<PAGE>

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                                                                    EXHIBIT 10.2



                         JANUARY 2000 - DECEMBER 2001





                 Contract for Medicaid/BadgerCare HMO Services

                                    Between

                                      HMO

                                      And


                            Wisconsin Department of
                          Health and Family Services






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

<PAGE>

                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                                                          Page No.
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ARTICLE I...............................................................................................         1
     I    DEFINITIONS...................................................................................         1

ARTICLE II..............................................................................................         7
     II.  DELEGATIONS OF AUTHORITY......................................................................         7

ARTICLE III.............................................................................................         7
     III. FUNCTIONS AND DUTIES OF THE HMO...............................................................         7
                 A.        Statutory Requirement........................................................         7
                 B.        Provision of Contract Services...............................................         8
                 C.        Time Limit for Decision on Certain Referrals.................................        18
                 D.        Emergency Care...............................................................        18
                 E.        24-Hour Coverage.............................................................        19
                 F.        Thirty Day Payment Requirement...............................................        20
                 G.        HMO Claim Retrieval System...................................................        20
                 H.        Appeals to the Department for HMO Payment/Denial of Providers................        20
                 I.        Payments for Diagnosis of Whether an Emergency Condition Exists..............        22
                 J.        Memoranda of Understanding for Emergency Services............................        22
                 K.        Provision of Services........................................................        22
                 L.        Open Enrollment..............................................................        23
                 M.        Pre-Existing Conditions......................................................        23
                 N.        Hospitalization at the Time of Enrollment or Disenroliment...................        23
                 0.        Non-Discrimination...........................................................        24
                 P.        Affirmative Action Plan......................................................        24
                 Q.        Cultural Competency..........................................................        25
                 R.        Health Education and Prevention..............................................        26
                 S.        Enrollee Handbook and Education and Outreach for Newly Enrolled
                           Recipients...................................................................        27
                 T.        Approval of Marketing Plans and Informing Materials..........................        29
                 U.        Conversion Privileges........................................................        31
                 V.        Choice of Health Professional................................................        31
                 W.        Quality Assessment/Performance Improvement (QAPI)............................        31
                 X.        Access to Premises...........................................................        52
                 Y.        Subcontracts.................................................................        52
                 Z..       Compliance with Applicable Laws, Rules or Regulations........................        52
                 AA.       Use of Providers Certified By Medicaid Program...............................        52
                 DD.       Coordination and Continuation of Care........................................        54
                 FE.       HMO ID Cards.................................................................        54
                 FF.       Federally Qualified Health Centers and Rural Health Centers
                           (FQHCS and RHCS).............................................................        54
</TABLE>

HMO Contract for January 1, 2000 - December 31, 2001

                                       i

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<TABLE>
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                 GG.       Coordination with Prenatal Care Services, School-Based Services,
                           Targeted Case Management Services, a Child Welfare Agencies, and
                           Dental Managed Care Organizations............................................        55
                 HH.       Physician Incentive Plans....................................................        57
                 II.       Advance Directives...........................................................        57
                 JJ.       Ineligible Organizations.....................................................        58
                 KK.       Clinical Laboratory Improvement Amendments...................................        60
                 LL.       Limitation on Fertility Enhancing Drugs......................................        60
                 MM.       Reporting of Communicable Diseases...........................................        60
                 NN.       MedicaBadgerCareare HMO Advocate Requirements................................        61
                 00.       HMO Designation of Staff Person as Contract Representative...................        64
                 PP.       Subcontracts with Local Health Departments...................................        64
                 QQ.       Subcontracts with Community-Based Health Organizations.......................        65
                 RR.       Prescription Drugs...........................................................        65


ARTICLE IV..............................................................................................        65
     IV.         FUNCTIONS AND DUTIES OF THE DEPARTMENT.................................................        65
                 A.        Eligibility Determination....................................................        65
                 B.        Enrollment...................................................................        67
                 C.        Disenroliment................................................................        67
                 D.        HMO Enrollment Reports.......................................................        67
                 E.        Utilization Review and Control...............................................        68
                 F.        HMO Review...................................................................        68
                 G.        HMO Review of Study or Audit Results.........................................        68
                 H.        Vaccines.....................................................................        68
                 I.        Coordination of Benefits.....................................................        68
                 J.        Wisconsin Medicaid Provider Reports..........................................        69


ARTICLE V...............................................................................................        69
     V.          PAYMENT TO THE HMO.....................................................................        69
                 A.        Capitation Rates.............................................................        69
                 B.        Actuarial Basis..............................................................        69
                 C.        Renegotiation................................................................        69
                 D.        Reinsurance..................................................................        69
                 E.        Neonatal Intensive Care Unit Risk-Sharing....................................        70
                 F.        Payment Schedule.............................................................        71
                 G.        Capitation Payments For Newborns.............................................        71
                 H.        Cordination of Benefits (COB)................................................        72
                 I.        Recoupments..................................................................        74
                 J.        HealthCheck Recoupment.......................................................        75
                 K.        Payment for Aids, HIV-Positive, and Ventilator Dependent.....................        76
</TABLE>

HMO Contract for January 1, 2000 - December 31, 2001

                                       ii

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        ARTICLE VI......................................................................................        78
            VI.   REPORTS, DATA, AND COMPUTER/DATA REPORTING SYSTEM.....................................        78
                  A.    Disclosure......................................................................        78
                  B.    Periodic Reports................................................................        79
                  C.    Access to and Audit of Contract Records.........................................        80
                  D.    Records Retention...............................................................        80
                  E.    Special Reporting and Compliance Requirements...................................        80
                  F.    Reporting of Corporate and Other Changes........................................        81
                  G.    Computer/Data Reporting System..................................................        81

       ARTICLE VII......................................................................................        83
            VII.  ENROLLMENT AND DISENROLLMENTS.........................................................        83
                  A.    Enrollment......................................................................        83
                  B.    Third Trimester Pregnancy Disenrollment.........................................        83
                  C.    Ninth Month Pregnancy Disenrollment.............................................        84
                  D.    Exemptions from Enrollment in any HMO and Disenrollment for
                        Patients of Certified Nurse Midwives or Nurse Practitioners.....................        84
                  F.    Exemption from Enrollment in any  HMO and Disenrollment For
                        AIDS or HIV-Positive with Anti Retroviral Drug Treatment........................        84
                  F.    Exemptions from Enrollment in any HMO and Disenrollment for
                        Patients of Federally Qualified Health Centers..................................        85
                  G.    Native American Disenrollment...................................................        85
                  H.    Special Disenrollments..........................................................        85
                  I.    Exemptions from Enrollment in any HMO and Disenrollment for
                        Recipients With Commercial HMO Insurance or Commercial
                        Insurance With a Restricted Provider Network....................................        85
                  J.    Exemption from Enrollment in any HMO and Disenrollment for
                        Families Where One or More Members are receiving SSI benefits...................        86
                  K.    Voluntary Disenrollment.........................................................        86
                  L.    Section 1115(A) Waiver and State Plan Amendment.................................        87
                  M.    Additional Services.............................................................        87
                  N.    Enrollment/Disenrollment Practices..............................................        87
                  0.    Enrollee Lock-In Period.........................................................        87

       ARTICLE VIII. ...................................................................................        88
            VIII. GRIEVANCE PROCEDURES..................................................................        88
                  A.    Procedures......................................................................        88
                  B.    Recipient Appeals of HMO Formal Grievance Decisions.............................        90
                  C.    Notifications of Denial, Termination, Suspension, or Reduction of
                        Benefits to Enrollees...........................................................        90
                  D.    Notifications of Denial of New Benefits to Enrollees............................        92
</TABLE>

HMO Contract for January 1, 2000 - December 31, 2001

                                     -iii-

<PAGE>

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        <S>                                                                                                      <C>
        ARTICLE IX.............................................................................................        93
           IX.    REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT...............................        93
                  A.      Suspension of New Enrollment.........................................................        93
                  B.      Department-Initiated Enrollment Reductions...........................................        93
                  C.      Other Enrollment Reductions..........................................................        93
                  D.      Withholding of Capitation Payments and Orders to Provide Services....................        94
                  E.      Inappropriate Payment Denials........................................................        97
                  F.      Sanctions............................................................................        97
                  G.      Sanctions and Remedial Actions.......................................................        98

        ARTICLE  X.............................................................................................        98
           X.     TERMINATION AND MODIFICATION OF CONTRACT.....................................................        98
                  A.      Mutual Consent.......................................................................        98
                  B.      Unilateral Termination...............................................................        98
                  C.      Obligations of Contracting Parties...................................................        99
                  D.      Modification.........................................................................       100

        ARTICLE XI.............................................................................................       101
           XI.    INTERPRETATION OF CONTRACT LANGUAGE..........................................................       101
                  A.      Interpretations......................................................................       101

        ARTICLE XII............................................................................................       101
           XIII.  CONFIDENTIALITY OF RECORDS...................................................................       101

        ARTICLE XIII...........................................................................................       102
           XIII.  DOCUMENTS CONSTITUTING CONTRACT..............................................................       102
                  A.      Current Documents....................................................................       102
                  B.      Future Documents.....................................................................       103

        ARTICLE XIV............................................................................................       103
           XIV.   MISCELLANEOUS................................................................................       103
                  A.      Indemnification......................................................................       103
                  B.      Independent Capacity of Contractor...................................................       104
                  C.      Omissions............................................................................       104
                  D.      Choice of Law........................................................................       104
                  E.      Waiver...............................................................................       104
                  F.      Severability.........................................................................       104
                  G.      Force Majeure........................................................................       105
                  H.      Headings.............................................................................       105
                  I.      Assignability........................................................................       105
                  J.      Right to Publish.....................................................................       105
                  K.      Year 2000 Compliance.................................................................       105
</TABLE>

HMO Contract for January 1, 2000 - December 31, 2001

                                     -iv-

<PAGE>

<TABLE>
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ARTICLE XV...................................................................................................  107
     XV. HMO SPECIFIC CONTRACT TERMS.........................................................................  107
         A.    Initial Contract Period.......................................................................  107
         B.    Renewals......................................................................................  107
         C.    Specific Terms of the Contract................................................................  107

ADDENDUM I...................................................................................................  109
     SUBCONTRACTS AND MEMORANDA OF UNDERSTANDING.............................................................  109

ADDENDUM II..................................................................................................  118
     POLICY GUIDELINES FOR MENTAL HEALTH/SUBSTANCE ABUSE AND
     COMMUNITY HUMAN SERVICE PROGRAMS........................................................................  118

ADDENDUM III.................................................................................................  125
     RISK-SHARING FOR INPATIENT HOSPITAL SERVICES............................................................  125

ADDENDUM IV..................................................................................................  128
     CONTRACT SPECIFIED REPORTING REQUIREMENTS...............................................................  128
     PART A.   REPORTS AND DUE DATES.........................................................................  128
     PART B.   WISCONSIN MEDICAID/BADGERCARE HMO SUMMARY AND
               ENCOUNTER DATA SET............................................................................  133
     PART C.   PROVIDER LIST ON TAPE.........................................................................  135
     PART D.   REPORTS FOR AIDS AND VENTILATOR DEPENDENT.....................................................  137

ADDENDUM V...................................................................................................  139
     STANDARD ENROLLEE HANDBOOK LANGUAGE.....................................................................  139

ADDENDUM VI..................................................................................................  150

ADDENDUM VII.................................................................................................  151
     ACTUARIAL BASIS COB REPORT..............................................................................  152

ADDENDUM VIII................................................................................................  153
     COMPLIANCE AGREEMENT AFFIRMATIVE ACTION/CIVIL RIGHTS....................................................  153

ADDENDUM IX..................................................................................................  156
     MODEL MEMORANDUM OF UNDERSTANDING HEALTH
     MAINTENANCE ORGANIZATION AND PRENATAL CARE
     COORDINATION AGENCY.....................................................................................  156

ADDENDUM X...................................................................................................  157
     MEMORANDUM OF UNDERSTANDING BETWEEN MILWAUKEE
     COUNTY HMOS AND BUREAU OF MILWAUKEE CHILD WELFARE.......................................................  157
</TABLE>


HMO Contract for January 1, 2000 - December 31, 2001

                                      -v-

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ADDENDUM XI.............................................................................................    160
     HEALTHCHECK WORKSHEET..............................................................................    160

ADDENDUM XII............................................................................................    161
     COMMON CARRIER TRANSPORTATION MEMORANDUM OF
     UNDERSTANDING MILWAUKEE COUNTY MEDICAID/BADGERCARE
     HMOS AND MILWAUKEE COUNTY DEPARTMENT OF HUMAN
     SERVICES...........................................................................................    161

ADDENDUM XIII...........................................................................................    163
     MODEL MEMORANDUM OF UNDERSTANDING BETWEEN..........................................................    163
     HEALTH MAINTENANCE ORGANIZATION AND SCHOOL DISTRICT OR.
     CESA MEDICAID-CERTIFIED FOR THE SCHOOL BASED SERVICES
     BENEFIT............................................................................................    163

ADDENDUM XIV............................................................................................    164
     GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN
     HMOS, TARGETED CASE MANAGEMENT (TCMs) AGENCIES, AND
     CHILD WELFARE AGENCIES.............................................................................    164

ADDENDUM XV.............................................................................................    167
     PERFORMANCE IMPROVEMENT PROJECT OUTLINE............................................................    167

ADDENDUM XVI............................................................................................    169
     TARGETED PERFORMANCE IMPROVEMENT MEASURES DATA SET.................................................    169

ADDENDUM XVII...........................................................................................    183
     MEDICAID/BADGERCARE HMO NEWBORN REPORT.............................................................    183

ADDENDUM XVIII..........................................................................................    185
     RECOMMENDED CHILDHOOD IMMUNIZATION SCHEDULE CDC-ACIP
     RECOMMENDATIONS, JANUARY-DECEMBER 2000.............................................................    185

ADDENDUM XIX............................................................................................    185
     REPORTING REQUIREMENTS FOR NEONATAL INTENSIVE CARE
     UNIT RISK-SHARING..................................................................................    186

ADDENDUM XX.............................................................................................    188
     SPECIFIC TERMS OF THE MEDICAID/BADGERCARE HMO
     CONTRACT...........................................................................................    188

ADDENDUM XXI............................................................................................    195
     FORMAL GRIEVANCE EXPERIENCE SUMMARY REPORT.........................................................    195
</TABLE>

HMO Contract for January 1, 2000 - December 31, 2001


                                     -vi-

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ADDENDUM XXII............................................................................................   196
     GUIDELINES FOR THE COORDINATION OF SERVICES BETWEEN
     MEDICAID HMOS AND COUNTY BIRTH TO THREE (B-3) AGENCIES..............................................   196

ADDENDUM XXIII...........................................................................................   202
     WISCONSIN MEDICAID HMO REPORT ON AVERAGE BIRTH
     COSTS BY COUNTY.....................................................................................   202

ADDENDUM XXIV............................................................................................   205
     LOCAL HEALTH DEPARTMENTS AND COMMUNITY-BASED
     HEALTH ORGANIZATIONS A RESOURCE FOR HMOs............................................................   205

ADDENDUM XXV.............................................................................................   208
     GENERAL INFORMATION ABOUT THE WIC PROGRAM, SAMPLE
     HMO-TO-WIC REFERRAL FORM, AND STATEWIDE LIST OF WIC
     AGENCIES............................................................................................   208
</TABLE>

HMO Contract for January 1, 2000- December 31, 2001

                                     -vii-

<PAGE>

                             CONTRACT FOR SERVICES

                                    Between

                   Department of Health and Family Services

                                      and

                                      HMO

The Wisconsin Department of Health and Family Services and HMO, an insurer with
a certificate of authority to do business in Wisconsin, and an organization
which makes available to enrolled participants, in consideration of periodic
fixed payments, comprehensive health care services provided by providers
selected by the organization and who are employees or partners of the
organization or who have entered into a referral or contractual arrangement with
the organization, for the purpose of providing and paying for Medicaid/Badger
Care contract services to recipients enrolled in the HMO under the
State of Wisconsin Medicaid Plan approved by the Secretary of the United States
Department of Health and Human Services pursuant to the provisions of the Social
Security Act and for the further specific purpose of promoting coordination and
continuity of preventive health services and other medical care including
prenatal care, emergency care, and HealthCheck services, do herewith agree:


                                   ARTICLE I

I.   DEFINITIONS

     The term "CESA" means Cooperative Educational Service Agencies, which are
     cooperatives that include multiple school districts that work together for
     purchasing and other coordinated functions. There are 12 CESAs in
     Wisconsin.

     The term "children with special health care needs" means children who have
     or are at increased risk for chronic physical, developmental, behavioral,
     or emotional conditions and who also require health and related services
     of a type or amount beyond that required by children generally and who are
     enrolled in a Children with Special Health Care Needs program operated by a
     Local Health Department or a local Title V funded Maternal and Child Health
     Program.

     The term "Community Based Health Organizations" means non-profit agencies
     providing community based health services. These organizations provide
     important health care services such as HealthCheck screenings, nutritional
     support, and family planning, targeting such services to high risk
     populations.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -1-

<PAGE>

     The term "continuing care provider" means (as stated in 42 CFR 441.60(a)) a
     provider who has an agreement with the Medicaid agency to provide:

     A.   any reports that the Department may reasonably require, and

     B.   at least the following services to eligible HealthCheck recipients
          formally enrolled with the provider as enumerated in 42 CFR
          441.60(a) (1)-(5):

          1.   screening, diagnosis, treatment, and referrals for follow-up
               services,

          2.   maintenance of the recipient's consolidated health history,
               including information received from other providers,

          3.   physician's services as needed by the recipient for acute,
               episodic or chronic illnesses or conditions,

          4.   provide or refer for dental services, and

          5.   transportation and scheduling assistance.

     The term "contract" means the agreements executed between HMOs and the
     Department to accomplish the duties and functions, in accordance with the
     rules and arrangements specified in this document.

     The term "contract services" means those services which the HMO is required
     to provide under this Contract.

     The term "contractor" means the HMOs awarded the contracts resulting from
     the HMO Certification process to provide capitated Managed care in
     accordance with the Contract.

     The term "cultural competency" means a set of congruent behaviors,
     attitudes, practices and policies that are formed within an agency, and
     among professionals that enable the system, agency, and professionals to
     work respectfully, effectively and responsibly in diverse situations.
     Essential elements of cultural competence include understanding diversity
     issues at work, understanding the dynamic of difference, institutionalizing
     cultural knowledge, and adapting to and encouraging organizational
     diversity.

     The term "Department" means the Wisconsin Department of Health and Family
     Services.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -2-

<PAGE>

     The term "emergency medical condition" means---

     A.   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:

          1.   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,

          2.   serious impairment of bodily functions, or

          3.   serious dysfunction of any bodily organ or part; or

     B.   With respect to a pregnant woman who is in active labor---

          1.   that there is inadequate time to effect a safe transfer to
               another hospital before delivery; or

          2.   that transfer may pose a threat to the health or safety of the
               woman or the unborn child.

     C.   A psychiatric emergency involving a significant risk of serious harm
          to oneself or others.

     D.   A substance abuse emergency exists if there is significant risk of
          serious harm to an enrollee or others, or there is likelihood of
          return to substance abuse without immediate treatment.

     E.   Emergency dental care is defined as an immediate service needed to
          relieve the patient from pain, an acute infection, swelling, trismus,
          fever, or trauma. In all emergency situations, the HMO must document
          in the recipient's dental records the nature of the emergency.

     The term "encounter" shall include the following:

     1.   A service or item provided to a patient through the health care
          system. Examples include but are not limited to:

          a.   Office visits
          b.   Surgical procedures
          c.   Radiology, including professional and/or technical components
          d.   Prescribed drugs
          e.   Durable medical equipment
          f.   Emergency transportation to a hospital

HMO Contract for January 1, 2000 - December 31, 2001

                                      -3-

<PAGE>

          g.   Institutional stays (inpatient hospital, rehabilitation stays)
          h.   HealthCheck screens

     2.   A service or item not directly provided by the HMO, but for which the
          HMO is financially responsible. An example would include an emergency
          service provided by an out-of-network provider or facility.

     3.   A service or item not directly provided by the HMO, and one for which
          no claim is submitted but for which the HMO may supplement its
          encounter data set. Such services might include HealthCheck screens
          for which no claims have been received and if no claim is received,
          the HMO's medical chart. Examples of services or items the HMO may
          include are:

          .    HealthCheck services
          .    Lead Screening and Testing
          .    Immunizations

     4.   The terms "services" or "items" as used above include those services
          and items not covered by the Wisconsin Medicaid Program, but which the
          HMO chooses to provide as part of its Medicaid managed care product.
          Examples include educational services, certain over-the-counter drugs,
          and delivered meals.

     The terms "enrollee" and "participant" mean a Medicaid/BadgerCare
     recipient who has been certified by the State as eligible to enroll under
     this Contract, and whose name appears on the HMO Enrollment Reports which
     the Department will transmit to the HMO every month in accordance with an
     established notification schedule. Children who are reported to the
     certifying agency within 100 days of birth shall be enrolled in the HMO
     their mother is enrolled in from their date of birth if the mother was an
     enrollee on the date of birth. Children who are reported to the certifying
     agency after the 100th day but before their first birthday may be eligible
     for Medicaid/BadgerCare on a fee-for-service basis.

     The term "enrollment area" means the geographic area within which
     recipients must reside in order to enroll, on a mandatory basis, in the HMO
     under this Contract.

     The term "experimental surgery and procedures" means experimental services
     that meet the definition of HFS 107.035(1) and (2) Wis. Adm. Code. as
     determined by the Department.

     The term "formally enrolled with a continuing care provider" (as cited in
     42 CFR 441.60(d)) means that a recipient (or recipient's guardian) agrees
     to use one continuing care provider as the regular source of a described
     set of services for a stated period of time.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -4-

<PAGE>

     The term "HMO" means the health maintenance organization or its parent
     corporation with a certificate of authority to do business in Wisconsin,
     that is obligated under this Contract.

     The term "HMO Encounter Technical Workgroup" means a workgroup composed of
     HMO technical staff, contract administrators, claims processing,
     eligibility, and/or other HMO staff, as necessary; Department staff from
     the Division of Health Care Financing; and staff from the Department's
     fiscal agent contractor.

     The term "encounter record" means an electronically formatted list of
     encounter data elements per encounter as specified in the Wisconsin
     Medicaid 2000-2001 HMO Encounter Data User Manual. An encounter record may
     be prepared from a single detail line from a claim such as the HCFA 1500 or
     UB-92.

     The term "Local Health Department" (LHD) means an agency of local
     government established according to Chapter 251, Wis. Stats. Local health
     departments have statutory obligation to perform certain core functions:
     which include assessment, assurance, and policy development for the purpose
     of protecting and promoting the health of their communities.

     The term "Medicaid" means the Wisconsin Medical Assistance Program operated
     by the Wisconsin Department of Health and Family Services under Title XIX
     of the Federal Social Security Act, Ch. 49, Wis. Stats., and related State
     and Federal rules and regulations. This will be the term used consistently
     in this Contract. However, other expressions or words equivalent to
     Medicaid are "MA," "Medical Assistance," and "WMAP."

     The term "BadgerCare" means part of the Wisconsin Medical Assistance
     Program operated by the Wisconsin Department of Health and Family Services
     under Title XIX and Title XXI of the Federal Social Security Act, s.
     49.655, Wis. Stats., and related State and Federal rules and regulations.
     This term will be used throughout this contract.

     The term "medical status code" means the two digit (alphanumeric) code that
     the Department uses in its computer system to define the type of Medicaid
     eligibility a recipient has: the code identifies the basis of eligibility,
     whether cash assistance is being provided, and other aspects of Medicaid.
     The medical status code is listed on the HMO enrollment reports. Please
     refer to Article IV. A. for a list of HMO eligible medical status codes.

     The term "medically necessary" means a medical service that meets the
     definition of HFS 101 .03(96m) Wis. Adm. Code.

     The term "newborn" means an enrollee who is less than 100 days old.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -5-

<PAGE>

     The term "Post Stabilization Services" means medically necessary non-
     emergency services furnished to an enrollee after he or she is stabilized
     following an emergency medical condition.

     The term "provider" means a person who has been certified by the Department
     to provide health care services to recipients and to be reimbursed by
     Medicaid for those services.

     The term "Public Institution" means an institution that is the
     responsibility of a governmental unit or over which a governmental unit
     exercises administrative control as defined by federal regulations.

     The term "recipient" means any individual entitled to benefits under Title
     XIX and XXI of the Social Security Act, and under the Medicaid State Plan
     as defined in Chapter 49, Wis. Stats.

     The term "risk" means the possibility of monetary loss or gain by the HMO
     resulting from service costs exceeding or being less than payments made to
     it by the Department.

     The term "service area" means an area of the State in which the HMO has
     agreed to provide Medicaid services to Medicaid enrollees. The Department
     will monitor enrollment levels of HMOs by the service areas of the HMO,
     and HMO will indicate whether they will provide dental or chiropractic
     services by service area. A service area may be as small as a zip code, may
     be a county, a number of counties, or the entire State.

     The term "State" means the State of Wisconsin.

     The term "subcontract" means any written agreement between the HMO and
     another party to fulfill the requirements of this Contract. However, such
     term does not include insurance purchased by the HMO to limit its loss with
     respect to an individual enrollee, provided the HMO assumes some portion of
     the underwriting risk for providing health care services to that enrollee.

     The term "Wisconsin Tribal Health Directors Association (WTHDA)" means the
     coalition of all Wisconsin American Indian Tribal Health Departments.

     Terms that are not defined above shall have their primary meaning
     identified in the Wisconsin Administrative Code, Chs. HFS 101-108.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -6-

<PAGE>

                                  ARTICLE II


II.      DELEGATIONS OF AUTHORITY

         The HMO shall oversee and remain accountable for any functions and
         responsibilities that it delegates to any subcontractor. For all
         subcontracting or delegation of function or authority:

         A.       There shall be a written agreement that specifies the
                  delegated activities and reporting responsibilities of the
                  subcontractor and provides for revocation of the delegation or
                  imposition of other sanctions if the subcontractor's
                  performance is inadequate.

         B.       Before any delegation, the HMO shall evaluate the prospective
                  subcontractor's ability to perform the activities to be
                  delegated.

         C.       The HMO shall monitor the subcontractor's performance on an
                  ongoing basis and subject the subcontractor to formal review
                  at least once a year.

         D.       If the HMO identifies deficiencies or areas for improvement,
                  the HMO and the subcontractor shall take corrective action.

         E.       If the HMO delegates selection of providers to another entity,
                  the HMO retains the right to approve, suspend, or terminate
                  any provider selected by that entity.


                                  ARTICLE III


III.     FUNCTIONS AND DUTIES OF THE HMO

         In consideration of the functions and duties of the Department
         contained in this Contract the HMO shall:

         A.       Statutory Requirement

                  Retain at all times during the period of this Contract a valid
                  Certificate of Authority issued by the State of Wisconsin
                  Office of the Commissioner of Insurance.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -7-

<PAGE>

         B.       Provision of Contract Services


                  1.       Promptly provide or arrange for the provision of all
                           services required under s. 49.46(2), Wis. Stats., and
                           HFS 107 Wis. Adm. Code; as further clarified in all
                           Wisconsin Medicaid Program Provider Handbooks and
                           Bulletins, and HMO Contract Interpretation Bulletins
                           (CIBs) and as otherwise specified in this Contract
                           except:

                           a.       County Transportation by common carrier or
                                    private motor vehicle (except as required in
                                    Article III. B (10). HealthCheck). HMOs are
                                    required to arrange for transportation for
                                    HealthCheck visits. When authorized by the
                                    Department, the HMO may provide
                                    non-emergency transportation by common
                                    carrier or private motor vehicle for
                                    HealthCheck visits and be reimbursed by the
                                    County.

                                    HMOs may negotiate arrangements with local
                                    county Departments of Health and Social
                                    Services for common carrier or private
                                    vehicle transportation for HMO services in
                                    general and not just for HealthCheck visits.

                                    The Department will facilitate the
                                    development of such arrangements between the
                                    HMO and the county. HMOs interested in
                                    developing a transportation arrangement with
                                    one or more counties and interested in
                                    Department assistance should contact the
                                    following office either by mail or phone:

                                        Bureau of Managed Health Care Programs
                                        P.O. Box 309
                                        Madison, WI 53701- 0309
                                        Phone Number: (608) 266-7894 or 267-2170
                                        Fax Number: (608) 261-7792

                           b.       Milwaukee County HMOs will provide common
                                    carrier transportation to enrollees.
                                    Transportation services will be limited to:

                                    .     Transporting Medicaid/BadgerCare HMO
                                          members only.

                                    .     Transportation of Medicaid/BadgerCare
                                          HMO members to and from Medicaid
                                          covered services.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -8-

<PAGE>

                                    The HMO is responsible for arranging for the
                                    common carrier transportation and providing
                                    monthly costs incurred to Milwaukee County
                                    Department of Human Services (DHS), of
                                    common carrier transportation arranged. HMO
                                    agrees to submit costs to the DHS within 15
                                    days following the end of each month to:

                                     Milwaukee County DHS
                                     Financial Assistant, Division Administrator
                                     1220 W. Vliet Street
                                     Milwaukee, WI 53206

                                    The DHS is responsible for reimbursing the
                                    HMO for mileage and an administration fee.
                                    The State Department of Health and Family
                                    Services reserves the right to adjust these
                                    rates.

                                    The HMO shall maintain adequate records for
                                    each enrollee which include all pertinent
                                    and sufficient information relating to
                                    common carrier transportation, and make this
                                    information readily available to the
                                    Department of Health and Family Services
                                    (DHFS). HMO agrees to report suspected
                                    abuse by enrollees or providers to the DHFS.

                           c.       Dental, if Article XV and Addendum XX
                                    indicates dental is not covered.

                           d.       Prenatal Care Coordination.

                           e.       Targeted Case Management.

                           f.       School-Based Services.

                           g.       Milwaukee Childcare Coordination.

                           h.       Tuberculosis-related Services.

                  2.       Cover chiropractic services, or in the alternative,
                           enter into a subcontract for chiropractic services
                           with the State as provided in Article XV. State law
                           mandates coverage.

                  3.       Remain liable for provision of care for that period
                           for which capitation payment has been made in cases
                           where medical status code changes occur subsequent to
                           capitation payment.



HMO Contract for January 1, 2000 - December 31, 2001

                                      -9-

<PAGE>

                  4.       Be liable, where emergencies and HMO referrals to
                           out-of-area or non-affiliated providers occur, for
                           payment only to the extent that Medicaid pays,
                           including Medicare deductibles, or would pay, its
                           fee-for-service providers for services to the AFDC
                           population. For inpatient hospital services, the
                           Department will provide each HMO per diem rates based
                           on the Medicaid fee-for-service equivalent. This
                           condition does not apply to: (1) cases where prior
                           payment arrangements were established; and (2)
                           specific subcontract agreements.

                  5.       Changes to Medicaid covered services mandated by
                           Federal or State law 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, or (2) unless the change is
                           necessary to continue to receive federal funds or due
                           to action of a court of law.

                           The Department may incorporate any change in covered
                           services mandated by Federal or State law into the
                           Contract effective the date the law goes into effect,
                           if it adjusts the capitation rate accordingly. The
                           Department will give the HMO 30 days notice of any
                           such change that reflects service increases, and the
                           HMO may elect to accept or reject the service
                           increases for the remainder of that contract year;
                           the Department will give the HMO 60 days notice of
                           any such change that reflects service decreases, with
                           a right of the HMO to dispute the amount of the
                           decrease within that 60 days. The HMO has the right
                           to accept or reject service decreases for the
                           remainder of the Contract year. The date of
                           implementation of the change in coverage will
                           coincide with the effective date of the increased or
                           decreased funding. This section does not limit the
                           Department's ability to modify the Medicaid/HMO
                           Contract for changes in the State Budget.

                  6.       Be responsible for payment of all contract services
                           provided to all Medicaid/BadgerCare recipients listed
                           as ADDs or CONTINUEs on either the Initial or Final
                           Enrollment Reports (see Article IV. B and D)
                           generated for the month of coverage. The HMO is also
                           responsible for payment of services to all newborns
                           meeting the criteria described in Article V. G.
                           "Capitation Payments for Newborns." Additionally, the
                           HMO agrees to provide, or authorize provision of,
                           services to all Medicaid enrollees with valid Forward
                           cards indicating HMO enrollment without regard to
                           disputes about enrollment status and without regard
                           to any other identification requirements. Any
                           discrepancies between the cards and the reports will
                           be reported to the Department for resolution. The HMO
                           shall continue to provide and authorize provision of
                           all contract services until the discrepancy is
                           resolved. This includes recipients who were PENDING
                           on the Initial Report and held a valid Forward card
                           indicating HMO enrollment, but did not appear as an
                           ADD on the Final Report.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -10-

<PAGE>

                  7.       Transplants: As a general principle, Wisconsin
                           Medicaid does not pay for items that it determines to
                           be experimental in nature.

                           a.       Procedures that are covered by Medicaid that
                                    are no longer considered experimental are
                                    cornea transplants and kidney transplants.
                                    HMOs shall cover these services.

                           b.       There are other procedures that are approved
                                    only at particular institutions, including
                                    bone marrow transplants, liver, heart,
                                    heart-lung, lung, pancreas-kidney, and
                                    pancreas transplants. HMOs need not cover
                                    the transplantation because there are no
                                    funds in the fee-for-service experience data
                                    (and thus in the HMO capitation rates) for
                                    these services. This relieves the HMO from
                                    paying for expensive follow-up care, as when
                                    there are permanent, expensive requirements
                                    for drugs or equipment.

                                    1)       The person to get the transplant
                                             will be permanently exempted from
                                             HMO enrollment the date of the
                                             transplant surgery.

                                    2)       In the case of autologous bone
                                             marrow transplants, the person will
                                             be permanently exempted from HMO
                                             enrollment the date the bone marrow
                                             was extracted.

                           c.       Enrollees who have had one or more
                                    transplant surgeries referenced in 7 b,
                                    prior to enrollment in an HMO will be
                                    -------------------
                                    permanently exempted the first of the month
                                    of their HMO enrollment.

                  8.       Dental Care: HMOs that agree to accept the dental
                           capitation rate for the purpose of covering all
                           Medicaid dental services must:

                           a.       Cover all dental services as required under
                                    HFS 107.07, provider handbooks, bulletins,
                                    and periodic updates.

                           b.       Provide diagnostic, preventive, and
                                    medically necessary follow-up care to treat
                                    the dental disease, illness, injury or
                                    disability of enrollees while they are
                                    enrolled in an HMO, except as required in
                                    sub. (c).



HMO Contract for January 1, 2000 - December 31, 2001

                                      -11-

<PAGE>

                           c.       Complete orthodontic or prosthodontic
                                    treatment begun while an enrollee is
                                    enrolled in an HMO if the enrollee becomes
                                    ineligible or disenrolls from the HMO, no
                                    matter how long the treatment takes.
                                    Medicaid/BadgerCare covers such continuing
                                    services for fee-for-service recipients and
                                    the costs of continuing treatment are
                                    included in the fee-for-service payment data
                                    on which the HMO capitation rates are based.
                                    An HMO will not be required to complete
                                    orthodontic or prosthodontic treatment on an
                                    enrollee who has begun treatment as a
                                    fee-for-service recipient and who
                                    subsequently has been enrolled in an HMO.

                                    [Refer to the chart following this page of
                                    the Contract for the specific details of
                                    completion of orthodontic or prosthodontic
                                    treatment in these situations.]



HMO Contract for January 1, 2000 - December 31, 2001

                                      -12-

<PAGE>

 RESPONSIBILITY FOR PAYMENT OF ORTHODONTIC & PROSTHODONTIC
 TREATMENT WHEN THERE IS AN ENROLLMENT STATUS CHANGE DURING THE
 COURSE OF TREATMENT

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                       Who pays for completion of orthodontic and
                                                                 prosthodontic treatment* where there is an enrollment
                                                                                     status change
                                                               ---------------------------------------------------------
                                                                  First HMO         Second HMO       Fee-for-Service
------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
 Person converts from one status to another:

 1.     Fee-for-service to an HMO covering dental.                                     N/A                  X
------------------------------------------------------------------------------------------------------------------------
 2a.    HMO covering dental to an HMO not covering dental,
        and person's residence remains within 50 miles of the          X
        person's residence when in the first HMO.
------------------------------------------------------------------------------------------------------------------------
 2b.    HMO covering dental to an HMO not covering dental,
        and person's residence changes to greater than                                                      X
        50 miles of the person's residence when in the first HMO.
------------------------------------------------------------------------------------------------------------------------
 3a.    HMO covering dental to the same or another HMO
        covering dental and the person's residence remains             X
        within 50 miles of the residence when in the first HMO.
------------------------------------------------------------------------------------------------------------------------
 3b.    HMO covering dental to the same or another HMO covering                                             X
        dental and the person's residence changes to greater
        than 50 miles of the residence when in the first HMO.
------------------------------------------------------------------------------------------------------------------------
 4.     HMO with dental coverage to fee-for-service because:

        a.    Person moves out of the HMO service area but the
              person's residence remains within 50 miles of the
              residence when in the HMO.                               X
------------------------------------------------------------------------------------------------------------------------
        b.    Person moves out of the HMO service area, but the
              person's residence changes to greater than 50 miles                      N/A                  X
              of the residence when in the HMO.
------------------------------------------------------------------------------------------------------------------------
        c.    Person exempted from HMO enrollment.                                     N/A                  X
------------------------------------------------------------------------------------------------------------------------
        d.    Person's medical status changes loan ineligible HMO      X               N/A
              code and the person's residence remains within 50
              miles of the residence when in that
              HMO.
-----------------------------------------------------------------------------------------------------------------------
        e.    Person's medical status changes to an ineligible HMO                     N/A                  X
              code and the person's residence changes to greater
              than 50 miles of the residence when in that
              HMO.
------------------------------------------------------------------------------------------------------------------------
 5a.    HMO with dental to ineligible for Medicaid/BC and the          X               N/A
        person's residence remains within 50 miles of the
        residence when in that HMO.
------------------------------------------------------------------------------------------------------------------------
 Sb.    HMO with dental to ineligible for Medicaid/BC and the                          N/A                  X
        person's residence changes to greater than 50 miles
        of the residence when in that HMO.
------------------------------------------------------------------------------------------------------------------------
 6.     HMO without dental to ineligible for Medicaid/BC.                              N/A                  X
------------------------------------------------------------------------------------------------------------------------
</TABLE>

 HMO Contract for January 1, 2000 - December 31, 2001

                                      -13-

<PAGE>

*  Orthodontic and prosthodontic treatment are only covered by
   Medicaid/BadgerCare for children under 21 as a result of a HealthCheck
   referral (HFS 107,07(3)).

                  9.  The following provision refers to payments made by the
                      HMO. HMO covered primary care and emergency care services
                      provided to a recipient living in a Health Professional
                      Shortage Area (HPSA) or by a provider practicing in a HPSA
                      must be paid at an enhanced rate of 20 percent above the
                      rate the HMO would otherwise pay for those services.
                      Primary care providers are defined as nurse practitioners,
                      nurse midwives, physician assistants, and physicians who
                      are Medicaid-certified with specialties of general
                      practice, OB-GYN, family practice, internal medicine, or
                      pediatrics. Specified HMO-covered obstetric or
                      gynecological services (see the Wisconsin Medicaid and
                      BadgerCare Physicians Services Handbook) provided to a
                      recipient living in a HPSA or by a provider practicing in
                      a HPSA must be paid at an enhanced rate of 25 percent
                      above the rate the HMO would otherwise pay providers in
                      HPSAs for those services.

                      However, this does not require the HMO to pay more than
                      the enhanced Medicaid fee-for-service rate or the actual
                      amount billed for these services. The HMO shall ensure
                      that the moneys for HPSA payments are paid to the
                      physicians and are not used to supplant funds that
                      previously were used for payment to the physicians. The
                      Department will supply a list of the services affected by
                      this provision, their maximum fee-for-service rates, and
                      HPSAs. The HMO must develop written policies and
                      procedures to ensure compliance with this provision. These
                      policies must be available for review by the Department,
                      upon request.

                 10.  HEALTHCHECK----Provide services as a continuing care
                      provider as defined in Article I, and according to
                      policies and procedures in Part D of the Wisconsin
                      Medicaid Provider Handbook related to covered services.

                      Provide HealthCheck screens at a rate equal to or greater
                      than 80 percent of the expected number of screens. The
                      rate of HealthCheck screens will be determined by the
                      calculation in the HealthCheck Worksheet in Addendum XI.
                      The Department will complete the worksheet from data
                      provided by the HMO- from the HMO Utilization Report for
                      calendar year 2000 and, for calendar year 2001, from
                      HealthCheck screens the Department retrieves and
                      identifies from the 2001 encounter data set. The HMO may
                      complete the worksheet on its own, periodically, as a
                      means to monitor its HealthCheck screening performance.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -14-

<PAGE>

                      For the 2000 HealthCheck worksheet data calculation, the
                      number of HealthCheck screens reported on the 2000 HMO
                      utilization Report must be substantiated by the number
                      reported on the 2000 encounter data set. If for the year
                      2000, the encounter data set does not substantiate the
                      HealthCheck screens reported on the HMO Utilization Report
                      within 5 percent, the Department will require HMOs to
                      submit a 2001 HMO Utilization Report.

                      When the Department completes the HealthCheck worksheet
                      using encounter data for calendar year 2001, the
                      Department will identify and retrieve HealthCheck
                      screening data from the encounter data set as of July 1,
                      2002. For those HMOs required to submit a 2001 HMO
                      Utilization Report, the Department will compare the
                      HealthCheck data submitted on the 2001 HMO Utilization
                      Report with HealthCheck data reported on the encounter
                      data set, and utilize the smaller number when completing
                      the worksheet.

                      If the HMO provides fewer screens in the contract year
                      than 80 percent, the Department will recoup the funds
                      provided to the HMO for the provision of the remaining
                      screens. This formula will be used:

                                   (0.80 x A - B) x (C - D), where

                                   A = Expected number of screens (Line 6 of
                                       Addendum XI: HealthCheck Worksheet)

                                   B = Number of screens paid in the contract
                                       year as reported in the Encounter Data
                                       Set or on the final Utilization Report
                                       for the year

                                   C = Fee-for-service maximum allowable fee*

                                   D = HMO discount

                      * The fee-for-service maximum allowable fee is the average
                      maximum fee for the year. For example, if the maximum
                      allowable fee for HealthCheck is $50 from January through
                      June, and $52 from July through December, then the average
                      maximum allowable fee for the year is $51.

                      For recipients over 1 year of age, if a recipient requests
                      a HealthCheck screen, HMO shall provide such screen within
                      60 days, if a screen is due according to the periodicity
                      schedule. If the screen is not due within 60 days, then
                      the HMO shall schedule the appointment in accordance with
                      the periodicity schedule. For recipients up to 1 year of
                      age, if a recipient requests a HealthCheck screen, HMO
                      shall provide such screen

HMO Contract for January 1, 2000 - December 31, 2001

                                      -15-

<PAGE>

                      within 30 days, if a screen is due according to the
                      periodicity schedule. If the screen is not due within 30
                      days, then the HMO shall schedule the appointment in
                      accordance with the periodicity schedule.

                 11.  The HMO must adequately fund physician services provided
                      to pregnant women and children under 19, so that they are
                      paid at rates sufficient to ensure that provider
                      participation and services are as available to the
                      Medicaid/BadgerCare population as to the general
                      population in the HMO service area(s).

                 12.  The actual provision of any service is subject to the
                      professional judgment of the HMO providers as to the
                      medical necessity of the service, except that the HMO must
                      provide assessment and evaluation services ordered by a
                      court. Decisions to provide or not to provide or authorize
                      medical services shall be based solely on medical
                      necessity and appropriateness as defined in HFS
                      101.03(96m). Disputes between HMOs and recipients about
                      medical necessity can be appealed through an HMO grievance
                      system, and ultimately to the Department for a binding
                      determination;the Department's determinations will be
                      based on whether Medicaid would have covered that service
                      on a fee-for-service basis (except for certain
                      experimental procedures discussed in Article III, B. 7).
                      Alternatively, disputes between HMOs and enrollees about
                      medical necessity can be appealed directly to the
                      Department.

                      HMOs are not restricted to providing Wisconsin Medicaid
                      covered services. Sometimes, HMOs find that other
                      treatment methods may be more appropriate than Medicaid
                      covered services, or result in better outcomes.

                      None of the provisions of this contract that are
                      applicable to Wisconsin Medicaid covered services apply to
                      other services that an HMO may choose to provide, except
                      that abortions, hysterectomies and sterilizations must
                      comply with 42 CFR 441 Subpart E and 42 CFR 441 Subpart F.

                      If a service provided is an alternative or replacement to
                      a Wisconsin Medicaid covered service, then the HMO or HMO
                      provider is not allowed to bill the enrollee for the
                      service.

                 13.  HMO and its providers and subcontractors shall not bill a
                      Medicaid BadgerCare enrollee for medically necessary
                      services covered under this Contract and provided during
                      the enrollee's period of HMO enrollment. HMO and its
                      providers and subcontractors shall not bill a
                      Medicaid/BadgerCare enrollee for copayments and/or
                      premiums for medically necessary services covered under
                      this Contract and provided


HMO Contract for January 1, 2000 - December 31, 2001

                                      -16-

<PAGE>

                      during the enrollee's period of HMO enrollment. This
                      provision shall continue to be in effect even if the HMO
                      becomes insolvent.

                      However, if an enrollee agrees in advance in writing to
                      pay for a nonMedicaid/BadgerCare covered service, then the
                      HMO, HMO provider, or HMO subcontractor may bill the
                      enrollee. The standard release form signed by the enrollee
                      at the time of services does not relieve the HMO and its
                      providers and subcontractors from the prohibition against
                      billing an enrollee in the absence of a knowing assumption
                      of liability for a nonMedicaid/BadgerCare covered service.
                      The form or other type of acknowledgment relevant to an
                      enrollee's liability must specifically state the
                      admissions, services, or procedures that are not covered
                      by Medicaid/BadgerCare.

                 14.  The HMO must operate a program to promote full
                      immunization of enrollees. The HMO shall be responsible
                      for administration of immunizations including payment of
                      an administration fee for vaccines provided by the
                      Department. For vaccines that are newly approved during
                      the term of the Contract and not yet part of the Vaccine
                      for Children program, the HMO will report usage for
                      reimbursement from the Department. The Department will
                      identify vaccines which meet these criteria to the HMO.

                      The HMO, as a condition of their certification as a
                      Medicaid BadgerCare provider, shall share enrollee
                      immunization status with Local Health Departments and
                      other non-profit HealthCheck providers upon request of
                      those providers without the necessity of enrollee
                      authorization. The Department is also requiring that Local
                      Health Departments and other non-profit HealthCheck
                      providers share that equivalent information with HMOs upon
                      request. This provision is made to ensure proper
                      coordination of immunization services and to prevent
                      duplication of services.

                 15.  Services required under s. 49.46(2). Wis. Stats., and HFS
                      107 Wis. Adm. Code, include (without limitation due to
                      enumeration) private duty nursing services, nurse-midwife
                      services, and independent nurse practitioner services:
                      physician services, including primary care services, are
                      not only services performed by physicians, but services
                      under the direct, on-premises supervision of a physician
                      performed by other providers such as physician assistants
                      and nurses of various levels of certification.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -17-

<PAGE>

               16.  Provision of Family Planning Services and Confidentiality
                    of Family Planning Information: Give enrollees the
                    opportunity to have their own primary physician for the
                    provision of family planning services whether that
                    provider is in-plan or out-of-plan. If the enrollee
                    chooses an out-of-plan provider, those family planning
                    services will be paid fee-for-service. The physician does
                    not replace the primary care provider chosen by or
                    assigned to the enrollee. All such information and
                    medical records relating to family planning shall be kept
                    confidential including those of a minor.

         C.    Time Limit for Decision on Certain Referrals

               Pay for covered services provided by a non-HMO provider to a
               disabled participant less than 3 years of age, or to any
               participant pursuant to a court order (for treatment),
               effective with the receipt of a written request for referral
               from the non-HMO provider, and extending until the HMO issues
               a written denial of referral. This requirement does not apply
               if the HMO issues a written denial of referral within 7 days
               of receiving the request for referral.

         D.    Emergency Care

               Promptly provide or pay for needed contract services for
               emergency medical conditions and post-stabilization services
               as defined in Article I. Nothing in this requirement mandates
               HMOs to reimburse for post-stabilization services that were
               not authorized by the HMO.

               1.   Payments for qualifying emergencies (including
                    services at hospitals or urgent care centers within
                    the HMO service area(s)) are to be based on the
                    medical signs and symptoms of the condition upon
                    initial presentation. The retrospective findings of a
                    medical work-up may legitimately be the basis for
                    determining how much additional care may be
                    authorized, but not for payment for dealing with the
                    initial emergency.

               2.   All HMOs, regardless of whether dental care is
                    included in their contract, are responsible for
                    paying all ancillary charges relating to dental
                    emergencies with the only exception being the
                    dentist's or oral surgeon's direct and office
                    charges. These charges would include, but are not
                    limited to, physician, anesthesia, pharmacy and
                    emergency room in a hospital or freestanding
                    ambulatory care setting.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -18-

<PAGE>

         Ambulance Services


         1.       HMOs may require submission of a trip ticket with ambulance
                  claims before paying the claim. Claims submitted without a
                  trip ticket need only be paid at the service charge rate.

         2.       HMOs will pay a service fee for ambulance response to a call
                  in order to determine whether an emergency exists, regardless
                  of the HMO's determination to pay for the call.

         3.       HMOs will pay for emergency ambulance services based on
                  established Medicaid criteria for claims payment of these
                  services.

         4.       HMO will either pay or deny payment of a complete claim for
                  ambulance services within 45 days of receipt of the claim.

         5.       HMOs will respond to appeals from ambulance companies within
                  the time frame described in Article III. H. Failure will
                  constitute HMO agreement to pay the appealed claim in full.

     E.  24-Hour Coverage

         Provide all emergency contract services and post-stabilization services
         as defined in this Contract 24 hours each day, 7 days a week, either by
         the HMO's own facilities or through arrangements approved by the
         Department with other providers. The HMO shall have one (1) toll-free
         phone number that enrollees or individuals acting on behalf of an
         enrollee can call at any time to obtain authorization for emergency
         transport, emergency, or urgent care. (Authorization here refers to the
         requirements defined in Addendum V, in the Standard Enrollee Handbook
         Language, regarding the conditions under which an enrollee must receive
         permission from the HMO prior to receiving services from a non-HMO
         affiliated provider in order for the HMO to reimburse the provider:
         e.g., for urgent care, for ambulance services for non-emergency care,
         for extended emergency services, and other situations.) This number
         must have access to individuals with authority to authorize treatment
         as appropriate. A response to such call must be provided within 30
         minutes (except that response to ambulance calls shall be within 15
         minutes) or the HMO will be liable for the cost of subsequent care
         related to that illness or injury incident whether treatment is in- or
         out-of-plan and whether the condition is emergency, urgent, or routine.

         The HMO must be able to communicate with a caller in the language
         spoken by the caller or the HMO will be liable for the cost of
         subsequent care related to that illness or injury incident whether
         treatment is in- or out-of-plan and whether the condition is emergency,
         urgent, or routine.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -19-

<PAGE>

         These calls must be logged with time, date and any pertinent
         information related to persons involved, resolution and follow-up
         instructions.

         The HMO shall notify the Department of any changes of this one toll-
         free phone number for emergency calls within 7 working days of change.

     F.  Thirty Day Payment Requirement

         Pay at least 90 percent of adjudicated (clean) claims from
         subcontractors for covered medically necessary services within 30 days
         of receipt of bill, and 99 percent within 90 days and 100% of the
         claims within 180 days of receipt, except to the extent subcontractors
         have agreed to later payment. HMO agrees not to delay payment to
         subcontractors pending subcontractor collection of third party
         liability unless the HMO has an agreement with their subcontractor to
         collect third party liability.

     G.  HMO Claim Retrieval System

         Maintain a claim retrieval system that can on request identify date of
         receipt, action taken on all provider claims (i.e., paid, denied,
         other), and when action was taken. HMO shall date stamp all provider
         claims upon receipt. In addition, maintain a claim retrieval system
         that can identify, within the individual claim, services provided and
         diagnoses of enrollees with nationally accepted coding systems: HCPCS
         including level I CPT codes and level II and level III HCPCS codes with
         modifiers, ICD-9-CM diagnosis and procedure codes, and other national
         code sets such as place of service, type of service, and EOB codes.
         Finally, the claim retrieval system must be capable of identifying the
         provider of services by the appropriate Wisconsin Medicaid provider ID
         number assigned to all in-plan providers. Refer to Article III, section
         AA for use of providers certified by the Medicaid program.

     H.  Appeals to the Department for HMO Payment/Denial of Providers

         Provide the name of the person and/or function at the HMO to whom
         provider appeals should be submitted.

         Provide written notification to providers of HMO payment/denial
         determinations which includes:

         1.    A specific explanation of the payment amount or a specific reason
               for the payment denial.

         2.    A statement regarding the provider's rights and responsibilities
               in appealing to the HMO about the HMO's initial determination by
               submitting a separate letter or form:

               a.     clearly marked "appeal"

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               b.     which contains the provider's name, date of service, date
                      of billing, date of rejection, and reason(s) claim merits
                      reconsideration

               c.     for each appeal

               d.     to the person and/or function at the HMO that handles
                      Provider Appeals within 60 days of the initial denial or
                      partial payment.

         3.    A statement advising the provider of the provider's right to
               appeal to the Department if the HMO fails to respond to the
               appeal within 45 days or if the provider is not satisfied with
               the HMO response to the request for reconsideration, and that
               all appeals to the Department must be submitted in writing within
               60 days of the HMO's final decision.

         4.    Accept written appeals from providers who disagree with the
               HMO's payment/denial determination, if the provider submits the
               dispute in writing and within 60 days of the initial
               payment/denial notice. The HMO has 45 days from the date of
               receipt of the request for reconsideration to respond in writing
               to the provider. If the HMO fails to respond within that time
               frame, or if the provider is not satisfied with the HMO's
               response, the provider may seek a final determination from the
               Department.

         5.    Accept the Department's determinations regarding appeals of
               disputed claims. In cases where there is a dispute about an
               HMO's payment/denial determination and the provider has
               requested a reconsideration by the HMO according to the terms
               described above, the Department will hear appeals and make final
               determinations. These determinations may include the override of
               the HMO's time limit for submission of claims in exceptional
               cases. The Department will not exercise its authority in this
               regard unreasonably. The Department will accept written comments
               from all parties to the dispute prior to making the decision.
               Appeals must be submitted to the Department within 60 days of the
               date of written notification of the HMO's final decision
               resulting from a request for reconsideration. The Department has
               45 days from the date of receipt of all written comments to
               respond to these appeals. HMOs will pay provider(s) within 45
               days of receipt of the Department's final determination.


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         I.       Payments for Diagnosis of Whether an Emergency Condition
                  Exists

                  Pay for appropriate, medically necessary, and reasonable
                  diagnostic tests utilized to determine if an emergency exists.
                  Payment for emergency services continue until the patient is
                  stabilized and can be safely discharged or transferred.

         J.       Memoranda of Understanding for Emergency Services

                  HMOs may have a contract or an MOU with hospitals or urgent
                  care centers within the HMO's service area(s) to ensure prompt
                  and appropriate payment for emergency services. For situations
                  where a contract or MOU is not possible, HMOs must identify
                  for hospitals and urgent care centers procedures that ensure
                  prompt and appropriate payment for emergency services.

                  1.    Such MOUs shall provide for:

                        a.   The process for determining whether an emergency
                             exists.

                        b.   The requirements and procedures for contacting the
                             HMO before the provision of urgent or routine care.

                        c.   Agreements, if any, between the HMO and the
                             provider regarding indemnification, hold harmless,
                             or any other deviation from malpractice or other
                             legal liability which would attach to the HMO or
                             provider in the absence of such an agreement.

                        d.   Payments for appropriate, medically necessary, and
                             reasonable diagnostic tests to determine if an
                             emergency exists.

                        e.   Assurance of timely and appropriate provision of
                             and payment for emergency services.

                  2.    Unless a contract or MOU specifies otherwise, HMOs are
                        liable to the extent that fee-for-service would have
                        been liable for the emergency situation. The Department
                        reserves the right to resolve disputes between HMOs,
                        hospitals and urgent care centers regarding emergency
                        situations based on fee-for-service criteria.

         K.       Provision of Services

                  Provide contract services to Medicaid/BadgerCare enrollees
                  under this Contract in the same manner as those services are
                  provided to other members of the HMO.


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         L.       Open Enrollment

                  Conduct a continuous open enrollment period during which the
                  HMO shall accept recipients eligible for coverage under this
                  Contract in the order in which they are enrolled without
                  regard to health status of the recipient or any other
                  factor(s).

         M.       Pre-Existing Conditions

                  Assume responsibility for all covered medical conditions of
                  each enrollee as of the effective date of coverage under the
                  Contract. The aforementioned responsibility shall not apply in
                  the case of persons hospitalized at the time of initial
                  enrollment, as provided for in this article.

         N.       Hospitalization at the Time of Enrollment or Disenrollment

                  1.    The HMO will not assume financial responsibility for
                        enrollees who are hospitalized at the time of enrollment
                        (effective date of coverage) until an appropriate
                        hospital discharge.

                  2.    The Department will be responsible for paying on a fee-
                        for-service basis all Medicaid covered services for
                        such hospitalized enrollees during hospitalization.

                  3.    Enrollees, including newborn enrollees, who are
                        hospitalized at the time of disenroliment from the HMO
                        shall remain the financial responsibility of the HMO.
                        The financial liability of the HMO shall encompass all
                        contract services. The HMO's financial liability shall
                        continue for the duration of the hospitalization, except
                        where (1) loss of Medicaid/BadgerCare eligibility
                        occurs; (2) disenrollment occurs because there is a
                        voluntary disenrollment from the HMO as a result of one
                        of the conditions in Addendum II, in which case HMO
                        liability shall terminate upon disenrollment being
                        effective; and (3) except where disenrollment is due to
                        medical status change to a code indicating SSI, 503
                        case, or institutionalized eligibility. 503 cases are
                        SSI cases that continue Medicaid eligibility in spite of
                        social security cost of living increases that cause an
                        SSI recipient to lose SSI eligibility. In these three
                        exceptions, the HMO's liability shall not exceed the
                        period for which it is capitated.

                  4.    Discharge from one hospital and admission to another
                        within 24 hours for continued treatment shall not be
                        considered discharge under this section. Discharge is
                        defined here as it is in the UB-92 Manual.



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         O.       Non-Discrimination


                  Comply with all applicable Federal and State laws relating to
                  non-discrimination and equal employment opportunity including
                  s. 16.765, Wis. Stats., Federal Civil Rights Act of 1964,
                  regulations issued pursuant to that Act and the provisions of
                  Federal Executive Order 11246 dated September 26, 1985, and
                  assure physical and program accessibility of all services to
                  persons with physical and sensory disabilities pursuant to
                  Section 504 of the Federal Rehabilitation Act of 1973, as
                  amended (29 U.S.C. 794), all requirements imposed by the
                  applicable Department regulations (45 CFR part 84) and all
                  guidelines and interpretations issued pursuant thereto, and
                  the provisions of the Age Discrimination and Employment Act of
                  1967 and Age Discrimination Act of 1975.

                  Chapter 16.765, Wis. Stats. requires that in connection with
                  the performance of work under this Contract, the Contractor
                  agrees not to discriminate against any employee or applicant
                  for employment because of age, race, religion, color,
                  handicap, sex, physical condition, developmental disability as
                  defined in s. 51.01(5), sexual orientation or national origin.
                  This provision shall include, but not be limited to, the
                  following: employment, upgrading, demotion or transfer;
                  recruitment or recruitment advertising; layoff or termination;
                  rates of pay or other forms of compensation; and selection for
                  training, including apprenticeship. Except with respect to
                  sexual orientation, the Contractor further agrees to take
                  affirmative action to ensure equal employment opportunities.
                  The Contractor agrees to post in conspicuous places, available
                  for employees and applicants for employment, notices to be
                  provided by the contracting officer setting forth the
                  provisions of the non-discrimination clause. Addendum VIII
                  contains further details on the requirements of
                  nondiscrimination.

         With respect to provider participation, reimbursement, or
         indemnification -- HMO will not discriminate against any provider who
         is acting within the scope of the provider's license or certification
         under applicable State law, solely on the basis of such license or
         certification. This shall not be construed to prohibit an HMO from
         including providers to the extent necessary to meet the needs of the
         Medicaid population or from establishing any measure designed to
         maintain quality and control cost consistent with these
         responsibilities.

         P.       Affirmative Action Plan

                  Comply with State Affirmative Action policies. Contracts
                  estimated to be twenty-five thousand dollars ($25,000) or more
                  require the submission of a written affirmation action plan or
                  have a current plan on file with the State of Wisconsin.
                  Contractors with an annual work force of less than twenty-five
                  employees are exempted from this requirement; however, such
                  contractors shall submit a statement to the Division of Health
                  Affirmative Action/Civil Rights

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                  Compliance Office certifying that its work force is less than
                  twenty-five employees.

                  1.    "Affirmative Action Plan" is a written document that
                        details an affirmative action program. Key parts of an
                        affirmative action plan are:

                        a.     a policy statement pledging nondiscrimination and
                               affirmative action in employment;

                        b.     internal and external dissemination of the
                               policy;

                        c.     assignment of a key employee as the equal
                               opportunity officer;

                        d.     a work force analysis that identifies job
                               classification where representation of women,
                               minorities and the disabled is deficient;

                        e.     goals and timetables that are specific and
                               measurable, and that are set to correct
                               deficiencies and to reach a balance of work
                               force;

                        f.     revision of all employment practices to ensure
                               that they do not have discriminatory effects; and

                        g.     establishment of internal monitoring and
                               reporting systems to measure progress regularly.

                  2.    Within fifteen (15) days after the award of a contract,
                        the affirmative action plan shall be submitted to the
                        Department of Health and Family Services Box 7850,
                        Madison, WI 53707-7850. Contractors are encouraged to
                        contact the Department of Health and Family Services,
                        Affirmative Action/Civil Rights Compliance Office at
                        (608) 266-9372 for technical assistance.

                  3.    Addendum VIII contains further details on the
                        requirements of Affirmative Action Plans.

         Q.       Cultural Competency

                  1.    HMO shall address the special health needs of enrollees
                        such as those who are low income or members of specific
                        population groups needing specific culturally competent
                        services. HMO shall incorporate in its policies,
                        administration, and service practice such as (1)
                        recognizing member's beliefs, (2) addressing cultural
                        differences in a competent manner, (3) fostering in
                        staff/providers behaviors and effectively address
                        interpersonal communication styles which respect
                        enrollees' cultural


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                           backgrounds. HMO shall have specific policy
                           statements on these topics and communicate them to
                           subcontractors.

                    2.     HMO shall encourage and foster cultural competency
                           among providers. HMO shall, when appropriate, permit
                           enrollees to choose providers from among the HMO's
                           network based on linguistic/cultural needs. HMO shall
                           permit enrollees to change primary providers based on
                           the provider's ability to provide services in a
                           culturally competent manner. Enrollees may submit
                           grievances to the HMO and/or the Department related
                           to inability to obtain culturally appropriate care,
                           and the Department may, pursuant to such grievance,
                           permit an enrollee to disenroll and enroll into
                           another HMO, or into fee-for-service in a county
                           where HMOs do not enroll all eligibles.

          R.        Health Education and Prevention

                    1.     Inform all enrollees of contributions which they can
                           make to the maintenance of their own health and the
                           proper use of health care services.

                    2.     Have a program of health education and prevention
                           available and within reasonable geographic proximity
                           to its enrollees. The program shall include health
                           education and anticipatory guidance provided as a
                           part of the normal course of office visits, and in
                           discrete programming.

                    3.     The program shall provide:

                           a.      An individual responsible for the
                                   coordination and delivery of services in the
                                   program.

                           b.      Information on how to obtain these services
                                   (locations, hours, phones, etc.).

                           c.      Health-related educational materials in the
                                   form of printed, audiovisual, and/or personal
                                   communication.

                           d.      Information on recommended check-ups and
                                   screenings, and prevention and management of
                                   disease states which affect the general
                                   population. This includes specific
                                   information for persons who have or who are
                                   at risk of developing such health problems
                                   (e.g., hypertension, diabetes, STD, asthma,
                                   breast and cervical cancer, osteoporosis and
                                   postpartum depression).


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                         e.        Health education and prevention programs.
                                   Recommended programs include: injury control,
                                   family planning, teen pregnancy, sexually
                                   transmitted disease prevention, prenatal
                                   care, nutrition, childhood immunization,
                                   substance abuse prevention, child abuse
                                   prevention, parenting skills, stress control,
                                   postpartum depression, exercise, smoking
                                   cessation, weight gain and healthy birth,
                                   postpartum weight loss, and breast-feeding
                                   promotion and support. Note that any
                                   education and prevention programs for family
                                   planning and substance abuse would supplement
                                   the required family planning and substance
                                   abuse health care services covered in the
                                   Medicaid/BadgerCare program.

                         f.        Promotion of the health education and
                                   prevention program, including use of
                                   languages understood by the population
                                   served, and use of facilities accessible to
                                   the population served.

                         g.        Information on and promotion of other
                                   available prevention services offered outside
                                   of the HMO including child nutrition
                                   programs, parenting classes, programs offered
                                   by local health departments and other
                                   programs.

                         h.        Systematic referrals of potentially eligible
                                   women, infants, and children to the Special
                                   Supplemental Nutrition Program for Women,
                                   Infants, and Children (WIC) and relevant
                                   medical information to the WIC program.
                                   General information about recipient
                                   eligibility requirements for the WIC program,
                                   a statewide list of WIC agencies, as well as
                                   a sample WIC Referral Form that can be used
                                   by HMOs, can be found in Addendum XXV.

                    4.   Health related educational materials produced by the
                         HMO must be at a sixth grade reading comprehension
                         level and reflect sensitivity to the diverse cultures
                         served. Also, if the HMO uses material produced by
                         other entities, the HMO must review these materials for
                         grade level comprehension level and for sensitivity to
                         the diverse cultures served. Finally, the HMO must make
                         all reasonable efforts to locate and use culturally
                         appropriate health related material.

          S.        Enrollee Handbook and Education and Outreach for Newly
                    Enrolled Recipients

                    1.   Within one week of initial enrollment notification to
                         the HMO, mail to caseheads an enrollee handbook which
                         is at the "sixth grade reading comprehension level" and
                         which at a minimum will include information about:


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                           a.  the phone number that can be used for assistance
                               in obtaining emergency care or for prior
                               authorization for urgent care;

                           b.  information on contract services offered by the
                               HMO;

                           c.  location of facilities;

                           d.  hours of service;

                           e.  informal and formal grievance procedures,
                               including notification of the enrollee's right to
                               a fair hearing;

                           f.  grievance appeal procedures;

                           g.  HealthCheck;

                           h.  family planning policies;

                           i.  policies on the use of emergency and urgent care
                               facilities;

                           j.  when you may have to pay for care; and

                           k.  changing HMOs.

                  2.       The HMO must provide periodic updates to the handbook
                           as needed explaining changes in the above policies.
                           Such changes must be approved by the Department prior
                           to printing.

                  3.       New standard language for the enrollee handbooks
                           required by this Contract may be included in the
                           handbooks when they are reprinted.

                  4.       Enrollee handbooks (or substitute enrollee
                           information approved by the Department which explains
                           HMO services and how to use the HMO) shall be made
                           available in at least the following languages:
                           Spanish, Lao, and Hmong if the HMO has enrollees who
                           are conversant only in those languages. The handbook
                           should direct enrollees who are not conversant in
                           English to the appropriate resources within the HMO
                           for obtaining a copy of the handbook with the
                           appropriate language.

                  5.       HMOs may create enrollee handbook language that they
                           believe is simpler than the standard language of
                           Addendum V, but this substitute language must be
                           approved by the Department.


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                  6.       Enrollee handbooks shall be submitted by contractors
                           during the Certification Application for review and
                           approval during the pre-contract review stage of the
                           HMO Certification process. The specific dates for
                           submittal of enrollee handbooks are prescribed in the
                           HMO Certification Application.

                  7.       Standard language on several subjects, including
                           HealthCheck, family planning, grievance and appeal
                           rights, conversion rights, and emergency and urgent
                           care shall appear in all handbooks and is included in
                           Addendum V. Any exceptions to the standard must be
                           approved in advance by the Department, and will be
                           approved only for exceptional reasons. Standard
                           language may change during the course of the contract
                           period, if there are changes in federal or state
                           laws, rules or regulations, in which case the new
                           language will have to be inserted into the enrollee
                           handbooks as of the effective date of any such
                           change.

                  8.       In addition to the above requirements sections 1
                           through 7 for the enrollee handbook, HMOs are
                           required to perform other education and outreach
                           activities for newly enrolled recipients. HMOs are to
                           submit to the Department for prior written approval
                           an education and outreach plan targeted towards newly
                           enrolled recipients. This outreach plan will be
                           examined by the Department during pre-contract
                           review. Newly enrolled recipients are those
                           recipients appearing on the enrollment reports
                           described in Article IV. D. and listed as "ADD-NEW."
                           The plan must identify at least 2
                           educational/outreach activities in addition to the
                           enrollee handbook to be undertaken by the HMO for the
                           purpose of informing new enrollees of pertinent
                           information necessary to access services within the
                           HMO network. The plan must include the frequency
                           (i.e., weekly, monthly, etc.) of the activity, the
                           person within the HMO responsible for the activities,
                           and how activities will be documented and evaluated
                           for effectiveness.

         T.       Approval of Marketing Plans and Informing Materials

                  1.       Submit to Department for prior written approval a
                           marketing plan and all marketing materials and other
                           marketing activities that refer to Medicaid Title
                           XIX, BadgerCare, or Title XXI or are intended for
                           Medicaid/BadgerCare recipients. This requirement
                           includes marketing or informing materials that are
                           produced by providers under subcontract to the HMO or
                           owned by the HMO in whole or in part. The Department
                           will not approve any materials which are deemed to be
                           confusing, fraudulent, misleading, or do not
                           accurately reflect the scope and philosophy of the
                           Medicaid program and/or its covered benefits.


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                  2.   The Department will review and either approve, approve
                       with modifications, or deny all informing material within
                       ten working days of receipt of the informing materials.
                       Time-sensitive material must be clearly marked by the
                       HMO and will be approved, approved with modifications or
                       denied by the Department within ten business days. The
                       Department reserves the right to determine whether the
                       material is, indeed, time-sensitive. HMO agrees to engage
                       only in marketing activities and distribute only those
                       marketing materials that are preapproved in writing,
                       except that marketing materials and other marketing
                       activities are deemed approved if there is no response
                       from the Department within 10 working days. However,
                       problems and errors subsequently identified by the
                       Department must be corrected by the HMO when they are
                       identified. HMO agrees to comply with in. 6.07 and
                       3.27, Wis. Admin. Code, and practices consistent with the
                       Balanced Budget Amendment of 1997 P.L. 105-33 Sec.
                       4707(a) [42 U.S.C. 1396v(d)(2)].

                  3.   As used in this section, "marketing materials and other
                       marketing activities" include the production and
                       dissemination of any promotional material by any medium,
                       including but not limited to community events, print
                       media, radio, television, billboards, Yellow Pages, and
                       advertisements that refer to Medicaid, BadgerCare, Title
                       XIX, or Title XXI are intended for Medicaid/BadgerCare
                       recipients. The Department in its sole discretion will
                       determine whether the marketing materials and/or other
                       marketing activities refer to Medicaid, BadgerCare, Title
                       XIX, or Title XXI are intended for Medicaid/BadgerCare
                       recipients.

                  4.   Approval of marketing plans and materials will be
                       reviewed by the Department in a manner that does not
                       unduly restrict or inhibit the HMO's marketing plans.
                       When applying this provision to specific marketing plans,
                       material and/or activity, the entire content and use of
                       the marketing material or activity shall be taken into
                       consideration.


                  5.   HMOs that fail to abide by these marketing requirements
                       may be subject to any and all sanctions available under
                       Article IX. In determining any sanctions, the Department
                       will take into consideration any past unfair marketing
                       practices, the nature of the current problem and the
                       specific implications on the health and well-being of the
                       Medicaid enrollees. In the event that an HMO's affiliated
                       provider fails to abide by these requirements, the
                       Department will evaluate whether the HMO should have had
                       knowledge of the marketing issue and the HMO's ability to
                       adequately monitor ongoing future marketing activities of
                       the subcontractor(s).


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         Note:    This section has been incorporated in Addendum I.


         U.       Conversion Privileges

                  Offer any enrollee covered under this Contract, whose
                  enrollment is subsequently terminated due to loss of
                  Medicaid/BadgerCare eligibility, the opportunity to convert to
                  a private enrollment contract without underwriting. This time
                  period for conversion following Medicaid/BadgerCare
                  termination notice will comply with Wisconsin Stats. 632.897
                  regarding conversion rights.

         V.       Choice of Health Professional

                  Offer each enrollee covered under this Contract the
                  opportunity to choose a primary health care professional
                  affiliated with the HMO, to the extent possible and
                  appropriate. If the HMO assigns recipients to primary
                  physicians, then the HMO shall notify recipients of the
                  assignment. HMOs must permit Medicaid BadgerCare enrollees to
                  change primary providers at least twice in any calendar year,
                  and to change primary providers more often than that for just
                  cause, just cause being defined as lack of access to quality,
                  culturally appropriate, health care. Such just cause will be
                  handled as a formal grievance. If the HMO has reason to
                  lock-in an enrollee to one primary provider and/or pharmacy in
                  cases of difficult case management. the HMO must submit a
                  written request in advance of such lock-in to the Department.
                  Requests should be submitted to the Contract Monitor.
                  Culturally appropriate care in this section means care by a
                  provider who can relate to the enrollee and who can provide
                  care with sensitivity, understanding, and respect for the
                  enrollee's culture.

         W.       Quality Assessment/Performance Improvement (QAPI)

                  1.       The HMO QAPI program must conform to requirements of
                           42 CFR, Part 400, Medicaid Managed Care Requirements,
                           Subpart E, Quality Assessment and Performance
                           Improvement. The program must also comply with 42
                           Code of Federal Regulations (CFR) 434.34 which states
                           that the HMO must have a Quality
                           Assessment/Performance Improvement system that:

                           a.       Is consistent with the utilization control
                                    requirement of 42 CFR 456;

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

                           c.       Provides for systematic data collection of
                                    performance and patient results:

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                                      -31-

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                           d.       Provides for interpretation of this data to
                                    the practitioners; and

                           e.       Provides for making needed changes.

                  2.       Quality Assessment/Performance Improvement Program

                           a.       The HMO must have a comprehensive Quality
                                    Assessment/Improvement Program (QAPI)
                                    program that protects, maintains, and
                                    improves the quality of care provided to
                                    Wisconsin Medicaid program recipients. The
                                    HMO must evaluate the overall effectiveness
                                    of its QAPI program annually to determine
                                    whether the program has demonstrated
                                    improvement, where needed, in the quality of
                                    care and service provided to its Medicaid
                                    BadgerCare population.

                                    The HMO must have documentation of all
                                    aspects of the QAPI program available for
                                    Department review upon request. The
                                    Department may perform off-site and on-site
                                    Quality Assessment/Performance Improvement
                                    audits to ensure that the HMO is in
                                    compliance with contract requirements. The
                                    review and audit may include: on-site
                                    visits; staff and enrollee interviews;
                                    medical record reviews; review of all QAPI
                                    procedures, reports, committee activities,
                                    including credentialing activities,
                                    corrective actions and follow-up plans; peer
                                    review process; review of the results of the
                                    member satisfaction surveys, and review of
                                    staff and provider qualifications.

                           b.       The HMO must have a written QAPI work plan
                                    that is ratified by the board of directors
                                    and outlines the scope of activity and the
                                    goals, objectives, and time lines for the
                                    QAPI program. New goals and objectives must
                                    be set annually based on findings from
                                    quality improvement activities and studies.

                           c.       The HMO governing body is ultimately
                                    accountable to the Department for the
                                    quality of care provided to HMO enrollees.
                                    Oversight responsibilities of the governing
                                    body are: approval of the overall QAPI
                                    program and an annual QAPI plan: designating
                                    an accountable entity or entities within the
                                    organization to provide oversight of QAPI:
                                    review of written reports from the
                                    designated entity on a periodic basis which
                                    include a description of QAPI activities,
                                    progress on objectives, and improvements
                                    made: formal review on an annual basis of a
                                    written report on the QAPI program; and
                                    directing modifications to the QAPI program
                                    on an ongoing basis to accommodate review
                                    findings and issues of concern within the
                                    HMO.


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               d.       The QAPI committee shall be in an organizational
                        location within the HMO such that it can be responsible
                        for all aspects of the QAPI program. The committee
                        membership must be interdisciplinary and be made up of
                        both providers and administrative staff of the HMO,
                        including:

                        1)       a variety of health professions (e.g.,
                                 pharmacy, physical therapy, nursing, etc.);

                        2)       qualified professionals specializing in mental
                                 health or substance abuse and dental care on a
                                 consulting basis when an issue related to these
                                 areas arises:

                        3)       a variety of medical disciplines (e.g..
                                 medicine, surgery, radiology, etc.);

                        4)       OB/GYN and pediatric representation; and

                        5)       HMO management or governing body.

                        6)       Enrollees of the HMO must be able to contribute
                                 input to the QAPI Committee. The HMO must have
                                 a system to receive enrollee input on quality
                                 improvement, document the input received,
                                 document the HMO's response to the input,
                                 including a description of any changes or
                                 studies it implemented as the result of the
                                 input and document feedback to enrollees in
                                 response to input received. The HMO response
                                 must be timely.

               e.       The committee must meet on a regular basis, but not less
                        frequently than quarterly. The activities of the QAPI
                        Committee must be documented in the form of minutes and
                        reports. The QAPI Committee must be accountable to the
                        governing body.

                        Documentation of Committee minutes and activities must
                        be available to the Department upon request.

               f.       QAPI activities of HMO providers and subcontractors, if
                        separate from HMO QAPI activities, shall be integrated
                        into the overall HMO/QAPI program. Requirements to
                        participate in QAPI activities are incorporated into all
                        provider and subcontractor contracts and employment
                        agreements. The HMO QAPI program shall provide feedback
                        to the providers/subcontractors regarding the
                        integration of, operation of, and corrective actions
                        necessary in provider/subcontractor QAPI efforts.


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                        Other management activities (Utilization Management,
                        Risk Management, Complaints and Grievances, etc.) must
                        be integrated with the QAPI program. Physicians and
                        other health care practitioners and institutional
                        providers must actively cooperate and participate in the
                        HMO's quality activities.

                        The HMO remains accountable for all QAPI functions, even
                        if certain functions are delegated to other entities. If
                        the HMO delegates any activities to contractors the
                        conditions listed in Article 11 of this agreement must
                        be met.

               g.       There is evidence that HMO management representatives
                        and providers participate in the development and
                        implementation of the QAPI plan of the HMO. This
                        provision shall not be construed to require that HMO
                        management representatives and providers participate in
                        every committee or subcommittee of the QAPI program.

               h.       The HMO must designate a senior executive to be
                        responsible for the operation and success of the QAPI
                        program. If this individual is not the HMO Medical
                        Director, the Medical Director must have substantial
                        involvement in the QAPI program. The designated
                        individual shall be accountable for the QAPI activities
                        of the HMO"s own providers, as well as the HMO's
                        subcontracted providers.

               i        The qualifications, staffing level and available
                        resources must be sufficient to meet the goals and
                        objectives of the QAPI program and related QAPI
                        activities. Such activities include, but are not limited
                        to, monitoring and evaluation of important aspects of
                        care and services, facilitating appropriate use of
                        preventive services, monitoring provider performance,
                        provider credentialing, involving members in QAPI
                        initiatives and conducting performance improvement
                        projects in identified priority areas.

                        Written documentation listing the staffing resources
                        that are directly under the organizational control of
                        the person who is responsible for QAPI (including total
                        FTEs, percent of time dedicated to QAPI, background and
                        experience, and role) must be available to the
                        Department upon request.




HMO Contract for January 1, 2000 - December 31, 2001

                                      -34-

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                  3.       Monitoring and Evaluation

                           a.       The QAPI program must monitor and evaluate
                                    the quality of clinical care on an ongoing
                                    basis. Important aspects of care (i.e.,
                                    acute, chronic conditions, high volume, high
                                    risk preventive care and services) are
                                    studied and prioritized for performance
                                    improvement and/or development of practice
                                    guidelines. Standardized quality indicators
                                    must be used to asses improvement, assure
                                    achievement of minimum performance levels,
                                    monitor adherence to guidelines, and
                                    identify patterns of over utilization and
                                    under utilization. The measurement of
                                    quality indicators must be supported by
                                    appropriate data collection methodologies
                                    and must be used to analyze and improve
                                    clinical care and services.

                           b.       Provider performance must be measured
                                    against practice guidelines and standards
                                    adopted by the QAPI Committee. Areas
                                    identified for improvement must be tracked
                                    and corrective actions taken when warranted.
                                    The effectiveness of corrective actions must
                                    be monitored until problem resolution
                                    occurs. Reevaluation must occur to assure
                                    that the improvement is sustained.

                           c.       The HMO must use appropriate clinicians to
                                    evaluate the data on clinical performance,
                                    and multi disciplinary teams to analyze and
                                    address data on systems issues.

                           d.       The HMO must also monitor and evaluate care
                                    and services in certain priority clinical
                                    and non-clinical areas of interest specified
                                    by the Department.

                           e.       The HMO must make documentation available to
                                    the Department upon request regarding
                                    quality improvement and assessment studies
                                    on plan performance, which relate to the
                                    enrolled population. See reporting
                                    requirements in Article III. W. Section 13,
                                    Priority Areas.

                           f.       Practice guidelines: The HMO must develop or
                                    adopt practice guidelines that are
                                    disseminated to providers and to enrollees
                                    as appropriate or upon request. The
                                    guidelines should be based on reasonable
                                    medical evidence or consensus of health
                                    professionals; consider the needs of the
                                    enrollees; developed or adopted in
                                    consultation with the contracting health
                                    professionals, and reviewed and updated
                                    periodically.



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                                      -35-

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               4.   Access

                    a.   The HMO must provide medical care to its
                         Medicaid/BadgerCare enrollees that is as accessible to
                         them, in terms of timeliness, amount, duration, and
                         scope, as those services are to nonenrolled
                         Medicaid/BadgerCare recipients within the area served
                         by the HMO.

                         The HMO must have a Medicaid certified primary care
                         provider within a 20 mile distance from any enrollee
                         residing in the HMO service area. A service area for an
                         HMO will be specified down to the zip code. Therefore,
                         all portions of each zip code in the HMO service area
                         must be within 20 miles from a Medicaid certified
                         primary care provider.

                    b.   Network Adequacy:

                         The HMO must assure that its delivery network is
                         sufficient to provide adequate access to all services
                         covered under this agreement. In establishing the
                         network, the HMO must consider:

                         1)   The anticipated enrollment with particular
                              attention to pregnant women and children:

                         2)   The expected utilization of services, considering
                              enrollee characteristics and health care needs.

                         3)   The number and types of providers required to
                              furnish the contracted services.

                         4)   The number of network providers not accepting new
                              patients.

                         5)   The geographic location of providers and
                              enrollees, distance, travel time, normal means of
                              transportation used by enrollees and whether
                              provider locations are accessible to enrollees
                              with disabilities.

                         This access standard does not prevent a recipient from
                         choosing and HMO when the recipient resides in zip code
                         that does not meet the 20 mile distance standard.
                         However, the recipient will not be automatically
                         assigned to that HMO. If by some circumstance the
                         recipient has been assigned to the HMO or has chosen
                         the HMO and becomes dissatisfied with access to medical
                         care, the recipient will be allowed to disenroll from
                         the HMO for reason of distance.

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<PAGE>

                         Primary care providers are defined to include, but are
                         not limited to, Physicians and Physician Clinics with
                         specialties in general practice, family practice,
                         internal medicine, obstetrics and gynecology,
                         adolescent medicine and pediatrics, FQHCs, RHCs, Nurse
                         Practitioners, Nurse Midwives, Physician Assistants,
                         and Tribal Health Centers. HMOs may define other types
                         of providers as primary care providers. If they do so,
                         the HMOs must define these other types of primary care
                         providers and justify their inclusion as primary care
                         providers during the precontract review phase of the
                         HMO Certification process.

                    c.   The HMO must have written protocols to ensure that
                         enrollees have access to screening, diagnosis and
                         referral, and appropriate treatment for those
                         conditions and services covered under the Wisconsin
                         Medicaid program.

                    d.   The HMO must also provide medically necessary high risk
                         prenatal care within two weeks of the enrollee's
                         request for an appointment, or within three weeks if
                         the request is for a specific HMO provider.

                    e.   The HMO must have written standards for the
                         accessibility of care and services which are
                         communicated to providers and monitored. The standards
                         must include the following: waiting times for care at
                         facilities; waiting times for appointments; specify
                         that providers' hours of operation do not discriminate
                         against Medicaid/ BadgerCare enrollees; and whether or
                         not provider(s) speak member's language. The HMO must
                         take corrective action if its standards are not met.

                    f.   The HMO must have a mental health or substance abuse
                         provider within a 35 mile distance from any enrollee
                         residing in the HMO service area or no further than the
                         distance for non-enrolled recipients residing in the
                         service area.

                    g.   The HMO must have a dental provider, when appropriate,
                         within a 35 mile distance from any enrollee residing in
                         the HMO service area or no further than the distance
                         for non-enrolled recipients residing in the service
                         area. The HMO must also give consideration to whether
                         the dentist is accepting new patients, and where full
                         or part-time coverage is available.

HMO Contract for January 1, 2000 - December 31, 2001

                                      -37-

<PAGE>

               5.   Health Promotion and Prevention Services

                    a.   The HMO must identify at-risk populations for
                         preventive services and develop strategies for reaching
                         Medicaid/ BadgerCare members included in this
                         population. Local health departments and community-
                         based health organizations can provide the HMO with
                         special access to vulnerable and low-income population
                         groups, as well as settings that reach at-risk
                         individuals in their communities, schools and homes.
                         Public health resources can be used to enhance the
                         HMO's health promotion and preventive care programs.

                    b.   The HMO must have mechanisms for facilitating
                         appropriate use of preventive services and educating
                         enrollees on health promotion. At a minimum, an
                         effective health promotion and prevention program
                         includes: tracking of preventive services, practice
                         guidelines for preventive services, yearly measurement
                         of performance in the delivery of such services, and
                         communication of this information to providers and
                         enrollees.

               6.   Provider Selection (credentialing) and Periodic Evaluation
                    (recredentialing)

                    a.   The HMO must have written policies and procedures for
                         provider selection and qualifications. For each
                         practitioner, including each member of a contracting
                         group that provides services to the HMO's enrollees,
                         initial credentialing must be based on a written
                         application, primary source verification of licensure,
                         disciplinary status, eligibility for payment under
                         Medicaid and certified for Medicaid. The HMO must
                         periodically monitor (no less than every two years)
                         the provider's documented qualifications to assure that
                         the provider still meets the HMO's specific
                         professional requirements.

                    b.   The HMO must periodically monitor (no less than every
                         two years) the provider's documented qualifications to
                         assure that the provider still meets the HMO's specific
                         professional requirements.

                    c.   The HMO must also have a mechanism for considering the
                         provider's performance. The method must include
                         updating all the information (except medical education)
                         utilized in the initial credentialing process.
                         Performance evaluation must include information from:
                         the QAPI system, reviewing enrollee complaints and
                         enrollee satisfaction surveys, and the utilization
                         management system.

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                                      -38-

<PAGE>

                    d.   The selection process must not discriminate against
                         providers such as those serving high-risk populations,
                         or specialize in conditions that require costly
                         treatment. The HMO must have a process for receiving
                         advice on the selection criteria for credentialing and
                         recredentialing practitioners in the HMO's network.

                    e.   If the HMO delegates selection of providers to another
                         entity, the organization retains the right to approve,
                         suspend or terminate any provider selected by that
                         entity.

                    f.   The HMO must have a formal process of peer review of
                         care delivered by providers and active participation of
                         the HMO's contracted providers in the peer review
                         process. This process may include internal medical
                         audits, medical evaluation studies, peer review
                         committees, evaluation of outcomes of care, and systems
                         for correcting deficiencies. The HMO must supply
                         documentation of its peer review process upon request.

                    g.   The HMO must have written policies that allow it to
                         suspend or terminate any provider for quality
                         deficiencies. There must also be an appeals process
                         available to the provider that conforms to the
                         requirements of the HealthCare Quality Improvement Act
                         of 1986 (42 USC (S)11101 etc. Seq.).

                    h.   In addition to the requirements in this section, the
                         names of individual practitioners and institutional
                         providers who have been terminated from the HMO
                         provider network as a result of quality issues must be
                         immediately forwarded to the Department and reported to
                         other entities as required by law (42 USC (S)11101 et.
                         Seq.).

                    i.   Institutional Provider Selection--For each provider,
                         other than an individual practitioner, the HMO
                         determines, and verifies at specified intervals, that
                         the provider is:

                         1)   licensed to operate in the State, if licensure is
                              required, and in compliance with any other
                              applicable State or Federal requirements; and

HMO Contract for January 1, 2000 - December 31, 2001

                                      -39-

<PAGE>

                                    2)      the HMO verifies that the provider
                                            is reviewed and approved by an
                                            approved accrediting body (if the
                                            provider claims accreditation), or
                                            is determined by the HMO to meet
                                            standards established by the HMO
                                            itself.

                  7.       Enrollee Feedback on Quality Improvement

                           a.      The HMO must have a process to maintain a
                                   relationship with its enrollees that promotes
                                   two way communication and contributes to
                                   quality of care and service. The HMO must
                                   show a commitment to treating members with
                                   respect and dignity.

                           b.      Annually, the HMO must conduct an internal
                                   satisfaction of care survey of a
                                   representative sample of enrolled Medicaid!
                                   BadgerCare recipients. The survey must be
                                   designed to identify potential problems and
                                   barriers to care, and should cover, at a
                                   minimum, the following three areas:

                                   1)   care process - attention received as a
                                        patient (i.e.. provider sensitivity);

                                   2)   structure or delivery of care - assess
                                        impediments to care such as waiting
                                        times, choice of provider, physical
                                        accessibility; and

                                   3)   perceived quality of care - thoroughness
                                        of exams and results or health status
                                        outcomes.

                                   The Department must approve the survey
                                   instrument and plan. The HMO shall have
                                   systems in place for acting on survey results
                                   and shall report to the Department the survey
                                   results and any quality management projects
                                   planned in response to survey results.

                           c.      The HMO is encouraged to find additional ways
                                   to involve Medicaid/BadgerCare enrollees in
                                   quality improvement initiatives and in
                                   soliciting enrollee feedback on the quality
                                   of care and services the HMO provides. Other
                                   ways to bring enrollees into the HMO's
                                   efforts to improve the health care delivery
                                   system include but are not limited to: focus
                                   groups, consumer advisory councils, enrollee
                                   participation on the governing board, the
                                   QAPI committees or other committees, or task
                                   forces related to evaluating services. All
                                   efforts to solicit feedback from enrollees
                                   must be approved by the Department.



HMO Contract for January 1, 2000 - December 31, 2001

                                      -40-

<PAGE>

                       8.  Medical Records


                           a.    The HMO must have policies and procedures for
                                 participating provider medical records content
                                 and documentation that have been communicated
                                 to providers and a process for evaluating its
                                 providers' medical records based on the HMO's
                                 policies. These policies must address patient
                                 confidentiality, organization and completeness,
                                 tracking, and important aspects of
                                 documentation such as accuracy, legibility, and
                                 safeguards against loss, destruction, or
                                 unauthorized use. The HMO must also have
                                 confidentiality policies and procedures that
                                 are applicable to administrative functions that
                                 are concerned with confidential patient
                                 information.

                           b.    Patient medical records must be maintained in
                                 an organized manner (by the HMO, and/or by the
                                 HMO's subcontractors) that permits effective
                                 patient care, they must reflect all aspects of
                                 patient care and be readily available for
                                 patient encounters, for administrative
                                 purposes, and for Department review.

                           c.    Because HMOs are considered contractors of the
                                 State and are therefore (only for the limited
                                 purpose of obtaining medical records of its
                                 enrollees) entitled to obtain medical records
                                 according to Wisconsin Administrative Code, HFS
                                 104.01(3), the Department will require
                                 Medicaid-certified providers to release
                                 relevant record to the HMO to assist in
                                 compliance with this section. Where HMOs have
                                 not specifically addressed photocopying
                                 expenses in their provider contracts or other
                                 arrangements, the HMOs are liable for charges
                                 for copying records only to the extent that the
                                 Department would reimburse on a fee-for-service
                                 basis.

                           d.    The HMO must have written confidentiality
                                 policies and procedures in regard to
                                 confidential patient information. Policies
                                 and procedures must be communicated to HMO
                                 staff, members, and providers. The transfer
                                 of medical records to out-of-plan providers
                                 or other agencies not affiliated with HMO
                                 (except for the Department) are contingent
                                 upon the receipt by the HMO of written
                                 authorization to release such records signed
                                 by the enrollee or, in the case of a minor,
                                 by the enrollee's parent, guardian. or
                                 authorized representative.



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                                      -41-

<PAGE>

                           e.    The HMO must have written quality standards
                                 and performance goals for participating
                                 provider medical record documentation and be
                                 able to demonstrate, upon request of the
                                 DHFS, that the standards and goals have been
                                 communicated to providers. The HMO must
                                 actively monitor established standards and
                                 provide documentation of standards and goals
                                 upon request of the Department.

                           f.    Medical records must be readily available
                                 for HMO-wide Quality Assessment/Performance
                                 Improvement (QAPI) and Utilization
                                 Management (UM) activities and provide
                                 adequate medical and other clinical data
                                 required for (QAPI)/UM, and Department use.

                           g.    The HMO must have adequate policies in regard
                                 to transfer of medical records to ensure
                                 continuity of care when enrollees are treated
                                 by more than one provider. This may include
                                 transfer to local health departments subject to
                                 the receipt of a signed authorization form as
                                 specified in Article III. W. 8 (d) above (with
                                 the exception of immunization status
                                 information described in Article III. B. 14.,
                                 which doesn't require enrollee authorization).

                           h.    Requests for completion of residual functional
                                 capacity evaluation forms and other impairment
                                 assessments, such as queries as to the presence
                                 of a listed impairment, shall be provided
                                 within 10 working days of request (at the
                                 discretion of the individual provider and
                                 subject to the provider's medical opinion of
                                 its appropriateness) and according to the other
                                 requirements listed above; the HMO and its
                                 providers and subcontractor may charge the
                                 enrollee, authorized representative, or other
                                 third party a reasonable rate for the
                                 completion of such forms and other impairment
                                 assessments. Such rates may be reviev~ed by the
                                 Department for reasonableness and may be
                                 modified based on this review.

                           i.    Minimum medical record documentation per chart
                                 entry or encounter must conform to the
                                 Wisconsin Administrative Code, Chapter HFS
                                 106.02. (9)(b) Medical record content.


HMO Contract for January 1, 2000 - December 31, 2001

                                      -42-

<PAGE>

                  9.       Utilization Management (UM)


                           a.       The HMO must have documented policies and
                                    procedures for all UM activities that
                                    involve determining medical necessity, and
                                    the approval or denial of medical services.
                                    Qualified medical professionals must be
                                    involved in any decision-making that
                                    requires clinical judgment. Criteria used to
                                    determine medical necessity and
                                    appropriateness must be communicated to
                                    providers.

                           b.       If the HMO delegates any part of the TIM
                                    program to a third party, the delegation
                                    must meet the requirements in Article II
                                    Delegations of Authority.

                           c.       If the HMO utilizes phone triage, nurse
                                    lines or other demand management systems,
                                    the HMO must document review and approval of
                                    qualification criteria of staff and of
                                    clinical protocols or guidelines used in the
                                    system. The system's performance will be
                                    evaluated annually in terms of clinical
                                    appropriateness.

                           d.       The policies specify time frames for
                                    responding to requests for initial and
                                    continued service determinations, specify
                                    information required for authorization
                                    decisions, provide for consultation with the
                                    requesting provider when appropriate, and
                                    provide for expedited responses to requests
                                    for authorization of urgently needed
                                    services, In addition, the HMO must have in
                                    effect mechanisms to ensure consistent
                                    application of review criteria for
                                    authorization decisions (interrater
                                    reliability).

                                    Within the timeframes specified above, the
                                    HMO must give the enrollee and the
                                    requesting provider written notice of:

                                    1)    the decision to deny, limit, reduce,
                                          delay or terminate a service along
                                          with the reasons for the decision.

                                    2)    the enrollee's right to file a
                                          grievance or request a state fair
                                          hearing.

                                    Authorization decisions must be made within
                                    the following time frames and in all cases
                                    as expeditiously as the enrollee's condition
                                    requires:

                                    1)    within 14 days of the receipt of the
                                          request, or


HMO Contract for January 1, 2000 - December 31, 2001

                                      -43-

<PAGE>

                              2)   within 72 hours if the physician indicates or
                                   the HMO determines that following the
                                   ordinary time frame could jeopardize the
                                   enrollee's health or ability to regain
                                   maximum function.

                              One extension of up to 14 days may be allowed if
                              the enrollee requests it or if the HMO justifies
                              the need for more information.

                         e.   Criteria for decisions on coverage and medical
                              necessity are clearly documented, are based on
                              reasonable medical evidence, current standards of
                              medical practice, or a consensus of relevant
                              health care professionals, and are regularly
                              updated.

                         f.   The HMO oversees and is accountable for any
                              functions and responsibilities that it delegates
                              to any subcontractor. (See Article II Delegations
                              of Authority).

                         g.   Postpartum discharge policy for mothers and
                              infants must be based on medical necessity
                              determinations. This policy must include all
                              follow-up tests and treatments consistent with
                              currently accepted medical practice and applicable
                              federal law. The policy must allow at least a 48-
                              hour hospital stay for normal spontaneous vaginal
                              delivery, and 96 hours for a cesarean section
                              delivery, unless a shorter stay is agreed to by
                              both the physician and the enrollee. HMOs may not
                              deny coverage, penalize providers, or give
                              incentives or payments to providers or enrollees.
                              Post hospitalization follow-up care must be based
                              on the medical needs and circumstances of the
                              mother and infant. The Department may request
                              documentation demonstrating compliance with this
                              requirement.

                    10.  External Quality Review Contractor

                         a.   The HMO must assist the Department and the
                              external quality review organization under
                              contract with the Department in identification of
                              provider and enrollee information required to
                              carry out on-site or off-site medical chart
                              reviews. This includes arranging orientation
                              meetings for physician office staff concerning
                              medical chart review, and encouraging attendance
                              at these meetings by HMO and physician office
                              staff as necessary. The provider of service may
                              elect to have charts reviewed on-site or off-site.

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                                      -44-

<PAGE>

                         b.   When the professional review organization under
                              contract with the Department identifies an adverse
                              health situation in which follow-up is needed to
                              determine whether appropriate care was provided,
                              the HMO will be responsible for the following
                              tasks:

                              1)   Assign a staff person(s) to conduct follow-up
                                   with the provider(s) concerning each adverse
                                   health situation identified by the
                                   Department's professional review
                                   organization, including informing the
                                   provider(s) of the QAPI finding and
                                   monitoring the provider's resolution of the
                                   QI finding;

                              2)   Inform the HMO's QAPI Committee of the final
                                   QAPI finding and involve the QAPI Committee
                                   in the development, monitoring and resolution
                                   of the corrective action plan; and

                              3)   Submit a corrective action plan or an opinion
                                   in writing to the Department within 60 days
                                   that addresses the measures that the HMO and
                                   the provider intend to take to resolve the
                                   QAPI finding. The HMO's final resolution of
                                   all cases must be completed within six (6)
                                   months of HMO notification. A case is not
                                   considered resolved by the Department until
                                   the Department approves the response provided
                                   by the HMO and provider.

                         c.   The HMO will facilitate training provided by the
                              Department to its providers.

                    11.  Dental Services Quality Improvement

                         a.   The HMO QAPI Committee and QAPI coordinator will
                              review subcontracted dental programs quarterly to
                              assure that quality dental care is provided and
                              that the HMO and the contractor comply with the
                              following:

                              1)   The HMO or HMO affiliated dental provider
                                   must advise the enrollee within 30 days of
                                   effective enrollment of the name of the
                                   dental provider and the address of the dental
                                   provider's site. The HMO or HMO affiliated
                                   dental provider must also inform the enrollee
                                   in writing how to contact his/her dentist (or
                                   dental office), what dental services are
                                   covered, when the coverage is effective, and
                                   how to appeal denied services.

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                                      -45-

<PAGE>

                              2)   An HMO or HMO affiliated dental provider who
                                   assigns all or some Medicaid/BadgerCare HMO
                                   enrollees to specific participating dentists
                                   must give enrollees at least 30 days after
                                   assignment to choose another dentist.
                                   Thereafter, in accordance with Article III.
                                   V., the HMO and/or affiliated provider must
                                   permit enrollees to change dentists at least
                                   twice in any calendar year and more often
                                   than that for just cause.

                              3)   HMO-affiliated dentists must provide a
                                   routine dental appointment to an assigned
                                   enrollee within 90 days after the request.
                                   Enrollee requests for emergency treatment
                                   must be addressed within 24 hours after the
                                   request is received.

                              4)   Dental providers must maintain adequate
                                   records of services provided. Records must
                                   fully disclose the nature and extent of each
                                   procedure performed and should be maintained
                                   in a manner consistent with standard dental
                                   practice.

                              5)   The HMO affirms by execution of this Contract
                                   that the HMO's peer review systems are
                                   consistently applied to all dental
                                   subcontractors and providers.

                              6)   The HMO must document, evaluate, resolve, and
                                   follow up on all verbal and written
                                   complaints they receive from
                                   Medicaid/BadgerCare enrollees related to
                                   dental services.

                    12.  Accreditation

                         a.   The Department encourages the HMO to actively
                              pursue accreditation by the National Committee for
                              Quality Assurance (NCQA), the Joint Commission on
                              Accreditation of Healthcare Organizations (JCAHO)
                              or other recognized accrediting body approved by
                              the Department.

                         b.   The achievement of full accreditation by one of
                              the above organizations by the HMO may result in:
                              reduction of on-site internal Quality Improvement
                              program audits; fewer requests for periodic
                              documentation to determine compliance with
                              contract requirements: and fewer medical record
                              reviews.

                         Where accreditation standards conflict with the
                         standard set forth in this agreement, the agreement
                         prevails unless the accreditation standard is more
                         stringent.

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                                      -46-

<PAGE>

               13.  Performance Improvement Priority Areas

                    a.   The HMO must develop and ensure implementation of
                         program initiatives to address the specific clinical
                         needs that have a higher prevalence in the HMO's
                         enrolled population served under this agreement. These
                         priority areas must include clinical and non-clinical
                         Performance Improvement projects. The Department
                         strongly advocates the development of collaborative
                         relationships among HMOs, Local Health Departments,
                         community based behavioral health treatment agencies
                         (both public and private), and other community health
                         organizations to achieve improved services in priority
                         areas. Linkages between managed care organizations and
                         public health agencies is an essential element for the
                         achievement of the public health objectives,
                         potentially reducing the quantity and intensity of
                         services the HMO needs to provide. The Department and
                         the HMO are jointly committed to on-going collaboration
                         in the area of service and clinical care improvements
                         by the development and sharing of "best practices."

                         Annually, for the priority areas specified by the
                         Department and listed below, the HMO must monitor and
                         evaluate the quality of care and services through
                         performance improvement projects for at least two of
                         the listed areas in Article III, W. 13 (c) or (d)
                         below, or an HMO may propose alternative performance
                         improvement topics to be addressed by making a request
                         in writing to the Department. The final or on-going
                         status report for each project must be submitted by
                         October 1, 2000, and October 1, 2001. The performance
                         improvement topic must take into account: the
                         prevalence of a condition among. or need for a specific
                         service by, the HMO enrollees served under this
                         agreement, enrollee demographic characteristics and
                         health risks; and the interest of consumers or
                         purchasers in the aspect of care or services to be
                         addressed. The final annual report must include an
                         overview of the performance improvement project that
                         addresses all of the information in the Performance
                         Improvement Project Outline in Addendum XV.

                    b.   Performance reporting will utilize standardized
                         indicators appropriate to the performance improvement
                         area. Minimum performance levels must be specified for
                         each performance improvement area, using normative
                         standards derived from regional, national norms, or
                         from norms established by an appropriate practice
                         organization. Goals for improvement for the "Priority
                         Areas" listed in c. of this section, may be set by the
                         organization itself.

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                    The organization must assure that improvements are sustained
                    through periodic audits of relevant data and maintenance of
                    the interventions that resulted in the improvement. The HMO
                    agrees to open at least one new performance improvement
                    project in 2001 with the report on that project to be
                    submitted to the Department by October 1, 2002. In all
                    cases, not less than two performance improvement projects
                    must be reported to the Department in any year and not less
                    than three different projects must be reported to the
                    Department between 2000 and 2002.

                    The organization must implement a performance improvement
                    project in the area if a quality improvement opportunity is
                    identified. The HMO must report to the Department on each
                    study, including those areas where the HMO will not pursue a
                    performance improvement project.

               c.   Clinical Priority Areas: 1) prenatal services; 2)
                    identification of adequate treatment for high-risk
                    pregnancies, including those involving substance abuse; 3)
                    evaluating the need for specialty services; 4) availability
                    of comprehensive, ongoing nutrition education, counseling,
                    and assessments; 5) Family Health Improvement Initiative:
                    Smoking Cessation; 6) children with special health care
                    needs; 7) outpatient management of asthma; 8) the provision
                    of family planning services, 9) early postpartum discharge
                    of mothers and infants; 10) STD screening and treatment; and
                    11) high volume/high risk services selected by the HMO.

                    Non-Clinical Priority Areas: 1) grievances, appeals and
                    complaints; 2) access to and availability of services.

                    In addition, the HMO may be required to conduct performance
                    improvement projects specific to the HMO and to participate
                    in one annual statewide project that may be specified by the
                    Department.

               d.   Targeted Performance Improvement Measures

                    The HMO must develop and implement programs that address the
                    specific performance improvement initiatives described
                    below. In addition, the HMO must measure and report activity
                    in the six areas using the standardized indicators
                    described. (The data reporting guidelines and specifications
                    for reporting activity are found in Addendum XVI.)


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                    The HMO's activity in these areas must be reported (along
                    with all other required data) to the Department by October
                    1, 2001, for calendar year 2000. Unless otherwise noted
                    within a specific targeted performance improvement measure.
                    the Department may specify minimum performance levels and
                    require that the HMOs develop action plans to respond to
                    performance levels below the minimum performance levels. In
                    subsequent years that this Contract is in force, the
                    Department may require the same or different Targeted
                    Performance Improvement Measures.

                    1) Immunization Performance Improvement

                       The objective for the year 2000 is to increase to 90
                       percent the proportion of children who are two years of
                       age who are fully immunized (Healthy People 2000 goal).
                       Immunization series complete is defined by the most
                       recent Advisory Committee on Immunization Practices
                       (ACIP) schedule found in Addendum XVIII.

                       If the organization's rate on this measure is below the
                       90 percent objective and the organization did not achieve
                       an improvement in adverse outcomes of at least 10 percent
                       in the current reporting year over the previous reporting
                       year, the organization must report a plan of action to
                       the Department. Such plans may include, but are not
                       limited to, initiation of a performance improvement
                       project, increased outreach to members and providers,
                       provider and member education or any other actions
                       designed to increase delivery of childhood immunization
                       services. The Department may directly monitor the
                       delivery of immunization services to children from birth
                       to age one using encounter data and other resources at
                       its disposal to assess the sufficiency of immunizations
                       in the first year of life.

                    2) Dental Preventive Care Performance Improvement

                       The objective for calendar year 2000 is that HMO
                       enrollees under this agreement will receive preventive
                       dental services at a rate greater than or equal to 110
                       percent of the preventive dental services rate for
                       Medicaid fee-for-service (FFS) recipients. The baseline
                       year for determining the FFS rate that will be used for
                       comparison is described in Addendum XVI. This measure
                       applies only in situations where the HMO receives the
                       capitation


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                         payment for total dental care in accordance with the
                         HMO's Medicaid/BadgerCare Contract.

                    3)   Lead Toxicity Screening Performance Improvement

                         The minimum performance level for calendar year 2000 is
                         65 percent of all enrollees served under this agreement
                         with their first or second birthday during the
                         reporting period. Two rates must be reported, one for
                         one year olds and one for two year olds. The minimum
                         performance level for calendar year 2001 is 85 percent
                         of all Medicaid/BadgerCare enrollees with their first
                         or second birthday during the reporting period
                         (calendar year). Detailed instructions for calculation
                         of these measures are included in Addendum XVI.

                    4)   Mental Health Follow Up Care Performance Improvement

                         The minimum performance level for calendar years 2000
                         and 2001 is a rate of ambulatory follow-up treatment
                         within 7 and 30 days of discharge after inpatient care
                         for treatment of selected mental health disorders, that
                         represents a reduction of 10 percentage points in
                         adverse outcomes each year from the HMO prior baseline.
                         For example:

                              The 1999 HMO rate for follow-up at 30 days is 80
                              percent. The adverse outcome is represented by the
                              20 percent that did not have a follow-up visit
                              within 30 days. The minimum performance level for
                              2000 would be calculated as a 10 percent
                              improvement on the adverse outcomes as follows:
                              .10 x 20 = 2.0. Thus, the minimum performance
                              level for 2000 would be eighty two percent: 80 +
                              2.0= 82 percent.

                    5)   Substance Abuse Follow-up Care Performance Improvement.

                         The minimum performance level for calendar year 2000
                         and 2001 is a rate of ambulatory follow-up treatment
                         within 7 and 30 days of discharge after inpatient care
                         for substance abuse for individuals with specific
                         substance abuse disorders, that represents a reduction
                         of 10 percentage points in adverse outcomes each year
                         from the HMO prior year baseline. See example 4) above
                         in


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                         Mental Health Follow Up Care Performance Improvement
                         for information on calculation of this measure.

                    6)   Outpatient Management of Diabetes

                         This targeted performance improvement project is
                         designed to measure and improve performance of
                         outpatient management services for people with Type 1
                         or Type 2 diabetes. The goal for 2000 is establishment
                         of baseline data for the provision of the following
                         services to enrollees with diabetes:

                         .  Hemoglobin A1c (HbA1c) testing, CPT-4 code 83036;

                         .  Lipid profile testing, CPT-4 procedure codes 80061,
                            83720 or 83721.

                         The goal for 2001 will be for the HMO to improve the
                         above rates of service provision by a 10 percent
                         reduction in adverse outcomes from the baselines
                         established in 2000.

                    7)   Satisfaction with referral for MH/SA services
                         performance improvement: This performance improvement
                         area establishes a baseline measure of enrollee
                         satisfaction with referral for mental health and
                         substance abuse services based on enrollee responses to
                         the following specific questions. These questions will
                         be included in the standardized Consumer Assessment of
                         Health Plan (CAHPS) survey administered by the
                         Department.

                         This measure assesses the number of enrollees
                         indicating they "need help with an alcohol, drug or
                         mental health problem" as the denominator and the
                         number of enrollees that indicate they did or did not
                         actually get counseling or help as the numerator. The
                         results will be aggregated by the Department or its
                         contractor and reported to the respective HMO. The
                         Department will share analysis of the baseline data for
                         the survey questions conducted in 1999 with HMOs. The
                         Department will work closely with HMOs to review or
                         revise if necessary survey questions for 2000 and 2001.
                         Survey questions will be reviewed for reasonableness,
                         validity and reliability. The


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                                            Department will work closely with
                                            HMOs to set reasonable minimum
                                            performance levels once it is
                                            determined that the survey questions
                                            are reasonable, reliable and valid.

         X.       Access to Premises

                  Allow duly authorized agents or representatives of the State
                  or Federal government, during normal business hours, access to
                  HMO's premises or HMO subcontractor's premises to inspect,
                  audit, monitor or otherwise evaluate the performance of the
                  HMO's or subcontractor's contractual activities and shall
                  within a reasonable time, but not more than 10 working days,
                  produce all records requested as part of such review or audit.
                  In the event right of access is requested under this Section,
                  the HMO 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 personnel conducting the
                  audit or inspection effort. All inspections or audits shall be
                  conducted in a manner as will not unduly interfere with the
                  performance of HMO's or subcontractor's activities. The HMO
                  will be given 15 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 laws, rules or
                  regulations.

         Y.       Subcontracts

                  Assure that all subcontracts shall be in writing, shall comply
                  with the provisions of Addendum I, shall include any general
                  requirements of this Contract that are appropriate to the
                  service or activity identified in Addendum I, and assure that
                  all subcontracts shall not terminate legal liability of the
                  HMO under this Contract. The HMO may subcontract for any
                  function covered by this Contract, subject to the requirements
                  of this Contract.

         Z.       Compliance with Applicable Laws, Rules or Regulations

                  Observe and comply with all Federal and State laws, rules or
                  regulations in effect when the Contract is signed or which may
                  come into effect during the term of the Contract, which in any
                  manner affects HMO's performance under this Contract, except
                  as specified in Article III, Section B.

         AA.      Use of Providers Certified By Medicaid Program

                  Except in emergency situations, use only providers who have
                  been certified by the Medicaid program for those services
                  required under this Contract. The Department reserves the
                  right to withhold retrospectively from the capitation payments
                  the monies related to services provided by non-Medicaid-
                  certified providers, at the Medicaid fee-for-service rate for
                  those services. (See

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                  Wisconsin Administrative Code. Chapter HFS 105, for provider
                  certification requirements.) Every Medicaid HMO will require
                  each physician providing services to enrollees to have a
                  unique physician identifier, as specified in Section 1173(b)
                  of the Social Security Act.

         BB.      Reproduction and Distribution of Materials

                  Reproduce and distribute at HMO expense, according to a
                  reasonable Department timetable, information or documents sent
                  to HMO from Department that contain information the
                  HMO-affiliated providers must have in order to fully implement
                  this Contract.

         CC.      Provision of Interpreters

                  Provide interpreter services for enrollees as necessary to
                  ensure availability of effective communication regarding
                  treatment, medical history or health education and/or any
                  other component of this contract. Furthermore, the HMO must
                  provide for 24 hour a day, 7 day a week access to interpreter
                  services in languages spoken by those individuals otherwise
                  eligible to receive the services provided by the HMO or its
                  provider. Also, upon a recipient or provider request for
                  interpreter services in a specific situation where care is
                  needed, the HMO shall provide an interpreter in time to assist
                  adequately with all necessary care, including urgent and
                  emergency care. The HMO must clearly document all such actions
                  and results. This documentation must be available to the
                  Department at the Department's request.

                  1.       Professional interpreters shall be used, when needed,
                           where technical, medical, or treatment information or
                           other matters, where impartiality is critical, are to
                           be discussed or where use of a family member or
                           friend as interpreter is otherwise inappropriate.
                           Family members, especially children, should not be
                           used as interpreters in assessments, therapy and
                           other situations where impartiality is critical.

                  2.       The HMO will maintain a current list of interpreters
                           who are on "on call" status to provide interpreter
                           services. Provision of interpreter services must be
                           in compliance with Title VI of the Civil Rights Act.

                  3.       The HMO must designate a person responsible for the
                           administration of interpreter/translation services.

                  4.       The HMO must receive Department approval of written
                           policies and procedures for the provision of
                           interpreter services.





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<PAGE>

         DD.      Coordination and Continuation of Care


                  Have systems in place to ensure well managed patient care,
                  including at a minimum:

                  1.       Management and integration of health care through
                           primary provider/gatekeeper/other means.

                  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 enrollees know where and how to obtain
                           medically necessary care in emergency situations.

                  4.       Specific referral requirements. HMO shall clearly
                           specify referral requirements to providers and
                           subcontractors and keep copies of referrals (approved
                           and denied) in a central file or the patient's
                           medical records.

                  5.       Systems to assure provision of a clinical
                           determination, within 10 working days, at the request
                           of the enrollee, of the medical necessity and
                           appropriateness of an enrollee to continue with MH or
                           Substance Abuse providers who are not subcontracted
                           by the HMO. If the HMO determines that the enrollee
                           does not need to continue with the non-contracted
                           provider, it must ensure an orderly transition of
                           care.

         EE.      HMO ID Cards

                  The HMO may issue their own HMO ID cards. The HMO may not deny
                  services to an enrollee solely for failure to present an HMO
                  issued ID card. The Forward ID card will always determine HMO
                  enrollment, even where an HMO issues HMO ID cards.

         FF.      Federally Qualified Health Centers and Rural Health Centers
                  (FQHCS and RHCS)

                  If an HMO contracts with a facility or program, which has been
                  certified as an FQHC or RHC by the Medicaid program, for the
                  provision of services to its enrollees, the HMO must negotiate
                  payment rates for that FQHC or RHC on the same basis as it
                  negotiates with other clinics and primary providers and the
                  HMO must increase the FQHC's or RHC's payment in direct
                  proportion to the annual increase for physicians' services in
                  the capitation rate paid to the HMO. In other words, if an HMO
                  receives a 10 percent increase from the Department for
                  physicians' services, the contracted rates paid to the FQHC or
                  RHC either through capitation or fee-for-service, must be
                  increased by at least 10 percent

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                                       54

<PAGE>

                  over those that were in effect on the date this Contract is
                  signed. The Department will notify the HMOs of the percentage
                  increase for physician services made in the capitation rates
                  by the Department when such changes occur. An HMO which
                  contracts with an FQHC or RHC must report to the Department
                  within 45 days of the end of each quarter (for example,
                  January 1 - March 31 is due May 15) the total amount paid to
                  each FQHC or RHC, per month and as reported on the 1099 forms
                  prepared by the HMO for each FQHC or RHC. FQHC or RHC payments
                  include direct payments to a medical provider who is employed
                  by the FQHC or RHC. The report should be for the entire HMO,
                  aggregating all service areas if the HMO has more than one
                  service area.

         GG.      Coordination with Prenatal Care Services, School-Based
                  Services, Targeted Case Management Services, a Child Welfare
                  Agencies, and Dental Managed Care Organizations

                  1.       Prenatal Care Services-- The HMO must sign an MOU
                           (Addendum IX) with all agencies in the HMO service
                           area that are Medicaid-certified prenatal care
                           coordination agencies. The MOU will be effective on
                           the effective date of the agency's PNCC certification
                           or when both HMO and PNCC agency have signed it,
                           whichever is later. In addition, if the PNCC wants to
                           negotiate additional provisions into the MOU, the HMO
                           must negotiate in good faith and document those
                           negotiations. Such documentation must be available to
                           the Department for review on request. In addition,
                           the HMO must assign an HMO medical representative to
                           interface with the care coordinator from the prenatal
                           care coordination agency. This HMO representative
                           shall work with the care coordinator to identify what
                           Medicaid covered services, in conjunction with other
                           identified social services, are to be provided to the
                           enrollee. The HMO is not liable for medical services
                           directed outside of their provider network by the
                           care coordinator unless prior authorized by the HMO.
                           In addition, the HMO is not required to pay for
                           services provided directly by the Prenatal Care
                           Coordinating provider: such services are paid on a
                           fee-for-service basis by the Department. The main
                           purpose of the MOU is to assure coordination of care
                           between the HMO, that provides medical services, and
                           the Prenatal Care Coordinating Agency, that provides
                           outreach, risk assessment, care planning, care
                           coordination, and follow-up.

                  2.       School-Based Services-- The HMO must sign an MOU
                           (Addendum XIII) with all School-Based Services (SBS)
                           providers in the HMO service area who are
                           Medicaid-certified (a School-Based Services provider
                           is a school district or Cooperative Educational
                           Service Agency (CESA) and not the individual schools
                           within the school district). The MOU will be
                           effective on the date when both the HMO and the SBS
                           provider have signed it or the date the SBS provider
                           is Medicaid-certified, whichever is

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                           later. As described in Addendum XIII, the purpose of
                           the MOU is to develop policies and procedures to
                           avoid duplication of services and to promote
                           continuity of care between the HMO and SBS provider.
                           There are many situations where schools cannot
                           provide services: after school hours, during school
                           vacations, and during the summer, and these
                           situations may interrupt the course of treatment or
                           otherwise affect the continuity of care. In addition,
                           the fact that HMOs and SBS providers may provide the
                           same services could lead to the duplication of
                           services. Therefore, an MOU is essential for the
                           avoidance of duplication of services and the
                           assurance of continuity of care. School-based
                           services are paid fee-for-service by Medicaid. SBS
                           providers, as a requirement of Medicaid/BadgerCare
                           certification, will be directed to negotiate MOUs
                           with HMOs.

                  3.       Targeted Case Management-- The HMO must assign an HMO
                           medical representative to interface with the case
                           manager from the Targeted Case Management (TCM)
                           agency. This HMO representative shall work with the
                           case manager to identify what Medicaid covered
                           services, in conjunction with other identified social
                           services, are to be provided to the enrollee. The HMO
                           is not required to pay for medical services directed
                           outside of their provider network by the case manager
                           unless prior authorized by the HMO. The Department
                           will distribute a statewide list of
                           Medicaid-certified TCM agencies to the HMOs and
                           periodically update the list. Addendum XIV contains
                           guidelines for how HMOs and TCM agencies should
                           coordinate care.

                  4.       Child Welfare Agencies-- Milwaukee County HMOs must
                           designate at least one individual to serve as a
                           contact person for the Bureau of Milwaukee Child
                           Welfare (BMCW) agency. If the HMO chooses to
                           designate more than one contact person, the HMO
                           should identify the service area for which each
                           contact person is responsible. The HMO must provide
                           all Medicaid covered mental health and substance
                           abuse services to individuals identified as clients
                           of the BMCW agency. Disputes regarding the medical
                           necessity of services identified in the Family
                           Treatment Plan will be adjudicated using the dispute
                           process outlined in Addendum X, except that HMOs will
                           provide court ordered services in accordance with
                           Addendum II. Addendum X contains guidelines for how
                           Milwaukee County HMOs and the Bureau of Milwaukee
                           Child Welfare agency will work together to provide
                           mental health and substance abuse services.


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                  5.       Dental Managed Care Pilot Programs-- Once the
                           Department's contract with dental managed care
                           organizations (MCOs) has been finalized, HMOs
                           providing contract services to enrollees residing in
                           Ashland, Bayfield, Douglas and Iron Counties shall
                           sign MOUs with the contracted MCOs to provide
                           Medicaid dental services. The purpose of the MOUs
                           shall be to:

                           .        Coordinate dental services provided by MCO
                                    dental providers in HMO affiliated hospitals
                                    and emergency rooms: and

                           .        Ensure necessary and appropriate information
                                    is shared between an enrollee's primary
                                    dental provider and an enrollee's primary
                                    care physician.

                           The MOU shall be signed by both parties. It will be
                           the responsibility of the Department's MCO(s) to
                           initiate contracts with the HMO for implementation.

         HH.      Physician Incentive Plans

                  A physician incentive plan is any compensation arrangement
                  between the HMO and a physician or physician group that may
                  directly or indirectly have the effect of reducing or limiting
                  services provided with respect to individuals enrolled with
                  the HMO.

                  1.       The HMO shall fully comply with the physician
                           incentive plan requirements specified in 42 CFR s.
                           417.479(d) through (g) and the requirements relating
                           to subcontracts set forth in 42 CFR s. 417.479(i), as
                           those provisions may be amended from time to time,
                           and shall submit to the Department its physician
                           incentive plans as required under 42 CFR s. 434.470
                           and as requested by the Department.

         II.      Advance Directives

                  Maintain written policies and procedures related to advance
                  directives. An advance directive is a written instruction,
                  such as a living will or durable power of attorney for health
                  care, recognized under Wisconsin law (whether statutory or
                  recognized by the courts of Wisconsin) and relating to the
                  provision of such care when the individual is incapacitated.
                  HMO shall:

                  1.       Provide written information at time of HMO enrollment
                           to all adults receiving medical care through the HMO
                           regarding: (a) the individual's rights under
                           Wisconsin law (whether statutory or recognized by the
                           courts of Wisconsin) to make decisions concerning
                           such medical care, including the right to accept or
                           refuse medical or surgical treatment and


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<PAGE>

                           the right to formulate advance directives; and (b)
                           the HMO's written policies respecting the
                           implementation of such rights.

                  2.       Document in the individual's medical record whether
                           or not the individual has executed an advance
                           directive.

                  3.       Shall not discriminate in the provision of care or
                           otherwise discriminate against an individual based on
                           whether or not the individual has executed an advance
                           directive. This provision shall not be construed as
                           requiring the provision of care which conflicts with
                           an advance directive.

                  4.       Ensure compliance with requirements of Wisconsin law
                           (whether statutory or recognized by the courts of
                           Wisconsin) respecting advance directives.

                  5.       Provide education for staff and the community on
                           issues concerning advance directives.

                  The above provisions shall not be construed to prohibit the
                  application of any Wisconsin law which allows for an objection
                  on the basis of conscience for any health care provider or any
                  agent of such provider which as a matter of conscience cannot
                  implement an advance directive.

         JJ.      Ineligible Organizations

                  Upon obtaining information or receiving information from the
                  Department or from another verifiable source, exclude from
                  participation in the HMO all organizations which could be
                  included in any of the following categories (references to the
                  Act in this section refer to the Social Security Act):

                  1.       Entities Which Could Be Excluded Under Section
                           1128(b)(8) of the Social Security Act.--These are
                           entities in which a person who is an officer,
                           director, agent or managing employee of the entity,
                           or a person who has direct or indirect ownership or
                           control interest of 5 percent or more in the entity
                           has:

                           a.       Been convicted of the following crimes:

                                    1)      Program related crimes, i.e., any
                                            criminal offense related to the
                                            delivery of an item or service under
                                            Medicare or Medicaid (see Section
                                            1128(a)(1) of the Act);

                                    2)      Patient abuse, i.e., criminal
                                            offense relating to abuse or neglect
                                            of patients in connection with the
                                            delivery of health care (see Section
                                            1128(a)(2) of the Act);


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                                    3)      Fraud, i.e., a State or Federal
                                            crime involving fraud, theft,
                                            embezzlement, breach of fiduciary
                                            responsibility, or other financial
                                            misconduct in connection with the
                                            delivery of health care or involving
                                            an act or omission in a program
                                            operated by or financed in whole or
                                            part by Federal, State or local
                                            government (see Section 1128(b)(1)
                                            of the Act);

                                    4)      Obstruction of an investigation,
                                            i.e., conviction under State or
                                            Federal law of interference or
                                            obstruction of any investigation
                                            into any criminal offense described
                                            in subsections a, b, or c (see
                                            Section 1128(b)(2) of the Act): or

                                    5)      Offenses relating to controlled
                                            substances, i.e., conviction of a
                                            State or Federal crime relating to
                                            the manufacture, distribution,
                                            prescription or dispensing of a
                                            controlled substance (see Section
                                            1128(b)(3) of the Act).

                           b.       Been Excluded, Debarred, Suspended or
                                    Otherwise Excluded from participating in
                                    procurement activities under the Federal
                                    Acquisition Regulation or from participating
                                    in non procurement activities under
                                    regulations issued pursuant to Executive
                                    Order No. 12549 or under guideline
                                    implementing such order.

                           c.       Been Assessed a Civil Monetary Penalty under
                                    Section 1128A of the Act. --Civil monetary
                                    penalties can be imposed on individual
                                    providers, as well as on provider
                                    organizations, agencies, or other entities
                                    by the DHHS Office of Inspector General.
                                    Section 1128A authorizes their use in case
                                    of false or fraudulent submittal of claims
                                    for payment, and certain other violations of
                                    payment practice standards. (See Section
                                    1128(b)(8)(B)(ii) of the Act.)

                  2.       Entities Which Have a Direct or Indirect Substantial
                           Contractual Relationship with an Individual or Entity
                           Listed in subsection A.--A substantial contractual
                           relationship is defined as any contractual
                           relationship which provides for one or more of the
                           following services:

                           a.       The administration, management, or provision
                                    of medical services;

                           b.       The establishment of policies pertaining to
                                    the administration, management, or provision
                                    of medical services; or

                           c.       The provision of operational support for the
                                    administration, management, or provision of
                                    medical services.


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               3.  Entities Which Employ, Contract With, or Contract Through Any
                   Individual or Entity That is Excluded From Participation in
                   Medicaid under Section 1128 or 1128A, for the Provision
                   (Directly or Indirectly) of Health Care, Utilization Review,
                   Medical Social Work or Administrative Services.--For the
                   services listed, HMO must exclude from contracting any entity
                   which employs, contracts with, or contracts through an entity
                   which has been excluded from participation in Medicaid by the
                   Secretary under the authority of Section 1128 or 1128A of the
                   Act.

               HMO attests by signing this Contract that it excludes from
               participation in the HMO all organizations which could be
               included in any of the above categories.

          KK.  Clinical Laboratory Improvement Amendments

               Use only certain laboratories. All laboratory testing sites
               providing services under this Contract must have a valid Clinical
               Laboratory Improvement Amendments (CLIA) certificate along with a
               CLIA identification number, and comply with CLIA regulations as
               specified by 42 CFR Part 493, "Laboratory Requirements." Those
               laboratories with certificates will provide only the types of
               tests permitted under the terms of their certification.

          LL.  Limitation on Fertility Enhancing Drugs

               The HMO must get prior authorization from the Chief Medical
               Officer in the Division of Health Care Financing before an HMO
               provider treats an enrollee with any of the following drug
               products: Chorionic Gonadotropin, Clomiphene, Gonadorelin,
               Menotropins, Urofollitropin and any other new fertility enhancing
               drugs.

          MM.  Reporting of Communicable Diseases

               As required by Wis. Stats. 252.05, 252.15(5)(a)6 and
               252.17(7)(9b), Physicians, Physician Assistants, Podiatrists,
               Nurses, Nurse Midwives, Physical Therapists, and Dietitians
               affiliated with a Medicaid HMO shall report the appearance,
               suspicion or diagnosis of a communicable disease or death
               resulting from a communicable disease to the Local Health
               Department for any enrollee treated or visited by the provider.
               Reports of human immunodeficiency virus (HIV) infection shall be
               made directly to the State Epidemiologist. Such reports shall
               include the name, sex, age, residence, communicable disease, and
               any other facts required by the Local Health Department and
               Wisconsin Division of Public Health. Such reporting shall be made
               within 24 hours of learning about the communicable disease or
               death or as specified in Wis. Admin. Code HFS 145.04, Appendix A.
               Charts and reporting forms on communicable diseases are available
               from the Local Health Department. Each laboratory subcontracted
               or otherwise affiliated with the HMO shall report the
               identification or suspected

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                                      -60-

<PAGE>

               identification of any communicable disease listed in Wis. Admin.
               Rules 145,. Appendix A to the local health department; reports of
               HIV infections shall be made directly to the State
               Epidemiologist.

          NN.  MedicaBadgerCareare HMO Advocate Requirements

               Each HMO must employ a Medicaid/BadgerCare HMO Advocate during
               the entire contract term. The HMO Advocate is to work with both
               enrollees and providers to facilitate the provision of Medicaid
               benefits to enrollees; is responsible for making recommendations
               to management on any changes needed to improve either the care
               provided or the way care is delivered; and must be in an
               organizational location within the HMO which provides the
               authority needed to carry out these tasks. The detailed
               requirements of the HMO Advocate are listed below:

               1.  Functions of the Medicaid/BadgerCare HMO Advocate(s)

                   a.  Investigation and resolution of access and cultural
                       sensitivity issues identified by HMO staff, State staff,
                       providers, advocate organizations, and enrollees.

                   b.  Monitoring formal and informal grievances with the
                       grievance personnel for purposes of identification of
                       trends or specific problem areas of access and care
                       delivery. An aspect of the monitoring function is the
                       ongoing participation in the HMO grievance committee.

                   c.  Recommendation of policy and procedural changes to HMO
                       management including those needed to ensure and/or
                       improve enrollee access to care and enrollee quality of
                       care. Changes can be recommended for both internal
                       administrative policies and for subcontracted providers.

                   d.  Act as the primary contact for enrollee advocacy groups.
                       Work with enrollee advocacy groups on an ongoing basis to
                       identify and correct enrollee access barriers.

                   e.  Act as the primary contact for local community based
                       organizations (local governmental units, non-profit
                       agencies, etc.). Work with the local community based
                       organizations on an ongoing basis to acquire knowledge
                       and insight regarding the special health care needs of
                       enrollees.

                   f.  Participate in the Advocacy Program for Managed Care that
                       is organized by the Department. Such participation
                       includes the following: attendance, on an as needed
                       basis, at the Regional

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                       Forums chaired by a Department staff person, at the
                       semiannual Statewide Forum; work with Division of Health
                       Care Financing Managed Care staff person assigned to the
                       HMO on issues of access to medical care and quality of
                       medical care; work with the Enrollment Contractor staff
                       persons on issues of access to medical care, quality of
                       medical care, and enrollment/disenrollment; attendance,
                       on an as needed basis, at bi-monthly Advocacy Team
                       meetings, which will be attended by the Division of
                       Health Care Financing Managed Care Staff, enrollment
                       contractor staff, community based organizations,
                       recipient service representatives from the Fiscal Agent,
                       and EDS ombuds.

                   g.  Ongoing analysis of internal HMO system functions, with
                       HMO staff, as these functions affect enrollee access to
                       medical care and enrollee quality of medical care.

                   h.  Organization and provision of ongoing training and
                       educational materials for HMO staff and providers to
                       enhance their understanding of the values and practices
                       of all cultures with which the HMO interacts.

                   i.  Provision of ongoing input to HMO management on how
                       changes in the HMO provider network will affect enrollee
                       access to medical care and enrollee quality and
                       continuity of care. Participation in the development and
                       coordination of plans to minimize any potential problems
                       that could be caused by provider network changes.

                   j.  Review and approve all HMO informing material to be
                       distributed to enrollees for the purpose of assessing
                       clarity and accuracy.

                   k.  Provision of assistance to enrollees and their authorized
                       representatives for the purpose of obtaining medical
                       records.

                   l.  The lead advocate position will be responsible for
                       overall evaluation of the HMO's internal advocacy plan
                       and will be required to monitor any contracts the HMO may
                       enter into for external advocacy with culturally diverse
                       associations or agencies. The lead advocate will be
                       responsible for training the associations or agencies and
                       assuring their input into the HMO's advocacy plan.

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<PAGE>

                  2.       Staff Requirements and Authority of the
                           Medicaid/BadgerCare HMO Advocate

                           a.       At a minimum one HMO Advocate must be
                                    located in the organizational structure so
                                    that the Advocate has the authority to
                                    perform the functions and duties listed in
                                    (1)(a-l).

                                    The HMO Certification Application requires
                                    HMOs to state the staffing levels to perform
                                    the functions and duties listed in (1)(a-1)
                                    in terms of number of full and part time
                                    staff and total Full Time Equivalents (FTEs)
                                    assigned to these tasks. The Department
                                    assumes that an HMO acting as an
                                    Administrative Service Organization (ASO)
                                    for another HMO will have one Advocate or
                                    FTE position for each ASO contract as well
                                    as maintaining their own internal advocate.
                                    An HMO may employ less than a Full Time
                                    Equivalent (FTE) advocate position, but must
                                    justify to the satisfaction of the
                                    Department why less than one FTE position
                                    will suffice the HMO's enrollee population.
                                    The HMO must also regularly evaluate the
                                    advocate position, workplan, and job duties
                                    and allocate an FTE advocate position to
                                    meet the duties listed in (1)(a-l) if there
                                    is significant increase in the HMO's
                                    enrollee population or in the HMO service
                                    area. The Department reserves the right to
                                    require an HMO to employ an FTE advocate
                                    position if the HMO does not demonstrate
                                    adequacy of a part-time advocate position.

                                    In order to meet the requirement for the
                                    Advocate position statewide, the DHFS
                                    encourages HMOs to contract or have a formal
                                    memorandum of understanding for advocacy
                                    and/or translation services with
                                    associations or organizations who have
                                    culturally diverse populations within the
                                    HMO service area. However, the overall or
                                    lead responsibility for the advocate
                                    position will be within each HMO. HMOs must
                                    monitor the effectiveness of the
                                    associations and agencies under contract and
                                    may alter the contract(s) with written
                                    notification to the Department.

                           b.       The HMO Advocate shall have authority for
                                    facilitating and assuring access to all
                                    medically necessary services as stipulated
                                    in this Contract for each enrollee.


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<PAGE>

                           c.       The HMO Advocate staffing levels submitted
                                    in the HMO Certification Application shall
                                    be maintained, and solely devoted to the
                                    functions and duties listed in (1)(a-l)
                                    throughout the contract term. Changes in the
                                    HMO Advocate staffing levels must be
                                    approved by the Department thirty days prior
                                    to the effective date of the change.

                           d.       The HMO Advocate shall develop prior to
                                    contract signing, and shall maintain and
                                    modify as necessary, throughout the Contract
                                    term, a Medicaid/BadgerCare HMO Advocacy
                                    workplan, with time lines and activities
                                    specified.

         OO.      HMO Designation of Staff Person as Contract Representative

                  The HMO is required to designate a staff person to act as
                  liaison to the Department on all issues that relate to the
                  contract between the Department and the HMO. The contract
                  representative will be authorized to represent the HMO
                  regarding inquiries pertaining to the Contract, will be
                  available during normal business hours, and will have decision
                  making authority in regard to urgent situations that arise.
                  The Contract representative will be responsible for follow-up
                  on contract inquiries initiated by the Department.

         PP.      Subcontracts with Local Health Departments

                  The Department encourages the HMO to contract with local
                  health departments for the provision of care to
                  Medicaid/BadgerCare enrollees in order to assure continuity
                  and culturally appropriate care and services. Local health
                  departments can provide HealthCheck outreach and screening,
                  immunizations, blood lead screening services, and services to
                  targeted populations within the community for the prevention,
                  investigation, and control of communicable diseases (e.g.,
                  tuberculosis, HIV/AIDS, sexually transmitted diseases,
                  hepatitis and others). WIC projects provide nutrition services
                  and supplemental foods, breastfeeding promotion and support;
                  and immunization screening. Many projects screen for blood
                  lead poisoning during the WIC appointment.

                  The Department encourages HMOs to work closely with local
                  health departments as noted in Addendum XXIV - Recommendations
                  for Coordination between HMOs and Local Health Departments and
                  Community-Based Health Organizations.

                  Local health departments have a wide variety of resources that
                  could be coordinated with HMOs to produce more efficient and
                  cost effective care for HMO enrollees. Examples of such
                  resources are ongoing programs of medical services, materials
                  on health education, prevention, and disease states, expertise
                  on outreaching specific subpopulations, communication networks
                  with varieties of medical providers, advocates,
                  community-based health organizations, and


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                                      -64-

<PAGE>

                  social service agencies, and access to ongoing studies of and
                  information about health status and disease trends and
                  patterns.

          QQ.     Subcontracts with Community-Based Health Organizations

                  The Department encourages the HMO to contract with
                  community-based health organizations for the provision of care
                  to Medicaid/BadgerCare enrollees in order to assure continuity
                  and culturally appropriate care and services. Community-based
                  organizations can provide HealthCheck outreach and screening,
                  immunizations, family-planning services, and other types of
                  services.

                  The Department encourages HMOs to work closely with
                  community-based health organizations as noted in Addendum
                  XXIV - Recommendations for Coordination between HMOs and Local
                  Health Departments and Community-Based Health Organizations.

                  Community-based health organizations may also provide
                  services, such as WIC services, that HMOs are required by
                  Federal law to coordinate with and refer to, as appropriate.

         RR.      Prescription Drugs

                  I.       If an HMO elects not to cover dental services, the
                           HMO is liable for the cost of all medically necessary
                           prescription drugs when ordered by a certified
                           Medicaid dental provider.

                  2.       When an enrollee elects to use a family planning
                           provider that is non-HMO affiliated, the HMO is
                           liable for the cost of all medically necessary drugs
                           when ordered by a certified Medicaid family planning
                           provider.

                                  ARTICLE IV


IV.      FUNCTIONS AND DUTIES OF THE DEPARTMENT

         In consideration of the functions and duties of the HMO contained in
         this Contract, the Department shall:

         A.       Eligibility Determination

                  Identify Medicaid/BadgerCare recipients who are eligible for
                  enrollment in HMOs as a result of eligibility under the
                  following eligibility status:


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                                      -65-

<PAGE>

<TABLE>
<CAPTION>
===============================================================================================================
    Med Stat                 Cap Rate*                                   Description
===============================================================================================================
<S>                          <C>                  <C>
 31, WN                          A                AFDC-Regular
---------------------------------------------------------------------------------------------------------------
 32                              A                AFDC-Unemployed
---------------------------------------------------------------------------------------------------------------
 38,39                           A                AFDC-Related, No Cash Payment
---------------------------------------------------------------------------------------------------------------
 CC, CM, GC, PC                  A                Healthy Start Children
---------------------------------------------------------------------------------------------------------------
 E2                              A                AFDC-Related, No Cash Payment
---------------------------------------------------------------------------------------------------------------
 GE                              A                Healthy Start Children Ages 15-18
---------------------------------------------------------------------------------------------------------------
 N1, N2                          A                Medicaid Newborn
---------------------------------------------------------------------------------------------------------------
 UA, WU                          A                AFDC-Related, Unemployed
---------------------------------------------------------------------------------------------------------------
 WH                              A                AFDC Employed over 100 Hours a Month
---------------------------------------------------------------------------------------------------------------
 X1, X2, X3, X4                  A                AFDC-Related, No Cash Payment
---------------------------------------------------------------------------------------------------------------
 B1                              A                BadgerCare -- Income equal or greater than 100% of FPL,
                                                  and less than or equal to 150% of FPL, Kids. No premium.
---------------------------------------------------------------------------------------------------------------
 B4                              A                BadgerCare -- Income equal or greater than 100% of FPL,
                                                  and less than or equal to 150% of FPL, Adults. No premium.
---------------------------------------------------------------------------------------------------------------
 B2                              A                BadgerCare -- Income greater than 150% of FPL, and less than
                                                  185% of FPL, Kids, Premium.
---------------------------------------------------------------------------------------------------------------
 B5                              A                Income greater than 150% of FPL, and less than 185% of FPL,
                                                  Adults, Premium.
---------------------------------------------------------------------------------------------------------------
 B3                              A                Income equal or greater than 185% of the FPL, and less than
                                                  200% of the FPL, Kids, Premium.
---------------------------------------------------------------------------------------------------------------
 B6                              A                Income equal or greater than 185% of the FPL, and less than
                                                  200% of the FPL, Adults, Premium.
---------------------------------------------------------------------------------------------------------------
 GP                              A                Income less than 100% of FPL, Adults Parents of OBRA kids
                                                  (AFDC), No premium.
---------------------------------------------------------------------------------------------------------------
 95                              B                Pregnant Women in Intact Families
---------------------------------------------------------------------------------------------------------------
 A6, A7, A8, A9                  B                Pregnant Woman, IRCA Alien
---------------------------------------------------------------------------------------------------------------
 E3, E4                          B                Extension for Pregnant Woman
---------------------------------------------------------------------------------------------------------------
 PW, P1                          B                Healthy Start Pregnant Women
===============================================================================================================
</TABLE>

          *A = AFDC/Healthy Start Children/BadgerCare capitation rate.
          *B = Pregnant Women Healthy Start capitation rate.

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                                      -66-

<PAGE>

B.   Enrollment

     Promptly notify the HMO of all Medicaid/BadgerCare recipients enrolled in
     the HMO under this Contract. Notification shall be effected through the HMO
     Enrollment Reports. All recipients listed as an ADD or CONTINUE on either
     the Initial or Final HMO Enrollment Report are members of the HMO during
     the enrollment month. The reports shall be generated in the sequence
     specified under HMO ENROLLMENT REPORTS. These reports shall be in both tape
     and hard copy formats or available through electronic file transfer
     capability and shall include Medical Status Codes. The Department will make
     all reasonable efforts to enroll pregnancy cases as soon as possible.

C.   Disenrollment

     Promptly notify the HMO of all Medicaid/BadgerCare recipients no longer
     eligible to receive services through the HMO under this Contract.
     Notification shall be effected through the HMO Enrollment Reports which the
     Department will transmit to the HMO for each month of coverage throughout
     the term of the Contract. The reports shall be generated in the sequence
     under HMO ENROLLMENT REPORTS. Any recipient who was enrolled in the HMO in
     the previous enrollment month, but does not appear as an ADD or CONTINUE on
     either the Initial or Final HMO Enrollment Report for the current
     enrollment month, is disenrolled from the HMO effective the last day of the
     previous enrollment month.

D.   HMO Enrollment Reports

     For each month of coverage throughout the term of the Contract, the
     Department shall transmit "HMO Enrollment Reports" to the HMO. These
     reports will provide the HMO with ongoing information about its Medicaid/
     BadgerCare enrollees and disenrollees and will be used as the basis for the
     monthly capitation claims described in Article V--PAYMENT TO THE HMO. The
     HMO Enrollment Reports will be generated in the following sequence:

     1.   The Initial HMO Enrollment Report will list all of the HMO's enrollees
          and disenrollees for the enrollment month who are known on the date of
          report generation. The Initial HMO Enrollment Report will be received
          by the HMO on or before the fifth day of each month covered by the
          Contract. A capitation claim shall be generated for each enrollee
          listed as an ADD or CONTINUE on this report. Enrollees who appear as
          PENDING on the Initial Report and are reinstated into the HMO during
          the month will appear as a CONTINUE on the Final Report and a
          capitation claim shall be generated at that time.


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<PAGE>

     2.   The final HMO Enrollment Report will list all of the HMO's enrollees
          for the enrollment month, who were not included in the Initial HMO
          Enrollment Report. The Final HMO Enrollment Report will be received
          by the HMO on or before the tenth day of each month subsequent to the
          coverage month. A capitation claim shall be generated for each
          enrollee listed as an ADD or CONTINUE on this report. Enrollees in
          PENDING status will not be included on the final report.

E.   Utilization Review and Control

     Waive, to the extent allowed by law, any present Department requirements
     for prior authorization, second opinions, co-payment, or other Medicaid
     restrictions for the provision of contract services provided by the HMO to
     enrollees, except as may be provided in Addendum II.

F.   HMO Review

     Submit to HMOs for prior approval materials that describe specific HMOs
     and that will be distributed by the Department or County to recipients.

G.   HMO Review of Study or Audit Results

     Submit to HMOs for a 15 business day review/comment period, any HMO
     Medicaid/BadgerCare audits, the annual HMO Comparison Report, HMO Consumer
     Satisfaction Reports, or any other HMO Medicaid studies the Department
     releases to the public.

H.   Vaccines

     Provide certain vaccines to HMO providers for administration to Medicaid/
     BadgerCare HMO enrollees according to the policies and procedures in the
     Wisconsin Medicaid and BadgerCare Physicians Services Handbook. The
     Department will reimburse the HMO for the cost of vaccines that are newly
     approved during the contract year and not yet part of the Vaccine for
     Children program. The cost of the vaccine shall be the same as the cost to
     the Department of buying the new vaccine through the Vaccine for Children
     program. The HMO retains liability for the cost of administering the
     vaccines.

I.   Coordination of Benefits

     Maintain a report of recovered money reported by the HMO and its
     subcontractor.


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<PAGE>

J.   Wisconsin Medicaid Provider Reports

     Provide a monthly electronic listing of all Wisconsin Medicaid certified
     providers to include, at a minimum, the name, address, Wisconsin Medicaid
     provider ID number, and dates of certification in Wisconsin Medicaid.


                                   ARTICLE V


V.   PAYMENT TO THE HMO

     A.   Capitation Rates

          In full consideration of contract services rendered by the HMO, the
          Department agrees to pay the HMO monthly payments based on the
          capitation rate specified in Addendum VII. The capitation rate shall
          be prospectively designed to be less than the cost of providing the
          same services covered under this Contract to a comparable Medicaid
          population on a fee-for-service basis. The capitation rate shall not
          include any amount for recoupment of losses incurred by the HMO under
          previous contracts. The Department shall have the right to make
          separate payments to subcontractors directly on a monthly basis when
          the Department determines it is necessary to assure continued access
          to quality care. Such separate payment will be made only to
          subcontractors that receive more than 90 percent of the contracted
          monthly capitation rate from the Department to the HMO.

     B.   Actuarial Basis

          The capitation rate is calculated on an actuarial basis (specified in
          Addendum VII) recognizing the payment limits set forth in 42 CFR
          447.361.

     C.   Renegotiation

          The monthly capitation rates set forth in this article shall not be
          subject to renegotiation during the contract term or retroactively
          after the contract term, unless such renegotiation is required by
          changes in Federal or State laws, rules or regulations.

     D.   Reinsurance

          The HMO may obtain a risk-sharing arrangement from an insurer other
          than the Department for coverage of enrollees under this Contract,
          provided that the HMO remains substantially at risk for providing
          services under this Contract.


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<PAGE>

E.   Neonatal Intensive Care Unit Risk-Sharing

     The Department agrees to reimburse each HMO for a portion of the neonatal
     intensive care unit (NICU) costs incurred by the HMO if the HMO's average
     number of NICU days per thousand member year exceeds 75 days per thousand
     member year during the contract period. This reimbursement shall be
     provided in the following manner:

     1.   The Department shall reimburse the HMO for the average number of NICU
          days per thousand member years that the HMO exceeds 75 NICU days per
          thousand member years during the contract period. For each day that
          the HMO's average number of NICU days per thousand member years
          exceeds 75 NICU days per thousand member years, the Department will
          reimburse the HMO for ninety percent (90%) of the HMO's NICU cost per
          day, not to exceed $1,443 per day.

     2.   The HMO's NICU cost per day shall include the HMO's NICU inpatient
          payment per day and the HMO's associated physician payments.
          Associated physician payments refers to total HMO payments made by the
          HMO to the physician(s) for services provided to the infant during the
          NICU stay. Associated physician payments will be divided by the number
          of days reported for the NICU stay to determine the HMO's payment per
          day of associated physician payments.

     3.   Neonatal intensive care unit days cover any newborn transferred or
          directly admitted after birth, to a Level II, Level III or Level IV
          SCN/NICD for treatment and/or observation under the care of a
          neonatologist or pediatrician. NICU coverage will continue until the
          infant is deemed medically stable to be discharged to a newborn
          nursery, medical floor or home.

          NICU days will also cover any newborn infant transferred or directly
          admitted after birth to a Level II, Level III or Level IV SCN/NICD who
          requires transfer to another institution for a severe, compromised
          physical status, diagnostic testing or surgical intervention which
          cannot be provided for at the hospital of initial admission. NICU
          coverage will continue until the infant is transferred back to the
          initial hospital and deemed medically stable to be discharged to a
          newborn nursery, medical floor or home.

          Level I facilities are those which are designed primarily for the care
          of neonatal patients who have no complications but which are able to
          provide competent emergency services when the need arises. Level II
          facilities provide a full range of services for low birthweight
          neonates who are not sick, but require frequent feeding, and neonates
          who require more hours of nursing than do normal neonates. Level III
          facilities


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<PAGE>

          provide a full range of newborn intensive care services for neonatal
          patients who do not require intensive care but require 6-12 hours of
          nursing each day. Level IV facilities provide a full range of services
          for severely ill neonates who require constant nursing and continuous
          cardiopulmonary and other support.

          Note: HMOs cannot claim additional reimbursement under both the NICU
          risk-sharing policy and the ventilator dependent policy for the same
          enrollee on the same date of service.

     4.   HMOs must submit all data requested by the Department for calculating
          the NICU reimbursement in the format specified by the Department
          before May 1 of the following calendar year. The data and data format
          required is defined in Addendum IX. The Department will calculate the
          NICU reimbursement amount by county.

     5.   NICU reimbursement shall be made by the Department to the HMO after
          the end of the contract year, following submittal of all needed NICU
          data from the HMO. The Department will reimburse the HMO within sixty
          days of receipt of all necessary data from the HMO. A final adjustment
          to the NICU reimbursement amount may be made by the Department one
          year after the initial payment. This adjustment will be based on
          updated NICU days and eligible months.

F.   Payment Schedule

     Payment to the HMO shall be based on the HMO Enrollment Reports which the
     Department will transmit to the HMO according to the schedule in Article
     IV. D. Payment for each person listed as an ADD or CONTINUE on the HMO
     Enrollment Reports shall be made by the Department within 60 days of the
     date the report is generated. Also, all retroactive capitation payments for
     newborns shall be paid within 60 days of the child's first appearance on an
     enrollment report. (See Article V. G.) Any claim that is not paid within
     these time limits shall be denied by the Department and the recipient shall
     be disenrolled from the HMO for the capitation month specified on the
     claim. Notification of all paid and denied claims shall be given through
     the weekly Remittance Status Report, which is available on both tape and
     hard copy.

G.   Capitation Payments For Newborns

     The HMO shall authorize provision of contract services to the newborn
     child of an enrolled mother for the first ten days of life. The child's
     date of birth should be counted as day one. In addition, if the child is
     reported within 100 days of its date of birth, the HMO shall provide
     contract services to the child from its date of birth until the child is
     disenrolled from the HMO. The HMO will receive a separate capitation
     payment for the month of birth and for all other


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<PAGE>

     months the HMO is responsible for providing contract services to the child.
     If the child is not reported within 100 days of its date of birth the child
     will not be retroactively enrolled into the HMO. In this case the HMO is
     not responsible for payment of services provided prior to the child's
     enrollment and will receive no capitation payments for that time period and
     may recoup from providers for any services that were authorized in that 100
     day time period. The providers who gave services in this 100 day time
     period may then bill the Department on a fee-for-service basis. More
     detailed information for providers on billing the Department on a fee-for-
     service basis in these situations can be found in Part A, Section IX, of
     the Wisconsin Medicaid Provider Handbook

     HMOs, or their providers, must complete an HMO Newborn Report (example and
     instructions in Addendum XVII) for newborns. The HMO shall report all
     births to the Department's fiscal agent as soon as possible after the date
     of birth, but at least monthly. Prompt HMO reporting of newborns will
     facilitate retroactive enrollment and capitation payments for newborns,
     since this newborn reporting will ensure the newborn's Medicaid/BadgerCare
     eligibility for the first 12 months of life contingent upon the newborn
     continuously residing with the mother.

H.   Coordination of Benefits (COB)

     The HMO must actively pursue, collect and retain all monies from all
     available resources for services to enrollees covered under this Contract
     except where the amount of reimbursement the HMO can reasonably expect to
     receive is less than the estimated cost of recovery (this exception does
     not apply to collections for AIDS and ventilator dependent patients), or
     except as provided in Addendum II. COB recoveries will be done by post-
     payment billing (pay and chase) for certain prenatal care and preventive
     pediatric services. Post-payment billing will also be done in situations
     where the third party liability is derived from a parent whose obligation
     to pay is being enforced by the State Child Support Enforcement Agency and
     the provider has not received payment within 30 days after the date of
     service.

     1.   Cost effectiveness of recovery is determined by, but not limited to
          time, effort, and capital outlay required to perform the activity. The
          HMO must be able to specify the threshold amount or other guidelines
          used in determining whether to seek reimbursement from a liable third
          party, or describe the process by which the HMO determines seeking
          reimbursement would not be cost effective, upon request of the
          Department.


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<PAGE>

     2.   To assure compliance, records shall be maintained by the HMO of all
          COB collections and reports shall be made quarterly on the form
          designated by the Department in Addendum VI. HMOs must be able to
          demonstrate that appropriate collection efforts and appropriate
          recovery actions were pursued. The Department has the right to review
          all billing histories and other data related to COB activities for
          enrollees. HMOs must seek from all enrollees information on other
          available resources. HMOs must also seek to coordinate benefits
          before claiming reimbursement from the Department for the AIDS and
          ventilator dependent enrollees:

          a.   Other available resources may include, but are not limited to,
               all other State or Federal medical care programs which are
               primary to Medicaid, group or individual health insurance,
               ERISAs, service benefit plans, the insurance of absent parents
               who may have insurance to pay medical care for spouses or minor
               enrollees, and subrogation/workers compensation collections.

          b.   Subrogation collections are any recoverable amounts arising out
               of settlement of personal injury, medical malpractice, product
               liability, or Worker's Compensation. State subrogation rights
               have been extended to HMOs under s. 49.89(9), Act 31, Laws of
               1989. After attorneys' fees and expenses have been paid, the HMO
               shall collect the full amount paid on behalf of the enrollee.

     3.   Section 1912(b) of the Social Security Act must be construed in a
          beneficiary-specific manner. The purpose of the distribution provision
          is to permit the beneficiary to retain TPL benefits to which he or she
          is entitled to except to the extent that Medicaid (or the HMO on
          behalf of Medicaid) is reimbursed for its costs. The HMO is free,
          within the constraints of State law and this contract, to make
          whatever case it can to recover the costs it incurred on behalf of its
          enrollee. It can use the Medicaid fee schedule, an estimate of what a
          capitated physician would charge on a fee-for-service basis, the value
          of the care provided in the market place or some other acceptable
          proxy as the basis of recovery. However, any excess recovery, over and
          above the cost of care (however the HMO chooses to define that cost),
          must be returned to the beneficiary. HMOs may not collect from amounts
          allotted to the beneficiary in a judgement or court-approved
          settlement. The HMO is to follow the practices outlined in the DHFS
          Casualty Recovery Manual.

     4.   Where the HMO has entered a risk-sharing arrangement with the
          Department, the COB collection and distribution shall follow the
          procedures described in Addendum III of this Contract. Act 27, Laws of
          1995 extended assignment rights to HMOs under s. 632.72.


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     5.   COB collections are the responsibility of the HMO or its
          subcontractors. Subcontractors must report COB information to the HMO.
          HMOs and subcontractors shall not pursue collection from the enrollee,
          but directly from the third party payer. Access to medical services
          will not be restricted due to COB collection.

     6.   The following requirement shall apply if the Contractor (or the
          Contractor's parent firm and/or any subdivision or subsidiary of
          either the Contractor's parent firm or of the Contractor) is a health
          care insurer (including, but not limited to, a group health insurer
          and/or health maintenance organization) licensed by the Wisconsin
          Office of the Commissioner of Insurance and/or a third-party
          administrator for a group or individual health insurer(s), health
          maintenance organization(s), and/or employer self-insurer health
          plan(s):

          a.   Throughout the Contract term, these insurers and third-party
               administrators shall comply in full with the provision of
               subsection 49.475 of the Wisconsin Statutes. Such compliance
               shall include the routine provision of information to the
               Department in a manner and electronic format prescribed by the
               Department and based on a monthly schedule established by the
               Department. The type of information provided shall be consistent
               with the Department's written specifications.

          b.   Throughout the Contract term, these insurers and third-party
               administrators shall also accept and properly process postpayment
               billings from the Department's fiscal agent for health care
               services and items received by Wisconsin Medicaid enrollees.

     7.   If, at any time during the contract term, any of the insurers or third
          party administrators fail, in whole or in part, to adhere to the
          requirements of (Article V. H. subsection 6. (a.) or (6.(b.)) above,
          the Department may take the remedial measures specified in Article IX.
          D. 1. and Article X. B. (2).

I.   Recoupments

     The Department will not normally recoup HMO per capita payments when the
     HMO actually provided service. However, in situations where the Medicaid
     enrollee cannot use HMO facilities, the Department will recoup HMO
     capitation payments. Such situations are described more fully below:

     1.   The Department will recoup HMO capitation payments for the following
          situations where an enrollee's HMO status has changed before the 1st
          day of a month for which a capitation payment has been made:


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          a.   enrollee moves out of the HMO's service area

          b.   enrollee enters a public institution

          c.   enrollee dies

     2.   The Department will recoup HMO capitation payments for the following
          situations where the Department initiates a change in an enrollee's
          HMO status on a retroactive basis, reflecting the fact that the HMO
          was not able to provide services. In these situations, recoupments for
          multiple month's capitation payments are more likely.

          a.   correction of a computer or human error, where the person was
               never really enrolled in the HMO.

          b.   disenrollments of enrollees for reasons of pregnancy and
               continuity of care, or for reasons specified in Addendum II.

     3.   In instances where membership is disputed between two HMOs, the
          Department shall be the final arbitrator of HMO membership and
          reserves the right to recoup an inappropriate capitation payment.

     4.   If an HMO enrollee moves out of the HMO service area, the enrollee
          will be disenrolled from the HMO on the date the enrollee moved as
          verified by the eligibility worker. Any capitation payment made for
          periods of time after disenrollment will be recouped.

     5.   If a contract is terminated, recoupments will be handled through a
          payment by the HMO within 30 days of contract termination.

J.   HealthCheck Recoupment

     The Department will determine the amount of the HMO's HealthCheck
     recoupment, by service area, by following the algorithm defined in Article
     III. B. (10) and by using the number of screens and eligibles reported in
     the second semi-annual Utilization Report. Data provided by the HMO must
     agree with medical record documentation. Before completing the recoupment,
     the Department will inform the HMO of the intended action and allow the
     HMO thirty days to review and respond to the calculation. The second semi-
     annual Utilization Report will be considered complete and final.


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K.   Payment for Aids, HIV-Positive, and Ventilator Dependent

     The Department will pay the HMO's costs of providing Medicaid-covered
     services to HMO enrollees who meet the criteria in this section, by HMO
     service area. These payments will be made based on the data submitted by
     the HMO to the Department on a quarterly basis. The data submission and
     payment schedule is included as Addendum IV to this Contract. Reimbursement
     already provided to the HMO in the form of capitation payments for
     qualified enrollees will be deducted from 100 percent reimbursement
     payments. 100 percent reimbursement refers to full reimbursement of HMO
     costs for providing Medicaid services to the above enrollees. The criteria
     for enrollees are:

     1.   Ventilator Assisted Patients----Costs incurred for enrollees who need
          ventilator treatment services qualify for reimbursement if the
          enrollee meets the following criteria:

          a.   For the purposes of this reimbursement, a ventilator-assisted
               patient must have died while on total respiratory support or must
               meet all of the criteria below:

               1)   The patient must require equipment that provides total
                    respiratory support. This equipment may be a volume
                    ventilator, a negative pressure ventilator, a continuous
                    positive airway pressure (CPAP) system, or a Bi (inspiratory
                    and expiratory) PAP. The patient may need a combination of
                    these systems. Any equipment used only for the treatment of
                    sleep apnea does not qualify as total respiratory support.

               2)   The total respiratory support must be required for a total
                    of six or more hours per 24 hours.

               3)   The patient must have total respiratory support for at least
                    30 days which need not be continuous.

               4)   The patient must have absolute need for the respiratory
                    support, as documented by appropriate blood gases.

          b.   The HMO will submit the following written documentation to
               qualify enrollees for reimbursement at the same time as the
               quarterly reports identified in Addendum IV:

               1)   The Department's designated form.


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               2)   A signed statement from the doctor attesting to the need of
                    the patient.

               3)   Copies of progress notes which show the need for
                    continuation of total ventilatory support, any change in the
                    type of ventilatory support and the removal of the
                    ventilatory support.

               Copies of lab reports must be submitted if the progress notes do
               not include blood gas levels.

          c.   Dates of enhanced funding are based on the following methodology:

               1)   Day one is the day that the patient is placed on the
                    ventilator. If the patient is on the ventilator for less
                    than six hours on the first day, the use must continue into
                    the next day and be more than six total hours.

               2)   Each day that the patient is on the ventilator for a part of
                    any day, as long as it is part of the six total hours per 24
                    hours, counts as a day for enhanced funding.

               3)   The period of enhanced funding starts on the first day of
                    the month that the patient was placed on ventilator support.
                    It ends on the last day of the month after which the patient
                    is removed from the ventilatory support, or at the end of
                    the hospital stay, whichever is later.

     2.   HMOs cannot claim additional reimbursement under both the NICU risk-
          sharing policy and the ventilator dependent policy for the same
          enrollee on the same date of service.

     3.   AIDS or HIV-Positive with Anti Retroviral Drug Treatment----Costs for
          services provided to enrollees with a confirmed diagnosis of AIDS, as
          indicated by an ICD-9-CM diagnosis code or HIV-Positive who are on
          anti retroviral drug treatment approved by the Food and Drug
          Administration, qualify for reimbursement. Written requests to qualify
          enrollees for reimbursement must be submitted by the HMO to the
          Contract Monitor. These requests should be batched and submitted with
          the reports identified in Addendum IV. A signed statement from a
          physician that indicates a diagnosis of AIDS or HIV-Positive and that
          the patient is on an Anti Retroviral Drug treatment must accompany
          each request. One hundred percent reimbursement will be effective for
          services provided on or after the first day of the month in which
          treatment begins.


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               a.   For AIDS and HIV -- Positive enrollees retroactively
                    disenrolled under Article VII of this Contract, the HMO will
                    have to back out the cost of the care provided during the
                    backdated period from the reports in Addendum IV. Part D.

               b.   Submission of Data -- As required by the Wisconsin
                    Administrative Code HFS 106.03, payment data or adjustment
                    data for AIDS and/or vent enrollees must be received by the
                    Department's fiscal agent within 365 days after the date of
                    the service. If the HMO cannot meet this requirement, the
                    HMO must provide documentation that substantiates the
                    delay. The Department will make the final determination to
                    pay or deny the services. The Department will exercise its
                    discretion reasonably in making the determination to waive
                    the 365-day billing requirement.

     4.   NICU days for which the HMO will collect 100 percent reimbursement
          cannot be counted under the NICU risk-sharing policy in this Contract.
          (HMOs cannot choose between the 100 percent policy and the NICU
          policy; if a cost qualifies under the 100 percent policy, it must be
          reported under that policy.)

          The HMO will manage the care of these enrollees, produce quarterly
          cost and utilization reports and meet with the Department on a
          quarterly basis to discuss cost and other issues related to care
          management for these.

     5.   The HMO must submit reports (eligibility summary, cost summary,
          inpatient hospital utilization summary, and detail) to the Department
          according to the schedule and in the format specified in Addendum IV.


                                  ARTICLE VI


VI.  REPORTS, DATA, AND COMPUTER/DATA REPORTING SYSTEM

     A.   Disclosure

          The HMO and any subcontractors shall make available to the Department,
          the Department's authorized agents, and appropriate representatives of
          the U.S. Department of Health and Family Services any financial
          records of the HMO or subcontractors which relate to the HMO's
          capacity to bear the risk of potential financial losses, or to the
          services performed and amounts paid or payable under this Contract.
          The HMO shall comply with applicable record keeping requirements
          specified in HFS 105.02(1)-(7) Wis. Adm. Code, as amended.


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     B.   Periodic Reports

          The HMO agrees to furnish within the Department's time frame and
          within the Department's stated form and format, information and/or
          data from its records to the Department, and to the Department's
          authorized agents, which the Department may require to administer this
          Contract, including but not limited to the following:

          1.   Summaries of amounts recovered from third parties for services
               rendered to enrollees under this Contract in the format specified
               in Addendum VI.

          2.   Enrollee summary utilization data to be submitted semiannually
               via electronic media and to include the data elements in the
               format specified in the Wisconsin Medicaid HMO Utilization
               Reporting User Manual for Reporting Period 2000.

               The Department will compare the summary data reported in this
               manner to data extracted from the encounter data set for the same
               time period using logic from the definitions obtained in the
               Wisconsin Medicaid HMO Utilization Reporting User Manual to
               ensure the completeness of the encounter data set. Based on the
               magnitude of any differences between the two data sets (summary
               vs. encounter), the Department retains the right to require the
               HMO to continue submitting summary utilization data during 2001.

               An encounter record for each service provided to enrollees. The
               Encounter data set will include at least those data elements
               specified in Addendum IV. The encounter data set must be
               submitted monthly via electronic media. Refer to Article I,
               Definitions, for the definition of an encounter.

          3.   Information and/or data to support the Department's monitoring
               and evaluation of the Medicaid/BadgerCare HMO Program to include,
               at a minimum, a Verification Data File supporting the utilization
               data from subpart 2, above.

          4.   Copies of all formal grievances and documentation of actions
               taken on each grievance, as specified in Article VIII. A. (11).

          5.   Birth Cost as specified in Addendum XXIII.


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     C.   Access to and Audit of Contract Records

          Throughout the duration of the Contract, and for a period of five (5)
          years after termination of the Contract, the HMO shall provide duly
          authorized representatives of the State or Federal government access
          to all records and material relating to the Contractor's provision of
          and reimbursement for activities contemplated under the Contract. Such
          access shall include the right to inspect, audit and reproduce all
          such records and material and to verify reports furnished in
          compliance with the provisions of the Contract. All information so
          obtained will be accorded confidential treatment as provided under
          applicable laws, rules or regulations.

     D.   Records Retention

          The HMO shall retain, preserve and make available upon request all
          records relating to the performance of its obligations under the
          Contract, including claim forms, paper and electronic, for a period of
          not less than five (5) years from the date of termination of the
          Contract. Records involving matters which are the subject of
          litigation shall be retained for a period of not less than five (5)
          years following the termination of litigation. Microfilm copies of the
          documents contemplated herein may be substituted for the originals
          with the prior written consent of the Department, provided that the
          microfilming procedures are approved by the Department as reliable and
          are supported by an effective retrieval system.

          Upon expiration of the five (5) year retention period, the subject
          records shall, upon request, be transferred to the Department's
          possession. No records shall be destroyed or otherwise disposed of
          without the prior written consent of the Department.

     E.   Special Reporting and Compliance Requirements

          The HMO shall comply with the following State and Federal reporting
          and compliance requirements for the services listed below, for the
          entire HMO, aggregating all service areas if the HMO has more than one
          service area:

          1.   Abortions shall comply with the requirements of Chapter 20.927,
               Wis. Stats., and with 42 CFR 441 Subpart E--Abortions.

          2.   Hysterectomies and sterilizations shall comply with 42 CFR 441
               Subpart F--Sterilizations.

          Sanctions in the amount of $10,000.00 may be imposed for non-
          compliance with the above special reporting and compliance
          requirements.


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F.   Reporting of Corporate and Other Changes

     If corporate restructuring or any other change affects the continuing
     accuracy of certain information previously reported by the HMO to the
     Department, the HMO shall report the change in information to the
     Department. The HMO shall report each such change in information as soon
     as possible, but not later than 30 days after the effective date of the
     change. Changes in information covered under this section include all of
     the following:

     1.   Any change in information previously provided by the HMO in response
          to questions posed by the Department in the current HMO Certification
          Application or any previous RFB for Medicaid/BadgerCare HMO Contracts.
          This includes any change in information originally provided by the HMO
          as a "new HMO," within the meaning of the HMO Certification
          Application or RFB.

     2.   Any change in information relevant to Article III, Section JJ of this
          Contract, relating to ineligible organizations.

     3.   Any change in information relevant to Section 4 of Addendum I of this
          Contract, relating to ownership and business transactions of the HMO.

G.   Computer/Data Reporting System

     The HMO must maintain a computer/data reporting system that meets the
     Department's following requirements. The HMO is responsible for complying
     with all of the reporting requirements established by the Department and
     with assuring the accuracy and completeness of the data as well as the
     timely submission of data. The data submitted must be supported by records
     available to the Department or its designee. The Department reserves the
     right to conduct on-site inspections and/or audits prior to awarding the
     Contract. The HMO must have a contact person responsible for the
     computer/data reporting system and in a position to answer questions from
     the Department and resolve problems identified by the Department in regard
     to the requirements listed below:

     1.   The HMO must have a claims processing system that is adequate to meet
          all claims processing and retrieval requirements specified in this
          Contract, specifically Article III. G.

     2.   The HMO must have a computer/data collection, processing, and
          reporting system sufficient to monitor HMO enrollment/ disenrollment
          (in order to determine on any specific day which recipients are
          enrolled or disenrolled from the HMO) and to monitor service
          utilization for the Utilization Management requirements of Quality
          Improvement that are specified in Article III. W. (9) of the Contract.


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     3.   The HMO must have a computer/data collection, processing, and
          reporting system sufficient to support the Quality Improvement (QI)
          requirements described in Article III. W. The system must be able to
          support the variety of QI monitoring and evaluation activities,
          including the monitoring/evaluation of quality of clinical care and
          service (III. W. (3)); periodic evaluation of HMO providers (III.
          W.(6)(b)); member feedback on QI (III. W. (7)(b) and (c)); maintenance
          of and use of medical records in QI (III. W. (8)(f) and (i)); and
          monitoring and evaluation of priority areas (III. W. (13)(a) - (f)).

     4.   The HMO must have a computer and data processing system sufficient to
          accurately produce the data, reports, and encounter data set, in the
          formats and time lines prescribed by the Department in this contract,
          that are included in Addendum IV of the Contract. HMOs are required to
          submit electronic test encounter data files as required by the
          Department in the format specified in the 2000-2001 HMO encounter data
          user manual and timelines specified in Addendum IV of the Contract and
          as may be further specified by the Department. The electronic test
          encounter data files are subject to Department review and approval
          before production data is accepted by the Department. Production
          claims or other documented encounter data must be used for the test
          data files.

     5.   The HMO must capture and maintain a claim record of each service or
          item provided to enrollees, using HCFA 1500, UB-92, NCPDP, or other
          claim, or claim formats that are adequate to meet all reporting
          requirements of this contact. The computerized database must be a
          complete and accurate representation of all services covered by the
          HMO for the contract period. The HMO is responsible for monitoring the
          integrity of the data base, and facilitating its appropriate use for
          such required reports as encounter data, summary utilization data, and
          targeted performance improvement studies.

     6.   The HMO must have a computer processing and reporting system that is
          capable of following or tracing an encounter within its system using a
          unique encounter record identification number for each encounter.

     7.   The HMO reporting system must have the ability to identify all denied
          claims/encounters using national ANSI EOB codes.

     8.   The HMO system must be capable of reporting original and reversed
          claim detail records and encounter records.

     9.   The HMO system must be capable of correcting an error to the encounter
          record within 90 days of notification by the Department.


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          10.  The HMO must notify the Department of all significant changes to
               the system that may impact the integrity of the data, including
               such changes as new claims processing software, new claims
               processing vendors and significant changes in personnel.


                                  ARTICLE VII


VII. ENROLLMENT AND DISENROLLMENTS

     A.   Enrollment

          The HMO shall accept as enrolled all persons who appear as enrollees
          on the HMO Enrollment Reports and newborns as defined in Article I.
          Enrollment in the HMO shall be voluntary by the recipient except where
          limited by Departmental implementation of a State Plan Amendment or a
          Section 1115(a) waiver. The current State Plan Amendment and 1115(a)
          waiver requires mandatory enrollment into an HMO for those service
          areas in which there are two or more HMOs with sufficient slots for
          the HMO eligible population. The Department reserves the right to
          assign a Medicaid/BadgerCare recipient to a specific HMO when the
          recipient fails to choose an HMO during a required enrollment period.

          The HMO shall designate, in Article XV, and Addendum XX, of this
          Contract, their maximum enrollment level for the different service
          areas of the HMO throughout the State. The Department may take up to
          60 days, from the date of written notification, to implement maximum
          enrollment level changes. The HMO shall accept as enrolled all
          persons who appear as enrollees on the HMO Enrollment Reports and
          newborns up to the HMO specified enrollment level for a particular
          service area. The number of enrollees may exceed the maximum
          enrollment level by 5 percent on a temporary basis. The Department
          does not guarantee any minimum enrollment level. The maximum
          enrollment level for a service area may be increased or decreased
          during the course of the contract period based on mutual acceptance of
          a different maximum enrollment level.

     B.   Third Trimester Pregnancy Disenrollment

          Enrollees who are in their third trimester of pregnancy when they are
          expected to enter an HMO may be eligible for disenrollment. In order
          for disenrollment to occur, the enrollee must have been automatically
          assigned or reassigned. In addition, they must be seeking care from a
          provider (physician and/or hospital) who is either not affiliated with
          the HMO to which they were assigned or is affiliated but the HMO is
          closed to new enrollment. Disenrollment requests can only be made by
          the enrollee and/or casehead. Disenrollment requests must be made
          before the end of the second month in the HMO or before the birth,


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          whichever occurs first. Disenrollment requests should be directed to
          the Enrollment Contractor or the Department's assigned HMO Contract
          Monitor.

     C.   Ninth Month Pregnancy Disenrollment

          Enrollees who deliver or are expected to deliver the first month they
          are assigned to a HMO may be eligible for disenrollment. In order for
          disenrollment to occur, the enrollee must have been automatically
          assigned or reassigned and must not have been in the HMO to which they
          were assigned or reassigned within the last seven months. In addition,
          they must be seeking care from a provider (physician and/or hospital)
          not affiliated with the HMO to which they were assigned. Disenrollment
          requests can be made by the HMO, a provider, or the recipient.
          Requests for ninth month pregnancy disenrollments should be directed
          to the Department's assigned HMO Contract Monitor.

     D.   Exemptions from Enrollment in any HMO and Disenrollment for Patients
          of Certified Nurse Midwives or Nurse Practitioners

          1.   Enrollees may be eligible for an exemption from enrollment if:

               a.   they reside in a service area of a certified nurse midwife
                    or nurse practitioner; and

               b.   they choose to receive their care from a certified nurse
                    midwife or nurse practitioner; and

               c.   the certified nurse midwife or nurse practitioner is not
                    affiliated with any HMO in the service area; or

               d.   the certified nurse midwife or nurse practitioner is not
                    independently certified as a provider of any HMO within the
                    service area.

          2.   Exemptions and disenrollment requests may be made by the enrollee
               and should be directed to the Department's Enrollment Contractor.
               Exemptions will be processed as soon as possible and will be
               effective as of the first of the month of request.

     E.   Exemption from Enrollment in any HMO and Disenrollment For AIDS or
          HIV-Positive with Anti Retroviral Drug Treatment

          Enrollees with a confirmed diagnosis of AIDS, as indicated by an ICD
          -9-CM diagnosis code, or HIV-Positive who are on anti retroviral drug
          treatment approved by the Federal Food and Drug Administration, are
          eligible for an exemption. The casehead may apply for the exemption.
          The HMO shall not counsel or otherwise influence an enrollee or
          potential enrollee in such a way as


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          to encourage exemption from enrollment or continued enrollment.
          Exemptions will be processed as soon as possible. Disenrollment will
          be effective with the first day of the month in which anti retroviral
          treatment begins or in which the enrollee was diagnosed with AIDS
          except that disenrollment will not be backdated more than nine (9)
          months from the date the request is received.

     F.   Exemptions from Enrollment in any HMO and Disenrollment for Patients
          of Federally Qualified Health Centers

          1.   Enrollees may be eligible for an exemption from enrollment if:

               a.   they reside in the service area of an FQHC;

               b.   they choose to receive their primary care from the FQHC; and

               c.   the FQHC is not affiliated with any HMO within the service
                    area.

          2.   Exemption and Disenrollment requests may be made by the casehead
               and should be directed to the Department's assigned HMO Contract
               Monitor. Exemptions will be processed as soon as possible and
               will be effective as of the first of the month of the request.

     G.   Native American Disenrollment

          Enrollees who are Native American and members of a federally
          recognized tribe are eligible for disenrollment. Only the enrollee can
          make disenrollment requests.

     H.   Special Disenrollments

          The HMO may request and the Department may approve disenrollment for
          specific cases or persons where there is just cause. Just cause is
          defined as a situation where enrollment would be harmful to the
          interests of the recipient or in which the HMO cannot provide the
          recipient with appropriate medically necessary contract services for
          reasons beyond its control.

     I.   Exemptions from Enrollment in any HMO and Disenrollment for Recipients
          With Commercial HMO Insurance or Commercial Insurance With a
          Restricted Provider Network

          Enrollees who have commercial HMO insurance may be eligible for
          exemption from enrollment in any HMO or disenrollment, if the
          commercial HMO does not participate in Medicaid. In addition,
          enrollees who have commercial insurance which limits enrollees to a
          restricted provider network (e.g., PPOs, PHOs, etc.) may be eligible
          for an exemption from enrollment in any HMO or


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          disenrollment. Requests for exemption and disenrollment should be
          directed to the Department's Enrollment Contractor. Exemptions will be
          processed as soon as possible and will be effective as of the first of
          the month of the request.

     J.   Exemption from Enrollment in any HMO and Disenrollment for Families
          Where One or More Members are receiving SSI benefits

          1.   Families may be eligible for exemption from enrollment if:

               a.   there are one or more members in the family who are
                    receiving SSI benefits, and

               b.   the SSI member receives primary care from a provider who
                    does not accept any Medicaid HMO, and

               c.   other family members receive their primary care from the
                    same provider as the SSI member.

          2.   Exemption and  Disenrollment requests may be made by the SSI
               member, parent or guardian and should be directed to the
               Department's Enrollment Contractor. Exemptions will be processed
               as soon as possible and will be effective as of the first of the
               month of request.

     K.   Voluntary Disenrollment

          All enrollees shall have the right to disenroll from the HMO pursuant
          to 42 CFR 434.27(b)(1) unless otherwise limited by a State Plan
          Amendment or a Section 1115(a) waiver of federal laws, or pursuant to
          Addendum II. A voluntary disenrollment shall be effective no later
          than the first day of the second month after the month in which the
          enrollee requests termination. The HMO will promptly forward to the
          Department or its designee all requests from enrollees for
          disenrollment. Wisconsin currently has a State Plan Amendment and an
          1115(a) waiver which allows the Department to "lock-in" enrollees to
          an HMO for a period of 12 months in mandatory HMO service areas,
          except that disenrollment is allowed for good cause as described in
          Sections B. through J. above. The lock-in policy is described more
          completely in Section O below. Addendum II allows voluntary exemptions
          and disenrollment from HMOs for a variety of reasons. Because of these
          two Department policies, voluntary disenrollment is limited to the
          situations described in Sections B. through K. of Article VII. and
          Addendum II.


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     L.   Section 1115(A) Waiver and State Plan Amendment

          Should the Department, at any time during the Contract, obtain a State
          Plan Amendment, a waiver or revised waiver authority under the Social
          Security Act (as amended), the conditions of enrollment described in
          the Contract, including but not limited to voluntary enrollment and
          the right to voluntary disenrollment, shall be amended by the terms of
          said waiver and State Plan Amendment.

     M.   Additional Services

          The HMO shall not obtain enrollment through the offer of any
          compensation, reward, or benefit to the enrollee except for additional
          health-related services which have been approved by the Department.

     N.   Enrollment/Disenrollment Practices

          The HMO shall permit the Department to monitor enrollment and
          disenrollment practices of the HMO under this Contract. The HMO will
          not discriminate in enrollment/disenrollment activities between
          individuals on the basis of health status or requirement for health
          care services, including those individuals who have AIDS or are HIV-
          Positive. This section shall not prevent the HMO from assisting in the
          disenrollment process for individuals who can be in a different
          medical status code.

     O.   Enrollee Lock-In Period

          Under the Department's State Plan Amendment and waiver authority of
          Section 1115(a) of the Social Security Act (as amended), in mandatory
          HMO service areas, enrollees will be locked in to an HMO for twelve
          months. The first 90 days of the 12-month lock-in period will be an
          open enrollment period in which the enrollee may change their HMO. The
          conditions of disenrollment as specified in VII. B - K still apply
          during this lock-in period.


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<PAGE>
                                 ARTICLE VIII



VIII.     GRIEVANCE PROCEDURES

          Medicaid/BadgerCare enrollees may grieve regarding any aspect of
          service delivery provided or arranged by the HMO.

          A.   Procedures

               The HMO shall:

               1.   Have written policies and procedures that detail what the
                    grievance system is and how it operates.

               2.   Identify a contact person in the HMO to receive grievances
                    and be responsible for routing/processing.

               3.   Operate an informal grievance/complaint process which
                    enrollees can use to get problems resolved without going
                    through the formal, written grievance process.

               4.   Operate a formal grievance process which enrollees can use
                    to grieve in writing.

               5.   Inform enrollees about the existence of the formal and
                    informal grievance/complaint processes and how to use the
                    formal and informal grievance process.

               6.   Attempt to resolve complaints informally.

               7.   Respond to written complaints (i.e., formal grievances)
                    in writing within 10 business days of receipt of grievance,
                    except that in cases of emergency or urgent (expedited
                    grievances) situations, HMOs must resolve the grievance
                    within 2 business days of receiving the complaint or sooner
                    if possible. This represents the first response. More
                    complete procedures are described in Section B. of this
                    Article.

               8.   Operate a grievance appeals process within the HMO which
                    enrollees can use to appeal any negative response to their
                    grievance to the Board of Directors of the HMO. The HMO
                    Board of Directors may delegate this authority to review
                    appeals to an HMO grievance appeal committee, but the
                    delegation must be in writing. If a grievance appeal
                    committee is established, the Medicaid HMO Advocate must be
                    a member of the committee.


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<PAGE>

          9.   Grant the enrollee the right to appear in person before the
               grievance committee, to present written and oral information. The
               enrollee may bring a representative to this meeting. The HMO must
               inform the enrollee in writing of the time and place of the
               meeting at least 7 calendar days before the meeting.

          10.  Maintain a record keeping system for informal grievances in the
               form of a "log" that includes a short, dated summary of each of
               the problems, the response, and the resolution. This log shall
               distinguish Medicaid/BadgerCare from commercial enrollees, if
               the HMO does not have a separate log for Medicaid. The HMO must
               submit quarterly reports to the Department of all informal
               grievances/complaints. The analysis of the log will include the
               number of informal grievances/complaints divided into two
               categories, program administration and benefits denials. The
               first report is due April 10, 2000.

          11.  Maintain a record keeping system for formal grievances that
               includes a copy of the original grievance, the response, and the
               resolution. This system shall distinguish Medicaid/BadgerCare
               from commercial enrollees. Beginning April 10 of each year and
               quarterly thereafter, the HMO shall forward copies of all formal
               grievances and documentation of actions taken on each grievance,
               for the previous quarter, to the Department, in the format
               specified under Addendum XXI.

          12.  Notify the enrollee who grieves, at the time of the initial HMO
               grievance decision denying the grievance, that the enrollee may
               appeal to the Division of Hearings and Appeals (DHA) or the
               Department.

          13.  Assure that individuals with the authority to require corrective
               action are involved in the grievance process.

          14.  Distribute to their gatekeepers* and IPAs the informational flyer
               on enrollee's grievance rights `(the ombudsman brochure). When a
               new brochure is available, the HMO shall distribute copies to
               their gatekeepers and IPAs within three weeks of receipt of the
               new brochure.

          15.  Assure that their gatekeepers* and IPAs have written procedures
               for describing how enrollees are informed of denied services. The
               HMO will make copies of the gatekeeper's and IPA's grievance
               procedures available for review upon request by the Department.


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               *The word "gatekeeper" in this context refers to any entity that
               performs a management services contract, a behavioral health
               science IPA, or a dental IPA, and not to individual physicians
               acting as a gatekeeper to primary care services.

     B.   Recipient Appeals of HMO Formal Grievance Decisions

          The enrollee may choose to use the HMO's formal grievance process or
          may appeal to the State instead of using the HMO's formal grievance
          process. If the enrollee chooses to use the HMO's process, the HMO
          must provide a first response within 10 business days and a final
          response within 30 calendar days of receiving the grievance. If the
          HMO is unable to resolve the grievance within 30 calendar days, the
          time period may be extended another 30 calendar days from receipt of
          the grievance if the HMO notifies the enrollee in writing that the HMO
          has not resolved the grievance, when the resolution may be expected
          and why the additional time is needed. The total timeline for HMOs to
          finalize a formal grievance may not exceed 60 calendar days from the
          date of the receipt of the grievance. Any formal grievance decision by
          the HMO may be appealed by the enrollee to the Department. The
          Department shall review such appeals and may affirm, modify, or reject
          any formal grievance decision of the HMO at any time after the formal
          appeal is filed by the enrollee. The Department will give final
          response within 30 days from the date the Department has all
          information needed for a decision. Also, an enrollee can submit a
          formal, written grievance directly to the Department. Any formal
          decision made by the Department under this section is subject to
          enrollee appeal rights to the extent provided by State and Federal
          Laws and rules. The Department will receive input from the recipient
          and the HMO in considering appeals.

     C.   Notifications of Denial, Termination, Suspension, or Reduction of
          Benefits to Enrollees

          1.   When an HMO, its gatekeepers,* or its IPAs discontinues,
               terminates, suspends, limits, or reduces a service (including
               services authorized by an HMO the enrollee was previously
               enrolled in or services received by the enrollee on a Medicaid
               fee-for-service basis), the HMO shall notify the affected
               enrollee(s) in writing of:

               a.   The nature of the intended action.

               b.   The reasons for the intended action.

               c.   The fact that the enrollee if appealing the action must do
                    so within forty-five (45) days.


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<PAGE>

               d.   An explanation of the enrollee's right to appeal the HMO's
                    decision to the Department.

               e.   The fact that the enrollee, if appealing the HMO action, may
                    file a request for a hearing with the Division of Hearings
                    and Appeals (DHA) and the address of the DHA.

               f.   The fact that the enrollee can receive help in filing a
                    grievance by calling either the Enrollment contractor or the
                    Ombudsman.

               g.   The telephone number of both the Enrollment contractor and
                    the Ombudsman.

               *The word "gatekeeper" in this context refers to any entity that
               performs a management services contract, a behavioral health
               science IPA, or a dental IPA, and not to individual physicians
               acting as a gatekeeper to primary care services.

               This notice requirement does not apply when an HMO, its
               gatekeeper or its IPA triages an enrollee to proper health care
               provider or when an individual health care provider determines
               that a service is medically unnecessary.

               The Department must review and approve all notice language prior
               to its use by the HMO. Department review and approval will occur
               during the Medicaid certification process of the HMO and prior to
               any change of the notice language by the HMO.

          2.   If the recipient files a request for a hearing with the Division
               of Hearings and Appeals within 10 days of the effective date of
               the decision to reduce, limit, terminate or suspend benefits,
               upon notification by the Division of Hearings and Appeals:

               a.   The Department will notify the enrollee they are eligible to
                    continue receiving care but may be liable for care if DHA
                    overturns the decision; and

               b.   The Department will put the enrollee on fee-for-service
                    status effective the first of the month in which the
                    enrollee received the termination, reduction, or suspension
                    notice from the HMO; and:

                    1)   If the Division of Hearings and Appeals reverses the
                         HMO's decision, the Department will recoup from the HMO
                         the amount paid for any benefits provided to the
                         enrollee during the period of the enrollee's fee-for-
                         service status while the decision was pending. The
                         enrollee will


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<PAGE>

                         be reenrolled into the HMO following the resolution of
                         the medical condition, the completion of medical,
                         psychological or dental services or the end of medical
                         necessity of the service(s) unless the HMO has reversed
                         its original decisions and agrees to reimburse the
                         provider(s) for services provided to the enrollee
                         during the administrative hearing process.

                    2)   If the Division of Hearings and Appeals upholds the
                         HMO's decision, the Department may pursue reimbursement
                         from the enrollee for all services provided to the
                         enrollee during their fee-for-service period. The
                         enrollee will be reenrolled into the HMO no later than
                         the end of the second month following notification from
                         the DHA.

     D.   Notifications of Denial of New Benefits to Enrollees

          When an HMO, its gatekeeper, or IPA denies a new service, the HMO
          shall notify the affected enrollee (s) in writing of:

          1.   The nature of the intended action.

          2.   The reasons for the intended action.

          3.   The fact that the enrollee if appealing the action must do so
               within forty-five (45) days.

          5.   An explanation of the enrollee's right to appeal the HMO's
               decision to the Department.

          6.   The fact that the enrollee can receive help in filing a grievance
               by calling either the Enrollment contractor or the Ombudsman.

          7.   The telephone number of both the Enrollment contractor and the
               Ombudsman.

          If the enrollee was not receiving the service prior to the denial, the
          HMO is not required to provide the benefit while the decision is being
          appealed.

          HMO grievance procedures must be reviewed and approved by the
          Department prior to signing the HMO Contract. All changes to HMO
          grievance procedures require prior review and approval by the
          Department.


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<PAGE>

                                  ARTICLE IX


IX.       REMEDIES FOR VIOLATION, BREACH, OR NON-PERFORMANCE OF CONTRACT

          A.   Suspension of New Enrollment

               Whenever the Department determines that the HMO is out of
               compliance with this Contract, the Department may suspend the
               HMO's right to receive new enrollment under this Contract. The
               Department, when exercising this option, must notify the HMO in
               writing of its intent to suspend new enrollment at least 30 days
               prior to the beginning of the suspension period. The suspension
               will take effect if the non-compliance remains uncorrected at the
               end of this period. The Department may suspend new enrollment
               sooner than the time period specified in this paragraph if the
               Department finds that enrollee health or welfare is jeopardized.
               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 expiration of the Contract as provided under
               Article XV.

               The Department may also notify enrollees of HMO non-compliance
               and provide an opportunity to enroll in another HMO.

          B.   Department-Initiated Enrollment Reductions

               The Department may reduce the maximum enrollment level and/or
               number of current enrollees whenever it determines that the HMO
               has failed to provide one or more of the contract services
               required under Article III or that the HMO has failed to maintain
               or make available any records or reports required under this
               Contract which the Department needs to determine whether the HMO
               is providing contract services as required under Article III. The
               HMO shall be given at least 30 days to correct the non-compliance
               prior to the Department taking any action set forth in this
               paragraph. The Department may reduce enrollment sooner than the
               time period specified in this paragraph if the Department finds
               that enrollee health or welfare is jeopardized.

          C.   Other Enrollment Reductions

               The Department may also suspend new enrollment or disenroll
               enrollees in anticipation of the HMO not being able to comply
               with federal or state law at its current enrollment level. Such
               suspension shall not be subject to the 30 day notification
               requirement.


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          D.   Withholding of Capitation Payments and Orders to Provide Services

               Notwithstanding the provisions of Article V, the Department may
               withhold portions of capitation payments as liquidated damages or
               otherwise recover damages from the HMO on the following grounds:

               1.   Whenever the Department determines that the HMO has failed
                    to provide one or more of the medically necessary Medicaid
                    covered contract services required under Article III, the
                    Department may either order the HMO to provide such service,
                    or withhold a portion of the HMO's capitation payments for
                    the following month or subsequent months, such portion
                    withheld to be equal to the amount of money the Department
                    must pay to provide such services.

                    If the Department orders the HMO to provide services under
                    this section and the HMO fails to provide the services
                    within the timeline specified by the Department, the
                    Department may withhold an amount up to 150 percent of the
                    fee-for-service amount for such services from the HMO's
                    capitation payments.

                    When it withholds payments under this section, the
                    Department must submit to the HMO a list of the participants
                    for whom payments are being withheld, the nature of the
                    service(s) denied, and payments the Department must make to
                    provide medically necessary services.

                    If the Department acts under this section and subsequently
                    determines that the services in question were not covered
                    services:

                    a.   In the event the Department withheld payments it shall
                         restore to the HMO the full capitation payment, or

                    b.   In the event the Department ordered the HMO to provide
                         services under this section, it shall pay the HMO the
                         actual documented cost of providing the services.

               2.   If the HMO fails to submit required data and/or information
                    to the Department or the Department's authorized agents, or
                    fails to submit such data or information in the required
                    form or format, by the deadline specified by the Department,
                    the Department may immediately impose liquidated damages in
                    the amount of $1,500 per day for each day beyond the
                    deadline that the HMO fails to submit the data or fails to
                    submit the data in the required form or format, such
                    liquidated damages to be deducted from the HMO's capitation
                    payments.


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<PAGE>

               3.   If the HMO fails to submit State and Federal reporting and
                    compliance requirements for abortions, hysterectomies and
                    sterilizations, the Department may impose liquidated damages
                    in the amount of $10,000 per reporting period.

               4.   If the HMO fails to correct an error to the encounter
                    record within the timeframe specified, the Department may
                    assess liquidated damages of $5 per erred encounter record
                    per month until the error has been corrected. The liquidated
                    damage amount will be deducted from the HMO's capitation
                    payment. When applied, these liquidated damages will be
                    calculated and assessed on a monthly basis.

                    If upon audit or review, the Department finds that the HMO
                    has, without Department approval, removed an erred encounter
                    record, the Department may assess liquidated damages for
                    each day from the date of original error notification until
                    the date of correction.

                    The term "erred encounter record" means an encounter record
                    that has failed an edit when a correction is expected by the
                    Department.

                    The following criteria will be used prior to assessing
                    liquidated damages:

                    .    The Department will calculate a percentage rate by
                         dividing the number of erred records not corrected
                         within 90 days (numerator), by the total number of
                         records in error (denominator) and multiply the result
                         by 100.

                    .    Records failing non-critical edits, as defined in the
                         Wisconsin Medicaid/BadgerCare HMO 2000-2001 Encounter
                         Data User Manual, will not be included in the
                         numerator.

                    .    If this rate is 2 percent or less, liquidated damages
                         will not be assessed.

                    .    The Department will calculate this rate each month.

               5.   Whenever the Department determines that the HMO has failed
                    to perform an administrative function required under this
                    Contract, the Department may withhold a portion of future
                    capitation payments. For the purposes of this section,
                    "administrative function" is defined as any contract
                    obligation other than the actual provision of contract
                    services. The amount withheld by the Department under this
                    section will be an amount that the Department determines in
                    the reasonable exercise of its discretion to approximate the
                    cost to the Department to perform the


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<PAGE>

                    function. The Department may increase these amounts by 50
                    percent for each subsequent non-compliance.

                    Whenever the Department determines that the HMO has failed
                    to perform the administrative functions defined in Article
                    V. H. (1) and (2), the Department may withhold a portion of
                    future capitation payments sufficient to directly compensate
                    the Department for the Medicaid/BadgerCare program's costs
                    of providing health care services and items to individuals
                    insured by said insurers and/or the insurers/employers
                    represented by said third party administrators.

               6.   In any case under this Contract where the Department has the
                    authority to withhold capitation payments, the Department
                    also has the authority to use all other legal processes for
                    the recovery of damages.

               7.   Notwithstanding the provisions of this subsection, in any
                    case where the Department deducts a portion of capitation
                    payments under subsection (2) above, the following
                    procedures shall be used:

                    a.   The Department will notify the HMO's contract
                         administrator no later than the second business day
                         after Department's deadline that the HMO has failed to
                         submit the required data or the required data cannot be
                         processed.

                    b.   The HMO will be subject to liquidated damages without
                         further notification per submission, per data file or
                         report, beginning on the second business day after the
                         Department's deadline.

                    c.   If the late submission of data is for encounter data,
                         and the HMO responds with a submission of the data
                         within five (5) business days from the deadline, the
                         Department will rescind liquidated damages if the data
                         can be processed according to the criteria published in
                         the Wisconsin Medicaid/BadgerCare HMO 2000-2001
                         Encounter Data User Manual. The Department will not
                         edit the data until the process period in the
                         subsequent month.

                    d.   If the late submission is for any other required data
                         or report, and the HMO responds with a submission of
                         the data in the required format within five (5)
                         business days from the deadline, the Department will
                         rescind liquidated damages and immediately process the
                         data or report.


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<PAGE>

                    e.   If the HMO repeatedly fails to submit required data or
                         reports, or data that cannot be processed, the
                         Department will require the HMO to develop an action
                         plan to comply with the contract requirements that must
                         meet Department approval.

                    f.   If the HMO, after a corrective action plan has been
                         implemented, continues to submit data beyond the
                         deadline, or continues to submit data that cannot be
                         processed, the Department will invoke the remedies
                         under Article IX, section A (SUSPENSION OF NEW
                         ENROLLMENT), from section B (DEPARTMENT-INITIATED
                         ENROLLMENT REDUCTIONS), or both, in addition to
                         liquidated damages that may have been imposed for a
                         current violation.

                    g.   If an HMO notifies the Department it is discontinuing
                         contracting with the Department at the end of a
                         contract period, but reports or data are due for a
                         contract period, the Department retains the right to
                         withhold up to two months of capitation payments
                         otherwise due the HMO which will not be released to
                         the HMO until all required reports or data are
                         submitted and accepted after expiration of the
                         contract. Upon determination by the Department that the
                         reports and data are accepted, the Department will
                         release the monies withheld.

     E.   Inappropriate Payment Denials

          HMOs that inappropriately fail to provide or deny payments for
          services may be subject to suspension of new enrollments, withholding,
          in full or in part, of capitation payments, contract termination, or
          refusal to contract in a future time period, as determined by the
          Department. The Department will select among these sanctions based
          upon the nature of the services in question, whether the failure or
          denial was an isolated instance or a repeated pattern or practice, and
          whether the health of an enrollee was injured, threatened or
          jeopardized by the failure or denial. 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 the documented abuse from other sources).

     F.   Sanctions

          Section 1903(m)(5)(B)(ii) of the Social Security Act vests the
          Secretary of the Department of Health and Human Services with the
          authority to deny Medicaid payments to an HMO for enrollees who enroll
          after the date on which the HMO has been found to have committed one
          of the violations identified in the federal law. State payments for
          enrollees of the contracting organization are


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<PAGE>

          automatically denied whenever, and for so long as, Federal payment for
          such enrollees has been denied as a result of the commission of such
          violations.

     G.   Sanctions and Remedial Actions

          The Department may pursue all sanctions and remedial actions with
          HMOs that are taken with Medicaid fee-for-service providers,
          including any civil penalties not to exceed the amounts specified in
          the Balanced Budget Amendment of 1997 P.L. 105-33 Sec. 4707(a) [42
          U.S.C. 1396v(d)(2)].


                                   ARTICLE X


X.        TERMINATION AND MODIFICATION OF CONTRACT

          A.   Mutual Consent

               This Contract may be terminated at any time by mutual written
               agreement of both the HMO and the Department.

          B.   Unilateral Termination

               This Contract between the parties may be terminated only as
               follows:

               1.   This Contract may be terminated at any time, by either
                    party, due to modifications mandated by changes in Federal
                    or State laws, rules or regulations, that materially affect
                    either party's rights or responsibilities under this
                    Contract. In such case, the party initiating such
                    termination procedures must notify the other party, at least
                    90 days prior to the proposed date of termination, of its
                    intent to terminate this Contract. Termination by the
                    Department under these circumstances shall impose an
                    obligation upon the Department to pay the Contractor's
                    reasonable and necessarily incurred termination expenses.

               2.   This Contract may be terminated by either party at any time
                    if it determines that the other party has substantially
                    failed to perform any of its functions or duties under this
                    Contract. In such event, the party exercising this option
                    must notify the other party, in writing, of this intent to
                    terminate this Contract and give the other party 30 days to
                    correct the identified violation, breach or non-performance
                    of Contract. If such violation, breach or non-performance of
                    Contract is not satisfactorily addressed within this time
                    period, the exercising party may terminate this Contract.
                    The termination date shall always be the last day of a
                    month. The Contract may be terminated by the Department
                    sooner than the time period specified in this paragraph if
                    the Department


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                    finds that enrollee health or welfare is jeopardized by
                    continued enrollment in the HMO. A "substantial failure to
                    perform" for purposes of this paragraph includes any
                    violation of any requirement of this Contract that is
                    repeated or ongoing, that goes to the essentials or purpose
                    of the Contract, or that injures, jeopardizes or threatens
                    the health, safety, welfare, rights or other interests of
                    enrollees.

               3.   By either party, in the event Federal or State funding of
                    contractual services rendered by the Contractor become or
                    will become permanently unavailable. In the event it becomes
                    evident State or Federal funding of claims payments or
                    contractual services rendered by the Contractor will be
                    temporarily suspended or unavailable, the Department shall
                    immediately notify the Contractor, in writing, identifying
                    the basis for the anticipated unavailability or suspension
                    of funding. Upon such notice, the Department or the
                    Contractor may suspend performance of any or all of the
                    Contractor's obligations under this Contract if the
                    suspension or unavailability of funding will preclude
                    reimbursement for performance of those obligations. The
                    Department or Contractor shall attempt to give notice of
                    suspension of performance of any or all of the Contractor's
                    obligations by 60 calendar days prior to said suspension, if
                    this is possible; otherwise, such notice of suspension
                    should be made as soon as possible. In the event funding
                    temporarily suspended or unavailable is reinstated, the
                    Contractor may remove suspension hereunder by written notice
                    to the Department, to be made within 30 calendar days from
                    the date the funds are reinstated. In the event the
                    Contractor elects not to reinstate services, the Contractor
                    shall give the Department written notice of its reasons for
                    such decision, to be made within 30 calendar days from the
                    date the funds are reinstated. The Contractor shall make
                    such decision in good faith and will provide to the
                    Department documentation supporting its decision. In the
                    event of termination under this Section, this Contract shall
                    terminate without termination costs to either party.

     C.   Obligations of Contracting Parties

          When termination of the Contract occurs, the following obligations
          shall be met by the parties:

          1.   Where this Contract is terminated unilaterally by the Department,
               due to non-performance by the HMO or by mutual consent with
               termination initiated by the HMO:

               a.   The Department shall be responsible for notifying all
                    enrollees of the date of termination and process by which
                    the enrollees will continue to receive contract services;
                    and


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               b.   The HMO shall be responsible for all expenses related to
                    said notification.

          2.   Where this Contract is terminated on any basis not given in (1)
               above:

               a.   The Department shall be responsible for notifying all
                    enrollees of the date of termination and process by which
                    the enrollees will continue to receive contract services;
                    and

               b.   The Department shall be responsible for all expenses
                    relating to said notification.

          3.   Where this Contract is terminated for any reason:

               a.   Any payments advanced to the HMO for coverage of enrollees
                    for periods after the date of termination shall be returned
                    to the Department within the period of time specified by the
                    Department; and

               b.   The HMO shall supply all information necessary for the
                    reimbursement of any outstanding Medicaid/BadgerCare claims
                    within the period of time specified by the Department.

          4.   If a contract is terminated, recoupments will be handled through
               a payment by the HMO within 90 days of contract termination.

     D.   Modification

          This Contract may be modified at any time by written mutual consent of
          the HMO and the Department or when modifications are mandated by
          changes in Federal or State laws, rules or regulations. In the event
          that changes in State or Federal law, rule or regulation require the
          Department to modify its contract with the HMO, notice shall be made
          to the HMO in writing. However, the capitation rate to the HMO can be
          modified only as provided in Article V relating to RENEGOTIATION.

          If the Department exercises its right to renew this Contract, as
          allowed by Article XV, the Department will recalculate the capitation
          rate for succeeding calendar years. The HMO will have 30 days to
          accept the new capitation rate in writing or to initiate termination
          of the Contract. If the Department changes the reporting requirements
          during the contract period, the HMO shall have 180 days to comply
          with such changes or to initiate termination of the Contract.


HMO Contract for January 1, 2000 - December 31, 2001

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<PAGE>

                                  ARTICLE XI


XI.       INTERPRETATION OF CONTRACT LANGUAGE

          A.   Interpretations

               The Department has the right to final interpretation of the
               contract language when disputes arise. The HMO has the right to
               appeal to the Department or invoke the procedures outlined in
               Chapter 788, Wis. Stats. if it disagrees with the Department's
               decision. Until a decision is reached, the HMO shall abide by the
               interpretation of the Department.


                                  ARTICLE XII


XIII.     CONFIDENTIALITY OF RECORDS

          A.   The parties agree that all information, records, and data
               collected in connection with this Contract shall be protected
               from unauthorized disclosure as provided in Chapter 19,
               Subchapter II, Wis. Stats., HFS 108.01, Wis. Admin. Code, and 42
               CFR 431 Subpart F. Except as otherwise required by law, rule or
               regulation, access to such information shall be limited by the
               HMO and the Department to persons who, or agencies which, require
               the information in order to perform their duties related to this
               Contract, including the U.S. Department of Health and Human
               Services and such others as may be required by the Department.

          B.   The HMO agrees to forward to the Department all media contacts
               regarding Medicaid/BadgerCare enrollees or the
               Medicaid/BadgerCare program.


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                                     -101-

<PAGE>

                                 ARTICLE XIII


XIII.     DOCUMENTS CONSTITUTING CONTRACT

          A.   Current Documents

               The contract between the parties to this Contract shall include,
               in addition to this document, existing Medicaid Provider
               Publications addressed to HMOs, the terms of the most recent HMO
               Certification Application issued by this Department for
               Medicaid/BadgerCare HMO Contracts, any Questions and Answers
               released pursuant to said HMO Certification Application by this
               Department, and an HMO's signed application. The terms of the HMO
               Certification Application are also part of this Contract even if
               the HMO had a Medicaid/BadgerCare HMO Contract in the prior
               contract period and consequently did not have to answer all the
               questions in the HMO Certification Application. In the event of
               any conflict in provisions among these documents, the terms of
               this Contract shall prevail. The provisions in any Question and
               Answer Document shall prevail over the HMO Certification
               Application. And the HMO Certification Application terms shall
               prevail over any conflict with an HMO's actual signed
               application. In addition, the Contract shall incorporate the
               following Addenda:

                       I.  Subcontracts and Memoranda of Understanding

                      II.  Policy Guidelines for Mental Health/Substance Abuse
                           and Community Human Service Programs

                     III.  Risk-Sharing for Inpatient Hospital Services (if the
                           HMO has elected to risk-share with the Department)

                      IV.  Contract Specified Reporting Requirements

                       V.  Standard Enrollee Handbook Language

                      VI.  COB Report Format

                     VII.  Actuarial Basis

                    VIII.  Compliance Agreement: Affirmative Action/Civil Rights

                      IX.  Model MOU for Prenatal Care Coordination

                       X.  Bureau of Milwaukee Child Welfare MOU

                      XI.  HealthCheck Worksheet

                     XII.  Common Carrier Transportation MOU for Milwaukee
                           County

                    XIII.  Model MOU for School Districts or CESAs

                     XIV.  Guidelines for Coordination of Services between HMOs,
                           Targeted Case Management Agencies, and Child Welfare
                           Agencies


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                                     -102-

<PAGE>

                      XV.  Performance Improvement Project Outline

                     XVI.  Targeted Performance Improvement Measures Data Set

                    XVII.  Medicaid/BC HMO Newborn Report

                   XVIII.  Recommended Childhood Immunization Schedule

                     XIX.  Reporting Requirements for NICU Risk-Sharing

                      XX.  Specific Terms of the Medicaid/BC HMO Contract

                     XXI.  Formal Grievance Experience Summary Report

                    XXII.  Guidelines for the Coordination of Services Between
                           Medicaid HMOs and County Birth to Three (B-3)
                           Agencies

                   XXIII.  Wisconsin Medicaid HMO Report on Average Birth Cost
                           by County

                    XXIV.  Local Health Departments and Community-Based Health
                           Organizations - A Resource for HMOs

                     XXV.  General Information About the WIC Program, Sample
                           HMO-to-WIC Referral Form, and Statewide List of WIC
                           Agencies


     B.   Future Documents

          The HMO is required, by this Contract, to comply with all future
          Medicaid Provider Publications addressed to the HMOs and Contract
          Interpretation Bulletins issued pursuant to this Contract.

     C.   The documents listed above constitute the entire Contract between the
          parties and no other expression, whether oral or written, constitutes
          any part of this Contract.


                                  ARTICLE XIV


XIV. MISCELLANEOUS

     A.   Indemnification

          The HMO agrees to defend, indemnify and hold the Department harmless,
          with respect to any and all claims, costs, damages and expenses,
          including reasonable attorney's fees, which are related to or arise
          out of:

          1.   Any failure, inability, or refusal of the HMO or any of its
               subcontractors to provide contract services;


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                                     -103-

<PAGE>

               2.   The negligent provision of contract services by the HMO or
                    any of its subcontractors; or

               3.   Any failure, inability or refusal of the HMO to pay any of
                    its subcontractors for contract services.

     B.   Independent Capacity of Contractor

          Department and HMO agree that HMO and any agents or employees of HMO,
          in the performance of this Contract, shall act in an independent
          capacity, and not as officers or employees of Department.

     C.   Omissions

          In the event that either party hereto discovers any material omission
          in the provisions of this Contract which such party believes is
          essential to the successful performance of this Contract, said party
          may so inform the other party in writing, and the parties hereto shall
          thereafter promptly negotiate in good faith with respect to such
          matters for the purpose of making such reasonable adjustments as may
          be necessary to perform the objectives of this Contract.

     D.   Choice of Law

          This Contract shall be governed by and construed in accordance with
          the laws of the State of Wisconsin. HMO shall be required to bring all
          legal proceedings against Department in Wisconsin State courts.

     E.   Waiver

          No delay or failure by either party hereto to exercise any right or
          power accruing upon noncompliance or default by the other party with
          respect to any of the terms of this Contract shall impair such right
          or power or be construed to be a waiver thereof. A waiver by either of
          the parties hereto of a breach of any of the covenants, conditions, or
          agreements to be performed by the other shall not be construed to be a
          waiver of any succeeding breach thereof or of any other covenant,
          condition, or agreement herein contained.

     F.   Severability

          If any provision of this Contract is declared or found to be illegal,
          unenforceable, invalid or void, then both parties shall be relieved of
          all obligations arising under such provision; but if such provision
          does not relate to payments or services to Medicaid/BadgerCare
          enrollees and if the remainder of this Contract shall not be affected
          by such declaration or finding, then each

HMO Contract for January 1, 2000 - December 31, 2001

                                     -104-

<PAGE>

          provision not so affected shall be enforced to the fullest extent
          permitted by law.

     G.   Force Majeure

          Both parties shall be excused from performance hereunder for any
          period that they are prevented from meeting the terms of this Contract
          as a result of a catastrophic occurrence or natural disaster including
          but not limited to an act of war, and excluding labor disputes.

     H.   Headings

          The article and section headings used herein are for reference and
          convenience only and shall not enter into the interpretation hereof.

     I.   Assignability

          Except as allowed under subcontracting, the Contract is not assignable
          by the HMO either in whole or in part, without the prior written
          consent of the Department.

     J.   Right to Publish

          The Department agrees to allow the HMO to write and have such writing
          published provided the HMO receives prior written approval from the
          Department before publishing writings on subjects associated with the
          work under this Contract.

     K.   Year 2000 Compliance

          Contractor warrants that:


          1.   All computer hardware, software or processes that we use in
               administering this contract have been tested for and will be
               fully Year 2000 compliant, which means they are capable of
               correctly and consistently handling all date-based functions
               before, during and after the Year 2000;

          2.   The date change from 1999 to 2000, or any other date changes,
               will not prevent goods, services or licenses from operating in a
               merchantable manner, for the purposes intended and is accordance
               with all applicable plans and specifications and without
               interruption before, during and after the Year 2000;

          3.   Contractor's internal systems will be Year 2000 compliant, such
               that Contractor will be able to deliver goods, services and
               licenses as required by this contract.


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                                     -105-

<PAGE>

               Contractor will not be held responsible for its failure to comply
               with this Year 2000 standard if such noncompliance results
               directly or indirectly from invalid or noncompliant information
               and/or data furnished to it by the Department or its
               representatives, agents, affiliates or subcontractors.

               In addition, the Contractor shall develop a written contingency
               plan which will ensure the protection of the health and safety of
               its clients and the ability to meet its contract obligations in
               the event that the Contractor experiences failures attributable
               to the date change from 1999 to 2000, or any other date change.


HMO Contract for January 1, 2000 - December 31, 2001

                                     -106-

<PAGE>

                                  ARTICLE XV


XV.       HMO SPECIFIC CONTRACT TERMS

          A.   Initial Contract Period

               The respective rights and obligations of the parties as set forth
               in this Contract shall commence on January 1, 2000, and, unless
               earlier terminated under Article X, shall remain in full force
               and effect through December 31, 2001. The specific terms for
               enrollment, rates, risk-sharing, dental coverage, and
               chiropractic coverage are as specified in C.

          B.   Renewals

               By mutual written agreement of the parties, there may be one (1)
               one-year renewal of the term of the Contract. An agreement to
               renew must be effected at least forty-five (45) calendar days
               prior to the expiration date of any contract term. The terms and
               conditions of the Contract shall remain in full force and effect
               throughout any renewal period, unless modified under the
               provision of Article X., Section D.

          C.   Specific Terms of the Contract

               The specific terms of the Medicaid/BadgerCare HMO Contract that
               the HMO is agreeing to are indicated by the Department in a
               completed Addendum XX - Specific Terms of the Medicaid/BadgerCare
               HMO Contract. These specific terms include the following items:
               the service area to be covered; and, whether dental services and
               chiropractic services will be provided by the HMO and the HMO's
               maximum enrollment level for each area; finally, whether the HMO,
               on a State-wide basis, will participate or not participate in
               risk-sharing under Addendum III. The Department has completed
               Addendum XX based on the information supplied the Department by
               the HMO in the HMO Certification Application.

          In WITNESS WHEREOF, the State of Wisconsin has executed this
          agreement:

          Managed Health Services
--------------------------------------------------------------------------------
               (Name of HMO)                         State of Wisconsin
================================================================================
  Official Signature                         Official Signature

        /s/ ILLEGIBLE                              /s/ ILLEGIBLE
--------------------------------------------------------------------------------
  Title                                      Title
        President and CEO                          Deputy Administrator
--------------------------------------------------------------------------------
  Date  3/29/00                                    9/19/00
--------------------------------------------------------------------------------


HMO Contract for January 1, 2000 - December 31, 2001

                                     -107-

<PAGE>

Note: The following subcontract with the Department for Chiropractic Services is
not effective unless signed below.

                     SUBCONTRACT FOR CHIROPRACTIC SERVICES

A.   THIS AGREEMENT is made and entered into by and between the HMO and the
     Department of Health and Family Services.

     The parties agree as follows:

     1.   The Department agrees to be at risk for and pay claims for
          chiropractic services covered under this Contract.

     2.   The HMO agrees to a deduction from the capitation rate of an amount of
          money based on the cost of chiropractic services. This deduction is
          reflected in the Contract that is being signed on the same date.

B.   This is the only subcontract for services that the Department is entering
     into with the HMO.

C.   The provisions of the Contract regarding subcontracts, in Addendum I, do
     not apply to this subcontract.

D.   The term of this subcontract is for the same period as the Contract between
     HMO and Department for medical services.

Signed: /s/ ILLEGIBLE                            /s/ ILLEGIBLE

FOR                                       FOR
HMO: Managed Health Services              STATE: State of Wisconsin
     -------------------------------             -----------------------------

TITLE: President and CEO                  TITLE: Deputy Administrator
       -----------------------------             -----------------------------

DATE: 3/29/00                             DATE: 9/19/00
      ------------------------------            ------------------------------

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                                     -108-