federally qualified
health centers from the rate in effect at the time the DEPARTMENT implemented
the wraparound payment procedure.

3.12  PROVIDER CREDENTIALING AND ENROLLMENT

a.    The MCO shall have written policies and procedures for the selection and
      retention of providers. The MCO shall establish minimum credentialing
      criteria

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      and shall formally re-credential all professional participating providers
      in their network at least once every two (2) years or such other time
      period as established by the NCQA. The MCO shall create and maintain a
      credentialing file for each participating provider that contains evidence
      that all credentialing requirements have been met. The file shall include
      copies of all documentation to support that credentialing criteria have
      been met, including licenses, Drug Enforcement Agency (DEA) certificates
      and provider statements regarding lack of impairment. Credentialing files
      shall be subject to inspection by the DEPARTMENT or its agent.

b.    MCO's credentialing and recredentialing criteria for professional
      providers shall include at a minimum:

      1.    Appropriate license or certification as required by Connecticut law;

      2.    Verification that providers have not been suspended or terminated
            from participation in Medicare or the Medicaid program in any state;

      3.    Verification that providers of covered services meet minimum
            requirements for Medicaid participation;

      4.    Evidence of malpractice or liability insurance, as appropriate;

      5.    Board certification or eligibility, as appropriate;

      6.    A current statement from the provider addressing:

            a.    lack of impairment due to chemical dependency/drug abuse;

            b.    physical and mental health status;

            c.    history of past or pending professional disciplinary actions,
                  sanctions, or license limitations;

            d.    revocation and suspension of hospital privileges;

            e.    a history of malpractice claims; and

      7.    Evidence of compliance with Clinical Laboratory Improvement
            Amendments of 1988 (CLIA), Public Law 100-578, 42 USC Section 1395aa
            et seq. and 42 CFR Part 493 (as amended, 68 Fed. Reg. 3639-3714
            (2003)).

c.    The MCO may require more stringent credentialing criteria. Any other
      criteria shall be in addition to the minimum criteria set forth above.

d.    Additional MCO credentialing/recredentialing criteria for PCPs shall
      include, but not be limited to:

      1.    Adherence to the principles of Ethics of the American Medical
            Association, the American Osteopathic Association or other
            appropriate professional organization;

      2.    Ability to perform or directly supervise the ambulatory primary care
            services of Members;

      3.    Membership on the medical staff with admitting privileges to at
            least one accredited general hospital or an acceptable arrangement
            with a PCP with admitting privileges;

      4.    Continuing medical education credits;

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      5.    A valid DEA certification; and

      6.    Assurances that any Advanced Practice Registered Nurses (APRN),
            Nurse Midwives or Physician Assistants are performing within the
            scope of their licensure.

e.    For purposes of credentialing and recredentialing, the MCO shall perform a
      check on all PCPs and other participating providers by contacting the
      National Practitioner Data Bank (NPDB). The DEPARTMENT will notify the MCO
      immediately if a provider under contract with the MCO is subsequently
      terminated or suspended from participation in the Medicare or Medicaid
      programs. Upon such notification from the DEPARTMENT or any other
      appropriate source, the MCO shall immediately act to terminate the
      provider from participation in its network.

f.    The MCO may delegate credentialing functions to a subcontractor. The MCO
      is ultimately responsible and accountable to the DEPARTMENT for compliance
      with the credentialing requirements. The MCO shall demonstrate and
      document to the DEPARTMENT the MCO's significant oversight of its
      subcontractors performing any and all provider credentialing, including
      facility or delegated credentialing. The MCO and any such entity shall be
      required to cooperate in the performance of financial, quality or other
      audits conducted by the DEPARTMENT or its agent(s). Any subcontracted
      entity shall maintain a credentialing file for each in-network provider as
      set forth above.

g.    The MCO must adhere to the additional credentialing requirements set forth
      in Appendix B.

SANCTION: The DEPARTMENT may impose a Class B sanction pursuant to Section 7.05
if, upon completion of a performance review, it is established that a provider
in the MCO's network fails to meet the minimum credentialing criteria for
participation set forth in (a) and (b) above or a PCP in the MCO's network
fails to meet the criteria set forth in (d).

3.13  SECOND OPINIONS, SPECIALIST PROVIDERS AND THE REFERRAL PROCESS

a.    The MCO shall provide for a second opinion from a qualified health care
      professional within its provider network, or arrange for the ability of
      the Member to obtain one outside the network, at no cost to the Member.

b.    The MCO shall contract with a sufficient number and mix of specialists so
      that the Member population's anticipated specialty care needs can be
      substantially met within the MCO's network of providers. The MCO will also
      be required to have a system to refer Members to out-of-network
      specialists if appropriate participating specialists are not available.
      The MCO shall make specialist referrals available to

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      its Members when it is medically necessary and medically appropriate and
      shall assume all financial responsibility for any such referrals whether
      they be in-network or out-of-network. The MCO shall ensure that the Member
      does not incur any costs for such referrals whether the referral is to an
      in-network or out-of network provider. The MCO must have policies and
      written procedures for the coordination of care and the arrangement,
      tracking and documentation of all referrals to specialty providers.

3.14  PCP SELECTION, SCHEDULING AND CAPACITY

a.    The MCO shall implement procedures to ensure that each Member has an
      ongoing source of primary care appropriate to his or her needs and a
      person formally designated as primarily responsible for coordinating the
      health care services furnished to the Member.

b.    The MCO shall provide Members with the opportunity to select a PCP within
      thirty (30) days of enrollment. The MCO shall assign a Member to a PCP
      when a Member fails to choose a PCP within thirty (30) days after being
      notified to do so. The assignment must be appropriate to the Member's age,
      gender and residence.

c.    The MCO shall ensure that the PCPs in its network adhere to the following
      PCP scheduling practices:

      1.    Emergency cases shall be seen immediately or referred to an
            emergency facility;

      2.    Urgent cases shall be seen within forty-eight (48) hours of PCP
            notification;

      3.    Routine cases shall be seen within ten (10) days of PCP
            notification;

      4.    Well-care visits shall be scheduled within six (6) weeks of PCP
            notification;

      5.    EPSDT/HealthTrack comprehensive health screens and immunizations
            shall be scheduled in accordance with the DEPARTMENT's HealthTrack
            periodicity and immunization schedules;

      6.    New Members shall receive an initial PCP appointment in a timely
            manner; (for those Members who do not access goods and services
            within the first six (6) months of enrollment, the MCO shall
            identify and remedy any access problems); and

      7.    Waiting times at PCPs are kept to a minimum.

d.    The MCO shall report quarterly on each PCP's panel size, group practice
      and hospital affiliations in a format specified by the DEPARTMENT. The
      DEPARTMENT will aggregate reports received from all MCOs for both HUSKY A
      and HUSKY B. In the event that the DEPARTMENT finds a PCP with more than
      1,200 HUSKY (combined HUSKY A and HUSKY B) panel Members, the DEPARTMENT
      will notify the MCO if the PCP is part of the MCO's network.

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      The DEPARTMENT expects that the MCO will take appropriate action to ensure
      that patient access to the PCP is assured.

e.    The MCO shall maintain a record of each Member's PCP assignments for a
      period of two (2) years.

f.    The MCO shall track each Member's use of primary medical care services. In
      the event that a Member does not regularly receive primary medical care
      services from the PCP or the PCP's group other than visits to school based
      health clinics, the MCO shall contact the Member and offer to assist the
      Member in selecting a PCP.

g.    If the Member has not received any primary care services, the MCO shall
      contact the Member and offer to assist the Member in scheduling a
      well-care visit if the Member's last well-care visit was not within the
      appropriate guidelines for his or her age and gender.

PERFORMANCE MEASURE: PCP Appointment Availability. The DEPARTMENT or its agent
will routinely monitor appointment availability as measured by (b)(1) through
(b)(6) by using test cases to arrange appointments of various kinds with
selected PCPs. If less than ninety (90) percent of the sample make appointments
available within the required time, the DEPARTMENT shall require that the MCO
submit a corrective action plan, which will outline the steps that the MCO will
take to rectify the problem, within thirty (30) days.

3.15  WOMEN'S HEALTH, FAMILY PLANNING ACCESS AND CONFIDENTIALITY

a.    The MCO shall provide female Members with direct access to a women's
      health specialist in network for covered care necessary to provide women's
      routine and preventive health care services. This access shall be in
      addition to the Member's PCP if that provider is not a women's health
      specialist.

b.    The MCO shall notify and give each Member, including adolescents, the
      opportunity to use his or her own PCP or utilize any family planning
      service provider for family planning services without requiring a referral
      or authorization. The MCO shall make a reasonable effort to subcontract
      with all local family planning clinics and providers, including those
      funded by Title X of the Public Health Services Act, and shall reimburse
      providers for all family planning services regardless of whether that
      provider is a participating provider. The MCO shall reimburse
      out-of-network providers of family planning services at least the Medicaid
      fee-for-service rate for the service. The MCO may require family planning
      providers to submit claims or reports in specified formats before
      reimbursing services.

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c.    The MCO shall keep family planning information and records for each
      individual patient confidential, even if the patient is a minor.

d.    Family planning services which must be covered include:

      1.    reproductive health exams;

      2.    patient counseling;

      3.    patient education;

      4.    lab tests to detect the presence of conditions affecting
            reproductive health;

      5.    sterilizations;

      6.    screening, testing, and treatment of and pre and post- test
            counseling for sexually transmitted diseases and HIV; and

      7.    abortions, if the pregnancy is the result of an act of rape or
            incest or in the case where a woman suffers from a physical
            disorder, physical injury, or physical illness, including a
            life-endangering physical condition caused by or arising from the
            pregnancy itself, that would, as certified by a physician, place the
            woman in danger of death unless an abortion is performed.

e.    Pursuant to federal law ("the Hyde Amendment," as reflected in the federal
      appropriations for Title XIX) and 42 CFR Part 441, Subpart E, the
      DEPARTMENT may only seek federal funding for those abortions described in
      (d)(7) above. The MCO shall cover all abortions that fall within these
      circumstances. The MCO shall submit a Form W-484 for any such abortions
      and comply with the DEPARTMENT's Medical Services Policy concerning
      abortions.

f.    The MCO shall also cover all other medically necessary abortions not
      covered under federal law and described in (d)(7) above. The determination
      as to whether an abortion is medically necessary shall be made by the
      Member's PCP or another physician, in consultation with the Member. The
      MCO shall not require prior authorization for any such medically necessary
      abortion. The DEPARTMENT will not seek federal funding for any abortion
      covered under this contract. The DEPARTMENT shall only seek federal
      funding for abortions covered pursuant to federal law. The DEPARTMENT and
      the MCO shall enter into a separate contract for all medically necessary
      abortions that do not qualify for federal matching funds, as described in
      subsection (d) and (e) above.

g.    The MCO shall submit a report on a quarterly basis due fifteen (15) days
      after the end of the quarter for all abortions performed pursuant to
      subsection (f) above. The report format is set forth in Appendix M.

SANCTION: If the MCO fails to comply with the provisions in subsection (e), and
fails to accurately maintain and submit accurate records of those abortions
which meet the federal definition for funding, the DEPARTMENT may impose a Class
A sanction, pursuant to Section 7.05.

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3.16  PHARMACY ACCESS

For purposes of this section, "prescription" shall include authorization for
legend and over-the-counter drugs covered by Medicaid policy.

a.    Pharmacies must be available and accessible on a statewide basis. The MCO
      shall:

      1.    Maintain a comprehensive provider network of pharmacies that will
            within available resources assure twenty four (24) hour access to
            pharmaceutical goods and services;

      2.    The MCO may establish a pharmacy lock-in program for Members
            suspected of abuse or excessive utilization. Any MCO pharmacy
            lock-in program will be subject to DEPARTMENT approval;

      3.    Have established protocols to respond to urgent requests for
            medications;

      4.    Monitor and take steps to correct excessive utilization of regulated
            substances, including but not limited to, restricting pharmacy
            access pursuant to a pharmacy lock-in program approved by the
            DEPARTMENT; and

      5.    Require pharmacists to utilize the Automated Eligibility
            Verification System (AEVS) to determine client eligibility and MCO
            affiliation when there is a discrepancy between the information in
            the MCO's eligibility system and information given to the
            pharmacists by the Member, the Member's physician or other third
            party.

b.    The MCO shall require that its provider network of pharmacies offer
      medically necessary goods and services to the MCO's Members. The MCO may
      have a drug management program that includes a prescription drug
      formulary. The MCO drug formulary must include only Food and Drug
      Administration approved drug products and must be broad enough in scope to
      meet the needs of all Members. The MCO drug formulary shall consist of a
      reasonable selection of drugs which do not require prior approval for each
      specific therapeutic drug class.

c.    The MCO shall submit any deletions to its formulary and any new prior
      authorization requirements for formulary drugs to the DEPARTMENT at least
      thirty (30) days prior to making any such change. The MCO shall also
      submit all physician, pharmacist and Member letters, notices, e-mail
      alerts or other electronic or written communications related to the
      proposed formulary change to the DEPARTMENT thirty (30) days prior to
      issuing or sending any such communication. The MCO shall not implement any
      formulary deletion or additional prior authorization requirements without
      the prior written approval of the DEPARTMENT. The MCO shall not send or
      issue any communication

                                     Part II
                                       25
<PAGE>

August 13 2003

      related to a formulary change without the prior written approval of the
      DEPARTMENT. If, however, the DEPARTMENT does not respond to proposed
      formulary changes or communications submitted for approval within thirty
      (30) days of receipt from the MCO, the MCO may proceed with the change or
      issue the communication, as applicable.

      The MCO shall also submit subsequent additions to the formulary at the
      time the addition is made without seeking prior approval by the DEPARTMENT
      and regardless of whether the drug(s) to be added requires prior
      authorization. If the MCO's formulary includes a legend drug that requires
      prior authorization and the FDA approves the drug for over-the-counter
      use, the MCO is not required to seek the DEPARTMENT's approval to
      substitute the over-the-counter version with a prior authorization
      requirement.

      The MCO shall notify prescribing providers thirty (30) days in advance of
      any changes to the MCO's formulary.

      The DEPARTMENT reserves the right to identify clinical deficiencies in the
      content of or operational deficiencies of the MCO's formulary. In this
      instance, the MCO shall have thirty (30) days to address in writing the
      identified deficiencies to the DEPARTMENT's satisfaction. The MCO may
      request to meet with the DEPARTMENT prior to submission of the written
      response. If the DEPARTMENT is not satisfied with the MCO's response, the
      DEPARTMENT may require the MCO to add specific drugs to its formulary or
      to or eliminate prior authorization requirements for specific drugs. If
      the MCO disputes the DEPARTMENT's determination, the MCO may exercise its
      rights pursuant to section 7.02 of this Contract.

d.    The MCO shall ensure that Members using maintenance drugs (drugs usually
      prescribed to treat long term or chronic conditions including, but not
      limited to diabetes, arthritis and high blood pressure) are informed in
      advance, but no less than thirty (30) days in advance of any changes to
      the prescription drug formulary related to such maintenance drugs if the
      Member using the drug will not be able to continue using the drug without
      a new authorization. When the MCO deletes a drug from its formulary or
      imposes prior authorization requirements on additional drug(s), the MCO
      shall identify to the DEPARTMENT which of the affected drugs the MCO
      intends to treat as maintenance drugs. The DEPARTMENT may require the MCO
      to treat additional drugs as maintenance drugs for purposes of this
      subsection and subsection (e). If the MCO treats all drugs affected by a
      formulary change as maintenance drugs for purposes of this subsection and
      for purposes of subsection e below, the MCO is not required to designate
      specific drugs as maintenance drugs. In such circumstances, the MCO shall
      notify the DEPARTMENT that all drugs affected by the formulary change will
      be treated in the same manner.

                                     Part II
                                       26
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August 13 2003

e.    If a prescribing provider seeks authorization to continue a maintenance
      drug that is being removed from the MCO's formulary or subjected to new
      prior authorization requirements at any time prior to the effective date
      of the change, the MCO shall conduct a medical necessity review. The MCO
      shall conduct the review, and, if the MCO does not approve the request,
      the MCO shall issue a notice of action in accordance with the provisions
      of subsection (i) below. If the MCO denies the prior authorization request
      for the maintenance drug, the MCO shall issue a notice of action at least
      ten days in advance of the effective date of the action. The MCO shall
      automatically continue authorization for the maintenance drug for at least
      the medical necessity review period plus, if the MCO does not approve the
      authorization, for the ten (10) day advance notic period, or the effective
      date of the action, whichever is later. If a Member requests an appeal and
      administrative hearing concerning a denial or termination that results
      from or relates to the imposition of new prior authorization requirements
      for or removal of the maintenance drug from the formulary, the MCO shall
      continue to authorize the drug for that Member pending a hearing decision.
      If the prescriber does not initiate the prior authorization process prior
      to the expiration of the existing authorization period, the Member shall
      receive a temporary supply of the maintenance drug if the conditions
      described in subsection (i) are met. If the MCO grandfathers some or all
      Members affected by the formulary changes for a period of more than ninety
      (90) days, the MCO shall either: 1) send a second advance notice letter at
      least thirty (30) days prior to the end of the extended authorization
      period or 2) ensure that if the Member's prescriber requests authorization
      prior to the end of the existing authorization period, that if the request
      is denied and the Member appeals, that the authorization will continue
      pending appeal.

f.    The MCO shall require that its provider network of pharmacies adheres to
      the provisions of Connecticut General Statutes Section 20-619 (b) and (c)
      related to generic substitutions for Medicaid recipients.

g.    If the MCO maintains a drug formulary, the MCO shall have a prior
      authorization process to permit access, at a minimum, to all medically
      necessary and appropriate drugs covered for the Medicaid fee-for-service
      population. The MCO shall develop a timely and efficient authorization
      process to obtain information from providers on medical necessity for a
      non-formulary drug, a formulary drug requiring prior authorization or a
      brand name drug where a generic substitution is available. The MCO shall
      make an individualized determination concerning medical necessity and
      appropriateness in each instance when a Member's prescribing provider
      requests a non-formulary drug, formulary drug requiring prior
      authorization or a brand name drug in accordance with the provisions of
      (f) above. If no request for prior authorization has been received by the
      MCO or the Pharmacy Benefits Manager (PBM) prior to the submission of a
      prescription to a pharmacy, the pharmacist may contact the prescribing
      physician and inform him or her of the prior authorization requirement.

                                     Part II
                                       27
<PAGE>

August 13 2003

h.    Except as provided in subsection (n) below, in the event that a provider
      requests authorization for, or prescribes a non-formulary drug, a
      formulary drug requiring prior authorization or a brand name drug where a
      generic substitution is available but elects during the prior
      authorization process or in discussions with the pharmacist to prescribe a
      formulary, generic or alternate formulary drug that the provider agrees
      will be equally effective for the Member, the MCO is not required to issue
      a notice of action and is not required to provide a temporary supply of
      the drug for which the provider initially sought authorization.

i.    In the event that a provider requests authorization, or prescribes a
      non-formulary drug, a formulary drug requiring prior authorization or a
      brand name drug where a generic substitution is available the MCO must
      approve or deny the request as expeditiously as the Member's health
      condition requires, but no later than 14 calendar days following the MCO's
      receipt of the request.

      An additional 14 calendar days will be allowed if: 1) the Member or the
      requesting provider asks for the extension or 2) the MCO or its PBM
      documents that the extension is in the Member's interest because
      additional information is needed for the MCO to authorize the service and
      the failure to extend the authorization timeframe will result in denial of
      the service. The DEPARTMENT may request and review such documentation from
      the MCO.

j.    In the event that a provider certifies to the MCO or its PBM that the drug
      is necessary to address an urgent or emergent condition or that the
      standard authorization period could seriously jeopardize the Member's life
      or health or ability to attain, maintain or regain maximum function, the
      MCO or its PBM must make an expedited authorization decision and provide
      notice as expeditiously as the member's health condition requires and no
      later than 3 working days after receipt of the request for service. The
      MCO or its PBM may extend the 3 working days time period by up to 14
      additional calendar days if: 1) the Member or the provider requests the
      extension or 2) if the MCO or its PBM documents that the extension is in
      the Member's interest because additional information is needed for the MCO
      to authorize the service and the failure to extend the authorization
      timeframe will result in denial of the service. The DEPARTMENT may request
      such documentation from the MCO.

k.    The MCO or its PBM shall without delay authorize up to a thirty (30) day
      temporary supply of the drug if the provider certifies to the MCO or its
      PBM that the drug is necessary to address an urgent or emergent condition.
      The MCO is also required to authorize a thirty (30) day temporary supply
      of the drug on the day of submission of the prescription to the pharmacy
      if the MCO has been unable to contact the provider to discuss an effective
      formulary drug during normal business hours. The certification shall be in
      a manner to be specified by the MCO, subject to the DEPARTMENT's approval.
      If the original prescription

                                     Part II
                                       28
<PAGE>

August 13 2003

      was for a period less then thirty (30) days, the temporary supply will be
      for the period prescribed.

l.    If the Member, upon receipt of a termination, suspension or reduction
      notice of action, timely requests an appeal and administrative hearing the
      MCO shall continue to authorize the drug for the Member pending a hearing
      decision or other resolution of the dispute concerning the prescription.
      As used within this section, "timely" means filing on or before the later
      of the following: (1) within ten (10) days of the MCO mailing of the
      notice of action; or (2) the intended effective date of the MCO's proposed
      action. If the Member does not request an appeal and administrative
      hearing, the MCO is no required to authorize any further refills.

m.    The MCO shall, on a quarterly basis, submit the report at Appendix L.

n.    If the DEPARTMENT or its agent determines that there is a pattern of
      denials for requested authorization for particular drugs, or any other
      pattern suggesting that the MCO's authorization process is one that does
      not appropriately consider each Member's individualized medical needs, the
      DEPARTMENT may require notices of action in circumstances other than those
      described above and/or may require the addition of a particular drug or
      drugs to the MCO's formulary as drugs that do not require prior
      authorizations.

3.17  MENTAL HEALTH AND SUBSTANCE ABUSE ACCESS

a.    The MCO shall provide to its Members all behavioral health care services
      (mental health and substance abuse) covered by Medicaid that are medically
      necessary and medically appropriate. These services may be provided by the
      MCO through contracts with providers of services or through subcontracted
      relationships with specialized behavioral health management entities. A
      Member will not need a PCP referral to obtain services; self-referral will
      be sufficient to obtain an initial service visit. The MCO may require
      prior authorization for an ongoing course of treatment. Members with
      mental health and substance abuse disorders shall not be denied coverage
      by the MCO for the initial visit, simply because they did not abide by the
      MCO's rules (either by going to an out-of-network provider or going to an
      in-network provider without an appropriate referral).

b.    Notwithstanding any contractual arrangement with a specialized management
      agency, the MCO is wholly responsible to ensure that medically necessary
      and medically appropriate services are provided to its Medicaid Members.

c.    The MCO shall contract with a consultant or employ a doctoral level mental
      health professional with appropriate qualifications, credentials and
      decision making authority who will have specific responsibilities for
      exercising oversight of the delivery of behavioral health services by the
      MCO or its subcontractors. Such person shall be responsible for promoting
      efforts to better integrate and

                                     Part II
                                       29
<PAGE>

August 13 2003

      coordinate the provision of behavioral health care with other services.
      The individual shall be available by phone for consultation on an as
      needed basis, dedicated to the Connecticut Members, as well as have an
      extensive understanding of the State of Connecticut's Medicaid rules and
      regulations.

d.    In reference to services for children with psychiatric/mental health and
      substance abuse needs, the MCO and any subcontracted entity is required to
      contract with and refer Members to qualified Medicaid providers who meet
      benchmark requirements or demonstrate that equal or superior services are
      being made available through other providers. The benchmark providers are
      child guidance clinics, community mental health centers and clinics,
      family service agencies and other qualified substance abuse providers (who
      provide services in compliance with state law) with a specialization in
      serving children. Continuation of benchmark status is contingent upon
      participation in the DSS Study of Behavioral Health Outcomes. Any
      benchmark poviders who refuse to participate in the study will lose this
      status.

e.    The MCO and any subcontractor entity will cooperate in the identification
      and improvement of processes working toward the development and
      standardization of administrative procedures. The MCO and any
      subcontracted entity shall take steps to promote successful
      provider-Member relationships and will monitor the effectiveness of these
      relationships.

f.    The MCO is responsible for monitoring the performance of its network
      providers and for monitoring and ensuring contract compliance. The MCO
      shall also be responsible for ensuring that its subcontractors comply with
      Medicaid policy and this contract. Such monitoring will ensure that
      providers and subcontractors observe all contractual and policy
      requirements as well as measuring performance relating to such areas as
      access to care and ensuring quality of care. The MCO and any subcontracted
      entity are required to cooperate in the performance of financial, quality
      or other audits conducted by the DEPARTMENT or its agent(s).

g.    The MCO and its behavioral health subcontractor are required to
      participate in the DSS Study on Behavioral. Health Outcomes for children
      receiving outpatient treatment services.

SANCTION: Failure of the MCO and or its subcontractor(s) to participate in the
DEPARTMENT Study may constitute grounds for the imposition of a Class B sanction
pursuant to Section 7.05.

3.18  CHILDREN'S ISSUES AND EPSDT COMPLIANCE

In order to meet the requirements of the EPSDT program as set forth in Sections
1902(a)(43) and 1905(r) of the Social Security Act, the MCO shall:

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                                       30
<PAGE>

August 13 2003

a.    Provide EPSDT screening services in accordance with the periodicity
      schedule attached to this contract as Appendix C. Any changes in the
      periodicity schedule subsequent to the effective date of this contract
      shall be provided to the MCO sixty (60) days before the effective date of
      the change. The MCO shall not require prior authorization of EPSDT
      screening services;

b.    Provide interperiodic screening examinations when medically necessary, or
      in accordance with the provisions of Section 3.19(5)(a), to determine the
      existence of a physical or mental illness or condition, or to assist
      Members in meeting the medical requirements for certification or
      recertification in WIC. Such interperiodic screens shall include screens
      for anemia as recommended by the Centers for Disease Control (CDC). The
      MCO shall not require prior authorization of interperiodic screening
      examinations;

c.    Provide EPSDT screening services that at a minimum, include:

      1.    A comprehensive health and developmental history (including
            assessment of both physical and mental health development and
            assessment of nutritional status);

      2.    A comprehensive unclothed or partially draped physical exam;

      3.    Appropriate immunizations as currently recommended by the
            Connecticut Department of Public Health;

      4.    Laboratory tests, as set forth in the periodicity schedule at
            Appendix C

      5.    Vision and hearing screenings as set forth in the periodicity
            schedule at Appendix C;

      6.    Dental assessments as set forth in the periodicity schedule at
            Appendix C and

      7.    Health education, including anticipatory guidance.

d.    Provide all medically necessary health care, diagnostic services, and
      treatment for Members under twenty-one (21) covered under the federal
      Medicaid program and described in Section 1905(a) of the Social Security
      Act regardless of whether the health care, diagnostic services, and
      treatment are specified in the list of covered services at Appendix A of
      this contract and regardless of any limitations on the amount, duration,
      or scope of the services that would otherwise be applied.

e.    Take all necessary steps to ensure that its Members under the age of
      twenty-one (21) receive EPSDT screening services and any necessary
      diagnostic and treatment services, including, but not limited to:

      1.    Providing assistance in arranging and scheduling appointments;

      2.    Providing and arranging transportation;

      3.    Following up on missed appointments; and

      4.    Providing interpreters to Members with limited English proficiency
            and Members who are hearing and visually impaired.

                                     Part II
                                       31
<PAGE>

August 13 2003

f.    No later than sixty (60) days after enrollment in the plan and annually
      thereafter, use a combination of oral and written methods including
      methods for communicating with Members with limited English proficiency,
      Members who cannot read, and Members who are visually or hearing impaired,
      to:

      1.    Inform its Members about the availability of EPSDT screening,
            diagnostic and treatment services;

      2.    Inform its Members about the importance and benefits of EPSDT
            screening services;

      3.    Inform its Members about how to obtain EPSDT screening services; and

      4.    Inform its Members that assistance with scheduling appointments and
            transportation is available, and inform them how to obtain this
            assistance.

g.    Coordinate and enhance the services provided to Members under twenty-one
      (21) through the development and execution of memorandums of understanding
      (MOUs) with the following programs:

      1.    Healthy Families Connecticut;

      2.    Healthy Start;

      3.    The Special Supplemental Food Program for Women, Infants, and
            Children (WIC);

      4.    Birth-to-Three;

      5.    Head Start;

      6.    InfoLine's Maternal and Child Health Project; and

      7.    Other programs operated by the Departments of Children and Families,
            Education, Public Health, Mental Health and Addiction Services and
            Mental Retardation as designated by the DEPARTMENT.

h.    Include in the MOUs developed and executed under subsection (g) of this
      section provisions that specify how the MCO will work with the program,
      including, but not limited to:

      1.    A description of the services provided by the program;

      2.    Designation of a liaison at the MCO to work with the program on
            ensuring the provision of medically necessary and appropriate
            covered services by the MCO and the coordination of services
            provided by the MCO and the program;

      3.    Protocols for referrals to the program by the MCO;

      4.    Protocols for communication of information concerning individuals
            who are Members of the MCO who are receiving services from the
            program;

      5.    Protocols for the resolution of any issues that arise concerning the
            delivery of services to HUSKY Members who are receiving services
            from the program;

      6.    Compliance with HIPAA privacy rules if the agreement includes
            exchange of members' protected health inforamation; and

      7.    Any other mutually agreed upon provisions.

i.    The MCOs shall require PCPs to obtain all available vaccines free of
      charge from the Department of Public Health under the Vaccines for
      Children program.

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August 13 2003

j.    Contract with the Connecticut Immunization Registry and Tracking System to
      track childhood immunizations of its Members and report the immunizations
      to the DEPARTMENT.

k.    In order to carry out the responsibilities set forth in this section, the
      MCO shall identify children who are overdue for EPSDT screening services,
      and those who have missed EPSDT screening services. The MCO shall work to
      develop a plan for ensuring that Members under twenty-one (21) years of
      age who are overdue or late for screening examinations receive their EPSDT
      screening services and that other Members continue to receive their
      examinations on a regular basis.

l.    The MCO shall attain an annual EPSDT participation ratio and an annual
      EPSDT screening ratio of at least eighty (80) percent for the period from
      October 1, 2002 through September 30, 2003. The DEPARTMENT shall determine
      the MCO's participation and screening ratio from the encounter data as
      reported to the DEPARTMENT or its agent(s) in accordance with the
      methodology established by HCFA or CMS for the HCFA-416 report.

SANCTION: Failure to achieve a participation and/or screening ratio of eighty
(80) percent may subject the MCO to a Class B sanction in accordance with the
provisions of Section 7.05. However, no sanction shall apply if the MCO's
participation and screening ratios, although less than eighty (80) percent, are
greater than the participation and screening ratios for the MCO for the
equivalent period one year earlier plus one half the difference between the
ratios for the earlier period and eighty (80) percent.

3.19  SPECIAL SERVICES FOR CHILDREN/REINSURANCE

1.    DISCHARGE PLANNING PROCESS AND INPATIENT PSYCHIATRIC HOSPITAL REINSURANCE
      FOR CHILDREN

a.    The discharge planning process for children and adolescents with
      significant mental health and substance abuse disorders is of particular
      concern to the DEPARTMENT and DCF due to the potential unavailability of
      appropriate subacute or step-down placements (e.g., residential treatment
      with a clinical component, group home, specialized foster care). In order
      to protect these particularly vulnerable minors, MCOs are required to seek
      or develop alternatives to hospital-based care. MCOs are required to
      negotiate "step-down" rates with qualified institutional providers, as
      defined by the DEPARTMENT, to address the financial issues that arise in
      the discharge planning circumstances described in this section.

b.    The following provisions of this Section shall apply to all new admissions
      of children and adolescents eighteen (18) years of age and younger in
      qualified institutions.

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<PAGE>

August 13 2003

      1.    REINSURANCE FOR ADMINISTRATIVELY NECESSARY DAYS

            On a limited basis, the MCO may authorize the admission of a child
            to a qualified institution for a one-day evaluation. If at the end
            of a twenty-four (24) hour period the MCO determines that there is
            no medical necessity for the continued admission but there is no
            immediate discharge option available, the remainder of the stay will
            qualify for 100% reinsurance by the DEPARTMENT. For the evaluation
            day, the MCO will pay the institution the rate for an acute care
            day. Beginning on day two (2) of the stay, the MCO will pay the
            institution a negotiated rate and bill the DEPARTMENT in the month
            following service delivery according to the process described below.
            Reinsurance for non-medically necessary days attendant to an
            evaluation stay may be claimed once per child per calendar year.

      2.    REINSURANCE FOR MEDICALLY NECESSARY DAYS

            Other than in the cases described above, where the length of stay in
            either a step down program or a hospital setting pursuant to a
            medically necessary admission extends beyond fifteen (15) days, the
            DEPARTMENT will provide reinsurance for the MCOs. Reinsurance shall
            be provided for medically necessary days of care provided at either
            an acute or a subacute level of care. Care provided to children
            admitted to subacute care pursuant to an observation bed stay shall
            be subject to the provisions of this section. For the purpose of
            this section, a medically necessary admission to inpatient
            psychiatric care for children will be defined to include those
            admissions which are court ordered, provided that there is
            consultation with the plan prior to the order regarding the
            appropriate level and setting for the care.

            The MCO may make decisions on the medical necessity of the admission
            and may evaluate the level of acuity of the child or adolescent at
            any time during the course of the stay. MCOs may redetermine the
            need for an acute level of care at any time based on changes in the
            patient's condition. However, within the first fifteen (15) days,
            the MCO shall provide all necessary acute or subacute care as part
            of the discharge process.

      3.    THE SCHEDULE FOR REINSURANCE IS AS FOLLOWS:

<TABLE>
<CAPTION>
# of days           State's Share          MCO's Share
<S>                 <C>                    <C>
0-15                      0%                  100%
16-45                    75%                   25%
46-60                    90%                   10%
60 +                    100%                    0%
</TABLE>

                                     Part II
                                       34
<PAGE>

August 13 2003

            If a psychiatric inpatient stay is interrupted due to an acute
            medical condition requiring an admission to a general hospital, the
            reinsurance day count will be suspended upon discharge from the
            psychiatric facility and will resume when the Member is readmitted
            to the psychiatric inpatient facility, if the readmission to the
            psychiatric inpatient facility is on the same day as the discharge
            from the general hospital.

            If there is a gap of one day or more between the discharge from the
            general hospital and readmission to the psychiatric facility, the
            admission to the psychiatric inpatient facility will be treated as a
            new admission and the new inpatient day count will be reset.

      4.    The MCO or its subcontractor shall incur the costs for the
            reinsurance and may bill the DEPARTMENT within ninety (90) days from
            the date the provider submits the claim to the MCO or its
            subcontractor. All initial reinsurance claims must be billed to the
            DEPARTMENT within twelve (12) months following service delivery.
            Reinsurance claims shall be submitted to the DEPARTMENT's Division
            of Fiscal Analysis and shall be reimbursed as a percentage of the
            facility specific per diem according to the state share described
            above. Claims may be submitted by the MCO or its behavioral health
            subcontractor with prior approval by the DEPARTMENT. The MCO or its
            subcontractor may retrospectively review claims submitted to the
            DEPARTMENT and submit corrections or readjustments to the DEPARTMENT
            within the DEPARTMENT'S timely filing limit. The DEPARTMENT also
            reserves the right to review the level of payments made under the
            reinsurance program retrospectively.

            The DEPARTMENT will designate a contact person for reinsurance
            claims.

3.    RESPONSIBILITIES OF THE DEPARTMENT OF CHILDREN AND FAMILIES

a.    DCF shall approve any placement, which is deemed by the MCO to be not
      medically necessary. If the DEPARTMENT determines that reinsurance claims
      were paid for services that were administratively necessary and not
      medically necessary, the DEPARTMENT will pursue reimbursement from DCF.

b.    In cases where the hospital identifies a discharge planning difficulty for
      youth under the direct auspices of DCF who are utilizing inpatient,
      hospital-based mental health or substance abuse services, the following
      discharge planning process will apply:

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August 13 2003

      1.    As soon as the hospital identifies a discharge planning difficulty,
            the MCO must contact DCF for assistance and notify the DEPARTMENT.
            The MCO in conjunction with the hospital and DCF, must attempt to
            resolve the discharge planning immediately. Service providers, the
            MCO, DCF and the Member and family must develop an individualized
            service plan that resolves the discharge issue while effectuating
            appropriate ongoing treatment. The MCO shall consult with DCF
            regarding the appropriate state licensed treatment setting. MCOs
            have the authority to transition the patient to any qualified
            provider of this level of care. Nothing in this section shall be
            construed to imply a time limit on the overall behavioral health or
            health care benefit in Medicaid managed care.

      2.    The DEPARTMENT will designate a contact person for clinical issues
            regarding discharge planning.

4.    THE FOLLOWING PROVISIONS WILL APPLY TO ADMISSIONS AT STATE FACILITIES.

a.    The discharge planning and reinsurance provisions described in this
      section shall apply to all new medically necessary and administratively
      necessary admissions at state operated facilities effective October 1,
      1998. When a child is admitted to a DCF facility, the MCO must reimburse
      the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admissions and stays at the facility.

b.    This discharge planning process and reinsurance program is not intended to
      force MCOs to continue funding the most restrictive levels of care in
      perpetuity; rather it is meant to insure the safety of children and
      adolescents and encourage the development of appropriate alternatives to
      hospital-based services.

5.    SPECIALIZED OUTPATIENT SERVICES FOR CHILDREN UNDER DCF CARE

a.    The MCO shall pay for a comprehensive multi-disciplinary examination for
      initial placement only, for each child entering DCF care, within thirty
      (30) days of placement into out-of-home care. The multi-disciplinary
      examination shall be authorized by either the child's PCP or the MCO and
      shall consist of a thorough assessment of the child's functional, medical,
      developmental, educational, and mental health status. Within each area of
      the assessment, the evaluation shall identify any additional specialized
      diagnostic and therapeutic needs. Physicians and other medical and mental
      health providers specializing in the assessment areas shall conduct the
      multi-disciplinary examination. Each multi-disciplinary examination shall
      occur at a single location. All components of the examination shall be
      performed on the same day, excluding additionally needed examinations,
      unless otherwise indicated. The provider shall report the findings and
      conclusions

                                     Part II
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<PAGE>

August 13 2003

      of the examination in a form acceptable to DCF. The report must be
      received by DCF within fifteen (15) days of the examination. The provider
      shall also provide for updates to DCF on any additional examinations.

b.    The providers of the MCO shall provide for training of foster parents on
      the use of special equipment or medications as needed.

c.    The MCO shall require regular collaboration between providers and DCF
      Regional Offices and Central Office medical, mental health and social work
      staff and consultants. The MCO shall assign staff to act as liaisons to
      identify, address and resolve health care delivery issues, barriers to
      comprehensive care and other problem areas. DCF shall specify the contact
      persons by name, title and phone number who will be available for
      quarterly meetings between DCF and the MCO and shall facilitate the
      initiation of these meetings with the MCO.

d.    The MCO shall include a panel of mental health providers who shall be
      qualified to perform psychological, psychiatric and developmental
      evaluations and perform assessment and treatment of sexual abuse and
      juvenile sexual offenders. DCF shall be available for consultation in the
      identification of such providers.

e.    In addition to standard prescription coverage, the MCO shall cover
      prescriptions in compliance with DCF policy for "Placement Medications"
      which are additional prescriptions which may be needed when children are
      placed or change placements. The MCO shall cover "Home Visit Medications".
      Home Visit Medications are additional prescriptions, which may be needed
      when children placed in out-of-home settings leave the placement for a
      home visit. Home Visit Medications should include only those doses which
      will be needed during the home visit, plus one extra dose.

f.    The MCO shall deliver a notice of action to an identified person at the
      DCF Central Office when a service is to be reduced, denied or terminated.
      DCF will, in turn, distribute the notice of action to its appropriate
      regional and local personnel.

3.20  PRENATAL CARE

a.    In order to promote healthy birth outcomes, the MCO or its contracted
      providers shall:

      1.    Identify enrolled pregnant women as early as possible in the
            pregnancy;

      2.    Conduct prenatal risk assessments in order to identify high risk
            pregnant women, arrange for specialized prenatal care and support
            services tailored to risk status, and begin care coordination that
            will continue throughout the pregnancy and early weeks of
            postpartum;

      3.    Refer enrolled pregnant women to the WIC program;

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      4.    Offer case management services for assistance with obtaining
            prenatal care appointments, transportation, WIC, and other support
            services as necessary;

      5.    Offer prenatal health education materials and/or programs aimed at
            promoting healthy birth outcomes;

      6.    Offer HIV testing and counseling and all appropriate prophylaxis and
            treatment to all enrolled pregnant women;

      7.    Refer any pregnant Member who is actively abusing drugs or alcohol
            to a behavioral health subcontractor or provider of behavioral
            health/substance abuse services and treatment; and

      8.    Educate new mothers about the importance of the postpartum visit and
            well-baby care.

PERFORMANCE MEASURE: Early access to prenatal care: Percentage of enrolled women
who had a live birth, who were continuously enrolled in the MCO for 280 days
prior to delivery who had a prenatal visit on or between 176 to 280 days prior
to delivery.

PERFORMANCE MEASURE: Adequacy of prenatal care: Percentage of women with live
births who were continuously enrolled during pregnancy who had more than eighty
(80) percent of the prenatal visits recommended by the American College of
Obstetrics and Gynecology, adjusted for gestational age at enrollment and
delivery.

3.21  DENTAL CARE

a.    The MCO shall contract with a sufficient number of dentists throughout the
      state to assure access to oral health care. The MCO shall:

      1.    Maintain an adequate dental provider network throughout the state's
            eight (8) counties including access to orthodontic services;

      2.    For the purpose of enrollment capacity a dental hygienist meeting
            the criteria of Connecticut General Statutes Section 20-1261, with
            two (2) years of experience, working in an institution (other than
            hospital), a community health center, a group home, a preschool
            operated by a local board of education or head start program, or a
            school setting shall be counted as fifty (50) percent of a general
            dentist. If the MCO's provider network includes dental hygienists
            acting independently within their scope of practice to provide
            preventive services to Members, the MCO shall require that dental
            hygienists make appropriate referrals to in-network dentists for
            appropriate restorative and diagnostic services;

      3.    Implement a plan that includes a systematic approach for enhancing
            access to dental care through monitoring appointment availability,
            provision of training to providers around issues of cultural
            diversity and any other specialized programs;

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      4.    To ensure that access standards are met with respect to dental
            screens and appointment availability. The MCO shall ensure that the
            scheduling of a routine dental visit is six (6) weeks;

      5.    Certify that all dentists in the MCO's network shall take Members
            and that MCO's HUSKY Members shall be assured the same access to
            providers as non-HUSKY Members. Nothing in this section shall
            preclude the implementation of limits on panel size by providers;

      6.    Implement procedures to provide all Members with the opportunity to
            choose a general dentist;

      7.    Implement specific outreach strategies to educate Members about the
            importance of regular dental care, with a focus on accessing age
            appropriate preventive care such as screenings and cleanings at
            least twice a year;

      8.    Provide for sufficient access to dental services for different age
            groups; and

      9.    Devise mechanisms to avoid unnecessary PCP visits related to dental
            problems.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members two (2) to twenty (20) years of age shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under children's dental access.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members twenty-one (21) years of age and over shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under adult dental access.

3.22  OTHER ACCESS FEATURES

a.    The MCO shall have systems in place to ensure access to medically
      necessary and medically appropriate well-care by its Members. The MCO
      shall develop procedures to identify access problems and shall take
      corrective action as problems are identified. These systems and
      initiatives shall include, but not be limited to:

      1.    Monitoring new Members to ensure that a well-care appointment is
            scheduled within six (6) months of enrollment for those whose last
            well-

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            care visit does not fall within the recommended age and gender
            appropriate schedules;

      2.    Monitoring and ensuring that Members receive well-care visits based
            on age and gender appropriate schedules;

      3.    Contacting and counseling Members who miss scheduled appointments;

      4.    Coverage and provision of services to newborns from the time of
            birth;

      5.    Assisting Members in accessing and locating linguistically and
            culturally appropriate services, including but not limited to,
            appropriate accommodation for Members with hearing disabilities;

      6.    Assisting disabled Members in accessing and locating services and
            providers that can appropriately accommodate their needs, for
            example wheelchair access to provider's office;

      7.    Development of special initiatives, case management, care
            coordination, and outreach to Members with special or multiple
            medical needs, for example persons with AIDS or HIV infected
            individuals;

      8.    Development of goals and action plans for incremental increases in
            utilization of services such as postpartum care, adolescent health,
            dental care and other health care measures agreed upon between the
            MCO and the DEPARTMENT;

      9.    Encouraging providers to offer extended business hours and weekend
            (Saturday) openings.

      10.   Monitoring timely access to care as described in Section 3.13(b).

b.    The MCO's access systems will be assessed as part of the annual
      performance review of the MCO.

c.    On or before November 1, 2003, the MCO shall submit to the DEPARTMENT an
      action plan to improve the delivery of well-child care to adolescents.
      This plan shall include measures to increase the volume of well-child
      screenings provided to adolescent members and to improve the quality and
      the completeness of those screenings according to the guidelines provided
      by the American Academy of Pediatrics. Emphasis should be placed on
      improving health risk assessment and anticipatory guidance during these
      visits. Following the submission of this plan, the MCOs will meet with the
      DEPARTMENT and representatives of other state agencies to develop a best
      practice model for the delivery of adolescent health care.

3.23  PRE-EXISTING CONDITIONS

a.    The MCO shall assume responsibility for all covered services as outlined
      in Appendix A for of each Member as of the effective date of coverage
      under the contract regardless of the new Member's health status.

b.    As outlined in Appendix K, for new Members who have transferred enrollment
      from another HUSKY MCO, coverage of services other than acute care
      hospitalization, nursing home care or care in a subacute facility shall be
      the

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August 13 2003

      responsibility of the MCO as of the beginning of the month during which
      enrollment becomes effective. Responsibility for acute hospitalization,
      nursing home or subacute care services at the time of enrollment or
      disenrollment is described in Section 3.25.

3.24  NEWBORN ENROLLMENT

Within six (6) months of a child's date of birth, the MCO must notify the
DEPARTMENT of newborns for which they have not received enrollment notification
from the DEPARTMENT. The MCO shall use the notification form made available by
the DEPARTMENT for this purpose. Should the MCO fail to report the child's
birth, the MCO shall reimburse the DEPARTMENT for any fee-for-service claims
paid for covered services that occurred for the newborn Members prior to
processing the newborn's enrollment into the MCO.

3.25  ACUTE CARE HOSPITALIZATION, NURSING HOME OR SUBACUTE STAY AT TIME OF
      ENROLLMENT OR DISENROLLMENT

For acute care requiring inpatient stay at a hospital, nursing home or subacute
facility, financial responsibility for covered services shall be determined as
follows:

a.    INPATIENT AT TIME OF ENROLLMENT

      Initial enrollment in HUSKY A should not commence during a recipient's
      inpatient stay at a hospital, nursing home or subacute facility unless the
      recipient is a newborn, born to a Member.

      The MCO shall notify the DEPARTMENT within sixty (60) days of the MCO's
      discovery of or from the date that the MCO receives information from which
      a determination can be made that initial enrollment will take effect
      during the course of a hospitalization. For those individuals who are
      inpatient in an MCO participating facility, the time period in which an
      MCO must notify the DEPARTMENT is limited to six (6) months from the
      enrollment effective date or sixty (60) days of discovery, whichever comes
      first. Upon timely notification to the DEPARTMENT by the MCO, the
      DEPARTMENT shall change the effective date to the first of the month after
      discharge. If the MCO fails to notify the DEPARTMENT of the inpatient
      status within the above specified time periods, the DEPARTMENT shall be
      relieved of its responsibility to change the enrollment effective date and
      the individual's initial enrollment effective date into the MCO shall be
      retained.

b.    HOSPITALIZATION AT TIME OF DISENROLLMENT

      Hospital costs for Members who are inpatient at the time of disenrollment
      from the MCO shall remain the financial responsibility of the MCO until
      discharge from the hospital. For purposes of this subsection, hospital
      costs shall include the

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August 13 2003

      per diem hospital charge. Hospital charges shall not include charges
      related to the inpatient stay, but performed and billed separately, such
      as the services of the attending physician or a consulting specialist.
      Upon discovery of the Member's disenrollment, the MCO shall notify the
      individual's new MCO of the inpatient status and coordinate care and
      discharge planning with the new MCO. The MCO shall assume financial
      responsibility for all non-hospital costs as of the enrollment effective
      date for new Members who change MCOs while inpatient. Individuals who are
      disenrolled due to recategorization of their Medicaid coverage to a
      non-managed care category shall revert to fee-for-service upon
      recategorization.

c.    DISENROLLMENT RESULTING FROM LONG-TERM HOSPITALIZATION

      1.    Members who are inpatient in a subacute facility or a nursing home
            will remain the responsibility of the MCO until they are discharged
            from the facility. If the MCO reports to DSS or its agent, any
            patient in a subacute facility or a nursing home other than for the
            purpose of behavioral health prior to the ninety (90) continuous
            days from the date of admission, the DEPARTMENT will disenroll the
            Member at the end of the month, that the Member has been inpatient
            in the facility for ninety (90) continuous days. If the MCO reports
            to the DEPARTMENT beyond ninety (90) days, the change will be
            effective the end of the month during which the change was reported
            to DSS or its agent. The facility's per diem (room and board) costs
            for a Member who is inpatient in a subacute facility or a nursing
            home will remain the responsibility of the MCO unti1 the Member is
            discharged from the facility or disenrolled from managed care
            whichever comes first. Upon discovery of the Member's disenrollment,
            the MCO shall notify the individual's new MCO of the inpatient
            status and coordinate care and discharge planning with the new MCO.
            The MCO shall assume financial responsibility for all non-room and
            board costs as of the enrollment effective date for any new Member
            who changed MCOs while inpatient.

      2.    Members between the ages of eighteen (18) and twenty (20),
            inclusive, who are inpatient in Cedarcrest or Connecticut Valley
            Hospital will remain the responsibility of the MCO until they are
            discharged from the hospital. If the MCO reports to DSS or its
            agent, any Member between the ages of eighteen (18) and twenty (20),
            inclusive, who is a patient in Cedarcrest or Connecticut Valley
            Hospital prior to forty-five (45) continuous days from the date of
            admission, the DEPARTMENT will disenroll the Member at the end of
            the month that the Member has been inpatient for forty-five (45)
            continuous days. If the MCO reports to the DEPARTMENT beyond
            forty-five (45) days, the change will be effective the end of the
            month during which the change was reported to the DEPARTMENT or its
            agent.

3.26  OPEN ENROLLMENT

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a.    The MCO shall conduct continuous open enrollment during which the MCO
      shall accept clients eligible for coverage under this contract in the
      order in which they are enrolled without regard to the need for health
      services, health status of the client or any other factor(s).

b.    The MCO shall accept membership of newborns born to a Member upon the
      child's date of birth with the exception of newborns that are placed for
      private adoption or when the mother has indicated in writing that she does
      not wish Medicaid coverage for the child. The enrollment effective date
      for newborns shall be the first of the month in which the child was born.

c.    The MCO shall not discriminate against individuals eligible to enroll on
      the basis of race, color, or national origin and will not use any policy
      or practice that has the effect of discriminating on the any such basis.
      The MCO shall not discriminate in enrollment activities on the basis of
      health status or the client's need for health care services or on any
      other basis, and shall not attempt to discourage or delay enrollment with
      the MCO or encourage disenrollment from the MCO of eligible Medicaid
      clients.

d.    If the MCO discovers that a Member's new or continued enrollment was in
      error, the MCO shall notify the DEPARTMENT or its agent within sixty (60)
      days of the discovery or sixty (60) days from the date that the MCO had
      the data to determine that the enrollment was in error, whichever comes
      first. Other than the case of a newborn retroactively enrolled, failure to
      notify the DEPARTMENT or its agent within the parameters defined in this
      section and within established procedures will result in the retention of
      the Member by the MCO for the erroneous period of enrollment.

3.27  SPECIAL DISENROLLMENT

a.    The MCO may request in writing and the DEPARTMENT may approve
      disenrollment of specific Members when there is good cause. The request
      shall cite the specific event(s), date(s) and other pertinent information
      substantiating the MCO's request. Additionally, the MCO shall submit any
      other information concerning the MCO's request that the DEPARTMENT may
      require in order to make a determination in the case.

b.    Good cause is defined as a case in which a Member:

      1.    Exhibits uncooperative or disruptive behavior. If, however, such
            behavior results from the Member's special needs, good cause may
            only be found if the Member's continued enrollment seriously impairs
            the MCO's ability to furnish services to either the particular
            Member or others; or

      2.    Permits others to use or loans his or her membership card to others
            to obtain care or services.

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c.    The following shall not constitute good cause:

      1.    extensive or expensive health care needs;

      2.    a change in the member's health; status;

      3.    the member's diminished mental capacity; or

      4.    uncooperative or disruptive behavior related to a medical condition
            except as described in b.l, above.

d.    The effective date for an approved disenrollment shall be no later than
      the first day of the second month following the month in which the MCO
      files the disenrollment request. If the DEPARTMENT fails to make the
      determination within this timeframe, the disenrollment shall be deemed
      approved.

e.    The DEPARTMENT will notify an MCO prior to enrollment if a Member was
      previously disenrolled for cause from another MCO pursuant to this section

3.28  LINGUISTIC ACCESS

a.    The MCO shall take appropriate measures to ensure adequate access to
      services by Members with limited English proficiency. These measures shall
      include, but not be limited to the promulgation and implementation of
      policies on linguistic accessibility for MCO staff, network providers and
      subcontractors; the identification of a single individual at the MCO for
      ensuring compliance with linguistic accessibility policies; identification
      of persons with limited English proficiency as soon as possible following
      enrollment; provisions for translation services; and the provision of a
      Member handbook, notices of action and grievance/administrative hearing
      information in languages other than English. The MCO shall notify its
      members that oral interpretation is available for any language.

b.    Member educational materials must also be available in languages other
      than English and Spanish when more than five (5) percent of the MCO's
      Members in any county served by the MCO speaks the alternative language,
      provided, however, this requirement shall not apply if the alternative
      language has no written form. The MCO may rely upon initial enrollment and
      monthly enrollment data from the DEPARTMENT's Eligibility Management
      System (EMS) to determine the percentage of Members who speak alternative
      languages. The MCO shall inform members that written materials are
      available in these alternative languages.

c.    The MCO shall also take appropriate measures to ensure access to services
      by persons with visual and hearing disabilities. This shall include the
      provision of information in alternative formats and in an appropriate
      manner that takes into

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August 13 2003

      consideration the special needs of Members with disabilities. Information
      concerning Members with visual impairments and hearing disabilities will
      be made available through the daily and monthly EMS enrollment data.

SANCTION: For each documented instance of failure to provide appropriate
linguistic accessibility to Members, the DEPARTMENT may impose a strike towards
a Class A sanction pursuant to Section 7.05.

3.29  SERVICES TO MEMBERS

a.    The MCO shall have in place an ongoing process of Member education which
      includes, but is not limited to: development of a Member handbook;
      provider directory; newsletter; and other Member educational materials.
      The MCO's written materials for members must be in a language and format
      that may be easily understood. All written materials and correspondence to
      Members shall be culturally sensitive and written at no higher than a
      seventh grade reading level. All Member educational materials must be in
      both English and Spanish.

b.    At the time of initial enrollment, the MCO shall provide a member handbook
      to each Member. If a Member loses eligibility and re-enrolls in the MCO
      less than ninety (90) days after losing eligibility, the MCO is not
      required to send a new handbook. If the lapse in enrollment is more than
      ninety (90) days, the MCO shall send a new handbook. The MCO shall mail
      the Member handbook and provider directory to Members within one week of
      enrollment notification. At least once a year, thereafter, the MCO shall
      notify the Members of their right to request the following information.
      The Member handbook shall address and explain, at a minimum, the
      following:

        1.  The amount, duration and scope of covered services under the
            contract in sufficient detail that the Member understands the
            benefits to which they are entitled;

        2.  Restrictions on services (including limitations and services not
            covered) and circumstances in which the Member could be held liable
            for payment for services;

        3.  Prior authorization process;

        4.  Definition of and distinction between emergency care and urgent care
            and the extent to which emergency coverage is available, including:
            the fact that prior authorization is not necessary for emergency
            care, the procedures for obtaining emergency services including the
            use of 911; the locations of emergency settings which provide
            emergency services and post-stabilization services; the fact that
            the Member can obtain emergency care in any hospital or other
            setting and the post stabilization rules;

        5.  Policies on the use of urgent care services including a phone number
            which can be used for assistance in obtaining urgent care;

        6.  How to access care twenty-four (24) hours a day;

        7.  Assistance with appointment scheduling;

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        8.  Member rights and responsibilities, as described in Section 3.03;

        9.  Member services, including hours of operation;

        10. Enrollment/disenrollment/plan changes;

        11. Procedures for selecting and changing PCPs;

        12. Policies on referrals for specialty care and other benefits not
            furnished by the PCP;

        13. Availability of provider network directory and updates;

        14. An explanation of circumstances in which a Member is responsible for
            making co-payments;

        15. Restrictions on the Member's freedom of choice among providers;

        16. Limited liability for services from out-of-network providers;

        17. Access and availability standards;

        18. Special access and other MCO features of the health plan's program;

        19. Family planning services and the availability of family planning
            from out-of network providers;

        20. Case management services targeted to Members as medically necessary
            and appropriate;

        21. The MCO's appeal and the DEPARTMENT's administrative hearing
            process, including the right to a hearing, the method for obtaining
            a hearing, the right to representation; the right to file appeals
            and hearing requests and the time frames for filing; the
            availability of assistance with filing; the toll-free numbers for
            filing appeals; the circumstances in which services will be
            continued pending a hearing; the MCO's provider appeal process;

        22. Procedures to request non-emergency transportation and
            transportation options;

        23. EPSDT services for children;

        24. Coordination of benefits and third party liability;

        25. Description of drug formulary, prior approval and temporary supply
            process, if applicable

        26. Advance directives; and

        27. How to obtain any benefits that are available under the Connecticut
            Medicaid Plan but are not covered under this contract.

      Upon request, the MCO shall also provide Members with information on the
      structure and operation of the MCO and physician incentive plans.

c.    The MCO's provider directory shall include, at a minimum, the names,
      location, telephone numbers and non-English languages spoken by current
      contracted providers in the Member's service area, including
      identification of providers that are not accepting new patients. The
      provider directory shall include, at a minimum, information on PCPs,
      specialists and hospitals. The MCO shall make a good faith effort to give
      written notice of termination of a network provider within fifteen (15)
      days after receipt or issuance of the termination notice to each Member
      who designated the provider as his or her PCP and each member who was seen
      on a regular basis by the terminated provider.

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d.    All Member educational materials must be prior approved by the DEPARTMENT.
      Educational materials include, but are not limited to: Member handbook;
      Membership card; introductory and other text language from the provider
      directory; and all communications to Members that include HUSKY A program
      information. The MCO must wait until receiving DEPARTMENT written approval
      or thirty (30) days from the date of submittal before disseminating
      educational materials to Members. The DEPARTMENT reserves the right to
      request revisions or changes in the material at any time.

e.    The DEPARTMENT shall, to the extent feasible, notify the MCO more than
      thirty (30) days in advance of any significant change to the HUSKY
      program, for example a change in the scope of covered services resulting
      from legislation. The MCO shall give each Member written notice of any
      significant change, at least 30 days before the intended effective date of
      the change.

      The MCO must provide periodic updates to the handbook or inform Members,
      as needed, of changes to the Member information discussed above. The MCO
      shall update its Member handbook to incorporate all provisions and
      requirements of this contract within six (6) weeks of the start date. The
      MCO shall distribute the Member handbook within six (6) weeks of receiving
      the DEPARTMENT's written approval.

f.    The MCO shall maintain an adequately staffed Member services office to
      receive telephone calls and to meet personally with Members in order to
      answer Members' questions, respond to Members' complaints and resolve
      problems informally.

g.    The MCO shall identify to the DEPARTMENT the individual who is responsible
      for the performance of the Member Services Department.

h.    The MCO's Member Services Department shall include bilingual staff
      (Spanish and English) and translation services for non-English speaking
      Members. The MCO shall also make available translation services at
      provider sites either directly or through a contractual obligation with
      the service provider.

i.    The MCO shall require members of the Member Services Department to
      identify themselves to Members when responding to Members' questions or
      complaints. At a minimum, ninety (90) percent of all incoming calls shall
      be answered by a staff Member within the first minute and the call
      abandonment rate shall not exceed five (5) percent. The MCO sha11 submit
      call response and abandonment reports for the preceding six (6) month
      period to the DEPARTMENT upon request.

j.    When Members contact the Member Services Department to ask questions
      about, or complain about, the MCO's failure to respond promptly to a
      request for goods

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      or services, or the denial, reduction, suspension or termination of goods
      or services, the MCO shall: attempt to resolve such concerns informally,
      and inform Members of the appeal and administrative hearing processes and,
      upon request, mail to them, within one business day, forms and
      instructions for filing a grievance.

k.    The MCO shall maintain a grievance report in the format designated by the
      DEPARTMENT pursuant to Section 6.01. These reports shall be made available
      to the DEPARTMENT upon request

l.    At the time of enrollment and at least anually thereafter, the MCO shall
      inform its Members of the procedural steps for filing an appeal and
      requesting an administrative hearing.

m.    The MCO shall monitor and track PCP transfer requests and follow up on
      complaints made by Members as necessary.

n.    The MCO will participate in an NCQA Consumer Assessment of Health Plans
      Survey (CAHPS) of combined HUSKY A and B Members using an independent
      vendor, and paid for by the MCO.

o.    The MCO may provide outreach to its current Members at the time of the
      Member's renewal of eligibility. The outreach may involve special mailings
      or phone calls as reminders that the Member must complete the HUSKY
      renewal forms to ensure continued coverage.

SANCTION: If either the incoming call response or call abandonment standards set
forth in paragraph h are not met for ninety (90) percent of the days during the
six (6) month review period, the DEPARTMENT may impose a strike towards a Class
A sanction pursuant to Section 7.05.

3.30  INFORMATION TO POTENTIAL MEMBERS

Informational materials for potential members shall also be provided in a manner
and format that may be easily understood. The MCO shall make the following
information available to potential Members, upon request the locations,
qualifications, non-English languages spoken by and availability of the MCO's
network providers. The MCO shall provide a summary of this information to the
DEPARTMENT, in a format to be approved by the DEPARTMENT. The DEPARTMENT shall
provide the summary information to all potential Members.

The MCO shall also provide oral interpretation services in all non-English
languages to potential Members.

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3.31  MARKETING REQUIREMENTS

DSS marketing restrictions apply to subcontractors and providers of care as well
as to the MCOs. The MCO shall notify all its subcontractors and network
providers of the DEPARTMENT's marketing restrictions. The detailed marketing
guidelines are set forth in Appendix D.

a.    PROHIBITED MARKETING ACTIVITIES

      The following activities are prohibited, in all forms of communication,
      regardless of whether they are performed by the MCO directly, by its
      contracted providers, or its subcontractors:

      1.    Asserting or implying that a Member will lose or not qualify for
            HUSKY benefits unless he/she enrolls in the MCO, or creating other
            threatening scenarios that do not accurately depict the consequences
            of choosing a different MCO;

      2.    Discriminating (in marketing or in the course of the enrollment
            process) against any eligible individual on the basis of health
            status or need for future health care services;

      3.    Making inaccurate, misleading or exaggerated statements (e.g. about
            the nature of the eligibility or enrollment process, the positive
            attributes of the MCO, or about the disadvantages of competing
            MCOs);

      4.    Any unsolicited personal contact including telephonic, door-to-door
            marketing or other cold call marketing or enrollment activities to
            potential Members;

      5.    Failing to submit for approval marketing materials or marketing
            approaches when such approval is required by DSS (see Appendix D).
            MCOs, subcontractors and their providers must wait until receiving
            DSS written approval before disseminating any such information to
            potential Members. DSS reserves the right to request revisions or
            changes in material at any time;

      6.    Making any statements or assertions that the MCO is endorsed by the
            DEPARTMENT or CMS or any other governmental entity;

      7.    Seeking to influence enrollment in conjunction with the sale or
            offering of private insurance; and

      8.    Conducting any form of individual or group solicitation activity
            other than those expressly permitted under Appendix D, the DSS
            Marketing Guidelines, unless prior approval is obtained from DSS.

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b.    Any type of marketing activity which has not been clearly specified as
      permissible under these guidelines should be assumed to be prohibited. The
      MCO shall contact the DEPARTMENT for guidance and approval for any
      activity not clearly permissible under these guidelines.

c.    The MCO shall submit all marketing materials to the DEPARTMENT for
      approval. The DEPARTMENT will provide comments on the marketing materials
      to the MCO within thirty (30) days of receipt of the materials.

d.    The MCO shall ensure that, before enrolling, members receive accurate
      written information needed to make an informed decision on whether to
      enroll.

e.    The MCO shall distribute marketing materials on a statewide basis.

SANCTION: If the MCO or its providers fails to submit marketing materials for
prior approval, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

SANCTION: If the MCO or its providers engages in inappropriate marketing
activities at provider sites, the DEPARTMENT may impose a Class B or Class C
sanction pursuant to Section 7.05 as it deems appropriate.

SANCTION: If the MCO or its providers engages in cold call or door-to-door
marketing, the DEPARTMENT may impose Class C sanctions pursuant to Section 7.05.

3.32  HEALTH EDUCATION

The MCO must routinely, but no less frequently than annually, remind and
encourage Members to utilize benefits including physical examinations which are
available and designed to prevent illness. The MCO must also offer periodic
screening programs which in the opinion of the medical staff would effectively
identify conditions indicative of a health problem. The MCO shall keep a record
of all activities it has conducted to satisfy this requirement.

3.33  INTERNAL AND EXTERNAL QUALITY ASSURANCE

a.    The MCO is required to provide a quality level of care for all services
      that it provides and for which it contracts. These services are expected
      to be medically necessary and may be provided by participating providers.
      A Quality Assessment and Performance Improvement program shall be
      implemented by the MCO to assure the quality of care. The EQRO shall
      monitor the MCO's compliance with all requirements in this section.

b.    The MCO shall comply with federal regulations and DEPARTMENT policies and
      requirements concerning Quality Assessment and Performance Improvement and

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      utilization review set forth below. The MCO will develop and implement an
      internal Quality Assessment and Performance Improvement program consistent
      with the Quality Assessment and Performance program guidelines as provided
      in Appendix E.

c.    The MCO shall comply with all applicable federal regulations concerning
      Quality Assessment and Performance Improvement.

d.    The MCO shall operate a Quality Assessment and Performance Improvement
      system which:

      1.    Is consistent with applicable federal regulations;

      2.    Provides for review by appropriate health professionals of the
            process followed in providing health services;

      3.    Provides for systematic data collection of performance and
            participant results;

      4.    Provides for interpretation of these data to the practitioners;

      5.    Provides for making needed changes;

      6.    Provides for the performance of at least one performance improvement
            project of the MCO's own choosing;

      7.    Provides for participation in at least one performance improvement
            project conducted by the EQRO; and

      8.    Has in effect mechanisms to detect both under utilization and over
            utilization of services.

e.    The MCO shall provide descriptive information on the operation,
      performance and success of its Quality Assessment and Performance
      Improvement program to the DEPARTMENT or its agent upon request.

f.    The MCO shall maintain and operate a Quality Assessment and Performance
      Improvement program which includes at least the following elements:

      1.    A Quality Assessment and Performance Improvement plan.

      2.    A full-time Quality Assessment and Performance Improvement Director,
            who is responsible for the operation and success of the Quality
            Assessment and Performance Improvement Program. This person shall
            have adequate experience to ensure successful Quality Assessment and
            Performance Improvement, and shall be accountable for the Quality
            Assessment and Performance Improvement systems of all the MCO's
            providers, as well as the MCC's subcontractors.

      3.    The Quality Assessment and Performance Improvement Director shall
            spend an adequate percentage of time on Quality Assessment and
            Performance Improvement activities to ensure that a successful
            Quality Assessment and Performance Improvement Program will exist.
            Under the

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            Quality Assessment and Performance Improvement program, there shall
            be access on an as-needed basis to the full compliment of health
            professions (e.g., pharmacy, physical therapy, nursing, etc.) and
            administrative staff. Oversight of the program shall be provided by
            a Quality Assessment and Performance Improvement committee that
            includes representatives from:

                  a.    a variety of medical disciplines (e.g., medicine,
                        surgery, mental health, etc.);

                  b.    administrative staff; and Board of Directors of the MCO.

      4.    Make available case management training for PCPs designed by the
            DEPARTMENT or its agent.

g.    The Quality Assessment and Performance Improvement committee shall be
      organized operationally within the MCO such that it can be responsible for
      all aspects of the Quality Assessment and Performance Improvement program.

h.    Quality Assessment and Performance Improvement activities shall be
      sufficiently separate from Utilization Review activities, so that Quality
      Assessment and Performance Improvement activities can be distinctly
      identified as such.

i.    The Quality Assessment and Performance Improvement activities of the MCO's
      network providers and subcontractors, if separate from the MCO's Quality
      Assessment and Performance Improvement activities, shall be integrated
      into the overall MCO Quality Assessment and Performance Improvement
      program, and the MCO shall provide feedback to the in-network
      providers/subcontractors regarding the operation of any such independent
      Quality Assessment and Performance Improvement effort. The MCO shall
      remain, however, fully accountable for all Quality Assessment and
      Performance Improvement relative to its in-network providers and
      subcontractors.

j.    The Quality Assessment and Performance Improvement committee shall meet at
      least quarterly and produce written documentation of committee activities
      to be shared with the DEPARTMENT.

k.    The results of the Quality Assessment and Performance Improvement
      activities shall be reported in writing at each meeting of the Board of
      Directors.

l.    The MCO shall have a written procedure for following up on the results of
      Quality Assessment and Performance Improvement activities to determine
      success of implementation. Follow-up shall be documented in writing.

m.    Where the DEPARTMENT determines that a Quality Assessment and Performance
      Improvement plan does not meet the above requirements, the DEPARTMENT may
      provide the MCO with a model plan. The MCO agrees to

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      modify its Quality Assessment and Performance Improvement plan based on
      negotiations with the DEPARTMENT.

n.    The MCO shall monitor access to and quality of health care goods and
      services for its Member population, and, at a minimum, use this mechanism
      to capture and report all of the DEPARTMENT's required utilization data.
      The MCO shall be subject to an annual medical audit by the DEPARTMENT's
      Quality Assessment and Performance Improvement contractor and shall
      provide access to the data and records requested for this purpose.

o.    To the extent permitted under state and federal law, the MCO certifies
      that all data and records requested shall, upon reasonable notice, be made
      available to the DEPARTMENT or its agent.

p.    The MCO will be an active participant in at least one of the EQRO's
      quality improvement focus studies each year

q.    The MCO must comply with external quality review that will be implemented
      by an organization contracted by the DEPARTMENT. This may include
      participating in the design of the external review, collecting data
      including, but not limited to, encounter and medical data, and/or making
      data available to the review organization.

r.    The MCO must conduct at least one performance improvement project that:

      1.    Focuses on one of the following areas:

            a.    Prevention and care of acute and chronic conditions;

            b.    High volume services;

            c.    Continuity and coordination of care;

            d.    Appeals, grievances and complaints;

            e.    Access to and availability of services; or

            f.    Other projects subject to DEPARTMENT approval.

      2.    Includes the measurement of performance and quality indicators that
            are:

            a.    Objective;

            b.    Clearly and unambiguously defined;

            c.    Based on current clinica1 knowledge or health services
                  research;

            d.    Valid and reliable;

            e.    Systematically collected; and

            f.    Capable of measuring outcomes such as changes in health status
                  or Member satisfaction or valid proxies of those outcomes.

      3.    Implements system interventions to achieve quality improvement;

      4.    Evaluates the effectiveness of the interventions;

      5.    Plans and initiates activities for increasing or sustaining
            improvement; and

      6.    Represents the entire population to which the quality indicator is
            relevant.

s.    The MCO shall maintain a health information system that collects,
      analyzes,

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      integrates and reports data. The system must provide information on areas
      including but not limited to utilization, appeals and hearings.

t.    With the approval of the DEPARTMENT, the MCO may conduct performance
      improvement projects for the combined HUSKY A and HUSKY B populations.

3.34  INSPECTION OF FACILITIES

a.    The MCO shall provide the State of Connecticut and any other legally
      authorized governmental entity, or their authorized representatives, the
      right to enter at all reasonable times the MCO's premises or other places,
      including the premises of any subcontractor, where work under this
      contract is performed to inspect, monitor or otherwise evaluate work
      performed pursuant to this contract. The MCO shall provide reasonable
      facilities and assistance for the safety and convenience of the persons
      performing those duties. The DEPARTMENT and its authorized agents will
      request access in advance in writing except in case of suspected fraud and
      abuse.

b.    In the event right of access is requested under this section, the MCO or
      subcontractor shall upon request provide and make available staff to
      assist in the audit or inspection effort, and provide adequate space on
      the premises to reasonably accommodate the State or Federal
      representatives conducting the audit or inspection effort.

c.    The MCO shall be given ten (10) business days to respond to any findings
      of an audit before the DEPARTMENT shall finalize its findings. All
      information so obtained will be accorded confidential treatment as
      provided under applicable law.

3.35  EXAMINATION OF RECORDS

a.    The MCO shall develop and keep such records as are required by law or
      other authority or as the DEPARTMENT determines are necessary or useful
      for assuring quality performance of this contract. The DEPARTMENT shall
      have an unqualified right of access to such records in accordance with
      Part II Section 3.34.

b.    Upon non-renewal or termination of this contract, the MCO shall turn over
      or provide copies to the DEPARTMENT or to a designee of the DEPARTMENT all
      documents, files and records relating to persons receiving services and to
      the administration of this contract that the DEPARTMENT may request, in
      accordance with Part II, Section 3.34.

c.    The MCO shall provide the DEPARTMENT and its authorized agents with
      reasonable access to records the MCO maintains for the purposes of this
      contract.

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      The DEPARTMENT and its authorized agents will request access in writing
      except in cases of suspected fraud and abuse. The MCO must make all
      requested medical records available within thirty (30) days of the
      DEPARTMENT's request. Any contract with a subcontractor must include a
      provision specifically authorizing access in accordance with the terms set
      forth in Part II, Section 3.34.

d.    The MCO shall maintain the confidentiality of patients' records in
      conformance with this contract and state and federa1 statutes and
      regulations, including but not limited to the Health Insurance Portability
      and Accountability Act (HIPAA), 42 U.S.C. Section 1320 d-2 et seq. and the
      implementing privacy regulations at 45 CFR pts. 160 and 164.

e.    The MCO, for purposes of audit or investigation, shall provide the State
      of Connecticut, the Secretary of HHS and his/her designated agent, and any
      other legally authorized governmental entity or their authorized agents
      access to all the MCO's materials and information pertinent to the
      services provided under this contract, at any time, until the expiration
      of three (3) years from the completion date of this contract as extended.

f.    The State and its authorized agents may record any information and make
      copies of any materials necessary for the audit.

g.    The MCO and its subcontractors shall retain financial records, supporting
      documents, statistical records and all other records supporting the
      services provided under this contract for a period of five (5) years from
      the completion date of this contract. The MCO shall make the records
      available at all reasonable times at the MCO's general offices. The
      DEPARTMENT and its authorized agents will request access in writing except
      in cases of suspected fraud and abuse. If any litigation, claim or audit
      is started before the expiration of the five (5) year period, the records
      must be retained until all litigation, claims or audit findings involving
      the records have been resolved. The MCO must make all requested records
      available within thirty (30) days of the DEPARTMENT's request.

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3.36  MEDICAL RECORDS

a.    In compliance with all state and federal law governing the privacy of
      individually identifiable health care information including the Health
      Insurance Portability and Accountability Act (HIPAA), 42 USC Sections
      1320d-2 et seq., and the implementing privacy regulations at 45 CFR pts
      160 and 164, the MCO shall establish a confidential, centralized record,
      for each Member, which includes information of all medical goods and
      services received. The MCO may delegate maintenance of the centralized
      medical record to the Member's PCP, provided however, that the record
      shall be made available upon request and reasonable notice, to the
      DEPARTMENT or its agent(s) at a centralized location. The medical record
      shall meet the DEPARTMENT's medical record requirements as defined by the
      DEPARTMENT in its regulations, and shall comply with the requirements of
      NCQA or other national accrediting body with a recognized expertise in
      managed care.

b.    The MCO shall also simultaneously maintain, with the medical record, a
      record of all contacts with each Member that the MCO will maintain in a
      computerized database and make available to the DEPARTMENT, at its
      request. Claims and encounter records will be provided to the DEPARTMENT
      in an electronic medium as specified by the DEPARTMENT, and its agent(s).
      The medical record shall demonstrate coordination of Member care; for
      example, relevant medical information from referral sources and
      out-of-network family planning providers shall be reviewed and entered
      into Members' medical records. For those MCOs that are governed under
      Connecticut General Statutes Chapter 705 Section 38a-975 et seq., known as
      the "Connecticut Insurance Information and Privacy Act", such MCO shall be
      required to observe the provisions of such Act with respect to disclosure
      of personal and privileged information as such terms are defined under the
      Act.

c.    The MCO shall not turn over or provide documents, files and records
      pertaining to a Member to another health plan unless the Member has
      changed enrollment to the other plan and the MCO has been so notified by
      the DEPARTMENT or its agent.

3.37  AUDIT LIABILITIES

In addition to and not in any way in limitation of the MCO's obligations
pursuant to this contract, it is understood and agreed by the MCO that the MCO
shall be held liable for any finally determined State or Federal audit
exceptions and shall return to the DEPARTMENT all payments made under the
contract to which exception has been taken or which have been disallowed because
of such an exception.

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3.38  CLINICAL DATA REPORTING

a.    Utilization Reporting: The MCO shall submit reports to the DEPARTMENT in
      the areas listed below. The purpose of the reports is to assist the
      DEPARTMENT in its efforts to assess utilization and evaluate the
      performance of the HUSKY A program and of the MCO.

      Utilization reports shall cover the following areas:

      1.    Inpatient Care;

      2.    Preventive Care;

      3.    Dental Care;

      4.    Behavioral Health Care;

      5.    Other Services;

      6.    Maternal and Child Health;

      7.    EPSDT, known as HealthTrack; and

      8.    Immunization Information.

b.    The DEPARTMENT shall consult with the MCO, through a workgroup comprised
      of DEPARTMENT and MCO representatives that meets on a periodic basis, or a
      similar process, on the necessary data, methods of collecting the data and
      the format and media for new reports or changes to existing reports.

c.    The DEPARTMENT shall provide the MCO with final specifications for
      submitting all reports no less than ninety (90) days before the reports
      are due. The MCO shall submit reports on a schedule to be determined by
      the DEPARTMENT, but not more frequently than quarterly. Before the
      beginning of each calendar year, the DEPARTMENT shall provide the MCO with
      a schedule of utilization reports which shall be due that calendar year.
      Due dates for the reports shall be at the discretion of the DEPARTMENT,
      but not earlier than ninety (90) days after the end of the period that
      they cover.

d.    For each report the DEPARTMENT shall consider using any HEDIS standards
      promulgated by the NCQA which cover the same or similar subject matter.
      The DEPARTMENT reserves the right to modify HEDIS standards, or not use
      them at all, if in the DEPARTMENT's judgment, the objectives of the HUSKY
      A program can be better served by using other methods.

e.    EPSDT (HealthTrack): The MCO shall submit to the DEPARTMENT reports on
      compliance with screening requirements of the EPSDT program sufficient to
      enable the DEPARTMENT to comply with its reporting obligations under
      federal and state requirements and to assess and evaluate the performance
      of the MCO in the screening requirements of the EPSDT program. These
      obligations include, but are not limited to, submitting reports to federal
      and state agencies.

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f.    Maternal and Prenatal Care:

      The MCO shall report aggregate summary data on outcomes of maternal and
      prenatal care to the DEPARTMENT no less frequently than quarterly. Such
      data will include:

      1.    Number of deliveries during the quarter to women enrolled in the MCO
            at the time of delivery;

      2.    Number of live births;

      3.    Number of fetal deaths;

      4.    Number of very low birthweight babies, defined as weighing less than
            one thousand five hundred grams;

      5.    Number of hospital inpatient/NICU days for very low birthweight
            babies;

      6.    Number of moderately low birthweight babies, defined as weighing
            less than two thousand five hundred grams;

      7.    Number of hospital/NICU days for moderately low birthweight babies;

      8.    Number of deliveries by cesarean section;

      9.    Number of women who delivered and had no prenatal care;

      10.   Number of women with inadequate prenatal care;

      11.   Number of women with deliveries who have received a postpartum
            visit; and

      12.   For the purpose of adjusting comparisons amongst plans, aggregate
            measures of weeks of pregnancy at the time of enrollment in the
            plan.

      The report will be due within six (6) months after the last day of the
      quarter in which the deliveries occurred. The DEPARTMENT will specify the
      methodology for preparing the report, no less than ninety (90) days prior
      to the end of the quarter which is the subject of the report and after
      consultation with the MCO. If the change requires the collection of
      additional data elements not currently being captured, the DEPARTMENT will
      notify the MCO no less than ninety (90) days prior to the beginning of the
      first quarter affected by the change.

g.    Encounter Data:

      1.    The MCO shall provide the DEPARTMENT with an electronic record of
            every encounter between a network provider and a Member within
            fifteen (15) days of the close of the month in which the specific
            encounter occurred, was paid for, or was processed whichever is
            later but no later than 180 days from the encounter. Such encounters
            shall be coded and formatted in accordance with the specifications
            outlined in the State's Encounter Submission and Reporting Guide.
            The DEPARTMENT or its agent shall analyze each month's encounter
            submission file. The DEPARTMENT or its agent wi11 reject those
            records that contain invalid or missing data and result in a
            critical edit failures as outlined in the Encounter Submission and
            Reporting Guide.

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      2.    Encounter data and any other types of data submitted by the MCO that
            the DEPARTMENT designates as data relied upon by the DEPARTMENT to
            set rates must be certified by one of the following: the MCO's Chief
            Executive Officer or Chief Financial Officer or an individual who
            has delegated authority to sign for and who reports directly to
            either the Chief Executive Officer or Chief Financial Officer. The
            certification must attest, based on the best knowledge, information
            and belief, as follows: 1) to the accuracy, completeness and
            truthfulness of the data and 2) to the accuracy, completeness and
            truthfulness of the reports required pursuant to this section. The
            MCO shall submit the certification concurrently with the certified
            data.

      PERFORMANCE MEASURE: The overall volume of rejected encounters shall not
      exceed five (5) percent in any given month.

      3.    The MCO shall resubmit rejected encounter records in accordance with
            the following schedule:

            a.    90% of rejected encounters shall be resubmitted within 30
                  days;

            b.    95% of rejected encounters shall be resubmitted within 60
                  days;

            c.    no less than 98% of rejected encounters shall be resubmitted
                  within 90 days.

      4.    The DEPARTMENT or its agent shall also analyze the MCO's encounter
            submissions for completeness. On a quarterly basis, no less than six
            (6) months from the date of service on the encounter, the DEPARTMENT
            or its agent will compare encounter data utilization levels to the
            MCO self-reported utilization levels in the reports specified in
            Sections 3.38(a)-(f).

      PERFORMANCE MEASURE: Encounter data shall not be over or under the MCO
      self-reported utilization levels for the same time period by ten (10)
      percent or more.

      5.    The DEPARTMENT or its EQRO, may choose a random sample of no more
            than one hundred (100) encounters for each year. The MCO will make
            the medical records of each encounter so chosen available to the
            DEPARTMENT or EQRO at a central location upon reasonable notice. The
            EQRO shall review the medical records and report back to the
            DEPARTMENT on the extent to which the information in each field of
            the encounter record corresponds to the information contained in the
            medical record. Prior to making its report to the DEPARTMENT, the
            EQRO shall afford the MCO a reasonable opportunity to suggest
            corrections to or comment upon the EQRO's findings.

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August 8, 2003

SANCTION: Failure to comply with the above reporting requirements in a complete
and timely manner may result in a strike towards a Class A sanction pursuant to
Section 7.05.

3.39  UTILIZATION MANAGEMENT

a.    The MCO and all subcontractors are required to be licensed by the
      Connecticut Department of Insurance as utilization review companies. The
      MCO may subcontract with a licensed utilization review company to perform
      some or all of the MCO's utilization management functions.

b.    The MCO and its subcontractors shall develop and adhere to written
      policies and procedures for processing requests for initial and continuing
      authorizations of services. The MCO shall have mechanisms in place to
      ensure consistent application of review criteria for authorization
      decisions. Authorization decisions must be made by a health care
      professional who has appropriate clinical expertise in treating the
      Member's condition or disease.

c.    The MCO must provide a written notice of action, as described in Section
      6.02, of any decision to deny a service authorization request or to
      authorize a service in an amount, duration, or scope that is less than
      requested or any decision to terminate, suspend or reduce a previously
      authorized Medicaid-covered service. The provider requesting authorization
      shall also receive notice of authorization decisions, except the provider
      notice need not be in writing.

d.    The MCO shall make authorization decisions and issue a written notice of
      action and notice to the provider as expeditiously as the Member's health
      condition requires, but not to exceed fourteen (14) calendar days
      following receipt of the request for service. This standard 14 day
      authorization period may be extended one time only by an additional
      fourteen (14) days if:

      1.    the Member or requesting provider asks for an extension; or

      2.    the MCO documents that the extension is in the Member's interest
            because additional information is needed to authorize the service
            and the failure to extend the timeframe will result in the denial of
            the service. The DEPARTMENT may request such documentation from the
            MCO.

e.    The MCO shall expedite its authorization decision if a provider indicates,
      or the MCO determines that following the timeframe in subsection (d) of
      this section could seriously jeopardize the Member's life or health or
      ability to attain, maintain or regain maximum function. In such
      circumstances the MCO shall issue a decision no later than three working
      days after receipt of the request for service. This three day period may
      be extended for an additional fourteen days if either criteria in (d)(l)
      or (d)(2). above, are met.

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August 8, 2003

f.    If the MCO subcontracts for any portion of the utilization management
      function, the MCO shall provide a copy of any such subcontract to the
      DEPARTMENT and any such subcontracts will be subject to the provisions of
      Section 5.08 of this contract. The DEPARTMENT will review and approve the
      subcontract, subject to the provisions of Section 3.45, to ensure the
      appropriateness of the subcontractor's policies and procedures. The MCO is
      required to conduct regular and comprehensive monitoring of the
      utilization management subcontractor.

g.    The MCO shall not compensate any subcontractor or other entity performing
      utilization management or utilization review functions so as to provide
      any incentive for the individual to deny, limit or discontinue medically
      necessary services to any Member.

3.40  FINANCIAL RECORDS

a.    Accounting: The MCO shall maintain for the purpose of this contract, an
      accounting system of procedures and practices that conforms to Generally
      Accepted Accounting Principles.

b.    The MCO shall permit audits or reviewe by the DEPARTMENT and HHS or their
      agent(s) of the MCO's financial records related to the performance of this
      contract and, for any subcontract that is a risk contract as defined in 42
      CFR 438.2, any such subcontractors' financial records related to the
      performance of this contract. In addition, the MCO will be required to
      provide Claims Aging Inventory Reports, Claims Turn Around Time Reports,
      cost, and other reports as outlined in subsections (c) and (d) below or as
      otherwise directed by the DEPARTMENT.

c.    Reports specific to the MCO's Medicaid line of business shall be provided
      in formats developed by the DEPARTMENT. All reports described in Sections
      3.40(c)(1) and 3.40(c)(2) shall contain separate sections for HUSKY A and
      HUSKY B. It is anticipated that the requirements in this area will be
      modified to enable the DEPARTMENT to respond to inquiries that the
      DEPARTMENT receives regarding the financial status of the HUSKY program,
      to determine the relationship of capitation payments to actual
      appropriations for the program, and to allow for proper oversight of
      fiscal issues related to the managed care programs. The MCO will cooperate
      with the DEPARTMENT or its agent(s) to meet these objectives. The
      following is a list of required reports:

      1.    Audited financial reports with an income statement by MCO HUSKY line
            of business. If the MCO is licensed as a health care center or
            insurance company, both the annual audited financial reports for the
            MCO and the audited financial reports per MCO HUSKY line of business
            shall be conducted and reported in accordance with C.G.S. Section
            38a - 54. If the MCO is not licensed as a health care center or
            insurance company, the annual audited financial reports for the MCO
            and the audited financial reports per

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August 8, 2003

            MCO line of business shall be completed in accordance with generally
            accepted auditing principles.

            The MCO may elect to combine HUSKY A and HUSKY B in the audited
            financial statement. If this election is made, the MCO shall also
            submit the following: a separate unaudited income statement for
            HUSKY A and HUSKY B, which will be compared to the audited financial
            statement.

      2.    Unaudited financial reports, HUSKY line of business (formats shown
            in Appendix F). The reports shall be submitted quarterly, forty-five
            (45) days subsequent to the end of each quarter. Every line of the
            requested report must contain a dollar figure or an indication that
            said line is not applicable.

      3.    Annual and Quarterly Statements. If the MCO is licensed as a health
            care center or insurance company, the MCO is required to submit
            Annual and Quarterly Statements to the Department of Insurance in
            accordance with C.G.S. Section 38a-53. One copy of each statement
            shall be submitted to the DEPARTMENT in accordance with the
            Department of Insurance submittal schedule.

      4.    Claims Aging Inventory Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). The Claims Aging Inventory
            Report will include a11 HUSKY claims outstanding as of the end of
            each quarter by type of claim, claim status and aging categories. If
            a subcontractor is used to provide services and adjudicate claims or
            a vendor is used to adjudicate claims, the MCO is responsible for
            providing a Claims Aging Inventory Report in the required format for
            each current or prior subcontractor who has claims outstanding. The
            Claims Aging Inventory Reports will be submitted to the DEPARTMENT
            forty-five (45) days subsequent to the end of each quarter.

      5.    Denied Claims Report. The MCO shall also submit a Denied Claims
            report, to include all HUSKY provider claims denied as of the end of
            each quarter. The MCO and the DEPARTMENT shall establish a joint
            workgroup to develop the criteria and format for the denied claims
            report.

      6     Claims Turn Around Time Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). For those claims processed
            in forty-six (46) days or more, the report shall indicate if
            interest was paid in accordance with Section 3.46 of this contract.
            If a subcontractor is used to provide services and adjudicate claims
            or a vendor is used to adjudicate claims, the MCO is responsible for
            providing a Claims Turn Around Time Report in the required format
            for each current or prior subcontractor who has claims outstanding.
            The Claims Turn

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            Around Time Report will be submitted to the DEPARTMENT forty-five
            (45) days subsequent to the end of each quarter.

d.    The MCO shall maintain accounting records in a manner which will enable
      the DEPARTMENT to easily audit and examine any books, documents, papers
      and records maintained in support of the contract. All such documents
      shall be made available to the DEPARTMENT at its request, and shall be
      clearly identifiable as pertaining to the contract.

e.    The MCO shall make available on request all financial reports required by
      the terms of any current contract with any other state agency(s) provided
      the said agency agrees that such information may be shared with the
      DEPARTMENT.

f.    The MCO shall submit to the DEPARTMENT on a quarterly basis, capitation
      income and disbursement reports from mental health and dental
      subcontractors with whom they have a risk arrangement. The report shall be
      in a format specified by the DEPARTMENT and shall include total payment
      received for Medicaid members from the MCO and breakdown of payment by
      categories as specified in Sec. 3.45 (j)(2).

3.41  INSURANCE

a.    The MCO, its successors and assignees shall procure and maintain such
      insurance as is required by currently applicable federal and state law and
      regulation. Such insurance should include, but not be limited to, the
      following:

      1.    liability insurance (general, errors and omissions, and directors
            and officers coverage);

      2.    fidelity bonding or coverage of persons entrusted with handling of
            funds;

      3.    workers compensation; and

      4.    unemployment insurance.

b.    The MCO shall name the State of Connecticut as an additional insured party
      under any insurance, except for professional liability, workers
      compensation, unemployment insurance, and fidelity bonding maintained for
      the purposes of this contract. However, the MCO shall name the State of
      Connecticut as either a loss payee or additional insured for fidelity
      bonding coverage.

3.42  THIRD PARTY COVERAGE

The DEPARTMENT is the payer of last reson when third party resources are
available to cover the costs of medical services provided to Medicaid
recipients. Pursuant to this requirement, the MCO is required to comply with
federal and state statutes and regulations regarding third party liability. The
MCO shall be responsible for making every reasonable effort to determine the
legal liability of third parties to pay for services rendered to Members under
this contract. The MCO shall be responsible for identifying

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appropriate third party resources, and if questions arise they shall consult
with the DEPARTMENT. The MCO shall pursue, collect, and retain any monies from
third party payers for services to the MCO's Members under this contract,
subject to the following terms and conditions:

a.    The DEPARTMENT hereby assigns to the MCO all rights to third party
      recoveries from Medicare, health insurance, casualty insurance, workers'
      compensation, tortfeasors, or any other third parties who may be
      responsible for payment of medical costs for the MCO's Members.

      1.    The MCO will have primary responsibility for cost avoidance through
            the coordination of benefits relative to federal and private health
            insurance resources including, but not limited to Medicare,
            individual health insurance, employment-related group health
            insurance and self administered or self funded health benefit plan,
            including ERISA (Employee Retirement and Income Security Act) plans.
            The MCO shall avoid initial payments of claims, as permitted by
            federal law, where federal or private health insurance resources are
            available. When cost avoidance is not possible, the MCO may utilize
            post payment recovery. If a third party insurer requires the Member
            to pay any copayment, coinsurance or deductible, the MCO is
            responsible for making any such payments to the extent that the
            third party insurer's co-payment exceeds the co-payment applicable
            under this contract.

      2.    The MCO may assign the right of recovery to their subcontractors
            and/or network providers. Notwithstanding any such assignment of the
            right of recovery, the MCO remains responsible for the effective and
            diligent performance of third party recovery.

      3.    In pursing third party recovery, the MCO, network providers, and
            subcontractors shall seek recovery of the cost of services actually
            rendered to the Member, notwithstanding the fact that the MCO may
            pay the subcontractor on a capitated basis.

      4.    The MCO or its assignee must initiate third party recoveries within
            sixty (60) days of the date of service or within sixty (60) days
            after the end of the month in which the MCO 1earns of the existence
            of the liable third party. The MCO or its assignees must maintain
            dated documentation of all claims to third parties. The MCO must
            document initiation of recovery by formal communication in written
            or electronic form to the liable third party, specifically
            requesting reimbursement up to the legal limit of liability for any
            services provided to the MCO's Member covered under the State
            Medicaid Plan.

      5.    The right to pursue, collect and retain recovery from claims not
            initiated and documented within sixty (60) days as stated above,
            will revert to the

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            DEPARTMENT and the MCC or its assignees will lose any right of
            recovery.

      6.    When the MCO seeks recovery from a third party for care provided to
            a Member following an accident, the MCO may recover only its cost of
            care.

b.    The MCO shall maintain records of recoveries of all third party
      collections, including cost avoidance, and recovery actions. The
      DEPARTMENT will specify a schedule and format for reporting such
      collections. The amounts avoided or recovered by the MCO shall be
      considered in establishing future capitated rates paid to the MCO.

c.    The MCO shall fully cooperate with the DEPARTMENT in all third party
      recovery efforts.

d.    The DEPARTMENT shall supply the MCO with a monthly file of Members where
      third party coverage has been identified. The information shall also be
      available to the MCO and its assignees from the DEPARTMENT'S Automated
      Electronic Voice Response System.

e.    The MCO shall notify the DEPARTMENT within thirty (30) days if the MCO or
      its network provider or subcontractor discovers that a Member has become
      eligible for coverage by a liable third party. The MCO shall notify the
      DEPARTMENT within thirty (30) days if the MCO or its in-network provider
      or subcontractor discovers that a Member has lost eligibility for coverage
      by a liable third party.

3.43  COORDINATION OF BENEFITS AND DELIVERY OF SERVICES

a.    The MCO shall ensure that the rules related to the coordination of
      benefits in Section 3.41 do not present any barriers to Members' access to
      the covered services under this contract.

b.    The MCO shall educate its Members on how to access services when a Member
      is covered by a third party insurer.

c.    If a third party insurer requires the Member to pay any co-payment,
      coinsurance or deductible, the MCO is responsible for paying the portion
      of the third party insurer's co-payment that exceeds the co-payment
      applicable under this contract, not to exceed the amount allowed per the
      MCO's fee schedule, even if the services are provided outside of the MCO's
      provider network.

d.    If a Member's third party insurer pays for only some services covered
      under this contract or for only part of a particular service, the MCO
      shall be liable up to the allowed amount in accordance with the MCO's fee
      schedule, for the full extent of

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      services covered under this contract, even if the services are provided
      outside of the MCO's provider network.

e.    If a Member is covered by a third party insurer, the MCO is bound by any
      prior authorization decisions made by the third party insurer.

3.44  PASSIVE BILLING

Capitation payments to the MCO shall be based on a passive billing system. The
MCO is not required to submit claims for the capitation payment for its HUSKY A
membership. Capitation payments will be based on MCO membership data as
reflected in the enrollment files provided by the DEPARTMENT to the MCOs. On a
monthly basis ACS will provide the MCO with a detailed capitation remittance
file.

3.45  SUBCONTRACTING FOR SERVICES

   a. Licensed health care facilities, group practices and licensed health care
      professionals operating within the scope of their practice may contract
      with the MCO directly or indirectly through a subcontractor who directly
      contracts with the MCO. The MCO shall be held directly accountable and
      liable for all of the contractual provisions under this contract
      regardless of whether the MCO chooses to subcontract their
      responsibilities to a third party. No subcontract shall operate to
      terminate the legal responsibility of the MCO to assure that all
      activities carried out by the subcontractor conform to the provisions of
      the contract. Subcontracts shall not terminate the legal liability of the
      MCO under this contract.

   b. The MCO may subcontract for any function, excluding Member Services,
      covered by this contract, subject to the requirements of this contract.
      Before delegating any of the requirements of this contract, the MCO shall
      evaluate the prospective subcontractor's ability to perform the activities
      to be delegated. All subcontracts shall be in writing, shall include any
      general requirements of this contract that are appropriate to the services
      being provided, and shall assure that all delegated duties of the MCO
      under this contract are performed, including any reporting requirements.
      The subcontract shall also provide for revocation or other sanctions if
      the subcontractor's performance is inadequate. All subcontracts shall also
      provide for the right of the DEPARTMENT or other governmental entity to
      enter the subcontractor's premises to inspect, monitor or otherwise
      evaluate the work being performed as a delegated duty of this contract, as
      specified in Section 3.34, Inspection of Facilities. All subcontracts
      shall comply with the requirements of 42 CFR 4386 that are appropriate to
      the service or activity delegated under the subcontract.

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   c.    With the exception of subcontracts specifically excluded by the
         DEPARTMENT, all subcontracts shall include verbatim the HUSKY A
         definitions of Medical Appropriateness / Medically Appropriate and
         Medically Necessary/Medical Necessity as set forth in Part II, General
         Contract Terms for the MCOs. All subcontracts shall require the use of
         these definitions by subcontractors in all requests for approval of
         coverage of goods or services made on behalf of HUSKY A Members. All
         subcontracts shall also provide that decisions concerning both acute
         and chronic care must be made according to these definitions.

   d.    Within fifteen (15) days of the effective date of this contract, the
         MCO shall provide the DEPARTMENT with a report of those functions under
         this contract that the MCO shall be providing through a subcontract and
         copies of the contracts between the MCO and the subcontractor. The
         report shall identify the names of the subcontractors, their addresses
         and a summary of the services they will be providing. If the MCO enters
         into any additional subcontracts after the MCO's initial compliance
         with this section, the MCO shall obtain the advance written approval of
         the DEPARTMENT. The MCO shall provide the DEPARTMENT with a draft of
         the proposed subcontract thirty (30) days in advance of the completion
         of the MCO's negotiation of such subcontract. In addition, amendments
         to any subcontract, excluding those of a technical nature, shall
         require the pre-review and approval of the DEPARTMENT.

   e.    All behavioral health and dental subcontracts which include the payment
         of claims on behalf of HUSKY A Members for the provision of goods and
         services to HUSKY A Members shall require a performance bond, letter of
         credit, statement of financial reserves or payment withhold
         requirements. The performance bond, letter of credit, statement of
         financial reserves or payment withhold requirements shall be in a form
         mutually agreed upon by the MCO and the subcontractor. The amount of
         the performance bond shall be sufficient to ensure the completion of
         the subcontractor's claims processing and provider payment obligations
         under the subcontract in the event the contract between the MCO and the
         subcontractor is terminated. The MCO shall submit reports to the
         DEPARTMENT upon the DEPARTMENT's request related to any payments made
         from the performance bonds or any payment withholds.

   f.    All behavioral health and dental subcontracts which include the payment
         of claims on behalf of HUSKY A Members for the provision of goods and
         services to HUSKY A members shall require the submission of a
         capitation income and disbursement report in a format specified by the
         DEPARTMENT. The report shall be submitted quarterly and shall include
         the amount of payment received for Medicaid members; amount paid
         directly to providers of health services on behalf of Medicaid members;
         administrative costs and profits.

   g.    All subcontracts shall include provisions for a well-organized
         transition in the event of termination of the subcontract for any
         reason. Such provisions shall

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      ensure that an adequate provider network will be maintained at all times
      during any such transition period and that continuity of care is
      maintained for all Members.

h.    Prior to the approval by the DEPARTMENT of any subcontract with a
      behavioral health or dental subcontractor, the MCO shall submit a plan to
      the DEPARTMENT for the resolution of any outstanding claims submitted by
      providers to the MCO's previous behavioral health or dental subcontractor.
      Such plan shall meet the requirements described in subsection (j) below.

i.    The MCO shall monitor all subcontractors' performance on an ongoing basis
      and subject the subcontractor to formal review once a year. All
      subcontracts shall provide that if the MCO identifies deficiencies or
      areas for improvement, the MCO and the subcontractor shall take corrective
      action.

j.    In the event that a subcontract is terminated, the MCO shall submit a
      written transition plan to the DEPARTMENT sixty (60) days in advance of
      the scheduled termination. The transition plan shall include provisions
      concerning financial responsibility for the final settlement of provider
      claims and data reporting, which at a minimum must include a claims aging
      report prepared in accordance with Section 3.39 (c)(5) of this contract,
      with steps to ensure the resolution of the outstanding amounts. This plan
      shall be submitted prior to the DEPARTMENT's approval of the replacement
      subcontractor.

k.    All subcontracts shall also include a provision that the MCO will withhold
      a portion of the final payment to the subcontractor, as a surety bond to
      ensure compliance under the terminated subcontract.

1.    The MCO shall have no right to and shall not assign, transfer or delegate
      this contract in its entirety, or any right on duty arising under this
      contract without the prior written approval of the DEPARTMENT. The
      DEPARTMENT in its discretion may grant such written approval of an
      assignment, transfer or delegation provided, however, that this paragraph
      shall not be construed to grant the MCO any right to such approval.

m.    This section shall not be construed as restricting the MCO from entering
      into contracts with participating providers to provide health care
      services to Members.

3.46  TIMELY PAYMENT OF CLAIMS

The MCO shall pay 90 (ninety) percent of all clean claims from providers in
group or individual practices or who practice in shared health facilities within
thirty (30) days from the date of receipt. The MCO shall pay ninety-nine (99)
percent of all clean claims from providers in group or individual practices or
who practice in shared health facilities

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within ninety (90) days from the date of receipt. These time limitations do not
apply if the MCO and its providers stipulate to an alternative schedule in their
provider contracts. If the MCO or any subcontractor or vendor who adjudicates
claims fails to pay a clean claim within forty-five (45) days of receipt, or as
otherwise stipulated by a provider contract, the MCO, vendor or subcontractor
shall pay the provider the amount of such clean claims plus interest at the rate
of fifteen (15) percent per annum or otherwise as stipulated by a provider
contract. In accordance with Section 3.40 (c)(5), Financial Records, the MCO
shall provide to the DEPARTMENT information related to interest paid beyond the
forty-five (45) day timely filing limit or otherwise stipulated by a provider
contract.

3.47  CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES

Members shall be responsible for a $1.00 co-payment for prescription drugs. The
co-payment shall apply to each prescription drug, covered over the counter
medication and refill. The following services and individuals shall be exempt
from the co-payment requirement:

      1)    Members under the age of 21;

      2)    Pregnant women, including the period of 60 days post-partum. This
            post-partum period begins on the 1ast day of pregnancy and extends
            through the end of the month in which the 60-day period following
            termination of pregnancy ends;

      3)    Members who are inpatients in the following medical institutions:
            acute care hospital, psychiatric hospital, chronic disease hospital
            or nursing facility;

      4)    Prescription for family planning drugs or supplies;

      5)    Compounded prescriptions.

The MCO shall ensure that the dispensing pharmacist is responsible for
collecting the co-payment at the time of the service unless the pharmacist, in
filling certain prescriptions, does not normally have face-to face contact with
the Member. If the pharmacist does not have face-to-face contact with the Member
in dispensing a prescription, the provider has the right to bill the Member for
the $1.00 co-payment.

Pursuant to 42 U.S.C. Section 1396o(e), no provider may deny care or services to
an individual eligible for such care or services because of an inability to pay
a co-payment. The MCO shall ensure that its providers do not refuse to render
the service or fill a prescription if the Member is unable to pay the
co-payment. The MCO may permit its providers to ask for the unpaid co-payment at
a subsequent visit or to bill the Member for the outstanding co-payment. The
pharmacist shall accept the Member's declaration that he is unable to pay the
co-payment.

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Except for the prescription drug co-payment described above, no deductibles or
co-payments or similar cost-sharing charges are permitted for HUSKY A covered
services.

A provider shall be permitted to charge an eligible Member for goods or services
which are not coverable only if the Member knowingly elects to receive the goods
or services and enters into an agreement in writing to pay for such goods or
services prior to receiving them. For purposes of this section noncovered
services are services not covered under the Medicaid state plan, services which
are provided in the absence of appropriate authorization, and services which are
provided out-of-network unless otherwise specified in the contract, policy or
regulation (e.g., family planning, mental health or emergency room services).

3.48  INSOLVENCY PROTECTION

Unless the MCO is (or is controlled by) one or more federally qualified health
care centers and meets the solvency standards established by the DEPARTMENT for
those centers, the MCO shall meet the solvency standards established by the
State of Connecticut for private health maintenance organizations, or be
licensed or certified by the State as a risk bearing entity. The MCO must
maintain protection against insolvency as required by the DEPARTMENT including
demonstration of adequate initial capital and ongoing reserve contributions. The
MCC must provide financial data to the DEPARTMENT in accordance with the
DEPARTMENT's required formats and timing.

3.49  ACCEPTANCE OF DSS RULINGS

In cases where there is a dispute between the MCO and an out-of-network provider
about whether a service is medically necessary, is an emergency, or is an
appropriate diagnostic test to determine whether an emergency condition exists,
the DEPARTMENT will hear appeals, filed within one year following the date of
service and make final determinations. The DEPARTMENT will accept written
comments from all parties to the dispute prior to making the decision, and order
or not order payment, as appropriate. The MCO shall accept the DEPARTMENT's
determinations regarding appeals.

3.50  POLICY TRANSMITTALS

The MCO shall comply with the provisions and requirements in the DEPARTMENT's
Managed Care Policy Transmittals as set forth in Appendix H. In addition, the
MCO shall comply with any future Managed Care Policy Transmittals issued by the
DEPARTMENT. The MCO shall comply with the Medical Services Policy as set forth
in the DEPARTMENT's provider manuals and the Regulations of Connecticut State
Agencies.

3.51  FRAUD AND ABUSE

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a.    The MCO shall not knowingly take any action or fail to take action that
      could result in an unauthorized benefit to the MCO, its employees, its
      subcontractors, its vendors, or to a Member.

b.    The MCO commits to preventing, detecting, investigating, and reporting
      potential fraud and abuse occurrences, and shall assist the DEPARTMENT and
      HHS in preventing and prosecuting fraud and abuse in the HUSKY program.

c.    The MCO acknowledges that the HHS, Office of the Inspector General, has
      the authority to impose civil monetary penalties on individuals and
      entities that submit false and fraudulent claims to the HUSKY program.

d.    The MCO shall immediately notify the DEPARTMENT when it detects a
      situation of potential fraud or abuse, including, but not limited to, the
      following:

      1.    False statements, misrepresentation, concealment, failure to
            disclose, and conversion of benefits;

      2.    Any giving or seeking of kickbacks, rebates, or similar
            remuneration;

      3.    Charging or receiving reimbursement in excess of that provided by
            the DEPARTMENT; and

      4.    False statements or misrepresentation made by a provider,
            subcontractor, or Member in order to qualify for the HUSKY program.

e.    Upon written notification of the DEPARTMENT, the MCO shall cease any
      conduct that the DEPARTMENT or its agent deems to be abusive of the HUSKY
      program, and to take any corrective actions requested by the DEPARTMENT or
      its agent.

f.    The MCO attests to the truthfulness, accuracy, and completeness of all
      data submitted to the DEPARTMENT, based on the MCO's best knowledge,
      information, and belief. This data certification requirement includes
      encounter data and also applies to the MCO's subcontractors.

g.    The MCO shall have administrative and management procedures and a
      mandatory compliance plan to guard against fraud and abuse. The MCO's
      compliance plan shall include but not necessarily be limited to, the
      following efforts:

      1.    The designation of a compliance officer and a compliance committee,
            responsible to senior management;

      2.    Written policies, procedures and standards that demonstrate
            commitment to comply with all applicable Federal and State
            standards;

      3.    Effective lines of communication between the compliance officer and
            MCO employees;

      4.    Conducting regular reviews and audits of operations to guard against
            fraud and abuse;

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      5.    Assessing and strengthening internal controls to ensure claims are
            submitted and payments are made properly;

      6.    Effectively training and educating employees, providers, and
            subcontractors about fraud and abuse and how to report it;

      7.    Effectively organizing resources to respond to complaints of fraud
            and abuse;

      8     Establishing procedures to process fraud and abuse complaints; and

      9.    Establishing procedures for prompt responses to potential offenses
            and reporting information to the DEPARTMENT.

h.    The MCO shall examine publicly available data, including but not limited
      to the CMS Medicare/Medicaid Sanction Report and the CMS website
      (http://www.oig.hhs.gov) to determine whether any potential or current
      employees, providers, or subcontractors have been suspended or excluded or
      terminated from the Medicare or Medicaid programs and shall comply with,
      and give effect to, any such suspension, exclusion, or termination in
      accordance with the requirements of state and federal law.

i.    The MCO must provide full and complete information on the identity of each
      person or corporation with an ownership or controlling interest, five (5)
      percent, in the managed care plan, or any subcontractor in which the MCO
      has a five (5) percent or more ownership interest.

j.    The MCO must immediately provide full and complete information when it
      becomes aware of any employee or subcontractor who has been convicted of a
      civil or criminal offense related to that person's involvement under
      Medicare, Medicaid, or any other federal or state assistance program prior
      to entering into or renewing this contract.

SANCTION: The DEPARTMENT may impose a sanction, up to and including a Class C
sanction for the failure to comply with any provision of this section, or take
any other action set forth in Section 7 of this contract, including terminating
or refusing to renew this contract or any other Sanction or remedy allowed by
federal or state law.

3.52  PERSONS WITH SPECIAL HEALTH CARE NEEDS

a.    The DEPARTMENT will provide to the MCO information to identify Members who
      are: 1) eligible for Supplemental Security Income; 2) over sixty-five (65)
      years of age; 3) children who are receiving foster care or otherwise in an
      out of home placement or receiving Title IV E foster care or adoption
      services; and 4) children who are enrolled in Title V's Children with
      Special Health Care Needs program.

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b.    The MCO shall conduct an assessment of these individuals and other persons
      with special health care needs and make a referral to the Member's PCP to
      develop a treatment plan, as appropriate.

c.    The MCO shall report to the DEPARTMENT, in a format specified by the
      DEPARTMENT, on quality indicators such as utilization of specialty
      services and case management to be developed jointly between the
      DEPARTMENT and the MCOs.

4. FUNCTIONS AND DUTIES OF THE DEPARTMENT

4.01  ELIGIBILITY DETERMINATIONS

The DEPARTMENT will determine the initial and ongoing eligibility for medical
assistance of each individual enrolled under this contract in accordance with
the DEPARTMENT's continuous and guaranteed eligibility policies.

4.02  POPULATIONS ELIGIBLE TO ENROLL

Appendix G contains a list of the Medicaid groups currently eligible for managed
care enrollment. New eligibility groups may be added to the managed care
population. The DEPARTMENT will notify the MCO of any changes in the eligibility
categories to be included. Additional groups included by the DEPARTMENT may be
served at the MCO's option.

4.03  ENROLLMENT/DISENROLLMENT

Enrollment, disenrollment and initial selection of PCP will be handled by the
DEPARTMENT through a contract with a central enrollment broker. Coverage for new
Members will be effective the first of the month and coverage for disenrollments
will terminate at the end of the month. Members remain continuously enrolled
throughout the term of this contract, except in situations where clients change
health plans, lose their Medicaid eligibility, receive Medicare, or are
recategorized into a Medicaid category not included in the managed care
initiative. Disenrollments due to loss of eligibility become effective upon loss
of eligibility and are effective on the last day of the month. Disenrollments
due to receipt of Medicare become effective the month following the month in
which DSS receives information of the existence of the Medicare coverage. Adults
receiving SSI become disenrolled from the MCO upon the recategorizing of their
Medicaid status from a family to an adult coverage group or the month following
the month in which the DEPARTMENT receives information of the individual's
receipt of SSI, whichever comes first. The DEPARTMENT will notify the MCO of
enrollments and disenrollments specific to the MCO via a daily data file. The
enrollments and

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disenrollments processed on any given day will be made available to the MCO via
the data file the following day (i.e. after the daily overnight batching has
been processed).

In addition to the daily data file, a full file of all the Members will be made
available on a monthly basis. Both the daily data file and the monthly full file
can be accessed by the MCO electronically via dial-up.

4.04  DEFAULT ENROLLMENT

The DEPARTMENT shall, on a rotating basis among all of the participating MCO's
and as the MCO's enrollment capacity allows, assign default Members to the MCO.

The default assignment methodology is structured to evenly distribute families
among all the participating MCOs. However, due to variability in MCO service
area and enrollment capacity, family size and loss of Medicaid eligibility, the
outcome of the default assignment may not result in an even net default
distribution among all the MCOs.

4.05  LOCK-IN

a.    Members may request disenrollment from the MCO after one (1) month. Upon
      availability of MIS Support, the DEPARTMENT will implement a lock-in
      period of up to twelve (12) months for managed care Members. The
      DEPARTMENT's implementation of lock-in will comply with all provisions of
      42 CFR 438.56. Members will not be allowed to change plan enrollment
      during the lock-in period except for cause. The lock-in period is subject
      to the following provisions and exceptions:

      1.    The first ninety (90) days of enrollment into a new MCO will be
            designated as the free-look period during which time the Member may
            change plans;

      2.    The last sixty (60) days of the lock-in period will be an open
            enrollment period, during which time Members may change plans;

      3.    Plan changes made during the open enrollment period will go into
            effect on the first day of the month following the end of the
            lock-in period; and

      4.    Members who do not change plans during the open enrollment period
            will continue the enrollment in the same MCO and be assigned to a
            new twelve (12) month lock-in period.

      The process being considered for implementation of lock-in for the
      existing HUSKY A membership is as follows: lock-in will be imposed on
      approximately twenty (20) percent of the membership each month over a
      consecutive five (5)

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      month period. Targeting for each month will be based on the last digit of
      the client ID number for the head-of-household. For example, families
      whose head-of-household has a client ID number that ends in 0 or 1 will be
      phased-in during the first month, those with 2 and 3 will be done in the
      second month, etc.

b.    The following shall constitute good a use for a Member to disenroll from
      the plan during the lock-in period:

      1. Unfavorable resolution of the MCO's internal complaint process and
      continued dissatisfaction due to repeated incidents of any of the
      following:

a.    documented long waiting times for appointments:

            1.    more than forty-five (45) days for well-care visit;

            2.    more than two (2) business days for non-urgent, symptomatic
                  office visit; and

            3.    unavailability of same day office visit or same day referral
                  to an emergency provider for emergency care services

b.    documented inaccessibility of health plan by phone or mail:

            1.    phone calls not answered promptly;

            2.    caller placed on hold for extended periods of time;

            3.    phone messages and letters not responded to promptly; and

            4.    repeated rude and demeaning treatment by MCO staff.

c.    Prior to pursuing the MCO's internal grievance process and without filing
      an appeal through the plan, dissatisfaction due to any of the following:

      1.    Discriminatory treatment as documented in a complaint filed with the
            State of Connecticut Commission on Human Rights and Opportunities
            (CHRO) or the DEPARTMENT's Affirmative Action Division;

      2.    PCP who has served the Member's specific documentable needs (i.e.
            language or physical accessibility) left health plan and there is no
            other suitable PCP within reasonable distance to the Member; or

      3.    Member has a pending lawsuit against the MCO (verification of
            pending lawsuit must be provided).

d     Child placed under DCF guardianship whose placement is changed to a
      location or facility not affiliated with the current health plan.

4.06  CAPITATION PAYMENTS TO MCO

a.    In full consideration of contract services rendered by the MCO, the
      DEPARTMENT agrees to pay the MCO monthly payments based on the

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      capitation rates specified in Appendix I, as amended. The DEPARTMENT shall
      provide the actuarial basis for future capitation rates upon CMS review
      and approval.

b.    Upon validation of client eligibility and MCO membership, the DEPARTMENT
      will pay the capitation payments in the month following the month to which
      the capitation payments apply or for retroactive enrollments, the month
      following the enrollment processing month in accordance with Connecticut
      General Statutes Section 4a-71 through 4a-72.

c.    Payment to the MCO shall be based on the enrollment data transmitted from
      the DEPARTMENT to ACS each month. The MCO will be responsible for
      detecting the source of any inconsistency in capitation payments. The MCO
      must notify the DEPARTMENT of any inconsistency between enrollment and
      payment data. The DEPARTMENT agrees to provide to the MCO information
      needed to determine the source of the inconsistency within sixty (60)
      working days after receiving written notice of the request to furnish such
      information. The DEPARTMENT will recoup overpayments or reimburse
      underpayments. The adjusted payment (representing reinstated recipients)
      for each month of coverage shall be included in the next monthly
      capitation payment, based on updated MCO enrollment information for that
      month of coverage.

d.    Any retrospective adjustments to prior payments will be made in the form
      of an addition to or subtraction from the current month's capitation
      payment. Positive adjustments are particularly likely for newborns,
      because the MCO may be aware of births before the DEPARTMENT.

4.07  RETROACTIVE ADJUSTMENTS

a.    When a Member loses Medicaid eligibility and managed care enrollment but
      regains coverage within sixty (60) days, and the coverage is made
      retroactive such that the entire coverage gap is eliminated, the
      DEPARTMENT shall reinstate enrollment into the MCO retroactive to the time
      of disenrollment. The MCO will remain responsible for the cost of
      in-network covered services and the cost of emergency and family planning
      services received by the Member during this sixty (60) day period.

b.    In instances where enrollment is disputed between two (2) MCOs or the MCO
      and Medicaid fee-for-service program the DEPARTMENT will be the final
      arbiter of Membership status and reserves the right to recover
      inappropriate capitation payments. Capitation payments for retroactive
      enrollment adjustments will be made to the MCO pursuant to rules outlined
      in Section II, 4.06(d), Capitation Payments to MCO.

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4.08  INFORMATION

The DEPARTMENT will make known to each MCO complete and current information
which relates to pertinent statutes, regulations policies, procedures, and
guidelines affecting the operation of this contract. This information shall be
available either through direct transmission to the MCO by reference to public
resource files accessible to the MCO personnel.

4.09  ONGOING MCO MONITORING

a.    To ensure access and the quality of care, the DEPARTMENT or its agent
      shall undertake plans to conduct monitoring activities, including but not
      limited to the following:

      1.    Analyze the MCO's access enhancement programs, financial and
            utilization data, and other reports to monitor the value the MCO is
            providing in return for the State's capitation payments. Such
            efforts shall include, but not be limited to, on-site reviews and
            audits of the MCO and its subcontractors and network providers.

      2.    Conduct regular recipient surveys of Members to address issues such
            as satisfaction with plan services to include administrative
            services, satisfaction with treatment by the plan or its providers,
            and reasons for disenrollment and access.

      3.    Review the MCO certifications on a regular basis.

      4.    Analyze encounter data, actual medical records, correspondence,
            telephone logs and other data to make inferences about the quality
            of and access to specific services.

      5.    Sample and analyze encounter data, actual medical records,
            correspondence, telephone logs and other data to make inferences
            about the quality of and access to MCO services.

      6.    Test the availability of and access to MCO services by attempting to
            make appointments.

      7.    At its discretion, commission or conduct additional objective
            studies of the effectiveness of the MCO, as well as the availability
            of, quality of and access to its services.

4.10  UTILIZATION REVIEW AND CONTROL

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The DEPARTMENT shall waive, to the extent allowed by law, any current DEPARTMENT
requirements for prior authorization, second opinions, co-payment, or other
Medicaid restrictions for the provision of contract services provided by the MCO
to Members.

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5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

5.01  COMPETITION NOT RESTRICTED

In signing this contract, the MCO asserts that no attempt has been made or will
be made by the MCO to induce any other person or firm to submit or not to submit
an application for the purpose of restricting competition.

5.02  NONSEGREGATED FACILITIES

a.    The MCO certifies that it does not and will not maintain or provide for
      its employees any segregated facilities at any of its establishments; and
      that it does not permit its employees to perform their services at any
      location, under its control, where segregated facilities are maintained.
      As Contractor, the MCO agrees that a breach of this certification is a
      violation of Equal Opportunity in Federal employment. In addition,
      Contractor must comply with the Federal Executive Order 11246 entitled
      "Equal Employment Opportunity" as amended by Executive Order 11375 and as
      supplemented in the United States Department of Labor Regulations (41 CFR
      Part 30). As used in this certification, the term "segregated facilities"
      includes any waiting rooms, restaurants and other eating areas, parking
      lots, drinking fountain, recreation or entertainment areas,
      transportation, and housing facilities provided for employees which are
      segregated on the basis of race, color, religion, or national origin,
      because of habit, local custom, national origin or otherwise.

b.    The MCO further agrees, (except where it has obtained identical
      certifications from proposed subcontractors for specific time periods)
      that it will obtain identical certifications from proposed subcontractors
      which are not exempt from the provisions for Equal Employment Opportunity;
      that it will retain such certifications in its files; and that it will
      forward a copy of this clause to such proposed subcontractors (except
      where the proposed subcontractors have submitted identical certifications
      for specific time periods).

5.03  OFFER OF GRATUITIES

The MCO, its agents and employees, certify that no elected or appointed official
or employee of the DEPARTMENT has or will benefit financially or materially from
this contract. The contract may be terminated by the DEPARTMENT if it is
determined that gratuities of any kind were either offered to or received by any
of the aforementioned officials or employees of the MCO, its agent or employee.

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5.04  EMPLOYMENT/AFFIRMATIVE ACTION CLAUSE

The MCO agrees to supply employment/affirmative action information as required
for agency compliance with Title VI and VII of the Civil Rights Acts of 1964 and
Connecticut General Statutes, Section 46a-68 and Section 46a-71.

5.05  CONFIDENTIALITY

a.    The MCO agrees that all material and information, and particularly
      information relative to individual applicants or recipients of assistance
      through the DEPARTMENT, provided to the Contractor by the State or
      acquired by the Contractor in performance of the contract whether verbal,
      written, recorded magnetic media, cards or otherwise shall be regarded as
      confidential information and all necessary steps shall be taken by the
      Contractor to safeguard the confidentiality of such material or
      information in conformance with federal and state statutes and
      regulations.

b.    The MCO agrees not to release any information provided by the DEPARTMENT
      or providers or any information generated by the MCO without the express
      consent of the Contract Administrator, except as specified in this
      contract and as permitted by applicable law.

5.06  INDEPENDENT CAPACITY

The MCO, its officers, employees, subcontractors, or any other agent of the
Contractor in performance of this contract will act in an independent capacity
and not as officers or employees of the State of Connecticut or of the
DEPARTMENT.

5.07  LIAISON

Both parties agree to have specifically named liaisons at all times. These
representatives of the parties will be the first contacts regarding any
questions and problems which arise during implementation and operation of the
contract.

5.08  FREEDOM OF INFORMATION

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a.    Due regard will be given for the protection of proprietary information
      contained in all documents received by the DEPARTMENT; however, the MCO is
      aware that all materials associated with the contract are subject to the
      terms of the state Freedom of Information Act, Conn. Gen. Stat. Sections
      1-200 et seq., and all rules, regulations and interpretations resulting
      therefrom. When materials are submitted by the MCO or a subcontractor to
      the DEPARTMENT and the MCO or subcontractor believes that the materials
      are proprietary or confidential in some way and that they should not be
      subject to disclosure pursuant to the Freedom of Information Act, it is
      not sufficient to protect the materials from disclosure for the MCO to
      state generally that the material is proprietary in nature and therefore,
      not subject to release to third parties. If the MCO or the MCO's
      subcontractor believes that any portions of the materials submitted to the
      DEPARTMENT are proprietary or confidential or constitute commercial or
      financial information, given in confidence, those portions or pages or
      sections the MCO believes to be proprietary must be specifically
      identified as such. Convincing explanation and rationale sufficient to
      justify each claimed exemption from release consistent with Section 1-210
      of the Connecticut General Statutes must accompany the documents when they
      are submitted to the DEPARTMENT. The rationale and explanation must be
      stated in terms of the prospective harm to the MCO's or subcontractor's
      competitive position that would result if the identified material were to
      be released and the reasons why the materials are legally exempt from
      release pursuant to the above cited statue. The final administrative
      authority to release or exempt any or all material so identified by the
      MCO or the subcontractor rests with the DEPARTMENT. The DEPARTMENT is not
      obligated to protect the confidentiality of materials or documents
      submitted to it by the MCO or the subcontractor if said materials or
      documents are not identified in accordance with the above-described
      procedure.

b.    The MCO understands the DEPARTMENT's need for access to eligibility and
      paid claims information and is willing to provide such data relating to
      the MCO to accommodate that need. The MCO is committed to providing the
      DEPARTMENT access to all information necessary to analyze cost and
      utilization trends; to evaluate the effectiveness of Provider Networks,
      benefit design, and medical appropriateness; and to show how the HUSKY
      population compares to the MCO's enrolled population as a whole. The MCO
      and the DEPARTMENT each understand and agree that the systems, procedures
      and methodologies and practices used by the MCO, its affiliates and agents
      in connection with the underwriting, claims processing, claims payment and
      utilization monitoring functions of the MCO, together with the
      underwriting, Provider Network, claims processing, claims history and
      utilization data and information related to the MCO and its agents, may
      constitute information which is proprietary to the MCO and/or its
      affiliates (collectively, the "Proprietary Information"). Accordingly, the
      DEPARTMENT acknowledges that the MCO shall not be required to divulge
      Proprietary Information if such disclosure would jeopardize or impair its
      relationships with providers or suppliers or would materially adversely
      affect the MCO's or any of its Affiliates' ability to service

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      the needs of its customers or the DEPARTMENT as provided under this
      Contract unless the DEPARTMENT determine that such information is
      necessary in order to monitor contract compliance or to fulfill Part II
      Sections 3.33 and 3.34 of Part II of this contract. The DEPARTMENT agrees
      not to disclose publicly and to protect from public disclosure any
      proprietary or trade secret information provided to the DEPARTMENT by the
      MCO and/or its Affiliates' under this contract to the extent that such
      information is exempted from public disclosure under the Connecticut
      Freedom of Information Act.

5.09  WAIVERS

Except as specifically provided in any section of this contract, no covenant,
condition, duty, obligation or undertaking contained in or made a part of the
contract shall be waived except by the written agreement of the parties, and
forbearance or indulgence in any form or manner by the DEPARTMENT or the MCO in
any regard whatsoever shall not constitute a waiver of the covenant, condition,
duty, obligation or undertaking to be kept, performed, or discharged by the
DEPARTMENT or the MCO; and not withstanding any such forbearance or indulgence,
until complete performance or satisfaction of all such covenants, conditions,
duties, obligations and undertakings, the DEPARTMENT or MCO shall have the right
to invoke any remedy available under the contract, or under law or equity.

5.10  FORCE MAJEURE

The MCO shall be excused from performance hereunder for any period that it is
prevented from providing, arranging for, or paying for services as a result of a
catastrophic occurrence or natural disaster including but not limited to an act
of war, and excluding labor disputes.

5.11  FINANCIAL RESPONSIBILITIES OF THE MCO

a.    The MCO must maintain at all times financial reserves in accordance with
      the Connecticut Health Centers Act under Section 38a-175 et seq. of the
      Connecticut General Statutes and with the requirements outlined in the
      DEPARTMENT's Request for Application.

b.    The MCO's physician incentive plans must comply with the requirements of
      1903(m)(2)(a)(x) of the Social Security Act and 42 CFR 422.208 and 42 CFR
      422.210.

c.    The DEPARTMENT reserves the right to inspect any physician incentive
      plans.

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d.    If the MCO is not a federally-qualified MCO or Competitive Medical Plan,
      the MCO must complete a HCFA Section 1318 Financial Disclosure Report,
      prior to the start of the contract.

5.12  CAPITALIZATION AND RESERVES

a.    The MCO shall comply with and maintain capitalization and reserves as
      required by the appropriate regulatory authority.

b.    If the MCO is licensed by the State of Connecticut, the MCO shall
      establish and maintain capitalization and reserves as required by the
      Connecticut Department of Insurance.

c.    If the MCO is majority-owned by federally qualified health centers (FQHCs)
      and not licensed by the State of Connecticut, the MCO will establish and
      maintain sequestered capital of $500,000 plus two (2) percent of ongoing
      annual capitation premiums.

      1.    These funds shall be placed in restricted account for the duration
            of the FQHC plan's existence, to be accessed only in the event such
            funds are needed to meet unpaid claims liabilities.

      2.    This restricted account shall be established such that any
            withdrawals or transfers of funds will require signatures of
            authorized representatives of the FQHC plan and the DEPARTMENT.

      3.    The initial $500,000 must be deposited into the account by the
            beginning of the MCO's first enrollment period.

      4.    The MCO must make quarterly deposits into this account so that the
            account balance is equal to $500,000 plus two (2) percent of the
            premiums received during the preceding twelve (12) months.

5.13  PROVIDER COMPENSATION

a.    The MCO shall comply with CMS's Physician Incentive Plan (PIP)
      requirements in 42 CFR 422.208 and 42 CFR 422.210. The MCO may operate a
      PIP only if:

      1.    no specific payment can be made directly or indirectly under a PIP
            to a physician or physician group as an inducement to reduce or
            limit medically necessary services furnished to an individual
            Member; and

      2.    the stop-loss protection, Member survey, and disclosure requirements
            of 42 CFR. 422.208 and 42 CFR 422.210 are met.

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b.    The MCO shall disclose to the DEPARTMENT the following information on PIPs
      in sufficient detail to determine whether the incentive plan complies with
      the regulatory requirements of 42 CFR 422.208. The disclosure must
      contain:

      1.    Whether services not furnished by the physician or physician group
            are covered by the PIP. If only the services furnished by the
            physician or physician group are covered by the incentive plan,
            disclosure of other aspects of the plan need not be made.

      2.    The type of incentive arrangement (i.e. withhold, bonus,
            capitation).

      3.    If the incentive plan involves a withhold or bonus, the percent of
            the withhold or bonus.

      4.    Proof that the physician or physician group has adequate stop-loss
            protection, including the amount and type of stop-loss protection.

      5.    The panel size and, if patients are pooled, the method used.

      6.    In the case of those MCOs that are required by 42 CFR. 422.208(h) to
            conduct Member surveys, the survey results.

c.    The MCO shall disclose this information to the DEPARTMENT (1) prior to
      approval of its contract as required by federal regulation and (2) upon
      the contract anniversary or renewal effective date. The MCO shall provide
      the capitation data required (see (6) above) for the previous contract
      year to the DEPARTMENT three (3) months after the end of the contract
      year. The MCO will provide to the Member upon request information
      regarding whether the MCO uses a physician incentive plan that affects the
      use of referral services, the type of incentive arrangement, whether
      stop-loss protection is provided, and the survey results of any Member
      survey conducted. See Appendix J for the applicable regulations and
      disclosure forms.

d.    The DEPARTMENT may impose Class C sanctions pursuant to Section 7.05 for
      failure to comply with 42 CFR 422.208 and 422.210

5.14  MEMBERS HELD HARMLESS

a.    The MCO shall not hold a Member liable for:

      1.    The debts of the MCO in the event of the MCO's insolvency;

      2.    The cost of Medicaid-covered services provided pursuant to this
            contract to the Member if the DEPARTMENT does not pay the MCO or the
            DEPARTMENT or the MCO does not pay the health care provider that
            furnishes the services under a contractual, referral, or other
            arrangement; and/or

      3.    Payments for covered services furnished under a contract, referral,
            or other arrangement, to the extent those payments are in excess of
            the amount that the Member would owe if the MCO directly provided
            the service.

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5.15  COMPLIANCE WITH APPLICABLE LAWS, RULES AND POLICIES

The MCO in performing this contract shall comply with all applicable federal and
state laws, regulations and written policies, including those pertaining to
licensing. In the provision of services under this Contract, the MCO and its
subcontractors shall comply with all applicable federal and state statutes and
regulations, and all amendments thereto, that are in effect when the agreement
is signed, or that come into effect during the term of the Contract. This
includes, but is not limited to Title XIX of the Social Security Act and Title
42 of the Code of Federal Regulations.

5.16  ADVANCE DIRECTIVES

a.    The MCO shall comply with the provisions of 42 CFR 422.128 relating to
      written policies and procedures for advance directives. The MCO shall:

      1.    Maintain written policies and procedures that meet the requirements
            for advance directives in Subpart 1 of 42 CFR pt. 489;

      2.    Maintain policies and procedures for all adults receiving medical
            care through the MCO;

      3.    Provide each adult Member with written information on advance
            directives policies, including a description of Connecticut General
            Statutes Sections 19a-570-19a-580d; and

      4.    Provide each adult Member with information on changes in Connecticut
            law regarding advance directives as soon as possible, but no later
            than ninety (90) days after the effective date of the change.

5.17  FEDERAL REQUIREMENTS AND ASSURANCES

GENERAL

a.    The MCO shall comply with those federal requirements and assurances for
      recipients of federal grants provided in OMB Standard Form 424B (4-88)
      which are applicable to the MCO. The MCO is responsible for determining
      which requirements and assurances are applicable to the MCO. Copies of the
      form are available from the DEPARTMENT.

b.    The MCO shall provide for the compliance of any subcontractors with
      applicable federal requirements and assurances.

c.    The MCO shall comply with all applicable provisions of 45 CFR 74.48 and
      all applicable requirements at 45 CFR 74.48 Appendix A.

LOBBYING

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a.    The MCO, as provided by 31 U.S.C. 1352 and 45 CFR 93.100 et seq., shall
      not pay federally appropriated funds to any person for influencing or
      attempting to influence an officer or employee of any agency, a member of
      the U.S. Congress, an officer or employee of the U.S. Congress or an
      employee of a member of the U.S. Congress in connection with the awarding
      of any federal contract, the making of any cooperative agreement or the
      extension, continuation, renewal, amendment or modification of any federal
      contract, grant, loan or cooperative agreement.

b.    The MCO shall submit to the DEPARTMENT a disclosure form as provided in 45
      CFR 93.110 and Appendix B to 45 CFR Part 93, if any funds other than
      federally appropriated funds have been paid or will be paid to any person
      for influencing or attempting to influence an officer or employee of any
      agency, a member of the U.S. Congress, an officer or employee of the U.S.
      Congress or an employee of a member of the U.S. Congress in connection
      with this contract.

BALANCED BUDGET ACT AND IMPLEMENTING REGULATIONS

The MCO shall comply with all applicable provisions of 42 U.S.C. Section
1396u-2, 42 U.S.C. Section 1396b(m) and 42 CFR Parts 431 and 438.

CLEAN AIR AND WATER ACTS

The MCO and all subcontractors with contracts in excess of $100,000 shall
comply with all applicable standards, orders or regulations issued pursuant to
the Clean Air Act as amended, 42 U.S.C. 7401, et seq. and section 508 of the
Clear Water Act (33 U.S.C. 1368), Executive Order 11738, and 40 CFR Part 15).

ENERGY STANDARDS

The MCO shall comply with all applicable standards and policies relating to
energy efficiency which are contained in the state energy plan issued in
compliance with the federal Energy Policy and Conservation Act, 42 USC Sections
6231 - 6246. The MCO further covenants that no federally appropriated funds have
been paid or will be paid on behalf of the DEPARTMENT or the contractor to any
person for influencing or attempting to influence an officer or employee of any
federal agency, a member of Congress, an officer or employee of Congress, or an
employee of a member of Congress in connection with the awarding of any federal
contract, the making of any federal grant, the making of any federal loan, the
entering into of any cooperative agreement, or the extension, continuation,
renewal, amendment, or modification of any federal contract, grant, loan, or
cooperative agreement. If any funds other than federally appropriated funds have
been

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paid or will be paid to any person for influencing or attempting to influence an
officer or employee of any federal agency, a member of Congress, or an employee
of a member of Congress in connection with this contract, grant, loan, or
cooperative agreement, the contractor shall complete and submit Standard Form -
LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.

MATERNITY ACCESS AND MENTAL HEALTH PARITY

The MCO shall comply with the maternity access and mental health parity
requirements of the Public Health Services Act, Title XXVII, Subpart 2, Part A,
Section 2704, as added September 26, 1996, 42 U.S.C. Section 300gg-4, 300 gg-5,
insofar as such requirements apply to providers of group health insurance.

5.18  CIVIL RIGHTS

FEDERAL AUTHORITY

The MCO shall comply with the Civil Rights Act of 1964 (42 U.S.C. Section 2000d,
et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6 [ILLEGIBLE] 01, et
seq.), the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101, et
seq.) and Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Section 794,
et seq.

DISCRIMINATION

Persons may not, on the grounds of race, color, national origin, creed, sex,
religion, political ideas, marital status, age or disability be excluded from
employment in, denied participation in, denied benefits or be otherwise
subjected to discrimination under any program or activity connected with the
implementation of this contract. The MCO shall use hiring processes that foster
the employment and advancement of qualified persons with disabilities.

MERIT QUALIFICATIONS

All hiring done in connection with this contract must be on the basis of merit
qualifications genuinely related to competent performance of the particular
occupational task. The MCO, in accordance with Federal Executive Order 11246,
dated September 24, 1965 entitled "Equal Employment Opportunity", as amended by
Federal Executive Order 11375 and as supplemented in the United States
Department of Labor Regulations, 41 CFR Part 60-1, et seq., must provide for
equal employment opportunities in its employment practices.

CONFIDENTIALITY

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The MCO shall, in accordance with relevant laws, regulations and policies,
protect the confidentiality of any material and information concerning an
applicant for or recipient of services funded by the DEPARTMENT. Access to
patient information, records, and data shall be limited to the purposes outlined
in 42 CFR 434.6(a)(8) and Conn. Gen. Stat. Section 17b-90. All requests for data
or patient records for participation in studies, whether conducted by the MCO or
outside parties, are subject to approval by the DEPARTMENT.

5.19  STATUTORY REQUIREMENTS

a.    A State licensed MCO shall retain at all times during the period of this
      contract a valid Certificate of Authority issued by the State Commissioner
      of Insurance.

b.    The MCO shall adhere to the provisions of the Clinical Laboratory
      Improvement Amendments of 1988 (CLIA) Public Law 100-578,42 USC Section
      1395aa et seq.

5.20  DISCLOSURE OF INTERLOCKING RELATIONSHIPS

An MCO which is not also a Federally-qualified Health Plan or a Competitive
Medical Plan under the Public Health Service Act must report on request to the
State, to the Secretary and the Inspector General of DHHS and the Comptroller
General, a description of transactions between the MCO and parties in interest
including related parties as defined by federal and state law. Transactions that
must be reported include: (a) any sale, exchange, or leasing of property; (b)
any furnishing for consideration of goods, services or facilities (but not
salaries paid to employees); and (c) any loans or extensions of credit.

5.21  DEPARTMENT'S DATA FILES

a.    The DEPARTMENT's data files and data contained therein shall be and remain
      the DEPARTMENT's property and shall be returned to the DEPARTMENT by the
      MCO upon the termination of this contract at the DEPARTMENT's request,
      except that any DEPARTMENT data files no longer required by the MCO to
      render services under this contract shall be returned upon such
      determination at the DEPARTMENT's request.

b.    The DEPARTMENT's data shall not be utilized by the MCO for any purpose
      other than that of rendering services to the DEPARTMENT under this
      contract, nor shall the DEPARTMENT's data or any part thereof be
      disclosed, sold, assigned, leased or otherwise disposed of to third
      parties by the MCO unless there has been prior written DEPARTMENT
      approval. The MCO may disclose

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      material and information to subcontractors and vendors, as necessary to
      fulfill the obligations of this contract.

c.    The DEPARTMENT shall have the right of access and use of any data files
      retained or created by the MCO for systems operation under this contract
      subject to the access procedures defined in Part II Section 3.34.

d.    The MCO shall establish and maintain at all times reasonable safeguards
      against the destruction, loss or alteration of the DEPARTMENT's data and
      any other data in the possession of the MCO necessary to the performance
      of operations under this contract.

5.22  CHANGES DUE TO A SECTION 1115 OR 1915(b) FREEDOM OF CHOICE WAIVER

The conditions of enrollment described in the contract, including but not
limited to enrollment and the right to disenrollment, are subject to change as
provided in any waiver under Section 1115 or 1915(b) of the Social Security Act
(as amended) obtained by the DEPARTMENT.

5.23  HOLD HARMLESS

The MCO agrees to indemnify, defend and hold harmless the State of Connecticut
as well as all Departments, officers, agents and employees of the State from all
claims, losses or suits accruing or resulting to any contractors,
subcontractors, laborers and any person, firm or corporation who may be injured
or damaged through the fault of the MCO in the performance of the contract.

The MCO, at its own expense, shall defend any claims or suits which are brought
against the DEPARTMENT or the State for the infringement of any patents,
copyrights, or other proprietary rights arising from the MCO's or the State's
use of any material or information prepared or developed by the MCO in
conjunction with the performance of this contract; provided any such use by the
State is expressly contemplated by this contract and approved by the MCO. The
State, its Departments, officers, employees, contractors, and agents shall
cooperate fully in the MCO's defense of any such claim or suit as directed by
the MCO. The MCO shall, in any such suit, satisfy any damages for infringement
assessed against the State or the DEPARTMENT, be it resolved by settlement
negotiated by the MCO, final judgment of a court with jurisdiction after
exhaustion of available appeals, consent decree, or any other manner approved by
the MCO.

5.24  EXECUTIVE ORDER NUMBER 16

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This contract is subject to Executive Order No. 16 of Governor John G. Rowland
promulgated August 4, 1999 and, as such, this Agreement may be cancelled,
terminated or suspended by the State for violation of or noncompliance with said
Executive Order No. 16. The parties to this contract, as part of the
consideration hereof, agree that:

a.  The MCO shall prohibit employees from bringing into the state work site,
      except as may be required as a condition of employment, any weapon or
      dangerous instrument as defined in subsection (b).

b.  Weapon means any firearm, including a BB gun, whether loaded or unloaded,
      any knife (excluding a small pen or pocket knife), including a switchblade
      or other knife having an automatic spring release device, a stiletto, any
      police baton or nightstick or any martial arts weapon or electronic
      defense weapon. Dangerous instrument means any instrument, article or
      substance that, under the circumstances, is capable of causing death or
      serious physical injury.

c.  The MCO shall prohibit employees from using, attempting to use or
      threatening to use any such weapon or dangerous instrument in the state
      work site and employees shall be prohibited from causing or threatening to
      cause physical injury or death to any individual in the state work site.

d.  The MCO shall adopt the above prohibitions as work rules, violations of
      which shall subject the employee to disciplinary action up to and
      including discharge. The MCO shall insure that all employees are aware of
      such work rules.

e.  The MCO agrees that any subcontract it enters into in furtherance of the
      work to be performed hereunder shall contain the provisions (a) through
      (d).

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6.    GRIEVANCE SYSTEM AND PROVIDER APPEALS

      The MCO shall establish and maintain a grievance system that meets all
      statutory and regulatory requirements. The MCO's grievance system shall
      include a grievance process, an appeal process and access to and
      participation in the DEPARTMENT'S administrative hearings process.

6.01  GRIEVANCES

a.    The MCO shall have a system in place to handle grievances. Grievances are
      expressions of dissatisfaction about any matter, other than those matters
      that qualify as an action. The subject matters of grievances may include,
      but are not limited to, quality of care, rudeness by a provider or MCO
      staff person or failure to respect a Member's rights.

b.    The MCO shall maintain adequate records to document the filing of a
      grievance, the actions taken, the MCO personnel involved and the
      resolution. The Department will prescribe a reporting format for tracking
      of grievances.

c.    A Member, or a provider acting on a Member's behalf, may file a grievance
      either orally or in writing. The MCO shall acknowledge the receipt of each
      grievance and provide reasonable assistance with the process, including
      but not limited to providing interpreter services and toll free numbers
      with TTY/TTD and interpreter capability.

d.    If the grievance involves a denial of expedited review of an appeal or
      some other clinical issue, the grievance must be reviewed by a health care
      professional with appropriate clinical expertise.

e.    The MCO shall dispose of each grievance as expeditiously as the member's
      health requires. If the Member filed the grievance orally, the MCO may
      resolve the grievance orally, but shall maintain documentation of the
      grievance and its resolution. If the Member filed a written grievance, the
      resolution shall be in writing. If applicable, each grievance shall be
      handled by an individual who was not involved in any previous level of
      decisionmaking. Each grievance shall be disposed of in ninety (90) days or
      less

6.02  NOTICES OF ACTION AND CONTINUATION OF BENEFITS

a.    The MCO or its subcontractor (as duly authorized by the MCO) shall mail a
      notice of action to a Member when the MCO takes action upon a request for
      services from the Member's treating PCP, or other treating provider,
      functioning within his or her scope of practice as defined under state
      law. For purposes of this requirement, an "action" includes:

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            1.    The denial or limited authorization of a requested service,
                  including the type or level of service;

            2.    The reduction, suspension or termination of a previously
                  authorized service;

            3.    The denial, in whole or in part, of payment for a service;

            4.    The failure to act within the timeframes for utilization
                  review decisions, as described in Section 3.39

            5.    The failure to provide access to services in a timely manner
                  as required by 3.14(c)(1) through (c)(4) and 3.21(a)(4) or the
                  failure to provide access to consultations and specialist
                  referrals within three (3) months.

            The notice of action requirements shall apply to all categories of
            covered services including transportation to medically necessary
            appointments.

            The MCO is required to issue a notice for actions described in
            (a)(3) above if the denial of payment for services already rendered
            may or will result in the Member being held financially responsible.
            Such circumstances include, but are not limited to, the provision of
            emergency services that do not appear to meet the prudent layperson
            standard, the provision of services outside of the United States
            without prior authorization, and the provision of non-covered
            services with the Member's written consent as described in 3.47. The
            MCO is not required to issue a notice of action for the denial of
            payment for covered services that have already been provided to the
            Member if the denial is based on a procedural or technical issue,
            including but not limited to a provider's failure to comply with
            prior authorization rules for services that the Member has already
            received, incorrect coding or late filing by a provider for services
            that the Member has already received. In these circumstances,
            coverage of the service is not at issue and the Member may not be
            held financially liable for the services. Nothing herein shall
            relieve the MCO from its responsibility to issue a notice of action
            in all circumstances in which a provider requests prior
            authorization for a service and the request is denied in whole or in
            part, as required in a.(1) above. Nothing herein shall relieve the
            MCO from its responsibility to hold a Member harmless for the cost
            of Medicaid covered services and its responsibility to ensure that
            the MCO's network providers hold a Member harmless for the cost of
            Medicaid covered services.

            The MCO is required to issue a notice of action for actions
            described in a.(5) above, only if the Member notifies the MCO of his
            or her inability to obtain timely access to services. In such
            instances, the MCO shall provide the Member with immediate
            assistance in accessing the services. If the Member has been unable
            to access emergency services, the MCO shall issue a notice of action
            immediately. For non-emergent services, if a

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                  Member contacts the MCO concerning the inability to access a
                  covered service within the timeframes referenced in (a)(5)
                  above, and three (3) business days later the Member has not
                  accessed or made arrangements for receiving the service that
                  are satisfactory to the Member, the MCO shall issue a notice
                  of action.

b.    The MCO shall issue a notice of action if the MCO approves a good or
      service that is not the same type, amount, duration, frequency or
      intensity as that requested by the provider, consistent with current DSS
      policy.

c.    The MCO shall identify if the Member reads only a language other than
      English. For Members who do not read English, the notice of action shall
      be provided in accordance with Sections 3.28(a) and 3.29(h).

d.    Except as provided in (h) below, the MCO shall mail an advance notice of
      action for a termination, suspension or reduction of a previously
      authorized service to a Member at least ten (10) days before the date of
      any action described in (a) above, consistent with current DSS policy. The
      MCO may shorten the period of advance notice to five (5) days before the
      date of action if: 1) the MCO has facts indicating that the action should
      be taken because of probable fraud by the Member; and 2) the facts have
      been verified, if possible, through secondary sources.

e.    All notices related to actions described in (a) above shall clearly state
      or explain:

      1.    the action the MCO intends to take or has taken;

      2.    the reasons for the action;

      3.    the statute, regulation, the DEPARTMENT's Medical Services Policy
            section, or when there is no appropriate regulation, policy or
            statute, the HUSKY A contract provision that supports the action;

      4.    the address and toll-free number of the MCO's Member Services
            Department;

      5.    the Member's right to challenge the action by filing an appeal and
            requesting an administrative hearing;

      6.    the procedure for filing an appeal and for requesting an
            administrative hearing;

      7.    how the Member may obtain an appeal form and, if desired, assistance
            in completing and submitting the appeal form;

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      8.    that the Member will lose his or her right to an appeal and
            administrative hearing if he or she does not complete and file a
            written appeal form with the DEPARTMENT within sixty (60) days from
            the date the MCO mailed the initial notice of action;

      9.    that the MCO must issue a decision regarding an appeal by the date
            that the administrative hearing is scheduled, but no more than
            thirty (30) days following the date the DEPARTMENT receives it;

      10.   that, if the Member files an appeal he or she is entitled to meet
            with or speak by telephone with the MCO representative who will
            decide the appeal, and is entitled to submit additional
            documentation or written material for the MCO's consideration;

      11.   that the Member may proceed automatically to an administrative
            hearing if he or she is dissatisfied with the MCO's appeal decision
            concerning the denial of coverage of goods or services or a
            reduction, suspension, or termination of ongoing goods or services,
            or if the MCO fails to render an appeal decision by the date the
            administrative hearing is scheduled;

      12.   that at an administrative hearing, the Member may represent himself
            or herself or use legal counsel, a relative, a friend, or other
            spokesperson;

      13.   that if the Member obtains legal counsel who will represent the
            Member during the appeal or administrative hearing process, the
            Member must direct his or her legal counsel to send written
            notification of the representation to the MCO and the DEPARTMENT;

      14.   that if the circumstances require advance notice, the Member's right
            to continuation of previously authorized goods and services,
            provided that the Member files a grievance/request for
            administrative hearing form with the DEPARTMENT on or before the
            intended effective date of the MCO's action or within ten (10)
            calendar days of the date the notice of action is mailed to the
            Member, whichever is later;

      15.   the circumstances under which expedited resolution is available and
            how to request expedited resolution; and

      16.   any other information specified by the DEPARTMENT.

f.    In the case of a child who is under the care of the Department of Children
      and Families (DCF), the MCO must send the notice of action to the child's
      foster parents and the DCF contact person specified by the DEPARTMENT.

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g.    The NOA shall be mailed within the following timeframes:

      1)    for termination, suspension, or reduction of previously authorized
            Medicaid covered services, 10 days in advance of the effective date;

      2)    for standard authorization decisions to deny or limit services, as
            expeditiously as the Member's health condition requires, not to
            exceed fourteen (14) calendar days following receipt of the request
            for services;

      3)    if the MCO extends the fourteen day time frame for denial or
            limitation of a service as permitted in Section 3.39d (1)(i) and
            (ii), as expeditiously as the Member's condition requires and no
            later than the date the extension expires;

      4)    for service authorization decisions not reached within the
            timeframes in 3.39 (which constitutes a denial and thus is an
            adverse action), on the date the timeframe expires;

      5)    for expedited service authorization decisions as expeditiously as
            the Member's health condition requires and no later than three (3)
            business days after receipt of the request for services;

      6)    for denial of payment where the Member may be held liable, at the
            time of any action affecting the claim

      7)    for failure to provide timely access to services as expeditiously as
            the Member's health requires, but no later than three (3) business
            days after the Member contacts the MCO.

h.          The ten (10) day advance notice requirements do not apply to the
            circumstances described in 42 CFR 431.213. Notice of action need not
            be sent to the Member ten (10) days in advance of the action, but
            may be sent no later than the date of action and will be considered
            an exception to the advance notice requirement, if the action is
            based on any of the following circumstances:

      1)    a denial of services;

      2)    the MCO has received a clear, written statement signed by the Member
            that:

            a.    the Member no longer wishes to receive the goods or services;
                  or

            b.    the Member gives information which requires the reduction,
                  suspension, or termination of the goods or services, and the
                  Member indicates that he or she understands that this must be
                  the result of supplying that information; and

      3)    the Member has been admitted to an institution where he or she is
            ineligible for the goods or services. In this instance, the Member
            must be notified on the notice of admission that any goods or
            services being reduced, suspended, or terminated will be reevaluated
            for medical necessity upon discharge, and the Member will have the
            right to appeal any post-discharge decisions.

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            If the circumstances are an exception to the advance notice
            requirement as set forth above the Member does not have the
            automatic right to continuation of ongoing goods or services. In
            these circumstances, however, and in any instance in which the MCO
            fails to issue an advance notice when required, the reduced,
            suspended, or terminated goods and services must be reinstated if
            the Member files a written appeal form with the DEPARTMENT within
            ten (10) days of the date the notice is mailed to the Member.

i.    The MCO shall follow the requirements for continuation of services set
      forth in 42 CFR 438.420. The right to continuation of ongoing goods or
      services applies to the scope of services previously authorized. The right
      to continuation of services does not apply to subsequent requests for
      approval that result in denial of the additional request or
      re-authorization of the request at a different level than requested. For
      example, the right to continuation of services does not apply:

                  1.    when a prescription (including refills) runs out and the
                        Member requests a new prescription for the same
                        medication; or

                  2.    to a request for additional home health care services
                        following the expiration of the approved number of home
                        health visits

      The MCO shall treat such requests as a new service authorization request
      and provide a denial notice.

j.    Notice of action is not required if the member's treating physician or
      PCP, using his or her professional judgment, refuses to prescribe (or
      prescribes an alternative to) a particular service sought by a member.
      Notice of action is also not required if the Member's treating physician
      or PCP, using his or her professional judgment, orders the reduction,
      suspension, or termination of goods or services. Such decisions do not
      constitute an action by the MCO. If, however, the Member disagrees with
      the provider and contacts the MCO to request authorization for the service
      the MCO shall conduct an expedited review of the request, according to the
      timeframe in 3.39(e). If the MCO affirms the provider's action to deny,
      terminate, reduce or suspend the service, the MCO shall issue a notice of
      action. If the Member requests an appeal and hearing, the MCO shall
      continue authorization for the services, to the extent services were
      previously authorized, unless the MCO determines that continued provision
      of the services could be harmful to the Member. The MCO shall also advise
      the Member of his or her right to a second opinion from another provider.
      Because only a licensed health care provider, and not the MCO, may
      prescribe or provide medical services, the Member may not be able to
      receive some or all of the requested goods or services while the appeal is
      pending. If the MCO approves the Member's request for the

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      good or service, the MCO shall inform the Member of the approval and shall
      inform the Member of the right to a second opinion.

k.    The DEPARTMENT will provide a standardized notice of action form to be
      used by the MCO and its subcontractors. The DEPARTMENT will also provide a
      standardized appeal form to be used by the MCO and its subcontractors. The
      MCO and its subcontractors shall not alter the standard format of either
      form without prior, written approval of the DEPARTMENT.

l.    The DEPARTMENT will conduct random reviews of the MCO and its
      subcontractors, as appropriate, to ensure that Members are sent accurate,
      complete and timely notices of action.

SANCTION: If the DEPARTMENT determines during any audit or random monitoring
visit to the MCO or one of its subcontractors that a notice of action fails to
meet any of the criteria set forth herein, the DEPARTMENT may impose a strike
towards a Class A sanction. If the deficiencies which give rise to a Class A
sanction continue for a period in excess of ninety (90) days, the DEPARTMENT may
impose a Class B sanction.

6.03  APPEALS AND ADMINISTRATIVE HEARING PROCESSES

a.    The MCOs shall have a timely and organized appeals process. The appeals
      process shall be available for resolution of disputes between the MCO and
      its Members concerning the MCO's actions as defined in 6.02.

b.    The MCO shall develop written policies and procedures for its appeals
      process. Those policies and procedures must be approved by the DEPARTMENT
      in writing and must include the elements specified in this contract. The
      MCO shall not be excused from providing the elements specified in this
      contract pending the DEPARTMENT's written approval of the MCO's policies
      and procedures.

c.    The MCO shall maintain a record keeping system for appeals which shall
      include a copy of the appeal, the response, the resolution and supporting
      documentation.

d.    The MCO must clearly specify in its Member handbook/packet the procedural
      steps and timeframes for filing an appeal and administrative hearing
      request, including the timeframe for maintaining benefits pending the
      conclusion of the appeal and administrative hearing processes. The Member
      handbook/packet shall also list the addresses, office hours, and toll-free
      telephone numbers for the Member Services office.

e.    The MCO shall ensure that network providers and subcontractors are
      familiar with the appeal process and shall provide information on the
      process to providers and subcontractors. The MCO shall provide information
      on the appeal process to its providers and subcontractors at the time it
      enters into contracts or subcontracts.

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      The MCO must ensure that appeal forms are available at each primary care
      site. At a minimum, appeals assistance must include providing forms on
      request, assisting the Member in filling out the forms upon request, and
      sending the completed form to the DEPARTMENT upon request.

f.    The MCO shall develop and make available to Members and potential Members
      appropriate foreign language versions of appeals materials, including but
      not limited to, the standard information contained in notices of action
      and appeals forms. Such materials shall be made available in Spanish,
      English, or any other languages if more than five (5) percent of the MCO's
      Members in any county of the State served by the MCO speak the alternative
      language. Such foreign language materials must be approved, in writing, by
      the DEPARTMENT.

g.    A Member may request an appeal either orally or in writing. When
      requesting an appeal orally, unless the member is seeking an expedited
      appeal review, the Member must follow up an oral request with a written,
      signed appeal form within five (5) days of the oral request. The MCO shall
      advise any member who requests an appeal orally, that the Member must file
      a written appeal form in order to receive an administrative hearing. In
      all other respects, the process for pursuing an appeal and for requesting
      an administrative hearing shall be unified. The MCO and the DEPARTMENT
      shall treat the filing of a written appeal as a simultaneous request for
      an administrative hearing. The MCO shall attempt to resolve appeals at the
      earliest point possible. If the MCO is not able to render a decision by
      the time the administrative hearing is scheduled, the Member will
      automatically proceed to the administrative hearing.

h.    Appeals may be filed by the Member, the Member's authorized
      representative, or the Member's conservator on a form approved by the
      DEPARTMENT. A provider, acting on behalf of the member and with the
      Member's written consent, may file an appeal. A provider may not file an
      administrative hearing request on behalf of a Member unless the authorized
      representative requirements in DSS Uniform Policy Manual Section 1525.05
      are met. The MCO shall request a copy of the written consent from the
      Member. Appeals shall be mailed or faxed to a single address within the
      DEPARTMENT. The appeal form must state both the mailing address and fax
      number at the DEPARTMENT where the form must be sent. If the MCO or its
      subcontractor receive an appeal directly from a Member or the Member's
      authorized representative or conservator, the MCO shall date stamp and fax
      the appeal to the appropriate fax number at the DEPARTMENT within two (2)
      business days.

i.    Upon receipt of a written appeal, the DEPARTMENT will schedule an
      administrative hearing and notify the Member and MCO of the hearing date
      and location. If a Member is disabled, the hearing may be scheduled for
      the Member's home, if requested by the Member.

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j.    The DEPARTMENT will date stamp and forward the appeal by fax to the MCO
      within two (2) business days of receipt. The fax to the MCO will include
      the date the Member mailed the appeal to the DEPARTMENT. The postmark on
      the envelope will be used to determine the date the appeal was mailed.

k.    The MCO's review of the appeal must be carried out by an individual or
      individuals having final decisionmaking authority. Any appeal stemming
      from an action based on a determination of medical necessity or involving
      any other clinical issues must be decided by one or more physicians who
      were not involved in making that medical determination.

l.    The MCO may decide an appeal on the basis of the written documentation
      available unless the Member requests an opportunity to meet with the
      individual or individuals making that determination on behalf of the MCO
      and/or requests the opportunity to submit additional documentation or
      other written material. The Member shall have a right to review his or her
      MCO record, including medical records and any other documents or records
      considered during the appeal process. The Member's right to access medical
      records shall be consistent with HIPAA privacy regulations and any
      applicable state or federal law.

m.    If the Member wishes to meet with the decisionmaker, the meeting can be
      held via the telephone or at a location accessible to the Member,
      including the Member's home if requested by a disabled Member. Subject to
      approval of the DEPARTMENT's Regional Offices, any of the DEPARTMENT'S
      office locations may be available for video conferencing. The MCO must
      invite a representative of the DEPARTMENT to attend any such meeting.

n.    The MCO must mail to the Member, by certified mail, a written appeal
      decision, described below, with a copy to the DEPARTMENT, by the date of
      the DEPARTMENT's administrative hearing as expeditiously as the Member's
      health condition requires, but no later than thirty (30) days from the
      date on which the appeal was received by the DEPARTMENT. If the Member is
      dissatisfied with the MCO's decision regarding the denial, reduction,
      suspension, or termination of goods or services, or if the MCO does not
      render a decision by the time of the administrative hearing, the Member
      may automatically proceed to the administrative hearing.

o.    The MCO's written appeal decision must include the Member's name and
      address; the provider's name and address; the MCO name and address; a
      complete description of the information or documents reviewed by the MCO;
      a complete statement of the MCO's findings and conclusions, including the
      section number and text of any contractual provision or DEPARTMENTAL
      policy provision that is relevant to the grievance decision; and a clear
      statement of the MCO disposition of the appeal.

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p.    Along with its written appeal decision, the MCO must remind the Member, on
      a form approved by the DEPARTMENT that:

      1.    if the Member is dissatisfied with the MCO's appeal decision, the
            DEPARTMENT has already reserved a time to hold an administrative
            hearing concerning that decision;

      2.    that the Member has the right to automatically proceed to the
            administrative hearing, and that the MCO must continue previously
            authorized goods and services pending the administrative hearing
            decision;

      3.    if the appeal pertains to the suspension, reduction, or termination
            of goods or services which have been maintained during the appeals
            process, and the MCO's appeals decision affirms the suspension,
            reduction, or termination of goods or services, those goods or
            services will be suspended, reduced, or terminated in accordance
            with the MCO's appeals decision unless the Member proceeds to an
            administrative hearing; and

      4.    if the Member fails to appear at the administrative hearing, the
            Member's reserved hearing time will be cancelled and any disputed
            goods or services that were maintained will be suspended, reduced,
            or terminated in accordance with the MCO's appeals decision.

q.    If the Member proceeds to an administrative hearing, the MCO must make its
      entire file concerning the Member and the appeal, including any materials
      considered in making its decision, available to the DEPARTMENT.

r.    If the MCO fails to issue an appeal decision by the date that an
      administrative hearing is scheduled, but no later than thirty (30) days
      following the date the grievance was received by the DEPARTMENT, an
      administrative hearing will be held as originally scheduled. At the
      hearing, the MCO must prove good cause for having failed to issue a timely
      decision regarding the appeal. Good cause for the MCO's failure to issue a
      timely decision shall include, but not be limited to, documented efforts
      to obtain additional medical records necessary for the MCO's decision on
      the appeal and the Member's refusal to sign a release for medical records
      necessary for the decision on the appeal.

      The MCO's inability to prove good cause shall constitute a sufficient
      basis for upholding the appeal, and the hearing officer, in his or her
      discretion, may uphold the appeal solely on that basis.

      If the MCO proves good cause for having failed to issue a timely appeal
      decision, the hearing officer may order a continuance of the hearing
      pending the issuance of the grievance decision by a certain date or the
      hearing officer may proceed with the hearing.

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s.    A representative of the MCO shall prepare the summary for the
      administrative hearing, subject to approval by the DEPARTMENT prior to the
      hearing, and shall present proof of all facts supporting its initial
      action if the administrative hearing proceeds in the absence of an appeal
      decision. The MCO shall submit a final, signed hearing summary to the
      DEPARTMENT no later than five (5) business days prior to the scheduled
      hearing date. The MCO's representative shall also present any provisions
      of this contract or any DEPARTMENT policies which support its decision.

t.    If the Member is represented by legal counsel at the hearing and has not
      notified either the DEPARTMENT or the MCC of the representation, the MCO
      may request a continuance of the hearing or may ask the hearing officer to
      hold the hearing record open for additional evidence or submissions. The
      decision as to whether a continuance will be granted or the record will be
      held upon is within the hearing officer's discretion.

u.    If a representative of the MCO fails to attend a scheduled session of an
      administrative hearing, the MCO's failure to attend shall constitute a
      sufficient basis for upholding the appeal, and the hearing officer, in his
      or her discretion, may close the hearing and uphold the appeal solely on
      that basis. This provision shall not apply unless the MCO receives notice
      of the hearing at least seven (7) business days prior to the
      administrative hearing.

v.    If the DEPARTMENT is advised that the Member does not intend to proceed to
      an administrative hearing, the DEPARTMENT will fax such notice to the MCO.

w.    The MCO must designate one primary and one back-up contact person for its
      grievance/administrative hearing process.

x.    If the DEPARTMENT's hearing officer reverses the MCO's decision to deny,
      limit or delay services that were not furnished while the appeal was
      pending, the MCO shall authorize or provide the disputed services
      promptly, and as expeditiously as the Member's health condition requires.

6.04  EXPEDITED REVIEW AND ADMINISTRATIVE HEARINGS

a.    Subject to Section 6.02 above, the appeal process must allow for expedited
      review. If the appeal contains a request for expedited review, it will be
      forwarded by fax to the MCO within one business day of receipt by the
      DEPARTMENT. The fax will include the date the Member mailed the appeal.
      The postmark on the envelope will be used to determine the date the appeal
      was mailed. If the MCO

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      receives an oral request for expedited appeal, the MCO shall notify the
      DSS liaison by fax or telephone within one business day of the oral
      request.

b.    The MCO must determine, within one business day of receiving the grievance
      which contains a request for an expedited review from the DEPARTMENT, or
      within one business day of receiving an oral request for an expedited
      appeal, whether to expedite the appeal or whether to perform it according
      to the standard timeframes. If the Member's provider indicates or the MCO
      determines that the appeal meets the criteria for expedited review, the
      MCO shall notify the DEPARTMENT immediately that the MCO will be
      conducting the appeal on an expedited basis.

c.    An expedited appeal must be performed when the standard timeframes for
      determining a grievance could seriously jeopardize the life or health of
      the Member or the Member's ability to attain, maintain or regain maximum
      function. The MCO must expedite its review in all cases in which the
      Member's provider indicates, in making the request for expedited review
      on behalf of the Member or supporting the member's request, that taking
      the time for a standard grievance review could seriously jeopardize the
      Member's life or health or ability to attain, maintain, or regain maximum
      function and if the DEPARTMENT requests the MCO to conduct an expedited
      review because the DEPARTMENT believes a specific case meets the criteria
      for expedited review.

d.    If the MCO denies a request for expedited review, the MCO shall perform
      the review within the standard timeframe and make reasonable efforts to
      give the Member prompt oral notice of the denial and follow up within two
      calendar days with a written notice.

e.    Unless the Member asks to meet with the decisionmaker or to submit
      additional information, an expedited review must be completed and an
      appeal decision must be issued within a timeframe appropriate to the
      condition or situation of the Member, but no more than three (3) business
      days from the DEPARTMENT's receipt of the written appeal or three (3)
      business days from an oral request received by the MCO.

f.    The MCO may extend the timeframe for decisions in paragraph d by up to 14
      days if: 1) the Member requests the extension or 2) MCO can demonstrate
      that the extension is in the member's interest because additional
      information is needed to decide the appeal and if the timeframe is not
      extended, the appeal will be denied. The DEPARTMENT may request this
      documentation from the MCO. If an extension is given and the member asks
      to meet with the decisionmaker and/or submit additional information, the
      decisionmaker must offer to meet with the Member within three (3) business
      days of receiving the appeal. The meeting with the Member can be held via
      the telephone or at a location accessible to the Member, and subject to
      approval of the DEPARTMENT's Regional Offices, any of the DEPARTMENT's
      office locations may be available for video conferencing.

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g.    The MCO shall ensure that no punitive action is taken against a provider
      who requests an expedited appeal or supports a Member's appeal.

h.    The MCO shall issue a written appeal decision for expedited appeals. The
      written notice of the resolution must meet the requirements of 6.03(o) and
      (p). The MCO shall also make reasonable efforts to provide the Member oral
      notice of an expedited appeal decision.

i. The DEPARTMENT also provides expedited administrative hearings for HUSKY A
      Members, where required. The DEPARTMENT shall issue a hearing decision as
      expeditiously as the Member's health condition requires, but no later than
      three (3) working days after the DEPARTMENT receives from the MCO, the
      case file and information for any appeal that meets the requirements for
      an expedited hearing. A Member is entitled to an expedited hearing for the
      denial of a service if the denial met the criteria for expedited appeal
      but was not resolved within the expedited appeals timeframe or was
      resolved within the expedited appeals timeframe, but the appeals decision
      was wholly or partially adverse to the Member.

SANCTION: If the MCO fails to provide expedited appeals in appropriate
circumstances, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

6.05  PROVIDER APPEAL PROCESS

a.    The MCO shall have an internal appeal process through which a health care
      provider may appeal the MCO decision on behalf of a Member.

b.    The health care provider appeal process shall not include any appeal
      rights to the DEPARTMENT or any rights to an administrative hearing.

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7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

7.01  PERFORMANCE REVIEW

a.    A designated representative of the MCO and a designated representative of
      the DEPARTMENT shall meet on an annual basis, and as requested by either
      party, to review the performance of the MCO under this contract. The
      DEPARTMENT will keep written minutes of such meetings. In the event of any
      disagreement regarding the performance of services by the MCO under this
      contract, the designated representatives shall discuss the problem and
      shall negotiate in good faith in an effort to resolve the disagreement.

b.    In the event that no such resolution is achieved within a reasonable time,
      the matter shall be referred to the Contract Administrator as provided
      under Article 7.02, the Disputes clause of this contract. If the Contract
      Administrator determines that the MCO has failed to perform as measured
      against applicable contract provisions, the Contract Administrator may
      impose sanctions or any other penalty, set forth in this Section including
      the termination of this contract in whole or in part, as provided under
      this Section.

7.02  SETTLEMENT OF DISPUTES

Any dispute arising under the contract which is not disposed of by agreement
shall be decided by the Contract Administrator whose decision shall be final and
conclusive subject to any rights the MCO may have in a court of law. The
foregoing shall not limit any right the MCO may have to present claims under
Connecticut General Statutes Section 4-141 et seq. or successor provisions
regarding the claims commissioner, including without limitation Connecticut
General Statutes Section 4-160 regarding authorization of actions. In connection
with any appeal to the Contract Administrator under this paragraph, the MCO
shall be afforded an opportunity to be heard and to offer evidence in support of
its appeal. Pending final decision of a dispute, the MCO shall proceed
diligently with the performance of the contract in accordance with the Contract
Administrator's decision.

7.03  ADMINISTRATIVE ERRORS

The MCO shall be liable for the actual amount of any costs in excess of $5,000
incurred by the DEPARTMENT as the result of any administrative error (e.g.
submission of erroneous capitation, encounter or reinsurance data) of the MCO or
its subcontractors. The DEPARTMENT may request a refund of, or recoup from
subsequent capitation payments, the actual amount of such costs.

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7.04  SUSPENSION OF NEW ENROLLMENT

Whenever the DEPARTMENT determines that the MCO is out of compliance with this
contract, unless corrective action is taken to the satisfaction of the
DEPARTMENT, the DEPARTMENT may suspend enrollment of new Members under this
contract. The DEPARTMENT, when exercising this option, must notify the MCO in
writing of its intent to suspend new enrollment at least thirty (30) days prior
to the beginning of the suspension period. The suspension period may be for any
length of time specified by the DEPARTMENT, or may be indefinite. The suspension
period may extend up to the contract expiration date as provided under PART I.
(The DEPARTMENT may also notify existing Members of MCO non-compliance and
provide an opportunity to disenroll from the MCO and to re-enroll in another
MCO.)

7.05  MONETARY SANCTIONS

It is agreed by the DEPARTMENT and the MCO that if by any means, including any
report, filing, examination, audit, survey, inspection or investigation, the MCO
is determined to be out of compliance with this contract, damage to the
DEPARTMENT may or could result. Consequently, the MCO agrees that the DEPARTMENT
may impose any of the following sanctions for noncompliance under this contract.
Unless otherwise provided in this contract, sanctions imposed under this
section shall be deducted from capitation payment or, at the discretion of the
DEPARTMENT, paid directly to the DEPARTMENT.

A.    SANCTIONS FOR NONCOMPLIANCE

      1. CLASS A SANCTIONS. THREE (3) STRIKES. SANCTIONS WARRANTED AFTER
         THREE (3) OCCURRENCES

      For noncompliance of the contract which does not rise to the level
      warranting Class B sanctions as defined in subsection (a)(2) of this
      section or Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class A
      sanctions in any provision of this contract, the following course of
      action will be taken by the DEPARTMENT:

            Each time the MCO fails to comply with the contract on an issue
            warranting a Class A sanction, the MCO receives a strike. The MCO
            will be notified each time a strike is imposed. After the third
            strike for the same contract provision, a sanction may be imposed.
            If no specific time frame is set forth in any such contractual
            provision, the time frame is deemed to be the full length of the
            contract.

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            The MCO will be notified in writing at least thirty (30) days in
            advance of any sanction being imposed and will be given an
            opportunity to meet with the DEPARTMENT to present its position as
            to the DEPARTMENT's determination of a violation warranting a Class
            A sanction. At the DEPARTMENT's discretion, a sanction will
            thereafter be imposed. Said sanction will be no more than $2,500
            after the first three (3) strikes. The next strike for noncompliance
            of the same contractual provision will result in a sanction of no
            more than $5,000 and any subsequent strike for noncompliance of the
            same contractual provision will result in a Class A sanction of no
            more than $10,000.

      2. CLASS B SANCTIONS. SANCTIONS WARRANTED UPON SINGLE OCCURRENCE

      For noncompliance with the contract which does not warrant the imposition
      of Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class B
      sanctions in any provision of this contract, the following course of
      action will be taken by the DEPARTMENT:

            The DEPARTMENT may impose a sanction at the DEPARTMENT's discretion
            if, after at least thirty (30) days notice to the MCO and an
            opportunity to meet with the DEPARTMENT to present the MCO's
            position as to the DEPARTMENT's determination of a violation
            warranting a Class B sanction, the DEPARTMENT determines that the
            MCO has failed to meet a performance measure which merits the
            imposition of a Class B sanction not to exceed $10,000.

b.    CLASS C SANCTIONS. SANCTIONS RELATED TO NONCOMPLIANCE POTENTIALLY
      RESULTING IN HARM TO AN INDIVIDUAL MEMBER

      (i) The DEPARTMENT may impose a Class C sanction on the MCO for
          noncompliance potentially resulting in harm to an individual Member,
          including, but not limited to, the following:

      1.    failing to substantially authorize medically necessary items and
            services that are required (under law or under this contract) to be
            provided to an Member covered under this contract;

      2.    imposing a premium or charge on Members except as specifically
            permitted under provisions of the approved Medicaid State Plan and
            the provisions of this Contract;

      3.    discriminating among Members on the basis of their health status or
            requirements for health care services, including expulsion or
            refusal to re-enroll an individual, except as permitted by Title
            XIX, or engaging in any practice that would reasonably be expected
            to have the effect of denying or discouraging enrollment with the
            MCO by eligible individuals whose medical condition or history
            indicates a need for substantial future medical services;

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      4.    misrepresenting or falsifying information that is furnished to the
            Secretary, the DEPARTMENT; Member, potential Member, or a health
            care provider;

      5.    failing to comply with the physician incentive requirements under
            Section 1903(m)(2)(A)(x) of the Social Security Act and 42 CFR
            422.208 and 422.210;

      6.    distributing directly or through any agent or independent contractor
            marketing materials that have not been approved by the DEPARTMENT or
            containing false or misleading information; and

      7.    failing to comply with any other requirements of 42 U.S.C. 1396b(m)
            or 42 U.S.C. 1396u-2.

      (ii) Class C sanctions for noncompliance with the contract under this
           subsection include the following:

      1.   withholding the next month's capitation payment to the MCO in full or
           in part;

      2.    assessment of liquidated damages:

            a.    for each determination that the MCO fails to substantially
                  provide medically necessary services, makes misrepresentations
                  or false statements to Members, potential Members or health
                  care providers, engages in marketing violations or fails to
                  comply with the physician incentive plan requirements, not
                  more than $25,000;

            b.    for each determination that the MCO discriminates among
                  Members on the basis of their health status or requirements
                  for health care services or engages in any practice that has
                  the effect of denying or discouraging enrollment with the
                  MCO by eligible individuals based on their medical condition
                  or history that indicates a need for substantial future
                  medical services, or the MCO misrepresents or falsifies
                  information furnished to the Secretary or DEPARTMENT, not more
                  than $100,000;

            c.    for each determination that the MCO has discriminated among
                  Members or engaged in any practice that has denied or
                  discouraged enrollment, $15,000 for each individual not
                  enrolled as a result of the practice up to a total of
                  $100,000;

            d.    for a determination that the MCO has imposed premiums or
                  charges on Members in excess of the premiums or charges
                  permitted, double the excess amount but not more than
                  $25,000. The excess amount charged in such a circumstance must
                  be deducted from the penalty and returned to the Member
                  concerned;

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      3.    freeze on new enrollment and/or alter the current enrollment; or

      4.    appointment of temporary management as described in 7.06.

      (iii) Prior to imposition of any Class C sanction, the MCO will be
            notified at least thirty (30) days in advance and provided, at a
            minimum, an opportunity to meet with the DEPARTMENT to present its
            position as to the DEPARTMENT's determination of a violation
            warranting a Class C Sanction. For any contract violation under this
            subsection, at the DEPARTMENT's discretion, the MCO may be permitted
            to submit a corrective action plan within twenty (20) days of the
            notice to the MCO of the violation. Immediate compliance (within
            thirty (30) days) under any such corrective action plan may result
            in the imposition of a lessor sanction on the MCO. If any sanction
            issued under this subsection is equivalent to termination of the
            contract, the MCO shall be offered a hearing to contest the
            imposition of such a sanction.

C.  OTHER REMEDIES

      1.    Notwithstanding the provisions of this section, failure to provide
            required services will place the MCO in default of this contract,
            and the remedies in this section are not a substitute for other
            remedies for default which the DEPARTMENT may impose as set forth in
            this contract.

      2.    The imposition of any sanction under this section does not preclude
            the DEPARTMENT from obtaining any other legal relief to which it may
            be entitled pursuant to state or federal law.

D.    CMS SANCTIONS

      Pursuant to 42 CFR 438.730, the DEPARTMENT may recommend the imposition of
      sanctions to CMS and CMS may sanction the MCO as described in that
      section. In the alternative, CMS may independently initiate the sanction
      process described in 42 CFR 438.730(a) through (d). The MCO shall comply
      with all applicable sanction provisions set forth in 42 CFR 438.730. CMS
      may deny payment to the DEPARTMENT for new Members under the circumstances
      described in 42 CFR 438.730(e) and capitation payments to the MCO will be
      denied so long as payment for those Members is denied by CMS.

7.06  TEMPORARY MANAGEMENT

The DEPARTMENT may impose temporary management upon a finding by the DEPARTMENT
that: 1) there is continued egregious behavior by the MCO; 2) there is a
substantial risk to the health of the Members or 3) temporary management is
necessary to ensure the health of the MCO's members while improvements are made
to remedy the violations or until there is an orderly termination or
reorganization of the MCO. For purposes of this section, "egregious behavior"
shall include but not be limited to any of

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the violations described in 7.05b(ii)(2) or any other MCO behavior that is
contrary to Sections 1903(m) and 1932 of the Social Security Act. After a
finding pursuant to this subsection, individuals enrolled with the MCO must be
permitted to terminate enrollment without cause and the MCO shall be responsible
for notification of such right to terminate enrollment. Nothing in this
subsection shall preclude the DEPARTMENT from proceeding under the termination
provisions of the contract rather than imposing temporary management. If
however, the DEPARTMENT chooses not to first terminate the contract and repeated
violations of substantive requirements in section 1903(m) or 1932 of the Social
Security Act occur, the DEPARTMENT must than impose temporary management and
allow individuals to disenroll without cause. The Department may impose
temporary management without a hearing.

7.07  PAYMENT WITHHOLD, CLASS C SANCTIONS OR TERMINATION FOR CAUSE

The DEPARTMENT may withhold capitation payments, impose sanctions including
Class C Sanctions set forth in Section 7.05 or terminate the contract for cause.
Cause shall include, but not be limited to: 1) use of funds and/or personnel for
purposes other than those described in the HUSKY A program and this contract and
2) if a civil action or suit in federal or state court involving allegations of
health fraud or violation of 18 U.S.C. Section 1961 et seq. is brought on
behalf of the DEPARTMENT.

7.08  EMERGENCY SERVICES DENIALS

If the MCO has a pattern of inappropriately denying payments for emergency
services as defined in Part II, Definitions, the MCO may be subject to
suspension of new enrollments, withholding of capitation payments, contract
termination, or refusal to contract in a future time period. This applies not
only to cases where the DEPARTMENT has ordered payment after appeal, but also to
cases where no appeal has been made (i.e., the DEPARTMENT is knowledgeable about
documented abuse from other sources.)

7.09  TERMINATION FOR DEFAULT

a.    The DEPARTMENT may terminate performance of work under this contract in
      whole, or in part, whenever the MCO materially defaults in performance of
      this contract and fails to cure such default or make progress satisfactory
      to the DEPARTMENT toward contract performance within a period of thirty
      (30) days (or such longer period as the DEPARTMENT may allow). Such
      termination shall be referred to herein as "Termination for Default."

b.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default,
      the notice of

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      termination shall be deemed to have been rescinded and the contract
      reinstated for the balance of the term.

c.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default
      or that the MCO's failure to perform or make progress in performance was
      due to causes beyond control and without the error or negligence of the
      MCO, or any subcontractor, the notice of termination shall be deemed to
      have been issued as a termination for convenience pursuant to Section 7.09
      and the rights and obligations of the parties shall be governed
      accordingly.

d.    In the event the DEPARTMENT terminates the contract in full or in part as
      provided in this clause, the DEPARTMENT may procure, services similar to
      those terminated, and the MCO shall be liable to the DEPARTMENT for any
      excess costs for such similar services for any calendar month for which
      the MCO has been paid to provide services to HUSKY A clients. In addition,
      the MCO shall be liable to the DEPARTMENT for administrative costs
      incurred by the DEPARTMENT in procuring such similar services. Provided,
      however, that the MCO shall not be liable for any excess costs or
      administrative costs if the failure to perform the contract arises out of
      causes beyond the control and without error or negligence of the MCO or
      any of its subcontractors.

e.    In the event of a termination for default, the MCO shall be financially
      responsible for Members in the current month at the applicable capitation
      rate.

f.    The rights and remedies of the DEPARTMENT provided in this clause shall
      not be exclusive and are in addition to any other rights and remedies
      provided by law or under this contract.

g.    In addition to the termination rights under Part I Section 8, the MCO may
      terminate this contract on ninety (90) days written notice in the event
      that the DEPARTMENT fails to (a) pay capitation claims in accordance with
      Part II Section 4.06 and Part II Section 3.01 of this contract (b) provide
      eligibility or enrollment/disenrollment information and shall fail to cure
      such default or make progress satisfactory to the MCO within a period of
      sixty (60) days of such default.

7.10  TERMINATION FOR MUTUAL CONVENIENCE

The DEPARTMENT and the MCO may terminate this contract at any time if both
parties mutually agree in writing to termination. At least sixty (60) days shall
be allowed. The effective date must be the first day of a month. The MCO shall,
upon such mutual agreement being reached, be paid at the capitation rate for
enrolled recipients through the termination of the contract.

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7.11  TERMINATION FOR FINANCIAL INSTABILITY OF THE MCO

In the event of financial instability of the MCO, the DEPARTMENT shall have the
right to terminate the contract upon the same terms and conditions as a
Termination for Default.

7.12  TERMINATION FOR UNAVAILABILITY OF FUNDS

a.    The DEPARTMENT at its discretion may terminate at any time the whole or
      any part of this contract or modify the terms of the contract if federal
      or state funding for the contract or for the Medicaid program as a whole
      is reduced or terminated for any reason. Modification of the contract
      includes, but is not limited to, reduction of the rates or amounts of
      consideration, reducing services covered by the MCO, or the alteration of
      the manner of the performance in order to reduce expenditures under the
      contract. Whenever possible, the MCO will be given thirty (30) days
      notification of termination.

b.    In the event of a reduction in the appropriation from the state or federal
      budget for the Division of Health Care Financing of the Department of
      Social Services or an across-the-board budget reduction affecting the
      Department of Social Services, the DEPARTMENT may either re-negotiate this
      contract or terminate with thirty (30) days written notice. Any reduction
      in the capitation rates that is agreed upon by the parties or any
      subsequent termination of this contract by the DEPARTMENT in accordance
      with this provision shall only affect capitation payments or portions
      thereof for covered services purchased on or after the effective date of
      any such reduction or termination. Should the DEPARTMENT elect to
      renegotiate the contract, the DEPARTMENT will provide the MCO with those
      contract modifications, including capitation rate revisions, it would deem
      acceptable.

c.    The MCO shall have the right not to extend the contract if the new
      contract terms are deemed to be insufficient notwithstanding any other
      provision of this contract. The MCO shall have a minimum of sixty (60)
      days to notify the DEPARTMENT regarding its desire to accept new terms. If
      the new capitation rates and any other contract modifications are not
      established at least sixty (60) days prior to the expiration of the
      initial or extension agreement, the DEPARTMENT will reimburse the MCO at
      the higher of the new or current capitation rates for that period during
      which the new contract period had commenced and the MCO's sixty (60) day
      determination and notification period had not been completed, and the MCO
      will be held to the terms of the executed contract.

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7.13  TERMINATION FOR COLLUSION IN PRICE DETERMINATION

In competitive bidding markets, the MCO has previously certified that the prices
presented in its proposal were arrived at independently, without consultation,
communication, or agreement with any other bidder for the purpose of
restricting competition; that, unless otherwise required by law, the prices
quoted have not been knowingly disclosed by the MCO, prior to bid opening,
directly or indirectly to any other bidder or to any competitor; and that no
attempt has been made by the MCO to induce any other person or firm to submit or
not to submit a proposal for the purpose of restricting competition.

In the event that such action is proven, the DEPARTMENT shall have the right to
terminate this contract upon the same terms and conditions as a Termination for
Default.

7.14  TERMINATION OBLIGATIONS OF CONTRACTING PARTIES

a.    The MCO shall be provided the opportunity for a hearing prior to any
      termination of this contract pursuant to any provision of this contract.
      The DEPARTMENT shall give the MCO written notice of its intent to
      terminate, the reason for the termination and the date and time of the
      hearing. After the hearing, the DEPARTMENT shall give the MCO written
      notice of its decision affirming or reversing the proposed termination. In
      the event of a decision to affirm the termination, the DEPARTMENT's
      written notice shall include the effective date of termination. The
      DEPARTMENT may notify Members of the MCO and permit such Members to
      disenroll immediately without cause during the hearing process.

b.    Upon contract termination, the MCO shall allow the DEPARTMENT, its agents
      and representatives full access to the MCO's facilities and records to
      arrange the orderly transfer of the contracted activities. These records
      include the information necessary for the reimbursement of any outstanding
      Medicaid claims.

c.    Where this contract is terminated due to cause or default by the MCO: 1)
      The DEPARTMENT shall be responsible for notifying all Members of the date
      of termination and process by which the Members will continue to receive
      services and 2) the MCO shall notify all providers and be responsible for
      all expenses related to notification to providers and members.

d.    If this contract is terminated for any reason other than default by the
      MCO,

      1.    The MCO shall ensure that an adequate provider network will be
            maintained at all times during the transition period and that
            continuity of care is maintained for all Members;

      2.    The MCO shall submit a written transition plan to the DEPARTMENT
            sixty (60) days in advance of the scheduled termination;

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      3.    The DEPARTMENT shall be responsible for notifying all Members of the
            date of termination and process by which the Members will continue
            to receive services;

      4.    The DEPARTMENT shall be responsible for all expenses relating to
            said notification to members;

      5.    The MCO shall notify all providers and be responsible for all
            expenses related to such notification; and

      6.    The DEPARTMENT shall withhold a portion, not to exceed $100,000, of
            the last month's capitation payment as a surety bond for a six (6)
            month period to ensure compliance under the contract.

7.15  WAIVER OF DEFAULT

Waiver of any default shall not be deemed to be a waiver of any subsequent
default. Waiver of breach of any provision of the contract shall not be deemed
to be a waiver of any other or subsequent breach and shall not be construed to
be a modification of the terms of the contract unless stated to be such in
writing, signed by an authorized representative of the DEPARTMENT, and attached
to the original contract.

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8.    OTHER PROVISIONS

8.01  SEVERABILITY

If any provision of this procurement or the resultant contract is declared or
found to be illegal, unenforceable, or void, then both parties shall be relieved
of all obligations under that provision. The remainder of this procurement or
the resultant contract shall be enforced to the fullest extent permitted by law.

8.02  EFFECTIVE DATE

This contract is subject to review for form an substance by the U.S. Department
of Health and Human Services Centers for Medicare and Medicaid Services and the
DEPARTMENT, and will not become effective until it is approved by those
agencies.

8.03  ORDER OF PRECEDENCE

This contract shall be read together to achieve one harmonious whole. However,
should any irreconcilable conflict arise between Part I and Part II of this
contract, Part II shall prevail.

8.04  CORRECTION OF DEFICIENCIES

This contract does not release the MCO from its obligation to correct any and
all outstanding certification deficiencies. Failure to correct all outstanding
material deficiencies may cause the MCO to be determined in Default of this
contract.

8.05  THIS IS NOT A PUBLIC WORKS CONTRACT

The DEPARTMENT and the MCO as parties to this purchase of service Contract
mutually covenant, acknowledge and agree that this contract does not constitute
and shall not be construed to constitute a public works contract. The DEPARTMENT
and the MCO's mutual agreement that this contract is not a public works contract
shall have full force and effect on Part I Section 32 and other Sections of this
contract as applicable.

9.0   APPENDICES

The following appendices that were attached to the Purchase of Service Contract
between the MCO and the DEPARTMENT effective August 11, 2001, have not changed
since that date and are hereby incorporated by reference as if fully set forth
herein: Appendix B Provider Credentialing and Enrollment; Appendix C, EPSDT
Periodicity Schedule,

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Appendix D, DSS Marketing Guidelines; Appendix E, Quality Assurance Program;
Appendix F, Unaudited Quarterly Financial Reports; Appendix H, Managed Care
Policy Transmittals; Appendix J, Physician Incentive Payments, Appendix K.
Recategorization Chart. The remaining appendices are attached hereto.

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                                     HUSKY A

                                Covered Services

For purposes of this contract, the information contained in the Department's
Medical Services Policy Manuals and Departmental regulations has been summarized
to provide an overview for reference of the goods and services covered by the
Medicaid program (see attached list of Medical Assistance Program policies and
regulations). Any limitations or exclusions to these covered goods and services
are also overviewed.

Plans should be advised that, notwithstanding the following summary overview,
guidance issued by the Department in the form of policy transmittals,
regulations, provider bulletins, provider manuals, letters, and other written
correspondence is the final authority regarding covered goods and services. The
intent of the summary is to provide a quick working guide. These policies are
available at the Connecticut Medical Assistance Program website:
www.ctmedicalprogram.com. Whenever any questions regarding Medicaid policy
occur, health plans should consult with the Department's Medical Administration
Policy Unit for clarification.

Health plans are required to cover identical goods and services that are covered
under the Medicaid program; health plans do not have the option of adding or
subtracting from the 'benefit package'. These goods and services are included in
plans' capitation rates. However, this does not preclude a decision to provide
an additional benefit (i.e., a noncovered service) for a given member. For
example, on a case-by-case basis, a health plan may decide to cover the cost of
installing a ramp or providing homemaker services or provide inpatient
behavioral health services in an Institution for the Treatment of Mental
Diseases (IMD) (all noncovered services) if so doing would enable a member to
remain at home rather than be placed in an institutionalized setting or to
receive services in a more cost-effective manner.

Under current Medicaid Fee-For-Service (FFS) reimbursement methodology, various
administrative procedures related to payment for covered goods and services are
in place. These procedures are not incumbent upon health plans under Medicaid
Managed Care (MMC). For example, currently Medicaid FFS has administrative
procedures related to physical therapy provided in the home. When physical
therapy exceeds two (2) sessions per any consecutive seven (7) day period,
prior authorization is required.

Whether or not a given health plan requires prior authorization prior to
physical therapy being provided in the home, or requires prior authorization
after x number of visits, or does not require prior authorization at all is not
prescribed. The management of the "benefit" is at the discretion of the health
plan. However, a health plan cannot decide to limit a covered good or service
(e.g., cut off all physical therapy home visits after x number of visits). The
number of medically necessary visits will vary by member, and the health plan
cannot set a limit for members unless the Medicaid "benefit" itself is
specifically limited in Medical Services Policy.

Additionally, medically necessary behavioral health services for children in
Medicaid Managed Care shall include:

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a) the coordination of and linkage to those social and medical services which
ensure the health and safety of the child; b) preventive health care services
that are designed to avoid the need for future medically necessary services; c)
services for chronic, long-term disorders which if left untreated, will effect
the physical or mental health of the child; and (d) the duration of treatment
provided by a managed health plan for these children shall be based on the
individual needs of the child.

The summary overview is divided into three (3) sections. Section A contains a
listing of covered goods and services included in the capitation rates. It also
lists the major limitations and exclusions to these covered goods and services.
Section B contains a listing of covered goods and services not included in the
capitation rates. Section C contains a listing of noncovered services.

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                         SUMMARY DESCRIPTION OF BENEFITS

A.    COVERED SERVICES INCLUDED IN THE CAPITATION PAYMENT

1.  Hospital Inpatient Care (acute care hospitals) - Medically necessary and
    medically appropriate hospital inpatient acute care, procedures, and
    services, as authorized by the responsible physician(s) or dentist, and
    covered under Department of Social Services (DSS) policies and regulations.

    a.  Administratively Necessary Days (ANDs) are covered when a nursing home
        placement delay is due to unavailability of beds. However, a patient is
        required to accept the first available, medically appropriate bed.

    b.  Organ transplants are covered if they are of demonstrated therapeutic
        value, medically necessary and medically appropriate, and likely to
        result in the prolongation and the improvement in the quality of life of
        the applicant. The DSS Transplant Advisory Committee has developed, and
        continues to develop, medical criteria relating to particular organ
        transplant procedures. These criteria are available for use by health
        plans. The criteria are guidelines. However, a final decision to deny a
        transplant request is not to be rendered without considering the medical
        opinion of a qualified organ transplantation expert(s) in the community.

    c.  Mental health and substance abuse services in a general hospital
        psychiatric unit are covered--regardless of the age of the individual.

2.  Psychiatric (mental health/substance abuse) Facility Inpatient Care

    a.  Medically necessary psychiatric hospital care, procedures, and services
        as covered under DSS policy and regulation.

    b.  Some psychiatric hospitals may qualify as an Institution for Mental
        Diseases (IMD). An IMD is defined as a facility of more than sixteen
        (16) beds that is primarily engaged in providing diagnosis, treatment,
        or care of persons with mental diseases. Medically IMD necessary care is
        only covered for individuals under age 21 and 65 years of age or older.
        IMD services for individuals aged 21 through 64 are noncovered services
        (see Section C.1 of this summary overview).

3.  Freestanding Alcohol Treatment Center Inpatient Care

    a.  Services must be provided by a program holding a current and active
        license to operate a Private Freestanding Facility for the Care and
        Treatment of Substance Abusive or Dependent Persons.

    b.  Services under the Medicaid program shall be for alcohol detoxification
        and shall be limited to: a) the acute and evaluation phase of the
        treatment program and b) a ten (10) day period for each occurrence Acute
        treatment and evaluation provides medical management of detoxification
        and assessment of the individual's total situation in an inpatient
        milieu for the purpose of formulating and implementing a plan of care in
        addition to detoxification.

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    c.  Services must predominately focus on the medical and/or psychological
        management of alcohol abuse and other medical or psychological
        conditions which impact upon or are related to alcohol abuse. Treatment
        and care shall be provided under the direction of a physician within the
        scope of accepted medical practice.

4.  Chronic Disease Hospital Inpatient Care - Such medically necessary care,
    procedures, and services as covered under DSS policy and regulation.

5.  Nursing Facility (Skilled Nursing and Intermediate Care) Inpatient Care -
    Such medically necessary care is covered while the patient remains in a
    managed care coverage group. For coverage in nursing Homes which are
    characterized as, institutions for mental disease' see Section CA of this
    summary overview.

6.  Intermediate Care Facility (Mentally Retarded) Inpatient Care - Such
    medically necessary care is covered while the patient remains in a managed
    care coverage group.

7.  Christian Science Sanitoria Service - Such medically necessary care is
    covered while the patient remains in a managed care coverage group.

8.  Hospital Outpatient Care (General Hospital, Psychiatric Hospital, and
    Chronic Disease Hospital) - Preventive, diagnostic, therapeutic,
    rehabilitative, or palliative medical services provided to an outpatient by
    or under the direction of a physician or dentist in a licensed hospital
    facility.

9.  Physician Services - Primary and specialty services provided by a licensed
    physician or doctor of osteopathy and performed within the scope of practice
    of medicine or osteopathy as defined by State law.

10. Psychologist Services - Clinical, diagnostic, and remedial services
    personally performed by a psychologist. Services include: a) counseling and
    psychotherapy to individuals who are experiencing problems of a mental or
    behavioral nature and b) measuring and testing of personality, aptitudes,
    emotions, and attitudes.

    Note: Effective 9/1/03, psychologist services provided by independently
    enrolled psychologists are no longer covered for individuals who are 21
    years of age or older.

11. Nurse-Midwifery Services - Services provided by a licensed, certified
    nurse-midwife which are related to the care, and to the management of the
    care, of essentially normal mothers and newborns (only throughout the
    maternity cycle) and well woman gynecological care, including family
    planning services.

12. Nurse Practitioner Services - Services which are provided by a licensed
    Advanced Practice Registered Nurse (APRN) and which are within his or her
    scope of practice as defined by State law.

13. Chiropractor Services - Manual manipulation of the spine performed by a
    licensed chiropractor within the scope of chiropractic practice. Noncovered
    services:

    a.  Prescription or administration of any medicine or drug or the
        performance of any surgery;

    b.  X-rays furnished by a chiropractor.

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    c.  Manipulation of other parts of the body (e.g., shoulder, arm, knee,
        etc.) even when for subluxation of the spine; and

    d.  Lab work ordered by a chiropractor.

Note: Effective 1/1/03, chiropractor services provided by independently enrolled
chiropractors are no longer covered for individuals who are 21 years of age or
older.

14. Naturopathic Services - Services provided by a licensed naturopath which
    conform to accepted methods of diagnosis and treatment and which are within
    the scope of naturopathic practice.

Note: Effective 1/1/03, naturopathic services provided by independently enrolled
naturopaths are no longer covered for individuals who are 21 years of age or
older.

15. Podiatrist Services - Services provided by a licensed podiatrist which
    conform to accepted methods of diagnosis and treatment and which are within
    the scope of podiatric practice.

Note: Effective 1/1/03, podiatrist services provided by independently enrolled
podiatrists are no longer covered for individuals who are 21 years of age or
older.

    a.  Limitations of Coverage

        i.   Orthotic and/or corrective arch supports for recipients under five
             years of age; and

        ii.  Orthotic and/or corrective arch supports only once every two (2)
             years.

    b.  Noncovered Services

        i.   Services of assistants at surgery;

        ii.  Simplified tests requiring minimal time or equipment and employing
             materials nominal in cost such as Clinitest, testape, Hematest,
             Bumintest, Dextrostix, nonphotolitric hemogloblin, etc.;

        iii. Simple foot hygiene; and

        iv.  Repairs to devices judged to be necessitated by willful or
             malicious abuse on the part of the patient.

16. Laboratory Services - Laboratory services: a) ordered by a duly licensed
    physician or other licensed practitioner of the healing arts; and b)
    performed in a laboratory which is certified according to the applicable
    provisions of the Clinical Laboratory Improvement Amendments of 1988 (CLIA )
    and meets all applicable licensing, accreditation and certification
    requirements for the specific services and procedures it provides.

17. Outpatient Medical Rehabilitation Services - Medically necessary and
    medically appropriate outpatient rehabilitation services provided by a
    licensed or certified practitioner. Such services include: physical
    therapy, occupational therapy, speech therapy, audiology, inhalation
    therapy, social services, psychological services, traumatic brain injury
    (T.B.I.) day treatment, neuropsychological evaluation, electonystagmography,
    and early childhood intervention services.

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Note: Effective 1/1/03, services provided by independently enrolled physical
therapists, audiologists and speech pathologists are no longer covered for
individuals who are 21 years of age or older. Services provided by independently
enrolled psychologists will no longer be covered for individuals who are 21
years of age or older effective 9/1/03.

      a.    Limitations include:

            i.    Sheltered workshop services for individuals who are primarily
                  developmentally disabled are covered only if their need for
                  this type of program stems from an etiology readily
                  identifiable as medical or psychological in origin;

            ii.   T.B.I. treatment programs are limited to individuals who have
                  sustained injury from interaction of any external forces
                  resulting in the central nervous system (brain) dysfunctions.
                  Developmental impairment primarily contributing to brain
                  dysfunction is not included. The impairment must be readily
                  identifiable as having been sustained through injury;

            iii.  The T.B.I. program is primarily a medical rehabilitation
                  program, however, vocational, social, and educational services
                  may be covered only when these services are: a) related to the
                  individual's injury, b) are reasonable and necessary for the
                  diagnosis or treatment of the injury, and c) are a part of the
                  recipient's written individual plan of care; and

            iv.   Programs relating to the learning of basic living skills, or
                  other activities of daily living, are limited to individuals
                  who have lost or had impaired functions of daily living and
                  require retraining to maximize restoration of these skills.

      b.    Noncovered Services include:

            i.    Services which are related solely to specific employment
                  opportunities, work skills, work settings, and/or academic
                  skills and are not reasonable or necessary for the diagnosis
                  or treatment of an illness or injury;

            ii.   Speech services involving nondiagnostic, nontherapeutic,
                  routine, repetitive, and reinforced procedures or services for
                  the patient's general good and welfare; and

            iii.  Services ordinarily covered are not covered if an individual's
                  expected restoration potential would be insignificant in
                  relation to the extent and duration of rehabilitation services
                  required to achieve such potential.

18.   Vision Care - Services performed by a licensed ophthalmologist,
      optometrist, or optician which conform to accepted methods of diagnosis
      and treatment.

      Limitations of Coverage

            i.    Contact lenses are covered when such lenses provide better
                  management of a visual or ocular condition than can be
                  achieved with spectacle lenses, including, but not limited to
                  the diagnosis of Unilateral Aphakia, Keratoconus, Corneal
                  Transplant, and High Anisometropia;

            ii.   Prescription sunglasses are covered when light sensitivity
                  which will hinder driving or seriously handicap the outdoor
                  activity of a patient is evident;

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            iii.  Trifocals are covered when the patient has a special need due
                  to job training program or extenuating circumstances;

            iv.   Extended wear contact lenses are covered for aphakia and for
                  members whose coordination or physical condition make daily
                  usage of contact lenses impossible;

            v.    Oversize lens are covered only when needed for physiological
                  reasons, and not for cosmetic reasons; and

            vi.   A spare pair of eyeglasses is not covered.

19.   Dental Care - Services performed by a licensed dentist or dental hygienist
which conform to accepted methods of diagnosis and treatment.

The categories of covered services are as follows:

      a.    Diagnostic Services

            i.    Home visits;

            ii.   Radiographs: a) intraoral, complete series; b) bitewing films;
                  and c) periapical films; and

            iii.  Oral examinations: a) initial oral exam; b) periodic oral
                  exam; and c) emergency oral exam.

      b.    Preventive Services

            i.    Prophylaxis;

            ii.   Fluoride treatment for children under 21;

            iii.  Space maintainers;

            iv.   Night guards; and

            v.    Pit and fissure sealants for children ages 5 through 16. Prior
                  authorization is required for children under 5 and persons
                  over 16.

      c.    Restorative Services - limited to the restoration of carious
            permanent, and primary teeth.

            i.    Fillings; and

            ii.   Crowns.

      d.    Endodontics

            i.    Root canal therapy and/or apicoectomy; and

            ii.   Apexification.

      e.    Prosthodontics - removable, complete, and partial prostheses;

      f.    Dental Surgery;

      9.    Edodontia (extractions);

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      h.    Orthodontics under the Early Periodic Screening, Diagnosis and
            Treatment (EPSDT) program;

      i.    Alveolectomy (alveoplasty);

      j.    Patient Management - in connection with dental services to
            individuals with cognitive disabilities;

      k.    General Surgical Anesthesia;

      l.    Prosthodontics with use on a regular basis;

      m.    Removable, complete and partial denture prostheses only; and

      n.    Replacement of existing dentures, only once in any five (5) years.

      o.    Relining or rebasing existing dentures - Two (2) year period.

      p.    Denture labeling, for patients in long-term care facilities only.

The categories of noncovered services are as follows:

      a.    Fixed Bridges

      b.    Periodontia

      c.    Implants

      d.    Transplants

      e.    Cosmetic Dentistry

      f.    Vestibuloplasty

      g.    Unilateral Removable Appliances

      h.    Partial dentures where there are at least eight (8) posterior teeth
            in occlusion and no missing anterior teeth.

      i.    Restorative procedures to deciduous teeth nearing exfoliation.

20.   Durable Medical Equipment - equipment which: a) can stand repeated use; b)
      is primarily and customarily used to serve a medical purpose; c) is
      generally not useful to a person in the absence of an illness or injury;
      and d) excludes items that are disposable.

      Equipment covered includes: wheelchairs and accessories, walking aids,
        bathroom equipment (e.g., commode and safety equipment), hospital beds
        and accessories, inhalation therapy equipment (e.g., IPPR machines,
        suction machines, nebulizers, and related equipment), enteral/parenteral
        therapy equipment, and the repair and replacement of durable medical
        equipment (DME) and related equipment.

21.   Orthotic and Prosthetic Devices - Mechanical appliances and devices for
      the purpose of providing artificial replacement of missing parts, and/or
      prevention or correction of disorders in involving physical deformities
      and impairments.

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      a.    Devices covered include: braces, corsets, collars, arch supports,
            footplates, orthopedic shoes, orthopedic prostheses, hearing aids
            (including batteries, earmolds, and cords).

      b.    Limitations: i) orthotic and/or corrective arch supports are not
            provided for recipients under five years of age; ii) Metatarsus
            Adductus Shoes are limited to a congenital metatarsus adductus
            condition and are limited to children through age four as medically
            necessary.

22.   Oxygen Therapy - oxygen, equipment, supplies, and services related to the
      delivery of oxygen.

23.   Respiratory Therapy - services include: intermittent positive pressure
      breathing, ultrasonography, aerosol, sputum induction, percussion and
      postural drainage, arterial puncture, and withdrawal of blood for
      diagnosis.

24.   Dialysis - hemodialysis and peritoneal dialysis services are covered,
      including the treatment of end stage renal disease.

25.   School-Based Clinics - services provided at a facility: a) located on the
      grounds of a public school; b) serving enrolled recipients on a scheduled
      basis or for an emergency situation; and c) licensed as an outpatient
      medical facility to provide comprehensive care.

      a.    Covered services include: health assessments; family planning
            services; diagnosis and/or treatment of illness or injuries;
            laboratory testing (performed by the School-Based Health Clinic);
            follow-up visits; EPSDT services; one-on- one health education,
            medical social work services, and nutritional counseling; and mental
            health and substance abuse services including diagnostic
            assessments, individual, group, and family therapy or counseling.

      b.    Noncovered services include: mandated school health screenings,
            simple intervention of a health problem such as nonmedical personnel
            could render, visits where the presenting health problem does not
            require a health or mental health assessment/evaluation, visits for
            the sole purpose of administering or monitoring medications,
            services which are not part of the written individual plan of care,
            and visits for mental health or substance abuse determined by the
            clinic to be beyond the scope of the clinic.

26.   Family Planning and Abortion - medically approved diagnostic procedures,
      treatment, counseling, drugs, supplies, or devices which are prescribed or
      furnished by a provider to individuals of child bearing age for the
      purpose of enabling such individuals to freely determine the number and
      spacing of their children.

      Noncovered services include: a) sterilizations for patients who are under
      age twenty-one (21), mentally incompetent, or institutionalized; and b)
      hysterectomies performed solely for the purpose of rendering an individual
      permanently incapable of reproducing.

27.   Ambulatory Surgery - Services include preoperative examinations, operating
      and recovery room services, and all required drugs and medicine.

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28.   Early and Periodic Screening, Diagnostic and Treatment (EPSDT) Services
      (HealthTrack Services)- Comprehensive child health care services to
      recipients under twenty-one (21) years of age, including all medically
      necessary prevention, screening, diagnosis, and treatment services listed
      in Section 1905(r) of the Social Security Act.

      EPSDT Covered Services are described below:

      a.    Initial and Periodic Comprehensive Health Screenings - includes the
            following services provided at the intervals recommended in the
            Periodicity Schedule consistent with the standards of the American
            Academy of Pediatrics and Center for Disease Control:

            i.    a comprehensive health and developmental history, including
                  assessment of both physical and mental health development and
                  nutritional assessments;

            ii.   a comprehensive unclothed physical examination;

            iii.  appropriate immunizations according to age and health history,
                  unless medically contraindicated at the time;

            iv.   appropriate laboratory tests (including blood lead level
                  assessments appropriate for age and risk factors);

            v.    health education (including anticipatory guidance and risk
                  assessment);

            vi.   diagnosis and treatment of problems found during the
                  screening;

            vii.  vision screenings - an objective vision screening is indicated
                  beginning at three years of age as indicated in accordance
                  with the Periodicity Schedule;

            viii. hearing screenings - an objective hearing screening is
                  indicated beginning at four years of age according to the
                  Periodicity Schedule; and

            ix.   dental screenings are recommended in the Periodicity Schedule,
                  for example, an initial direct referral to a dentist beginning
                  at age two.

      b.    Dental Services - includes those dental services provided by or
            under the direction of a dentist, in addition to the dental
            screening, that are recommended in the Periodicity Schedule. Dental
            services also include relief of pain and infections, restoration of
            teeth, and maintenance of dental health.

      c.    Administration and Medical Interpretation of Developmental Tests -
            objective standardized tests, recognized by the Connecticut
            Birth-To-Three Council, for further diagnosis and treatment of
            problems found during a periodic comprehensive health screen or
            interperiodic encounter. Such tests include, but are not limited to,
            the Battelle, the Mullen, and the Bayley.

      d.    Case Management Services - The following services are determined to
            be necessary when a child evidences a need for such services as a
            result of a periodic comprehensive health screening or interperiodic
            encounter:

            i.    Initial case management assessment and periodic reassessment,
                  including development of the plan of services and revision as
                  necessary.

            ii.   Ongoing case management, including, at a minimum:

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            A)    assistance in implementing the plan of services, which
                  includes: facilitating referrals, providing assistance in
                  scheduling needed health or health-related services, and
                  helping to identify and link with the child's health and
                  social service providers. Particularly, the case management
                  provider shall identify the child's health home or, if
                  necessary, participate in linking the child with a quality
                  health home, and encourage continuity of care;

                  B)    monitoring the delivery of and facilitating access to a
                        periodic comprehensive health screening at the intervals
                        recommended in the Periodicity Schedule, and other
                        screening, diagnosis, and treatment services. Such
                        activities also include follow-up on missed
                        appointments, and, if necessary, assistance with
                        arranging medical transportation, child care, and
                        interpreter services;

                  C)    coordinating and integrating the plan of services, as
                        necessary, through direct or collateral contacts with
                        the family and members of their team of direct service
                        providers, as appropriate;

                  D)    monitoring the quality and quantity of needed services
                        that are being provided, and evaluating outcomes and
                        assessing future needs which might support changes in
                        the plan of services, including completing a quarterly
                        progress note;

                  E)    providing health education, as needed, and in
                        coordinating with a direct service provider,
                        interpreting and reinforcing the service provider's
                        recommendations for the health of the child; and

                  F)    providing client advocacy to ensure the smooth flow of
                        information between the child, the child's
                        representative, providers, and agencies, to minimize
                        conflict between service providers, and to mobilize
                        resources to obtain needed services.

      e.    Interperiodic Encounters

            i.    An encounter or visit to determine if there is a problem, or
                  to treat a problem that was not evident at the time of the
                  regularly scheduled periodic comprehensive screening but needs
                  to be addressed before the next periodic comprehensive
                  screening;

            ii.   Any screening, in addition to the screenings recommended in
                  the Periodicity Schedule, to determine the existence of
                  suspected physical, mental, or developmental conditions;

            iii.  An encounter or follow-up visit in the case of a child whose
                  physical, mental, or developmental illness or condition has
                  already been diagnosed prior to the child being Medicaid
                  eligible (e.g., a pre-existing condition), but needs to be
                  addressed before the next scheduled screening interval
                  recommended in the Periodicity Schedule, if there are
                  indications that the illness or condition may have become more
                  severe or changed sufficiently so that further examination is
                  medically necessary; and

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            iv.   An encounter necessary to provide immunizations, vision,
                  and/or hearing screenings (e.g., which had been deemed
                  medically contraindicated at the time of the periodic
                  comprehensive health screening).

      f.    Personal Care Services - services for a child who has a diagnosed
            disability and is judged to be able to benefit from one (1) or more
            personal care service activities as the result of a periodic
            comprehensive health screen or interperiodic encounter performed by
            a primary care provider.

            i.    Covered personal care services include all tasks to assist a
                  child with major life activities of self-care and instrumental
                  activities as identified in the personal care services plan of
                  care:

                  A)    covered major life activities include, but are not
                        limited to, dressing, bathing, eating, and personal
                        health care maintenance; and

                  B)    covered instrumental activities include, but are not
                        limited to, cooking, cleaning, travel, and shopping.

            ii.   The following services are not covered:

                  A)    personal care services provided to an individual who
                        does not reside at home;

                  B)    personal care services provided by a family member;

                  C)    home health services which duplicate personal care
                        services (e.g., home health aide services are not
                        covered when personal care services are appropriate);

                  D)    transportation of the personal attendant to and from the
                        child's home to provide services;

                  E)    acute health care services which are covered under other
                        DSS regulations;

                  F)    personal care services when the child is eligible for or
                        receiving comparable services from another agency or
                        program; and

                  G)    personal care services for the care or assistance that
                        would routinely be given to a child in the absence of a
                        disability.

      g.    EPSDT Special Services - other medically necessary and medically
            appropriate health care, diagnostic services, treatment, or other
            measures necessary to correct or ameliorate disabilities and
            physical and mental illnesses and conditions discovered as a result
            of a periodic comprehensive health screening or interperiodic
            encounter, whether or not the good or service is included in the
            Connecticut Medicaid Program State Plan as a good or service
            available to all other Medicaid recipients. Such services include,
            but are not limited to, medically necessary and medically
            appropriate over-the-counter drugs and personal care services.

      h.    All medically necessary diagnosis and treatment services available
            to all Medicaid recipients under the Connecticut Medical Assistance
            Program.

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29.   Diagnostic Services - Medical procedures (e.g., radiology, cardiology,
      EEG, and ultrasound procedures) or supplies recommended by a physician or
      other licensed practitioner of the healing arts, within the scope of
      his/her practice under State law, to enable the identification of the
      existence, nature, or extent of illness, injury, or other health
      deviation.

30.   Home Health Care - Medically necessary home health services ordered by the
      licensed practitioner and provided by a licensed home health agency on a
      part-time or intermittent basis to members who reside at home, as defined
      by Departmental policy, for the purpose of enabling the patient to remain
      at home or to provide a less costly alternative to institutional care.

31.   Mental Health/Substance Abuse Services-Medically necessary outpatient
      Mental Health and Substance Abuse services provided by a licensed
      psychiatrist (or under the supervision of a licensed psychiatrist) or
      other licensed or certified mental health practitioner. Such services
      must be provided within the scope of the practitioner's
      license/certification.

      a.    Covered services include:

            i.    Initial evaluation (diagnostic);

            ii.   Mental health and substance abuse treatment services:

                  A)    Individual psychotherapy;

                  B)    Group psychotherapy;

                  C)    Family therapy;

                  D)    Specialized treatment, such as methadone maintenance and
                        outpatient detoxification; and

                  E)    Partial hospitalization.

            iii.  Physical/neurological exams in connection with evaluation of
                  mental illness;

            iv.   Parent interview/group - Children's Mental Health Services;

            v.    Psychological testing - performed by licensed psychologists
                  only; and

            vi.   Neuropsychological evaluation performed by a qualified
                  neuropsychologist.

      b.    Noncovered services: Hypnosis or electroshock therapy, unless
            personally performed by a licensed practicing physician (M.D.).

32.   Medical Transportation Services

      a.    Emergency and Nonemergency Ambulance Service is covered when: Q the
            patient's condition requires medical attention during transit; or
            ii) the patient's diagnosis indicates that the patient's condition
            might deteriorate in transit to the point where medical attention
            would be needed; or iii) the patient's condition requires hand
            and/or feet restraints; or iv) the ambulance is responding to an
            emergency; or v) no alternative less expensive means of
            transportation is

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            available. Ambulance trips to an emergency room, regardless of the
            outcome, nor ambulance trips in response to a 911 call, cannot be
            subject to prior authorization.

      b.    Air Transportation - when a medical condition or time constraint
            dictates its use.

      c.    Critical Care Helicopter - when a medical condition or time
            constraint dictates its use.

      d.    Other Nonambulance Transportation [Livery, Invalid Coach, Commercial
            Carrier, Taxi, Private Transportation, Service bus ("Dial-a-Ride"
            type service), etc.] - when needed to obtain necessary medical
            services covered by Medicaid, and when it is not available from
            volunteer organizations, other agencies, personal resources, etc. To
            administer this benefit, DSS currently employs the following
            limitations on services:

            i.    requirement of prior authorization;

            ii.   requirement of the use of the nearest appropriate provider of
                  medical services when a determination has been made that
                  traveling further distances provides no medical benefit to the
                  patient; and

            iii.  requirement of the use of the least expensive appropriate
                  method of transportation, depending on the availability of the
                  service and the physical and medical circumstances of the
                  patient.

      e.    Transportation for relatives or foster parents of a Medicaid
            recipient - only under the following circumstances:

i.    the person needs to be present at and during the medical service being
      provided to the patient (for example, in parent/child situations); and

ii.   the person needs to be trained by hospital staff to provide unpaid health
      care in the home to the patient, and without this health care being
      provided the patient would not be able to return home.

vii.  Children under twelve (12) years of age shall be escorted to medical
      appointments. Either the child's parent foster parent, caretaker, legal
      guardian or the Department of Children and Families (DCF), as appropriate,
      shall be responsible for providing the escort.

viii. For children between the ages of twelve (12) to fifteen (15) years, a
      consent form signed by a parent, caretaker or guardian shall be required
      in order for a child to be transported without parental consent as
      specified by state statute (i.e., for family planning and mental health
      treatment).

ix.   For children sixteen (16) years or older, no consent form shall be
      required.

      f.    Out-of-State Transportation Services - when out-of-state- medical
            services are needed because of the following:

            i.    a medical emergency;

            ii.   the patient's health would be endangered if required to travel
                  to Connecticut; and

            iii.  needed medical services are not available in Connecticut.

                                       14

<PAGE>

August 13, 2003

33.   Medical Surgical Supplies - those items which are prescribed by a
      physician to meet the needs or requirements of a specific medical and/or
      surgical treatment. They are generally disposable and not reusable.

      a.    Covered services include: gauze pads, surgical dressing material,
            splints, tracheotomy tube, diabetic supplies, elastic hosiery,
            sterile gloves, incontinence supplies, thermometers, blood pressure
            kit (aneroid type including stethoscope, but limited to use in the
            home for patient's diagnosed to have complicated cardiac conditions
            and labile hypertension), enteral/parenteral feeding therapy
            supplies including solutions and manufacturing materials,

      b.    Items considered first aid supplies such as, bandages, solutions,
            vaseline, etc., are not covered services.

34)   Pharmacy Services

      a)    Covered services

            i)    Drugs prescribed by a licensed authorized practitioner. The
                  MCO may use a prescription drug formulary which is described
                  in Section 3.15, Pharmacy Access of the contract.

            ii)   Over-The-Counter (OTC) Drugs on the State of Connecticut's OTC
                  Formulary, including liquid generic antacids, birth control
                  products, calcium preparations, diabetic-related products,
                  electrolyte replacement products, heratinics, nutritional
                  supplements and vitamins (prenatal, pediatric, high potency).

      b)    Noncovered Services

            i)    Drugs included in the Food and Drug Administration's Drug
                  Efficacy Study Implementation Program;

            ii)   Alcoholic liquors;

            iii)  Items used for personal care and hygiene or cosmetic purposes;

            iv)   Drugs solely used to promote fertility;

            v)    Drugs not directly related to the patient's diagnosis, when
                  diagnosis is required by the DEPARTMENT to be written on the
                  prescription;

            vi)   Any vaccines and/or biologicals which can be obtained free of
                  charge from the CT. State Department of Health Services. The
                  DEPARTMENT will notify pharmacists of such vaccines or
                  biologicals;

            vii)  Any drugs used in the treatment of obesity unless caused by a
                  medical condition;

            viii) Controlled substances dispensed to HUSKY members which are in
                  excess of the product manufacturer's recommendation for safe
                  and effective use for which there is no documentation of
                  medical justification in the pharmacy's file; and,

            ix)   drugs used to promote smoking cessation.

                                       15
<PAGE>

August 13, 2003

35.   Emergency Services - such inpatient and outpatient services in and out of
      the health plan's service area are covered services.

36.   Dental Hygienist Services - Services which are provided by a licensed
      dental hygienist and which are within his or her scope of practice as
      defined by State Law.

B.    COVERED SERVICES NOT INCLUDED IN THE CAPITATION PAYMENT

1.    School-Based Child Health Services - Medically necessary special education
      related diagnostic and treatment services provided to children by or on
      behalf of school districts pursuant to the Individuals with Disabilities
      Education Act (IDEA) and Connecticut General Statutes (CGS). Diagnostic
      services must be ordered by a Planning and Placement Team and treatment
      services must be prescribed in a child's Individualized Education Program
      (IEP)--and verified by a physician's signature.

2.    Connecticut Birth to Three Program Services - The Connecticut Birth to
      Three Program, pursuant to the Individuals with Disabilities Education Act
      (IDEA) and Connecticut General Statutes (CGS), provides a range of early
      intervention services for eligible children from birth to three years of
      age with developmental delays and disabilities. Eligibility of children is
      determined by Department of Mental Retardation (DMR) staff or entities
      with which DMR contracts. Services are authorized in an Individualized
      Family Service Plan (IFSP) and verified by a physician's signature.

3.    Inpatient Department of Children and Families (DCF). Operated Psychiatric
      Facilities - The discharge planning and reinsurance provisions described
      in Section 3.18 (Special Services for Children) shall apply to all new
      medically necessary and administratively necessary admissions at DCF
      operated facilities effective October 1, 1998. When a child is admitted to
      a DCF facility, the child will remain enrolled in the MCO and the MCO must
      reimburse the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admission and stays at the facility.

C.    NONCOVERED SERVICES

1.    Institutions for Mental Disease (IMD) - The federal definition of an IMD
      is a hospital, nursing facility, freestanding alcohol treatment center, or
      other institution of more than sixteen (16) beds that is primarily engaged
      in providing diagnosis, treatment, or care of persons with mental
      diseases.

      a.    IMD Exclusion - Medicaid does not cover IMD services (i.e., these
            services are excluded). States, rather than the Federal Government,
            have principle responsibility for funding inpatient psychiatric
            services; therefore, State funding of IMI)s is not through the
            Medicaid program.

      b.    Exceptions - certain individuals are not part of the IMD exclusion
            (i.e., they are covered by Medicaid for services in IMDs):

            i.    inpatient psychiatric services for individuals under age 21;

                                       16
<PAGE>

August 13, 2003

            ii.   individuals 65 years of age or older who are in hospitals or
                  nursing facilities that are IMDs.

2.    Services and/or procedures considered to be of an unproven, experimental,
      or research nature or cosmetic, social, habilitative, vocational,
      recreational, or educational.

3.    Services in excess of those deemed medically necessary to treat the
      patient's condition.

4.    Services not directly related to the patient's diagnosis, symptoms, or
      medical history.

5.    Any services or items furnished for which the provider does not usually
      charge.

6.    Medical services or procedures in the treatment of obesity, including
      gastric stapling. When obesity is caused by an illness (hypothyroidism,
      Cushing's disease, hypothalamic lesions) or aggravates an illness
      (cardiac and respiratory diseases, diabetes, hypertension) services in
      connection with the treatment of obesity could be covered services.

7.    Services related to transsexual surgery or for a procedure which is
      performed as part of the process of preparing an individual for
      transsexual surgery, such as hormone therapy and electrolysis.

8.    Services for a condition that is not medical in nature.

9.    Routine physical examinations requested by third parties, such as
      employers or insurance companies.

10.   Drugs that the Food and Drug Administration (FDA) has proposed to withdraw
      from the market in a notice of opportunity for hearing.

11.   Tattooing or tattoo removal.

12.   Punch graft hair transplants.

13.   Tuboplasty and sterilization reversal.

14.   Implantation of nuclear-powered pacemaker.

15.   Nuclear powered pacemakers.

16.   Inpatient charges related to autopsy.

17.   All services or procedures of a plastic or cosmetic nature performed for
      reconstructive purposes, including but not limited to lipedtomy, hair
      transplant, rhinoplasty, dermabrasion, and chernabrasion.

18.   Drugs solely used to promote fertility.

19.   Drugs used to promote smoking cessation.

20.   Services which are not within the scope of a practitioner's practice under
      state law.

21.   Acupuncture provided outside of pain management therapy.

                                       17
<PAGE>

August 13, 2003

             MEDICAL ASSISTANCE PROGRAM POLICIES AND REGULATIONS BY
                                 PROVIDER AREA

<TABLE>
<CAPTION>
Provider Area                                  Policy or Regulation Sections
-------------                                  -----------------------------
<S>                                            <C>
Birth to Three                                 Sections 17b-262-597 through 17b-262-605
                                               of the Regulations of Connecticut State
                                               Agencies

Case Management Services to Persons            Proposed Regulations
Under 21

Chiropractic Services                          Sections 17b-262-535 through 17b-262-545
                                               of the Regulations of Connecticut State
                                               Agencies

Clinics                                        Sections 171 through 171 B. XI of Medical
                                               Services Policy and Sections 17-134d-7
                                               through 17-134d-8, 17-134d-56 and 17-
                                               134d-70 through 17-134d-78 of the
                                               Regulations of Connecticut State Agencies

Mental Health Clinics                          Sections 171.1 through 171.11.iii.m. of
                                               Medical Services Policy

Rehabilitation Clinics                         Sections 171.2 through 171.2l.lll.k. of
                                               Medical Services Policy

Dental Clinics                                 Sections 171.3 through 171.3l.lll.f. of
                                               Medical Services Policy

Medical Clinics                                Sections 171.4 through 171.4l.lll.i. of
                                               Medical Services Policy

Dental Services                                Sections 184 through 184l.lll.h. of Medical
                                               Services Policy and Section 17-134d-35 of
                                               the Regulations of Connecticut State
                                               Agencies

Dialysis                                       Sections 17b-262-651 through 17b-262-
                                               660 of the Regulations of Connecticut State
                                               Agencies

Early and Periodic Screening, Diagnostic       Included in Regulations with Other
and Treatment Services (Health Track           Providers
Services)

Family Planning, Abortions and                 Sections 173 through 173l. of Medical
Hysterectomies                                 Services Policy

Freestanding Alcohol Treatment Centers         Sections 160 through 160l. of Medical
                                               Services Policy

Home Health Services                           Sections 185 through 185l.lll.b.4. of
</TABLE>

                                       18
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
                                               Medical Services Policy and Sections 17-134d-37,
                                               17-134d-48, 17-134d-60, 17-134d-62 and 17b-262-1
                                               through 17b-262-9 of the Regulations of Connecticut
                                               State Agencies

Hospital Inpatient Services                    Sections 150.1 through 150.1I.VI.d of
                                               Medical Services Policy and Sections 19a-630,
                                               17b-225, 17b-238 through 17b-247, 17b-262,
                                               19-13D, 19a-490 through 19a-493, 19a-495 of the
                                               Regulations of Connecticut State Agencies

Hospital Outpatient Services                   Sections 150.2 through l50.2J.V.n of
                                               Medical Services Policy and Sections 4-67c (fees),
                                               17-311 (payments), 17-312 (payments), 19a-490
                                               (licensing), 19a-493 (licensing) of the Connecticut
                                               General Statutes and Sections 19-13D, 17-134d-2
                                               (Medical Care), 17-134d-40 (payments - clinic),
                                               17-134d-63 (out-of-state hospitals), 17-134d-86
                                               (emergency room) of the Regulations of Connecticut
                                               State Agencies.

Inpatient Psychiatric Hospital Services        Sections 17b-262-499 through 17b-262-510 of the
                                               Regulations of Connecticut State Agencies

Intermediate Care Facility                     Sections 156 through 156l.l.b.6. of Medical
                                               Services Policy and Section 17-134d-47 of
                                               the Regulations of Connecticut State
                                               Agencies.

Independent Radiology and Ultrasound           Sections 17b-262-512 through 17b-262-520 of the
Centers                                        Regulations of Connecticut State Aagencies.

Independent Therapy Services                   Sections 17b-262-630 through 17b-262-640 of the
                                               Regulations of Connecticut State Agencies.

Laboratory Services                            Sections 17b-262-641 through 17b-262-650 of the
                                               Regulations of Connecticut State Agencies.

Medical Equipment, Devices and Supplies        See Below.
(MEDS)

Medical Surgical Supplies                      Sections 188 through 188J. of Medical
                                               Services Policy

Durable Medical Equipment                      Sections 17b-262-672 through 17b-262-
</TABLE>

                                       19
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
                                               682 of Medical Services Policy

Orthotic and Prosthetic Devices                Sactions 190 through 190l.iii.k. of Medical
                                               Services Policy

Oxygen Therapy                                 Section 196 of Medical Services Policy and
                                               17-134d-83 through 17-134d-85 of the
                                               Regulations of Connecticut State Agencies

Natureopathic Services                         Sections 17b-262-547 through 17b-262-
                                               557 of the Regulations of Connecticut State
                                               Agencies

Nurse-Midwifery Services                       Sections 17b-262-573 through 17b-262-
                                               585 of the Regulations of Connecticut State
                                               Agencies

Nurse Practitioner Services                    Sections 17b-262-607 through 17b-262-
                                               618 of the Regulations of Connecticut State
                                               Agencies

Pharmacy                                       Sections 174 through 174H.IV.a.4. of
                                               Medical Services Policy and Section 17-
                                               134d-81 of the Regulations of Connecticut
                                               State Agencies

Physician's Services                           Sections 17b-262-337 through 17b-262-
                                               449 of the Regulations of Connecticut State
                                               Agencies

Podiatric Services                             Sections 179 through 179l.ll.b. of Medical
                                               Services Policy

Provider Participation                         Sections 17b-262-522 through 17b-262-
                                               533 of the Regulations of Connecticut State
                                               Agencies

Psychiatrists                                  Sections 17b-262-452 through 17b-262-
                                               463 of the Regulations of Connecticut State
                                               Agencies

Psychologists                                  Sections 17b-262-467 through 17b-262-
                                               478 of the Regulations of Connecticut State
                                               Agencies

School Based Child Health Services             Sections 17b-262-213 through 17b-262-
                                               224 of the Regulations of Connecticut State
                                               Agencies

Skilled Nursing Facility                       Sections 154 through 154l.l.b.6. of Medical
                                               Services Policy and Sections 17-134d-46, 17-134d-68
                                               and 117-134d-79 of the Regulations of Connecticut
                                               State Agencies
</TABLE>

                                       20
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
Targeted Case Management Services              Sections 194 through 194J.b and 195
                                               through 195J. of Medical Services Policy and Sections
                                               17-134d-82 and 17-134d-139 through 17-134d-149 of the
                                               Regulations of Connecticut State Agencies

Transportation Services                        Section 17b-134d--33 of the Regulations
                                               of Connecticut State Agencies

Vision Care Services                           Sections 17b-262-559 through 17b-262-
                                               571 of the Regulations of Connecticut State
                                               Agencies, DSS Policy Transmittal MS 93-
                                               18 and DSS Policy Bulletin 98-19.
</TABLE>

                                       21
<PAGE>

August 13, 2003

                  Appendix G: Medicaid Managed Care Eligibility
                                   Categories

Revised 8/13/03

<PAGE>

August 13, 2003

HUSKY A MEDICAID COVERAGE
GROUPS

<TABLE>
<CAPTION>
Eligibility
    Code       Description
-----------    -----------
<S>            <C>
    F01        Temporary Assistance to Needy Families (TANF)
    F03        Transitional Work Extension
    F04        Child Support Extension
    F05        Work Supplementation
    F07        Family Coverage (100% FPL)
    F08        Special Child Care Deduction
    F09        Eligible for TANF except for Non-Medicaid Requirements
    F10        Newborn Coverage
    F11        Newborn Children
    F12        CN Ribicoff Children
    F25        Children under 185 % of the Federal Poverty Level (FPL)
    F95        Children under 18, 18-21, and Caretaker Relatives
    P01        Pregnant Women who meet TANF Financial Requirements
    P02        Pregnant Women under 185 % of the Federal Poverty Level (FPL)
    P95        Pregnant Women Coverage
 MO1\M02       Pregnant Women Extension (Post-Partum)
 D01\D02       DCF Children
</TABLE>

Revised 8/13/03

<PAGE>

                            APPENDI[ILLEGIBLE]-Amended

PLAN NAME:
FIRSTCHOICE
CAPITATION RATES
07/01/02 - 09/30/03

<TABLE>
<CAPTION>
                             FAIRFIELD   HARTFORD   LITCHFIELD   MIDDLESEX    NEW HAVEN   NEW LONDON    TOLLAND    WINDHAM
                             ----------  --------   ----------   ---------    ---------   ----------    -------    -------
<S>                          <C>         <C>        <C>          <C>          <C>         <C>           <C>        <C>
UNDER ONE                     $536.44    $606.89     $605.12      $717.18      $602.97     $600.00      $724.78    $581.51
AGES 1 TO 14                  $102.32    $110.46     $110.15      $130.10      $109.79     $109.23      $131.46    $107.71
MALE - AGES 15 TO 39          $127.22    $138.42     $138.03      $162.52      $137.60     $136.94      $164.18    $135.18
FEMALE - AGES 15 TO 39        $207.77    $231.48     $230.81      $273.76      $230.00     $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER       $227.33    $254.24     $253.48      $301.18      $252.59     $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER     $218.52    $244.15     $243.42      $289.20      $242.55     $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1
                                Effective 7/1/02

<PAGE>

August 13, 2003                     Appendix L

PHARMACY REPORT # 1: PRESCRIPTION EQUEST PROCESS FOR LEGEND DRUGS

NAME OF MCO                                          Quarter Ending

NUMBERS ARE FOR PRESENTATION PURPOSES ONLY.

<TABLE>
<CAPTION>
                                                                  NUMBER OF REQUESTS *
                                               -----------------------------------------------------
                                                          TEMPORARY
                                                           SUPPLY
REQUESTS FOR AUTHORIZATION AND OUTCOME         TOTAL **    GRANTED     APPROVED     DENIED     OTHER
--------------------------------------         --------    -------     --------     ------     -----
<S>                                            <C>        <C>          <C>          <C>        <C>
1. URGENT CERTIFIED BY PRESCRIBER                 =           =            =           -         -

2. ROUTINE                                        -                        =           =         -

3. TEMPORARY SUPPLY ISSUED PENDING REVIEW         =           =            =           -         -

4. UNDUPLICATED TOTAL OF REQUESTS FOR PERIOD      -           -            -           -         -
</TABLE>

<TABLE>
<CAPTION>
                                                                  NUMBER OF REQUESTS
                                               -----------------------------------------------------
                                                          TEMPORARY
                                                           SUPPLY
REQUESTS FOR AUTHORIZATION AND OUTCOME         TOTAL **    GRANTED     APPROVED     DENIED     OTHER
--------------------------------------         --------    -------     --------     ------     -----
<S>                                            <C>        <C>          <C>          <C>        <C>
5. SUBSEQUENT REFILL OF A DRUG PREVIOUSLY
ISSUED AS A TEMP. SUPPLY IN EITHER 1 OR 3
ABOVE (URGENT CERTIFIED BY PRESCRIBER/TEMP
SUPPLY PENDING REVIEW)                            -                        =           =         -

6. A TEMPORARY SUPPLY ISSUED IN 1 OR 3 ABOVE,
BUT PRESCRIPTION DOES NOT HAVE ANY REFILLS
(I.E. 10 DAY TREATMENT)                           =

7. TOTAL MEMBER MONTHS THIS QUARTER               =

8. NUMBER PER MEMBER PER MONTH (4/7)            #VALUE!     #VALUE!     #VALUE!     #VALUE!   #VALUE!
</TABLE>

<PAGE>

August 13, 2003                            Appendix L

<TABLE>
<S>                                            <C>
9. TOTAL PRESCRIPTIONS FILLED BY THE MCO
THIS QUARTER

10. PERCENT OF AUTH. REQUESTS TO TOTAL
PRESCRIPTIONS FILLED BY THE MCO
(EXAMPLE 2+5/9)                                 #DIV/0!
</TABLE>

TICK MARK LEGEND

      *     Drugs requiring authorization include non-formulary drugs, formulary
            drugs that require authorization, and brand name drugs where a
            generic substitute is available. It excludes those prescriptions
            which may require prior authorization but on-line edits in the POS
            system approve and adjudicate the claim without any intervention on
            the part of the MCO and/or Pharmacy Benefits Manager. It also
            excludes over the counter drugs.

      **    Include only requests for authorization completed during this
            quarter.

     ***    The time elapsed between when the request was received by PBM or MCO
            and when the decision was made.

      1.    Initial requests received from a provider for an urgent/emergent
            medication need, where a temporary supply is issued.

      2.    Requests for authorization of non-formulary drugs, formulary drugs
            that require authorization, and brand name drugs where a generic
            substitute is available. All scenarios which do not meet the
            criteria of category 1 or 3.

      3.    All prescriptions that result in the issuance of a temporary supply
            except for temporary supplies issued upon provider certification of
            urgency

      4.    The total of request certified as urgent by prescriber, requests
            that are routine, and requests pending review. The total of 1, 2 and
            3 above.

      5.    Requests received from provider after a temporary supply has already
            been issued in either 1 or 3 above.

      6.    A temporary supply was provided to the member in either 1 or 3
            above, however, a refill of the prescription has not been requested.

      7.    The total member months for reporting period.

<PAGE>

August 13, 2003                            Appendix L

<TABLE>
<CAPTION>
                       TURN AROUND TIME TO APPROVE/DENY OR ISSUE A TEMPORARY        AVERAGE TIME ELAPSED SINCE AUTHORIZATION
   PERCENT OF TOTAL                         SUPPLY (carret)                    REQUEST RECEIVED BY MCO (HOURS) *** (double carret)
--------------------  -------------------------------------------------------- ---------------------------------------------------
TEMP SUPPLY
  GRANTED              <24 HOURS - 5                                                                            WEIGHTED
 /APPROVED    DENIED       DAYS        6 - 10 DAYS    11 - 14 DAYS    >14 DAYS    APPROVALS      DENIALS      AVERAGE TOTAL
----------   -------   -------------   -----------    ------------    --------    ---------      -------      -------------
<S>          <C>       <C>             <C>            <C>             <C>         <C>            <C>          <C>

  #VALUE!    #VALUE!        =              -               -              -           =            0.00          #VALUE!

  #VALUE!    #VALUE!        =              =               5             11           =               =          #VALUE!

  #VALUE!    #VALUE!        =              -               -              -           =            0.00          #VALUE!

  #DIV/0!    #DIV/0!        =              -               5             11         #VALUE!       #VALUE!        #VALUE!
</TABLE>

<TABLE>
<CAPTION>
                       TURN AROUND TIME TO APPROVE/DENY OR ISSUE A TEMPORARY          AVERAGE TIME ELAPSED SINCE REQUEST
   PERCENT OF TOTAL                         SUPPLY                                  RECEIVED BY MCO (DAYS) (doule carret)
--------------------  --------------------------------------------------------  -------------------------------------------
                       <24 HOURS - 5                                                                            WEIGHTED
  APPROVED    DENIED       DAYS        6 - 10 DAYS    11 - 14 DAYS    >14 DAYS    APPROVALS      DENIALS      AVERAGE TOTAL
----------   -------   -------------   -----------    ------------    --------    ---------      -------      -------------
<S>          <C>       <C>             <C>            <C>             <C>         <C>            <C>          <C>

  #VALUE!    #VALUE!       1,292           9               6              32         2.59          1.19           #VALUE!

  #VALUE!    #VALUE!
</TABLE>

<PAGE>

PHARMACY REPORT # 2: TOP 30 LEGED DRUGS BY NUMBER OF REQUESTS DENIED

NAME OF MCO     Quarter Ending

<TABLE>
<CAPTION>
                                                                                     PERCENT OF AUTHORIZATION
                                                                                       REQUESTS (EXCLUDING NO
                                                  NUMBER OF AUTHORIZATION REVIEWS    REFILLS) COMPLETED DURING      TEMPORARY
                                                      COMPLETED THIS QUARTER*              THE QUARTER            SUPPLY ISSUED
                                                ----------------------------------   -------------------------   ---------------
                                                           NUMBER        NUMBER       PERCENT          PERCENT      TEMPORARY
     BRAND NAME OF DRUG   THERAPEUTIC CLASS     SUBTOTAL  APPROVED      DENIED (7)    APPROVED          DENIED        SUPPLY
     ------------------   -----------------     --------  --------      ----------    --------         -------   ------------------
                                                                                                                 (Sum of Rows 1 & 3
                                                                                                                  from Report #1)
<S>  <C>                  <C>                   <C>       <C>           <C>           <C>              <C>       <C>
 1
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29
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30
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                                      SUB TOTAL:     0         0              0         #DIV/0!          #DIV/0!          0
                                                     -----------------------------------------------------------------------------
 ALL OTHER DRUGS REQUIRING PRIOR AUTHORIZATION (1)
                                                     -----------------------------------------------------------------------------
 GRAND TOTAL DRUGS REQUIRING AUTHORIZATION (2)
                                                     -----------------------------------------------------------------------------
TOTAL AUTHORIZATION REVIEWS COMPLETED DURING THE QUARTER                                               REASON FOR DENIAL PERCENT %
                                                     -----------------------------------------------------------------------------

<CAPTION>

                                                            REASON FOR DENIAL
      ------------------------------------------------------------------------------------------------------------------------------
                                                   EQUALLY
      STEP THERAPY    QUANTITY                    EFFECTIVE        MEDICAL        NOT A COVERED
      CRITERIA NOT     LIMITS     INAPPROPRIATE  ALTERNATIVE    NECESSITY NOT      BENEFIT (I.E       LACK OF           TOTAL DENIAL
        MET (4)     EXCEEDED (5)    DIAGNOSIS    ON FORMULARY   ESTABLISHED (6)   FERTILITY DRUGS)  INFORMATION  OTHER      CODE
      ------------  ------------  -------------  ------------   ---------------   ----------------  -----------  -----  ------------
<S>   <C>           <C>           <C>            <C>            <C>               <C>               <C>          <C>    <C>
 1
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------------------------------------------------------------------------------------------------------------------------------------
27
------------------------------------------------------------------------------------------------------------------------------------
28
------------------------------------------------------------------------------------------------------------------------------------
29
------------------------------------------------------------------------------------------------------------------------------------
30
------------------------------------------------------------------------------------------------------------------------------------
          0              0             0              0               0                  0               0         0         0
      ------------------------------------------------------------------------------------------------------------------------------

      ------------------------------------------------------------------------------------------------------------------------------
TOTAL AUTHORIZATION REVIEWS COMPLETED DURING THE QUARTER                                                 REASON FOR DENIAL PERCENT %
                                                     -------------------------------------------------------------------------------

      ------------------------------------------------------------------------------------------------------------------------------
         #DIV/0!       #DIV/0!       #DIV/0!       #DIV/0!          #DIV/0!            #DIV/0!        #DIV/0!   #DIV/0!    #DIV/0!
      ------------------------------------------------------------------------------------------------------------------------------

</TABLE>

TOTAL PRESCRIPTIONS FILLED (3)
(INCLUDING AUTHORIZED (18) AND TEMPORARY SUPPLIES (15) FROM ABOVE)

PERCENT OF AUTH. REQUESTS TO TOTAL PRESCRIPTIONS FILLED BY THE MCO
(EXAMPLE 22/10,00)

TICK MARK LEGEND

  *   Drugs requiring authorization include non-formulary drugs, formulary drugs
      that require authorization, and brand name drugs where a generic
      substitute is available. It excludes those prescriptions which may require
      prior authorization but on-line edits in the POS system approve and
      adjudicate the claim without any intervention on the part of the MCO
      and/or Pharmacy Benefits Manager. This report also excludes over the
      counter drugs.

 **   Include only requests for authorization completed during this quarter.

(1)   Any additional prescriptions requiring prior authorization count not
      accounted for within the top 30 denied drugs.

(2)   The sum of all drugs which require authorization. This amount should tie
      into the total approved, denied and temp supply given on the Prescription
      Request Process Report.

(3)   The total HUSKY A prescriptions filled (units dispensed) for the reporting
      period being displayed.

(4)   A process of reviewing prescription requests (e.g. might include
      determining if drug A & B were used prior to approving drug C).

(5)   Evaluation of the quantity of drugs being utilized over a specific time
      period.

(6)   Examples of medical necessity not established may include but not be
      limited to off-label utilization per FDA.

(7)   Sort Records/Rows 3-32 (Drugs 1-30) by Column F 'Number of Authorization
      Reviews Denied' from most to least.
<PAGE>

[QUI TRANSTULIT SUSTINET LOGO]              STATE OF CONNECTICUT
                                        DEPARTMENT OF SOCIAL SERVICES

                                             CONTRACT AMENDMENT

AMENDMENT NUMBER:      6
CONTRACT #:            093-MED-FCHP-1
CONTRACT PERIOD:       08/11/2001 - 10/31/2003
CONTRACTOR NAME:       FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS:    23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4 and 5 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2,3, 4 AND 5 IS FURTHER
      AMENDED TO EXTEND THE CONTRACT END DATE FROM SEPTEMBER 30, 2003 TO OCTOBER
      31, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 9/30/03 TO OCTOBER 31, 2003. IF, THROUGH THE PASSAGE
      OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION RATES ARE TO
      BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE NEXT AMENDMENT
      TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE EXPIRATION OF THIS
      AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT SUCH REVISIONS AND
      SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT     [APPROVED SEP 29 2003 WELLCARE LEGAL SERVICES]

/s/ Todd S. Farha                 9/29/03
-------------------------------   ---------------
Signature (Authorized Official)   Date

TODD S. FARHA                     PRESIDENT & CEO
-------------------------------   ---------------
Typed Name (Authorized Official)  Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES
_____________________________     ______________
Signature (Authorized Official)     Date

MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
-------------------------------   -------------------
Typed Name (Authorized Official)  Title

<PAGE>

OFFICE OF THE ATTORNEY GENERAL

______________________________    ________________
Attorney General (as to form)     Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

<PAGE>

                                 APPEND -Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRSTCHOICE

CAPITATION RATES
07/01/02 - 10/31/03

                           FAIRFIELD   HARTFORD     LITCHFIELD    MIDDLESEX     NEW HAVEN    NEW LONDON     TOLLAND    WINDHAM
                           ---------   --------     ----------    ---------     ---------    ----------     -------    -------
<S>                        <C>         <C>          <C>           <C>           <C>          <C>            <C>        <C>
UNDER ONE                   $536.44    $606.89       $605.12       $717.18       $602.97       $600.00      $724.78    $581.51
AGES 1 TO 14                $102.32    $110.46       $110.15       $130.10       $109.79       $109.23      $131.46    $107.71
MALE-AGES 15 TO 39          $127.22    $138.42       $138.03       $162.52       $137.60       $136.94      $164.18    $135.18
FEMALE-AGES 15 TO 39        $207.77    $231.48       $230.81       $273.76       $230.00       $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER     $227.33    $254.24       $253.48       $301.18       $252.59       $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER   $218.52    $244.15       $243.42       $289.20       $242.55       $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications, contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 29th day of September, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    --------------------------------------------
                                    By: Thaddeus Bereday, Secretary

<PAGE>

                                             STATE OF CONNECTICUT
[QUI TRANSTULIT SUSTINET LOGO]           DEPARTMENT OF SOCIAL SERVICES

                                              CONTRACT AMENDMENT

AMENDMENT NUMBER:   7
CONTRACT #:         093-MED-FCHP-1
CONTRACT PERIOD:    08/11/2001 - 11/30/2003
CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4, 5 and 6 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3, 4, 5 AND 6 IS
      FURTHER AMENDED TO EXTEND THE CONTRACT END DATE FROM OCTOBER: 1, 2003 TO
      NOVEMBER 30, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    SECTION 3.47 OF PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED AUGUST 13,
      2003 IS DELETED IN ITS ENTIRETY AND REPLACED WITH SECTION 3.47 (EFFECTIVE
      11/01/03) AS SET FORTH ON PAGE 3 OF THIS AMENDMENT.

4.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 10/31/03 TO NOVEMBER 30, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

                                   Page 1 of 3

<PAGE>

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT

/s/ Thaddeus Bereday                       10/29/03
--------------------
Signature (Authorized Official)            Date
          Thaddeus Bereday
          Senior Vice President &
          General Counsel                  _________________________
Typed Name (Authorized Official)           Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES

/s/ Michael P. Starkowski                  10/31/03
-----------------------------
Signature (Authorized Official)            Date

MICHAEL P. STARKOWSKI                      DEPUTY COMMISSIONER
Typed Name (Authorized Official)           Title

OFFICE OF THE ATTORNEY GENERAL

_____________________________              ________________________
 Attorney General (as to form)                         Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

                                   Page 2 of 3

<PAGE>
\
3.47        CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES
            (EFFECTIVE 11/01/03)

a.    Pursuant to Section 72 of Public Act 3-03 of the June 30 Special Session
      and Section 11 of Public Act 03-1 of the September 8 Special Session,
      Members shall be responsible for a $1.50 co-payment for prescription drugs
      and a $2.00 co-payment for outpatient services.

b.    The MCO shall implement the $2.00 co-pay for outpatient services in
      accordance with the provisions of Provider Bulletin PB 2003-89, September
      2003.

c.    The $1.50 co-payment for prescription drugs shall apply to each
      prescription drug, covered over the counter medication and refill. The
      following services and individuals shall be exempt from the $1.50
      co-payment for prescription drugs requirement:

            1)    Members under the age of 21;

            2)    Pregnant women, including the period of 60 days post-partum.
                  This post-partum period begins on the last day of pregnancy
                  and extends through the end of the month in which the 60-day
                  period following termination of pregnancy ends;

            3)    Members who are inpatients in the following medical
                  institutions: acute care hospital, psychiatric hospital,
                  chronic disease hospital or nursing facility, as more fully
                  described in Provider Bulletin PB 2003-45, June 2003;

            4)    Prescription for family planning drugs or supplies;

            5)    Compounded prescriptions.

d.    The MCO shall ensure that the dispensing pharmacist is responsible for
      collecting the co-payment at the time of the service unless the
      pharmacist, in filling certain prescriptions, does not normally have
      face to face contact with the Member. If the pharmacist does not have
      face-to-face contact with the Member in dispensing a prescription, the
      provider has the right to bill the Member for the $1.50 co-payment.

e.    Pursuant to 42 U.S.C. 13960(e), no provider may deny care or services to
      an individual eligible for such care or services because of an inability
      to pay a co-payment. The MCO shall ensure that its providers do not refuse
      to render the service or fil1 a prescription if the Member is unable to
      pay the co-payment. The MCO may permit its providers to ask for the unpaid
      co-payment at a subsequent visit or to bill the Member for the outstanding
      co-payment. The provider shall accept the Member's declaration that he is
      unable to pay the co-payment.

f.    Except for the prescription drug and outpatient services co-payments
      described above, no deductibles or co-payments or similar cost-sharing
      charges are permitted for HUSKY A covered services.

g.    A provider shall be permitted to charge an eligible Member for goods or
      services which are not coverable only if the Member knowingly elects to
      receive the goods or services and enters into an agreement in writing to
      pay for such goods or services prior to receiving them. For purposes of
      this section noncovered services are services not covered under the
      Medicaid state plan, services which are provided in the absence of
      appropriate authorization, and services which are provided out-of-network
      unless otherwise specified in the contract, policy or regulation (e.g.,
      family planning, mental health or emergency room services).

                                   Page 3 of 3

<PAGE>

                                APPENDIX   Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRST CHOICE

CAPITATION RATES
07/01/02 - 11/30/03

                           FAIRFIELD     HARTFORD     LITCHFIELD    MIDDLESEX    NEW HAVEN    NEW LONDON     TOLLAND    WINDHAM
                           ---------     --------     ----------    ---------    ---------    ----------     -------    -------
<S>                        <C>           <C>          <C>           <C>          <C>          <C>            <C>        <C>
UNDER ONE                   $536.44      $606.89       $605.12       $717.18      $602.97       $600.00      $724.78    $581.51
AGE 1 TO 14                 $102.32      $110.46       $110.15       $130.10      $109.79       $109.23      $131.46    $107.71
MALE - AGES 15 TO 39        $127.22      $138.42       $138.03       $162.52      $137.60       $136.94      $164.18    $135.18
FEMALE - AGE 15 TO 39       $207.77      $231.48       $230.81       $273.76      $230.00       $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER     $227.33      $254.24       $253.48       $301.18      $252.59       $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER   $218.52      $244.15       $243.42       $289.20      $242.55       $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications, contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may; determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 29th day of October, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    --------------------------------------------
                                    By: Thaddeus Bereday, Secretary

<PAGE>

            Chronic Inpatient
            ICF/MR (Intermediate Care Facility for the Mentally Retarded)
            SNF (Skilled Nursing Facility)
            ICF (Intermediate Care Facility)
            ICF-2
            Super SNF
            CDH Outpatient (Chronic Disease Hospital Outpatient)

Please be aware that Code 06 - Boarding Home may also be used to describe a
Non-ICF Group Home. Additionally, Code 05 - Rest Home is also used for a Home
for the Aged.

Some institutions are listed as a Multi-care institution since they consist of
segregated units each of which are devoted to various complexities of patient
care. An institution may be classified as a Boarding Home in one section and an
Intermediate Care Facility for the Mentally Retarded in another section. Again,
ASK AND CODE THE PATIENT LOCATION AS THE PRESCRIBER OR FACILITY DIRECTS.

AS A REMINDER, federal law under Section 1916(e) of the Social Security Act
requires that no provider enrolled in the Medicaid Program may deny care or
services to an individual eligible for such care or services because of an
inability to pay a copayment. If the client cannot pay the copayment, a provider
may not refuse to render the service or not fill the prescription for that
reason. However, a provider may ask for the unpaid copayment at a subsequent
visit or bill the client for the outstanding copayment. The client's own
declaration that he/she is unable to pay is the basis for determining when a
client is unable to pay.

This bulletin and other program information can be found at
WWW.CTMEDICALPROGRAM.COM. Questions regarding this bulletin may be directed to
the EDS Provider Assistance Center - Monday through Friday from 8:30 a.m. to
5:00 p.m. at:

In-state toll free..........  800-842-8440 OR  EDS
Out-of-state or in the                         PO Box 2991            [EDS LOGO]
local New Britain, CT area..  860-832-9259     Hartford, CT 06104

                                                                          2 of 2
<PAGE>

                 CONNECTICUT DEPARTMENT OF SOCIAL SERVICES
[LOGO]           MEDICAL ASSISTANCE PROGRAM
                 PROVIDER BULLETIN

                 PB 2003-89                                       SEPTEMBER 2003

TO:         SELECT PROVIDERS

SUBJECT:    CO-PAY FOR OUTPATIENT SERVICES

The Department of Social Services is implementing a patient co-payment
requirement for recipients of Medicaid. Effective NOVEMBER 1, 2003 and forward,
Medicaid enrolled providers of certain outpatient services shall collect a $2.00
CO-PAYMENT per client, per date of service.

EXEMPTIONS:

The co-payment requirement does not apply to the following:

-     children under 21 years of age;

-     women who are pregnant or in the postpartum period. The postpartum period
      is the 60 day period following child birth;

-     family planning services and supplies;

-     emergency services provided by a hospital for revenue center codes 450 -
      452 and 459;

-     clients who have Medicare as their primary insurance, provided Medicare
      makes a payment towards the deductible;

-     hospital outpatient laboratory services revenue center codes 300 - 309
      only;

-     clients residing in a nursing facility, chronic disease hospital or
      intermediate care facility for the mentally retarded (ICF/MR).

CONDITIONS FOR CO-PAYMENT

Federal law under Section 1916(e) of the Social Security Act requires that no
provider enrolled in the Medicaid program may deny care or services to an
individual eligible for such care or services because of the inability to pay a
co-payment. Therefore, if the client cannot pay the co-payment, a provider may
not refuse to render the service for that reason. However, a provider may ask
for the unpaid co-payment at a subsequent visit or bill the client for the
outstanding co-payment. The client's own declaration that he/she is unable to
pay is the basis for determining when a client is unable to pay.

OUTPATIENT SERVICES/PROVIDERS THAT REQUIRE A CO-PAY

The following provider types shall collect the $2.00 co-payment from appropriate
clients if the services are performed in one of the designated facility types
identified below.

-     Ambulatory Surgical Centers

-     Dental & Dental Group

-     Dental Clinic

-     FQHC (Dental, Medical, Mental Health)

-     Hospital Dental Clinic

-     Hospital Outpatient

-     Independent Radiology

-     Medical Clinic

-     Mental Health Clinic

-     Methadone Maintenance Clinic

-     Nurse Midwife & Nurse Midwife Group

-     Nurse Practitioner & Nurse Practitioner Group

-     Optician & Optician Group

-     Optometrist & Optometrist Group

-     Physician & Physician Group

-     Psychiatric Hospital Outpatient

-     Rehabilitation Center Clinic

<PAGE>

DESIGNATED FACILITY TYPE

The co-payment requirement applies if the service provided by one of the above
referenced provider types is rendered in any of the following facility types.
The corresponding facility type code would be indicated on the claim form.

<TABLE>
<CAPTION>
FACILITY TYPE                                           FACILITY TYPE CODE
-------------                                           ------------------
<S>                                                     <C>
Office                                                        11
Outpatient Hospital                                           22
Ambulatory Surgical Center                                    24
Independent Clinic                                            49
Federally Qualified Health Center (FQHC)                      50
Psychiatric Facility Partial Hospitalization                  52
Community Mental Health Center                                53
Non-Residential Substance Abuse Treatment Facility            57
Comprehensive Outpatient Rehabilitation Facility              62
Public Health Clinic                                          71
</TABLE>

CLAIMS PROCESSING INSTRUCTIONS

Providers should bill their usual and customary charge. The $2.00 co-payment
will be systematically deducted from the allowed amount once per provider, per
client, per date of service. If a claim is billed with span dates of service on
one detail line, then the claim detail will have $2.00 deducted for each date of
service. If a claim is submitted with multiple procedure codes for the same date
of service on separate details the $2.00 co-payment will be deducted from the
first paid detail.

Explanation of benefits (EOB) code 364, "Payment Reduced By Co-pay" will be
posted to each detail that a co-payment was deducted from. If both co-payment
and other insurance were deducted from the same detail, EOB 416, "Payment Amount
Reduced By Other Insurance And Co-pay" will be posted to the detail.

This bulletin and other program information can be found at
WWW.CTMEDICALPROGRAM.COM. Questions regarding this bulletin may be directed to
the EDS Provider Assistance Center - Monday through Friday from 8:30 a.m. to
5:00 p.m. at:

In-state toll free..........  800-842-8440 or    EDS

Out-of-state or in the                           PO Box 2991          [EDS LOGO]

local New Britain, CT area..  860-832-9259       Hartford, CT 06104

<PAGE>

                                           STATE OF CONNECTICUT
[QUI TRANSTULIT SUSTNET LOGO]          DEPARTMENT OF SOCIAL SERVICES

                                            CONTRACT AMENDMENT

AMENDMENT NUMBER:    8
CONTRACT #:          093-MED-FCHP-1
CONTRACT PERIOD:     08/11/2001 - 12/31/2003
CONTRACTOR NAME:     FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS:  23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4, 5, 6 and 7 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3, 4, 5, 6 AND 7 IS
      FURTHER AMENDED TO EXTEND THE CONTRACT END DATE FROM NOVEMBER 30, 2003 TO
      DECEMBER 31, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 11/30/03 TO DECEMBER 31, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

                                   Page 1 of 2

<PAGE>

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT     [APPROVED NOV 25 2003 WELLCARE LEGAL SERVICES]

/s/ Todd S. Farha
-------------------------------   ___________________
Signature (Authorized Official)        Date

________________________________  ___________________
Typed Name (Authorized Official)       Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES
_____________________________     ______________
Signature (Authorizd Official)    Date

MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
---------------------             -------------------
Typed Name (Authorized Official)  Title

OFFICE OF THE ATTORNEY GENERAL

___________________________________________________________________
 Attorney General (as to form)                 Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

                                   Page 2 of 2

<PAGE>

                              APPENDIX      Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRSTCHOICE

CAPITATION RATES
07/01/02 - 12/31/03

                            FAIRFIELD    HARTFORD   LITCHFIELD     MIDDLESEX    NEW HAVEN    NEW LONDON       TOLLAND      WINDHAM
                            ---------    --------   ----------     ---------    ---------    ----------       -------      -------
<S>                         <C>          <C>        <C>            <C>          <C>          <C>              <C>          <C>
UNDER ONE                    $536.44     $606.89      $605.12       $717.18      $602.97       $600.00        $724.78      $581.51
AGES 1 TO 14                 $102.32     $110.46      $110.15       $130.10      $109.79       $109.23        $131.46      $107.71
MALE - AGES 15 TO 39         $127.22     $138.42      $138.03       $162.52      $137.60       $136.94        $164.18      $135.18
FEMALE - AGES 15 TO 39       $207.77     $231.48      $230.81       $273.76      $230.00       $228.84        $276.70      $223.07
MALE - AGES 40 AND OVER      $227.33     $254.24      $253.48       $301.18      $252.59       $251.31        $304.41      $244.68
FEMALE - AGES 40 AND OVER    $218.52     $244.15      $243.42       $289.20      $242.55       $241.32        $292.32      $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same man determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 25th day of November, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    -------------------------------------------
                                    By: Thaddeus Bereday, Secretary