Document:

<PAGE>
                                                                   Exhibit 10.21

                                                     TDH Doc. 7526032317* 01-02A

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

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

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

         2.0               DEFINITION

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

         4.10              CLAIMS PROCESSING REQUIREMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Article XII is amended to read as follows:

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

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

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

Texas Department of Health                         AMERICAID Texas Inc.

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

Approved as to Form:

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

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

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

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

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

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

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

2.0               DEFINITIONS

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

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

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

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

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

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

3.5               RECORDS REQUIREMENTS AND RECORDS RETENTION

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

6.6               BEHAVIORAL HEALTH CARE SERVICES - SPECIFIC REQUIREMENTS

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

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6.8               TEXAS HEALTH STEPS (EPSDT)

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

7.2               PROVIDER CONTRACTS

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

7.5               MEMBER PANEL REPORTS

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

7.7               PROVIDER QUALIFICATIONS - GENERAL

                  The providers in HMO network must meet the following
                  qualifications:

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

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

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

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

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

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

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

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

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

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

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

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

7.10              SPECIALTY CARE PROVIDERS

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

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7.11              SPECIAL HOSPITALS AND SPECIALTY CARE FACILITIES

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

8.2               MEMBER HANDBOOK

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

8.4               MEMBER ID CARDS

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

9.2               MARKETING ORIENTATION AND TRAINING

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

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

10.1              MODEL MIS REQUIREMENTS

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

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

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

                  -    A new plan is brought into the program

                  -    An existing plan begins business in a new SDA

                  -    An existing plan changes location

                  -    An existing plan changes their processing system

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

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

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

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

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

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

10.3              ENROLLMENT ELIGIBILITY SUBSYSTEM

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

12.1              FINANCIAL REPORTS

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

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

12.5              PROVIDER NETWORK REPORTS

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

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

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

12.13             EXPEDITED PRENATAL OUTREACH REPORT

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

13.1              CAPITATION AMOUNTS

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

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

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<PAGE>

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

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

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

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

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

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

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

13.2              EXPERIENCE REBATE TO THE STATE

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

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

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

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

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

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

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<PAGE>

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

13.3              PERFORMANCE OBJECTIVES\INCENTIVES

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

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

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

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

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                                       11
<PAGE>

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

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

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

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

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

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

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

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<PAGE>

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

13.5.4            NEWBORN AND PREGNANT WOMAN PAYMENT PROVISIONS

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

15.6              ASSIGNMENT

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

16.3              DEFAULT BY HMO

16.3.14.1         REMEDIES AVAILABLE TO HHSC FOR THIS HMO DEFAULT

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

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<PAGE>

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

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

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

-    Suspend new enrollment as set out in Article 18.3;

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

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

16.3.15           FAILURE TO PERFORM A MATERIAL DUTY OR RESPONSIBILITY

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

16.3.15.1         REMEDIES AVAILABLE TO HHSC FOR THIS HMO DEFAULT

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

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

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

-    Suspend new enrollment as set out in Article 18.3;

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

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

18.1.6            TERMINATION BY HMO

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

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                                       13
<PAGE>

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

18.2              DUTIES OF CONTRACTING PARTIES UPON TERMINATION

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

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

Article XIX       TERM

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

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

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

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

HEALTH AND HUMAN SERVICES COMMISSION                   AMERIGROUP Texas, Inc.

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

Approved as to Form:

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

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                                       14

<PAGE>

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

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

1.       ARTICLE XVIII IS AMENDED TO READ AS FOLLOWS:

15.2              AMENDMENT AND CHANGE REQUEST PROCESS

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

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

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

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

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

15.2.6            Change Request Process.

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

October 30, 2001

                                                                          1 of 3

<PAGE>

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

15.2.6.2          Change Order Approval Procedure

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

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

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

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

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

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

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

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

October 30, 2001

                                                                          2 of 3

<PAGE>

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

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

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

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

Health and Human Services Commission          AMERIGROUP Texas, Inc.

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

Approved as to Form:

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

October 30, 2001

                                                                          3 of 3

<PAGE>

         ATTACHMENT 1

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

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

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

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

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

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

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

1999 Contract
August 1999                                                           Appendix C

                                     1 of 2

<PAGE>

         ATTACHMENT 1

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

1999 Contract
August 1999                                                          Appendix C

                                     2 of 2

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

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

1. Article XIII is amended to read as follows:

ARTICLE   XIII PAYMENT PROVISIONS

13.1      CAPITATION AMOUNTS

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

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

                                                    PPAC Rate Increase Amendment
                                                                        12/12/01

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

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

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

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

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

                                                    PPAC Rate Increase Amendment
                                                                        12/12/01

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

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

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

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

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

Health and Human Services Commission                      AMERIGROUP Texas, Inc.

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

Approved as to Form:

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

                                                    PPAC Rate Increase Amendment
                                                                        12/12/01

<PAGE>

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

<PAGE>

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

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

<PAGE>

                                                    HHSC CONTRACT NO. 529-03-037

STATE OF TEXAS
COUNTY OF TRAVIS

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

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

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

                               ARTICLE 1. PURPOSE.

SECTION 1.01 AUTHORIZATION.

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

SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES.

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

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 GENERAL

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

SECTION 2.02 MODIFICATION OF SECTION 1.4, RENEWAL REVIEWS

     Section 1.4 is replaced with the following language:

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

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SECTION 2.03 MODIFICATION OF ARTICLE 2, DEFINITIONS

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

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

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

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

                    (b) serious impairment to bodily functions;

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

                    (d) serious disfigurement; or

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

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

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

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

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

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

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

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

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

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

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

     Section 3.4.3 is replaced with the following language:

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

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

     Section 3.5.1 is replaced with the following language:

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

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

SECTION 2.06 MODIFICATION OF SECTION 3.7, HMO TELEPHONE ACCESS REQUIREMENTS

     Section 3.7. is replaced with the following language:

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

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

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

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<PAGE>

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

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

SECTION 2.07 MODIFICATION OF SECTION 4.3, PERFORMANCE BOND

     Section 4.3 is replaced with the following language:

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

SECTION 2.08 MODIFICATION OF SECTION 4.6, AUDIT

     Section 4.6.2 is replaced with the following language:

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

SECTION 2.09 MODIFICATION OF SECTION 4.9, THIRD PARTY RECOVERY

     Section 4.9.2 is replaced with the following language:

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

SECTION 2.10 MODIFICATION OF SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS

     Section 4.10.8 is replaced with the following language:

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<PAGE>

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

SECTION 2.11 MODIFICATION TO SECTION 5.4, SAFEGUARDING INFORMATION

     Section 5.4. is replaced with the following language:

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

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

     Sections 5.6.1 through 5.6.3 are replaced with the following language:

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

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

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

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<PAGE>

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

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

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

SECTION 2.13 MODIFICATION OF SECTION 5.10, NOTICE AND APPEAL

     Section 5.10 is replaced with the following:

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

SECTION  2.14 MODIFICATION OF SECTION 6.3, SPAN OF ELIGIBILITY

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

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

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

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

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

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

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

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

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                                  Page 6 of 17

<PAGE>

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

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

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

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

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

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

     Section 6.4.3 is replaced with the following language:

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

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

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

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<PAGE>

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

SECTION 2.16 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES

     Section 6.5.1 is replaced with the following language:

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

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

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

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

     Section 6.6.8 is replaced with the following language:

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<PAGE>

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

SECTION 2.18 MODIFICATION TO SECTION 6.16, BLIND AND DISABLED MEMBERS

     Section 6.16.1 is replaced with the following language:

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

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

SECTION 2.19 MODIFICATION OF SECTION 8.4, MEMBER ID CARDS

     Section 8.4.1 is replaced with the following language:

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

SECTION 2.20 MODIFICATION OF SECTION 10.1, MODEL MIS REQUIREMENTS

     Section 10.1.3.6 is replaced with the following language:

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

SECTION 2.21 MODIFICATION OF SECTION 10.4, PROVIDER SUBSYSTEM

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

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

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

SECTION 2.22 MODIFICATION OF SECTION 10.9, DATA INTERFACE SUBSYSTEM

     Section 10.9.3 is replaced with the following language:

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<PAGE>

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

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

                    2. Maintain history on provider enrollment/disenrollment.

                    3. Identify PCP capacity.

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

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

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

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

     Section 10.11 is deleted in its entirety.

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

     Section 10.12 is added as follows:

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

SECTION 2.25 MODIFICATION OF SECTION 12.1., FINANCIAL REPORTS

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

                    12.1.2       [Deleted]

                    12.3         [Deleted]

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

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

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

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                                 Page 10 of 17

<PAGE>

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

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

                    12.1.7       [Deleted]

                    12.1.10      [Deleted]

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

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

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

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

     Section 12.4 is replaced with the following language:

HHSC Contract 529-03-037

                                 Page 11 of 17

<PAGE>

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

SECTION 2.27 MODIFICATION OF SECTION 12.6, MEMBER COMPLAINTS

     Section 12.6 is replaced with the following language:

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

SECTION 2.28 MODIFICATION OF SECTION 12.13, EXPEDITED PRENATAL OUTREACH REPORT

     Section 12.13 is deleted in its entirety.

SECTION 2.29 ADDITION OF SECTION 12.14, MEMBER HOTLINE PERFORMANCE REPORT

     Section 12.14 is added as follows:

                    "12.14       MEMBER HOTLINE PERFORMANCE REPORT

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

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

     Section 12.15 is added as follows:

                    "12.15       SUBMISSION OF STAR DELIVERABLES/REPORTS

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

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

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

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

HHSC Contract 529-03-037

                                 Page 12 of 17

<PAGE>

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

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

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

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

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

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

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

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

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

SECTION 2.31 MODIFICATIONS TO SECTION 13.1, CAPITATION AMOUNTS

     Section 13.1.7.1 is added:

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

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

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

HHSC Contract 529-03-037

                                 Page 13 of 17

<PAGE>

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

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

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

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

HHSC Contract 529-03-037

                                 Page 14 of 17

<PAGE>

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

SECTION 2.33 SECTION 13.3, PERFORMANCE OBJECTIVES

     Section 13.3.9 is replaced with the following language:

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

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

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

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

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

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

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

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

HHSC Contract 529-03-037

                                 Page 15 of 17

<PAGE>

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

SECTION 2.35 MODIFICATION OF 14.3, NEWBORN ENROLLMENT

     Section 14.3.1.1 is replaced with the following language:

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

SECTION 2.36 MODIFICATION OF SECTION 15.12, NOTICES

     Section 15.12 is replaced with the following language:

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

SECTION 2.37 MODIFICATION OF SECTION 18.1.6, TERMINATION BY HMO

     Section 18.1.6 is replaced with the following language:

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

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

     Section 18.10 is replaced with the following language:

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

HHSC Contract 529-03-037

                                 Page 16 of 17

<PAGE>

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

SECTION 1.01 MODIFICATION OF SECTION 19.1, CONTRACT TERM

     Section 19.1 is replaced with the following language:

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

SECTION 1.02 MODIFICATIONS TO CONTRACT APPENDICES.

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

               -    Appendix B, HUB

               -    Appendix C, Value-added Services

               -    Appendix F, Texas Trauma Facilities

               -    Appendix G, Texas Hemophilia Centers

               -    Appendix I, Financial Statistical Report

               -    Appendix K, Preventive Health Performance Objectives

            ARTICLE 2. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

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

        AMERIGROUP TEXAS, INC.           HEALTH & HUMAN SERVICES COMMISSION

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

Date: 8/27/2002                        Date: 8.29.02

HHSC Contract 529-03-037

                                 Page 17 of 17
<PAGE>

                                                    HHSC CONTRACT NO. 529-03-037

STATE OF TEXAS

COUNTY OF TRAVIS

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

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

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

                               ARTICLE 1. PURPOSE.

SECTION 1.01 AUTHORIZATION.

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

SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES.

     This Amendment is effective November 1, 2002.

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 MODIFICATION OF ARTICLE 2 DEFINITIONS

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

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

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

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

HHSC Contract 529-03-037

                                  Page 1 of 4

<PAGE>

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

SECTION 2.02 MODIFICATION TO SECTION 13.2, EXPERIENCE REBATE TO STATE

     Section 13.2 is replaced with the following language:

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

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

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

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

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

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

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

HHSC Contract 529-03-037

                                  Page 2 of 4

<PAGE>

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

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

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

             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

HHSC Contract 529-03-037

                                  Page 3 of 4

<PAGE>

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

          AMERIGROUP TEXAS, INC.            HEALTH & HUMAN SERVICES COMMISSION

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

Date: ________________________           Date:_______________________________

HHSC Contract 529-03-037

                                  Page 4 of 4
<PAGE>

                                   AMENDMENT 8

                                TO THE AGREEMENT
                                   BETWEEN THE

                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                             AMERIGROUP TEXAS, INC.

                                       FOR
                               HEALTH SERVICES TO
                            THE MEDICAID STAR PROGRAM

                                     IN THE
                          DALLAS SERVICE DELIVERY AREA

<PAGE>

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

                                TABLE OF CONTENTS

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

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

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

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

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

                                        i
<PAGE>

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

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

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

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

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

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

                    (b)  serious impairment to bodily functions;

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

                    (d)  serious disfigurement; or

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

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

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

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

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

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

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

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<PAGE>

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

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

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

SECTION 2.03 MODIFICATION TO ARTICLE 3.2, NON-PROVIDER SUBCONTRACTS

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

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

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

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

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

     Section 3.5.5, Medical Records, is modified as follows:

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

SECTION 2.05 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS

     Section 4.10.8 is modified as follows:

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

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

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

     Section 5.11 is added as follows:

                    "5.11     DATA CERTIFICATION

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

                         (a) encounter data;

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

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

                         5.11.3 The certification must:

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

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

SECTION 2.07 SECTION 6.1, SCOPE OF SERVICES

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

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

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

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

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<PAGE>

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

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

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

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

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

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

SECTION 2.09 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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<PAGE>

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

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

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

                    (b) the HMO cannot be contacted;

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

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

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<PAGE>

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

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

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

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

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

                    6.13.9.1  Participate in hospital discharge planning;

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

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

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

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

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

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<PAGE>

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

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

SECTION 2.11 MODIFICATION OF SECTION 7.1.3, TIMEFRAMES FOR ACCESS REQUIREMENTS

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

                    "7.1.3.5  Prenatal Care within 2 weeks of request."

SECTION 2.12 MODIFICATION OF SECTION 7.2, PROVIDER CONTRACTS

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

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

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

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

SECTION 2.13 MODIFICATION OF SECTION 7.7, PROVIDER QUALIFICATIONS - GENERAL

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

                    "7.7.1 PROVIDER QUALIFICATIONS - GENERAL

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

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                                     10 of 27
<PAGE>

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

                    "7.7.2    PROVIDER CREDENTIALING AND RECREDENTIALING

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

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

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

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

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

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

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

                    b) Valid DEA or CDS certificate, as applicable;

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

                    d) Work history;

                    e) Professional liability claims history;

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

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

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

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

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

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

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

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

                    n) Any history of chemical dependency/substance abuse;

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 2.14 MODIFICATION OF SECTION 7.8, PRIMARY CARE PROVIDERS

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

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

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

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

SECTION 2.15 MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK

     Section 8.2.4 is added with the following language:

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

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SECTION 2.16 MODIFICATION OF SECTION 8.5, MEMBER COMPLAINTS

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

                    "8.5      MEMBER COMPLAINT AND APPEAL SYSTEM

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

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

                    8.5.1     MEMBER COMPLAINT PROCESS

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

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

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

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

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

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

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

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

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

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

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

                    8.5.2     STANDARD MEMBER APPEAL PROCESS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                    8.5.3     EXPEDITED HMO APPEALS

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

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

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

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

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

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

                    8.5.4     ACCESS TO STATE FAIR HEARING

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

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

                    8.5.5     NOTICES OF ACTION AND DISPOSITION OF APPEALS

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

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

                    (b) the reasons for the action;

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

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

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

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

                    (g) the date the action will be taken;

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

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

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

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

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

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

                    8.5.5.2   TIMEFRAME FOR NOTICE OF ACTION

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

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

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

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

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

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

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

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

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

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

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

                    (a) the right to request a fair hearing,

                    (b) how to request a state fair hearing,

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

                    (d) how to request the continuation of benefits,

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

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

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

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

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

                    8.6       [deleted]

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

     New Section 9.1.1 is added as follows:

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

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

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

HHSC Contract 529-03-037-H

                                    21 of 27
<PAGE>

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

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

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

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

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

                    "11.1     QUALITY ASSESSMENT AND PERFORMANCE IMPROVEMENT
                              PROGRAM

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

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

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

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

                    "11.7     PRACTICE GUIDELINES

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

HHSC Contract 529-03-037-H

                                    22 of 27
<PAGE>

SECTION 2.23 MODIFICATION OF ARTICLE 12, REPORTING REQUIREMENTS

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

                    "12.6     MEMBER COMPLAINTS & APPEALS

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

                    12.8      UTILIZATION MANAGEMENT REPORTS

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

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

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

                    12.8.4    Qualified medical professionals supervise
               preauthorization and concurrent review decisions.

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

                    12.9      [deleted]"

SECTION 2.24 MODIFICATION OF SECTION 12.10, QUALITY IMPROVEMENT REPORTS

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

                    "12.10.1  [deleted]

                    12.10.2   [deleted]

                    12.10.3   [deleted]

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

HHSC Contract 529-03-037-H

                                    23 of 27
<PAGE>

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

SECTION 2.25 MODIFICATION OF SECTION 13.1, CAPITATION AMOUNTS

          Section 13.1.2 is modified as follows:

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

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

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

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

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

SECTION 2.26 MODIFICATION OF SECTION 13.3, PERFORMANCE OBJECTIVES

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

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

                    13.3.2    [deleted]

                    13.3.3    [deleted]

                    13.3.4    [deleted]

                    13.3.5    [deleted]

                    13.3.6    [deleted]

                    13.3.7    [deleted)

                    13.3.8    [deleted]

                    13.3.9    [deleted]

                    13.3.10   [deleted]

HHSC Contract 529-03-037-H

                                    24 of 27
<PAGE>

                    13.3.10.1 [deleted]

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

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

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

SECTION 2.28 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION

          Section 14.1.2.8 is modified as follows and 14.1.2.9 is deleted:

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

                    14.1.2.9  [deleted]"

SECTION 2.29 MODIFICATION OF ARTICLE 15, GENERAL PROVISIONS

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

                    "15.14 GLOBAL DRAFTING CONVENTIONS.

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

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

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

SECTION 2.30 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO

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

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

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

HHSC Contract 529-03-037-H

                                    25 of 27
<PAGE>

SECTION 2.31 MODIFICATION OF SECTION 18.8, CIVIL MONETARY PENALTIES

          Sections 18.8.2 and 18.8.7 are modified as follows:

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

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

SECTION 2.32 MODIFICATION OF ARTICLE 19, TERM

          Section 19.1 is modified as follows:

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

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

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

SECTION 2.34 MODIFICATION TO APPENDIX D, CRITICAL ELEMENTS

                    Appendix D is replaced with the attached Appendix D.

SECTION 2.35 MODIFICATION OF APPENDIX E, TRANSPLANT FACILITIES

                    Appendix E is replaced with the attached Appendix E.

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

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

SECTION 2.37 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES

                    Appendix K is replaced with the attached Appendix K

HHSC Contract 529-03-037-H
                                    26 of 27
<PAGE>

             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

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

    AMERIGROUP TEXAS, INC.                    HEALTH & HUMAN SERVICES COMMISSION

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

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

HHSC Contract 529-03-037-H

                                    27 of 27<PAGE>

                                                                   Exhibit 10.22

                                    AMENDMENT

         This is an amendment ("Amendment") of the Contract for Services
relating to Medicaid STAR + PLUS for Harris County between the Texas Department
of Human Services ("TDHS") and Amerigroup Texas, Inc. ("HMO") executed on August
30, 2002, to be effective on September 1, 2002 ("STAR + PLUS Contract"). TDHS
and HMO agree to amend the STAR + PLUS Contract as follows:

     1.   Without Cause Termination. Either TDHS or HMO may terminate the STAR +
          PLUS Contract without cause. The party terminating the STAR + PLUS
          Contract must give the other party 90 days written notice of intent to
          terminate. The termination date will be calculated as the last day of
          the month following 90 days from the date the notice of intent to
          terminate is received by TDHS. Notwithstanding any other provision of
          this Amendment of the STAR + PLUS Contract, neither TDHS nor HMO can
          exercise this termination provision until after midnight on February
          28, 2003.

     2.   Transition Period. If either party terminates the STAR + PLUS
          Contract pursuant to Paragraph 1 above, TDHS and HMO must prepare a
          transition plan, which is acceptable to and approved by TDHS, to
          ensure that Members are reassigned to other plans without interruption
          of services. That transition plan shall be implemented during the
          90-day period between receipt of notice and the termination date. HMO
          must continue to perform services under the transition plan until the
          last day of the month following 90 days from the date of receipt of
          notice.

     3.   Effective Date. The effective date of this Amendment is September 1,
          2002.

IN WITNESS HEREOF, TDHS and the HMO have each caused this Amendment to be signed
and delivered by its duly authorized representative.

AMERIGROUP TEXAS, INC.                       TEXAS DEPARTMENT OF HUMAN SERVICES

By: /s/ James D. Donovan, Jr.                By: /s/ [ILLEGIBLE]
    --------------------------                   ------------------------------
    James D. Donovan, Jr.                        James R. Hine
    President and CEO                            Commissioner

Date: 8/30/2002                              Date: 6/30/02

<PAGE>

                                                    TDHS CONTRACT NO. 65M1015HPC
STATE OF TEXAS

COUNTY OF HARRIS

                                AMENDMENT FY03-03
                          TO THE AGREEMENT BETWEEN THE
                       TEXAS DEPARTMENT OF HUMAN SERVICES
                                       AND
                              AMERIGROUP TEXAS INC
                               FOR HEALTH SERVICES
                                     TO THE
                           MEDICAID STAR+PLUS PROGRAM

          THIS CONTRACT AMENDMENT (the "Amendment") is entered into between the
TEXAS DEPARTMENT of HUMAN SERVICES ("TDHS") and AMERIGROUP TEXAS INC
("CONTRACTOR"), a health maintenance organization organized under the laws of
the State of Texas, possessing a certificate of authority issued by the Texas
Department of Insurance to operate as a health maintenance organization, and
having its principal office at 2730 North Stemmons Freeway Suite 608, Dallas,
Texas. TDHS and CONTRACTOR may be referred to in this Amendment individually as
a "Party" and collectively as the "Parties. " The effective date of this
amendment is November 1, 2002. The parties agree to amend the Contract as
follows:

                        ARTICLE 13.1.2 CAPITATION AMOUNTS

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                                                                FY 2003
                                                       Monthly Capitation Amounts
       Member Risk Groups                                 11/1/2002 - 8/31/2003
---------------------------------------------------------------------------------
<S>                                                    <C>
CBA Waiver Clients-Dual Eligible                              $    1,294.50
---------------------------------------------------------------------------------
CBA Waiver Clients-Medicaid Only                              $    2,917.06
---------------------------------------------------------------------------------
Other Community Clients-Dual Eligible                         $      128.77
---------------------------------------------------------------------------------
Other Community Clients-Medicaid Only                         $      608.43
---------------------------------------------------------------------------------
Nursing Home-Dual Eligible (4 months)                         $      128.77
---------------------------------------------------------------------------------
Nursing Home-Medicaid Only (4 months)                         $      608.43
---------------------------------------------------------------------------------
</TABLE>

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

             ARTICLE 1. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

POST-IT(TM) brand fax transmittal memo 7671    # OF PAGE 5

To    Bobbie Jo Jones               From    Don Mann
Co.   AMERIGROUP                    Co.     HHSC
Dept.                               Phone # (512)685-3175
Fax # (757)222-2377                 Fax #

TDHS Contract 65M1015HPC

                                  Page 1 of 2

<PAGE>

     IN WITNESS HEREOF, TDHS and the CONTRACTOR have each caused this Amendment
to be signed and delivered by its duly authorized representative.

AMERIGROUP TEXAS INC                                   TEXAS DEPARTMENT OF HUMAN
                                                                SERVICES

By: /s/ Jim Donovan                                 By: /s/ [ILLEGIBLE]
    ---------------                                     ---------------------
    Jim Donovan                                         James R. Hine
    President                                           Commissioner

Date : 11/4/2002                                    Date:____________________

Approved as to Form:

/s/ K. O.
-------------------------
Office of General Counsel

TDHS Contract 65M1015HPC

                                  Page 2 of 2

<PAGE>

                                                    TDHS CONTRACT NO. 65M1015HPC

STATE OF TEXAS

COUNTY OF HARRIS

                                AMENDMENT FY03-04
                          TO THE AGREEMENT BETWEEN THE
                       TEXAS DEPARTMENT OF HUMAN SERVICES
                                       AND
                             AMERIGROUP TEXAS, INC.
                              FOR HEALTH SERVICES
                                     TO THE
                           MEDICAID STAR+PLUS PROGRAM

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

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

                               ARTICLE 1. PURPOSE.

SECTION 1.01 AUTHORIZATION.

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

SECTION 1.02 GENERAL EFFECTIVE DATE OF CHANGES.

     This Amendment is effective November 1, 2002.

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 MODIFICATION OF ARTICLE 2, DEFINITIONS

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

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

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

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

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

TDHS Contract No. 65M1015HPC

                                  Page 1 of 3

<PAGE>

SECTION 2.02 MODIFICATION TO SECTION 13.2, EXPERIENCE REBATE TO STATE

     Section 13.2 is replaced with the following language:

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

<TABLE>
<CAPTION>
---------------------------------------------------------
                 GRADUATED REBATE FORMULA
---------------------------------------------------------
Net Income Before Taxes as
   a Percentage of Total
         Revenues              HMO Share       TDHS Share
---------------------------------------------------------
<S>                            <C>             <C>
0% - 3%                           100%              0%
---------------------------------------------------------
Over 3% - 7%                       75%             25%
---------------------------------------------------------
Over 7% - 10%                      50%             50%
---------------------------------------------------------
Over 10% - 15%                     25%             75%
---------------------------------------------------------
Over 15%                            0%            100%
---------------------------------------------------------
</TABLE>

                    13.2.2      Deleted in its entirety.

                    13.2.2.1    Deleted in its entirety.

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

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

                    For the 1st and 2nd Experience Rebate Periods, to the Net
               Income Before Taxes for the STAR+PLUS Medicaid service area
               contracted between TDHS and HMO.

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

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

                    13.2.5      There will be two settlements for payment(s) of
               the experience rebate for the 1st Experience Rebate Period, two
               settlements for payment(s) of the experience rebate for the 2nd
               Experience Rebate Period, and two settlements for payment(s) of
               the experience rebate for the 3rd Experience Rebate Period.
               Settlement payments for the 1st and

TDHS Contract No. 65M1015HPC

                                  Page 2 of 3

<PAGE>

               2nd Experience Rebate Periods are payable to the Texas Department
               of Human Services. Settlement payments for the 3rd Experience
               Rebate Period are payable to the HHSC. The first settlement for
               the specified Experience Rebate Period shall equal 100 percent of
               the experience rebate as derived from Net Income Before Taxes
               reduced by any value-added services expenses in the first Final
               MCFS Report and shall be paid on the same day that the first
               Final MCFS Report is submitted to TDHS for the specified time
               period. The second settlement shall be an adjustment to the first
               settlement and shall be paid on the same day that the second
               Final MCFS Report is submitted to TDHS for that specified time
               period if the adjustment is a payment from HMO to TDHS. If the
               adjustment is a payment from TDHS to HMO, TDHS shall pay such
               adjustment to HMO within thirty (30) days of receipt of the
               second Final MCFS Report. TDHS or its agent may audit the MCFS
               Reports. If TDHS determines that corrections to the MCFS Reports
               are required, based on an audit of other documentation acceptable
               to TDHS, to determine an adjustment to the amount of the second
               settlement, then final adjustment shall be made within three (3)
               years from the date that the HMO submits the second Final MCFS
               Report. HMO must pay the first and second settlements on the due
               dates for the first and second Final MCFS Reports, respectively,
               as identified in Article 12.1.2. TDHS may adjust the experience
               rebate if TDHS determines HMO has paid (an) affiliate(s) amounts
               for goods or services that are higher than the fair market value
               of the goods and services in the service area. Fair market value
               may be based on the amount HMO pays (a) non-affiliate(s) or the
               amount another HMO pays for the same or similar goods and
               services in the service area. TDHS will have final authority in
               auditing and determining the amount of the experience rebate.

             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

     IN WITNESS HEREOF, TDHS and the CONTRACTOR have each caused this Amendment
to be signed and delivered by its duly authorized representative.

      AMERIGROUP TEXAS, INC.                 TEXAS DEPARTMENT OF HUMAN SERVICES

By: /s/ James D. Donovan, Jr.            By: /s/ [ILLEGIBLE]
    -------------------------                ------------------------------
    James D. Donovan, Jr.                    James R. Hine
    President and CEO                        Commissioner

Date: 11/04/2002                         Date: ____________________________

Approved as to Form:

/s/ K.O.
-------------------------
Office of General Counsel

TDHS Contract No. 65M1015HPC

                                  Page 3 of 3
<PAGE>

                                   AMENDMENT 5

                            TO THE AGREEMENT BETWEEN
                     THE HEALTH & HUMAN SERVICES COMMISSION
                                 AND AMERIGROUP

                               FOR HEALTH SERVICES
                                     TO THE
                           MEDICAID STAR+PLUS PROGRAM

<PAGE>

STAR+PLUS BBA Amendment                     Health and Human Services Commission

                                   AMENDMENT 5
                          TO THE AGREEMENT BETWEEN THE
                HEALTH & HUMAN SERVICES COMMISSION AND AMERIGROUP
              FOR HEALTH SERVICES TO THE MEDICAID STAR+PLUS PROGRAM

                                TABLE OF CONTENTS

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

   Section 1.01     Authorization................................................................................    1
   Section 1.02     Modifications................................................................................    1
   Section 1.03     General Effective Date of Changes............................................................    1

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

   Section 2.01     General......................................................................................    1
   Section 2.02     Modification to Article 1 Parties and Authority to Contract..................................    1
   Section 2.03     Modification of Article 2, Definitions.......................................................    2
   Section 2.04     Modification of Article 3, Plan Administrative and Human Resource Requirements...............    4
   Section 2.05     Modification of Section 3.7, Requirements for Education, Training and
                    Advisory Committee Activities................................................................    5
   Section 2.06     Modification to Section 4.10, Claims Processing Requirements.................................    6
   Section 2.07     Modification of Article 5, Statutory and Regulatory Compliance Requirements..................    7
   Section 2.08     Modification to Section 6.1, Scope of Services...............................................    9
   Section 2.09     Section 2.09 Addition to Section 6.4, Continuity of Care and Out-of-Network Providers........   10
   Section 2.10     Modification of Section 6.5, Emergency Services..............................................   11
   Section 2.11     Section 2.11 Modification of Section 6.6, Behavioral Health Services
                     - Specific Requirements.....................................................................   12
   Section 2.12     Modifications to Section 6.8, Texas Health Steps.............................................   13
   Section 2.13     Modification of Section 6.9, Perinatal Services..............................................   14
   Section 2.14     Modification of 6.11 Special, Supplemental Nutrition Program for Women,
                    Infants and Children (WIC) - Specific Requirements...........................................   15
   Section 2.15     Modification of Section 6.12.4.3, Tuberculosis...............................................   15
   Section 2.16     Modification of Section 6.13, Health Education and Wellness and Prevention Plan..............   15
   Section 2.17     Modification to Section 6.14, Care Coordination and Transition Plan for
                    Long Term Care Services......................................................................   17
   Section 2.18     Modification of Section 6.15, 1915(c) Waiver Service (Community Based Alternatives)..........   18
   Section 2.19     Modification of Section 6.16, Blind and Disabled Members.....................................   19
   Section 2.20     Addition to Article 6, Scope of Services.....................................................   20
   Section 2.21     Addition to-Article 6, Scope of Services.....................................................   23
   Section 2.22     Addition to Article 6, Scope of Services.....................................................   24
   Section 2.23     Modification of Section 7.1, Network Provider Directory......................................   25
   Section 2.24     Modification of Section 7.2, Provider Accessibility..........................................   26
   Section 2.25     Modification to Section 7.3, Provider Contracts..............................................   29
   Section 2.26     Modification to Section 7.4, Physician Incentive Plan........................................   30
   Section 2.27     Modification to Section 7.5, Provider Manual and Provider Training...........................   31
   Section 2.28     Modification to Section 7.6, Member Panel Reports............................................   31
   Section 2.29     Modification of Section 7.7, Provider Complaint and Appeal Procedures........................   31
   Section 2.30     Modification of Section 7.8, Provider Qualifications - General...............................   33
   Section 2.31     Modification to Section 7.9, Primary Care Providers..........................................   36
   Section 2.32     Modification to Section 7.10, OB/GYN Providers...............................................   37
   Section 2.33     Modification to Section 7.11, Specialty Care Providers.......................................   38
   Section 2.34     Modification to Section 7.11, Special Hospitals And Specialty Care Facilities................   38
   Section 2.35     Modification to Section 7.13, Behavioral health- Local Mental Health Authority (LMHA)........   39
   Section 2.36     Modification Of Section 7.14, Significant Traditional Providers (STPS).......................   40
   Section 2.37     Addition to Article 7, Provider Network Requirements.........................................   40
</TABLE>

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                                  Page i of 65
<PAGE>

STAR+PLUS BBA Amendment                     Health and Human Services Commission

<TABLE>
<S>                                                                                                                 <C>
   Section 2.38     Addition to Article 7, Provider Network Requirements.........................................   42
   Section 2.39     Addition to Article 7, Provider Network Requirements.........................................   43
   Section 2.40     Modification of Section 8.2, Member Handbook.................................................   44
   Section 2.41     Modification of Section 8.5, Member Hotline..................................................   45
   Section 2.42     Modification to Section 8.6, Member Complaint Process........................................   46
   Section 2.43     Modification of Section 8.7, Member Notices, Appeals, and Fair Hearings......................   47
   Section 2.44     Addition to Article 8, Member Services Requirements..........................................   48
   Section 2.45     Modification to Section 9.2 Adherence to Marketing Guidelines With
                    Marketing Orientation and Training...........................................................   48
   Section 2.46     Addition to Article 9, Marketing and Prohibited Practices....................................   48
   Section 2.47     Modification of Section 10.1, Model MIS Requirements.........................................   50
   Section 2.48     Modification of Section 10.7, Utilization/Quality Improvement Subsystem......................   50
   Section 2.49     Modification of Article 11, Quality Assessment and Performance Improvement Program...........   50
   Section 2.50     Modification of Section 12.1, Financial Reports..............................................   51
   Section 2.51     Modification of Section 12.2, Statistical Reports............................................   53
   Section 2.52     Modification of Section 12.8, Utilization Management Reports -- Behavioral Health............   54
   Section 2.53     Section 2.53 Modification of Section 12.9, Utilization Managements Reports --
                    Physical Health..............................................................................   54
   Section 2.54     Modification of Section 12.10 Utilization Management Reports -- Long Term Care...............   54
   Section 2.55     Modification of Section 12.11 Quality Improvement Reports....................................   55
   Section 2.56     Modification of Section 12.12, HUB Quarterly Reports.........................................   55
   Section 2.57     Modification of Section 11.13 THSTEPS Reports................................................   55
   Section 2.58     Modification of Section 12.14, CBA Status Report.............................................   55
   Section 2.59     Modification of Section 12.15, Submission of STAR+PLUS Deliverables/Reports..................   56
   Section 2.60     Addition to Article 12, Reporting Requirements...............................................   57
   Section 2.61     Modification to Section 13.2, Capitation Amounts.............................................   57
   Section 2.62     Modification to Section 13.2, Experience Rebate to State.....................................   57
   Section 2.63     Modification to Section 13.3, Adjustments to Premium.........................................   59
   Section 2.64     Modification to Section 13.4, CBA Reassessment Packet........................................   59
   Section 2.65     Addition to Article 13, Payment Provisions...................................................   60
   Section 2.66     Modification of Section 14.1, Eligibility Determination......................................   60
   Section 2.67     Modification of Section 14.3, Plan Changes from HMO and Disenrollment
                    from Managed Care............................................................................   62
   Section 2.68     Modification of Section 14.4, Automatic Re-enrollment........................................   62
   Section 2.69     Modification of Section 14.5, Enrollment Reports.............................................   63
   Section 2.70     Addition to Article 14, Eligibility, Enrollment, and Disenrollment...........................   63
   Section 2.71     Addition to Article 15, General Provisions...................................................   63
   Section 2.72     Modification of Section 16.3, Default by HMO.................................................   64
   Section 2.73     Modification to Appendix A, Value Added Services.............................................   64
   Section 2.74     Modification of Appendix E, Cost Principles for Administrative Expenses......................   64
   Section 2.75     Modification to Appendix K, Performance Objectives...........................................   64
   Section 2.76     Addition of Appendix L, Value Added Services.................................................   64
   Section 2.77     Addition of Appendix M, Cost Principles for Administrative Expenses..........................   64
   Section 2.78     Addition of New Appendix O, Standard for Medical Records.....................................   64
</TABLE>

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                                  Page ii of 65
<PAGE>
                                                    HHSC CONTRACT NO. 65M1015HPC

STATE OF TEXAS

COUNTY OF TRAVIS

                                   AMENDMENT 5
                          TO THE AGREEMENT BETWEEN THE
                       HEALTH & HUMAN SERVICES COMMISSION
                                       AND
                              AMERIGROUP _________
                               FOR HEALTH SERVICES
                                     TO THE
                                STAR+PLUS PROGRAM

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

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

                               ARTICLE 1. PURPOSE

SECTION 1.01 AUTHORIZATION.

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

SECTION 1.02 MODIFICATIONS.

     The Parties amend the Agreement to provide for HHSC's recoupment of certain
     duplicate premium payments for Members concurrently enrolled in Medicaid
     and CHIP.

SECTION 1.03 GENERAL EFFECTIVE DATE OF CHANGES.

     This Amendment is effective August 13, 2003 and terminates on August 31,
     2004, unless extended or terminated sooner by HHSC in accordance with the
     Agreement.

             ARTICLE 2. AMENDMENT TO THE OBLIGATIONS OF THE PARTIES

SECTION 2.01 GENERAL

     This Amendment is to incorporate the Department of Health and Human
     Services rules pertaining to the Balanced Budget Act found in 42 CFR Parts
     400, 430, 431, 434, 435, 438, 440, and 447 . This amendment also replaces
     the Texas Department of Human Services (TDHS) with the Health and Human
     Services Commission (HHSC).

SECTION 2.02 MODIFICATION TO ARTICLE 1 PARTIES AND AUTHORITY TO CONTRACT

     Article 1, Parties and Authority to Contract, is replaced with the
     following language, Substituted current contract language to match STAR
     contract language as follows:

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

         1.1.1 The Texas Legislature has designated the Texas Health and Human
         Services Commission (HHSC) as the single State agency to administer the
         Medicaid program in the State of Texas. HHSC has authority to contract
         with HMO to carry out the duties and functions of the Medicaid managed
         care program under Health and Safety Code, Title 2, Section 12.011 and
         Section 12.021 and Texas Government Code Section 533.001 et seq.

         1.4.2 Substituted current contract language to match STAR contract
         language as follows: HHSC will provide HMO with at least 30 days
         written notice prior to conducting an HMO renewal review. A report of
         the results of the renewal review findings will be provided to HMO
         within 10 weeks from the completion of the renewal review. The renewal
         review report will include any deficiencies, which must be corrected
         and the timeline within which the deficiencies must be corrected.

         1.4.3 Substituted current contract language to match STAR contract
         language as follows: HHSC reserves the right to conduct on-site
         inspections of any or all of HMO's systems and processes as often as
         necessary to ensure compliance with contract requirements. HHSC may
         conduct at least one complete on-site inspection of all systems and
         processes every three years. HHSC will provide six weeks advance notice
         to HMO of the three-year on-site inspection, unless HHSC enters into an
         MOU with the TDI to accept the TDI report in lieu of a HHSC on-site
         inspection. HHSC will notify HMO prior to conducting an onsite visit
         related to a regularly scheduled review specifically described in this
         contract. Even in the case of a regularly scheduled visit, HHSC
         reserves the right to conduct an onsite review without advance notice
         if HHSC believes there may be potentially serious or life-threatening
         deficiencies.

         1.5 Substituted current contract language to match STAR contract
         language as follows: AUTHORITY OF HMO TO ACT ON BEHALF OF HHSC. HMO is
         given express, limited authority to exercise the State's right of
         recovery as provided in Article 4.9, and to enforce provisions of this
         contract which require providers or subcontractors to produce records,
         reports, encounter data, public health data, and other documents to
         comply with this contract and which HHSC has authority to require under
         State or federal laws.

SECTION 2.03 MODIFICATION OF ARTICLE 2, DEFINITIONS

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

                  ACTION, also known as an adverse determination, is the denial
         or limited authorization of a requested service, including the type or
         level of service; the reduction, suspension, or termination of a
         previously authorized service; the denial in whole or in part, of
         payment for service; the failure of an HMO to act within the
         timeframes; or for a resident of a rural area with only one HMO, the
         denial of a Medicaid members request to exercise his or her right, to
         obtain services outside of the network.

                  DISABILITY-RELATED ACCESS means that facilities are readily
         accessible to and usable by individuals with disabilities, and that
         auxiliary aids and services are provided to ensure effective
         communication, in compliance with Title III of the Americans with
         Disabilities Act.

                  APPEAL means the formal process by which a request for review
         of an action as defined above.

                  CONTRACTOR means any entity that contracts with the State
         agency, under the State plan, in return for a payment, to process
         claims, to provide or pay for medical services, or to enhance the State
         agency's capability for effective administration of the program.

                  COMPLAINT, also known as a grievance, is an expression of
         dissatisfaction about any matter that does not result in an adverse
         action.

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

                  CONTRACT ANNIVERSARY DATE means September 1 of each year after
         the first year of this contract, regardless of the date of execution or
         effective date of the contract.

                  EMERGENCY BEHAVIORAL HEALTH CONDITION means any condition,
         without regard to the nature or cause of the condition, which in the
         opinion of a prudent layperson possessing an average knowledge of
         health and medicine requires immediate intervention and/or medical
         attention without which Members would present an immediate danger to
         themselves or others or which renders Members incapable of controlling,
         knowing or understanding the consequences of their actions.

                  EMERGENCY SERVICES means covered inpatient and outpatient
         services that are furnished by a provider that is qualified to furnish
         such services under this contract and are needed to evaluate or
         stabilize an emergency medical condition and/or an emergency behavioral
         health condition.

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

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

                    (b)  serious impairment to bodily functions;

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

                    (d)  serious disfigurement; or

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

                  ENCOUNTER means a covered service or group of services
         delivered by a provider to a Member during a visit between the Member
         and provider. This also includes value-added services.

                  ENCOUNTER DATA means data elements from fee-for-service claims
         or capitated services proxy claims that are submitted to HHSC by HMO in
         accordance with HHSC's "HMO Encounter Data Claims Submission Manual".

                  ENROLLMENT BROKER means an entity contracting with HHSC to
         carry out specific functions related to Member services (i.e.,
         enrollment/disenrollment, complaints, etc.) under HHSC's Medicaid
         managed care program.

                  ENROLLMENT REPORT/ENROLLMENT FILE means the daily or monthly
         list of Medicaid recipients who are enrolled with an HMO as Members on
         the day or for the month the report is issued.

                  EPSDT means the federally mandated Early and Periodic
         Screening, Diagnosis and Treatment program contained at 42 USC 1396d(r)
         (see definition for Texas Health Steps). The name has been changed to
         Texas Health Steps (THSteps) in the State of Texas.

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

                  EXPEDITED APPEAL means an appeal where the decision is
         required quickly based on the member's health status and taking the
         time for a standard appeal could jeopardize the member's life or health
         or ability to attain, maintain, or regain maximum function. An
         expedited appeal must be heard in no more than 3 working days of an
         approved request.

                  LINGUISTIC ACCESS means translation and interpreter services,
         for written and spoken language to ensure effective communication.
         Linguistic access includes sign language interpretation, and the
         provision of other auxiliary aids and services to persons with
         disabilities.

                  PERFORMANCE PREMIUM means an amount, which may be paid to a
         managed care organization as a bonus for accomplishing a portion or all
         of the performance objectives contained in this contract.

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

                  PCP stands for primary care physician.

                  PROVIDER means either of the following:

                    (1)  For the fee-for-service program, any individual or
                         entity furnishing Medicaid services under an agreement
                         with the Medicaid agency.

                    (2)  For the managed care program, any individual or entity
                         that is engaged in the delivery of health care services
                         and is legally authorized to do so by the State in
                         which it delivers the services.

               REPRESENTATIVE has the meaning given the term by each State
         consistent with its laws, regulations, and policies.

               SPECIAL NEEDS means an increased prevalence of risk of
         disability.

SECTION 2.04 MODIFICATION OF ARTICLE 3, PLAN ADMINISTRATIVE AND HUMAN RESOURCE
REQUIREMENTS

     STAR Program is the name of the State of Texas Medicaid managed care
     program. "STAR" stands for the State of Texas Access Reform. Renumbered
     Article 3 to reflect STAR contract and added STAR+PLUS changes at the end
     of the appropriate section. Section 3. 1 to 3.1.6 in the STAR+PLUS contract
     was replaced with 3.1 through 3.1.6.1 of the STAR contract for consistency
     as follows:

         3.1.1 HMO must maintain the organizational and administrative capacity
         and capabilities to carry out all duties and responsibilities under
         this contract.

         3.1.2 HMO must maintain assigned staff with the capacity and capability
         to provide all services to all Members under this contract.

         3.1.3 HMO must maintain an administrative office in the service area
         (local office). The local office must comply with the American with
         Disabilities Act (ADA) requirements for public buildings. Member
         Advocates for the service area must be located in this office (see
         Article 8.8).

         3.1.4 HMO must provide training and development programs to all
         assigned staff to ensure they know and understand the service
         requirements under this contract including the reporting requirements,
         the policies and procedures, cultural and linguistic requirements and
         the scope of services to be provided.

         3.1.5 HMO must notify HHSC no later than 30 days after the effective
         date of this contract of any changes in its organizational chart as
         previously submitted to HHSC.

         3.1.5.1 HMO must notify HHSC within fifteen (15) working days of any
         change in key managers or behavioral health subcontractors. This
         information must be updated whenever there is a significant change in
         organizational structure or personnel.

         3.1.6 Participation in Regional Advisory Committee. HMO must
         participate on a Regional Advisory Committee established in the service
         area in compliance with the Texas Government Code, Section
         533.021-533.029. The Regional Advisory Committee in each managed care
         service area must include representatives from at least the following
         entities: hospitals; managed care organizations; primary care
         providers; state agencies; consumer advocates; Medicaid recipients;
         rural providers; long-term care providers; specialty care providers,
         including pediatric providers; and political subdivisions with a
         constitutional or statutory obligation to provide health care to
         indigent patients. HHSC will determine the composition of each Regional
         Advisory Committee.

         The Regional Advisory Committee is required to meet at least quarterly
         for the first year after appointment of the committee and at least
         annually in subsequent years. The actual frequency may vary depending
         on the needs and requirements of the committee.

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

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

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

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

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

         3.4.8  Delete from STAR+PLUS contract

SECTION 2.05 MODIFICATION OF SECTION 3.7, REQUIREMENTS FOR EDUCATION, TRAINING
AND ADVISORY COMMITTEE ACTIVITIES

     Section 3.7, Requirements for Education, Training and Advisory Committee
     Activities, is replaced by Section 3.7, HMO Telephone Access Requirements,
     to be consistent with the STAR contract as follows:

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

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

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

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

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

         3.7.2 Member Helpline: The HMO must furnish a toll-free phone line
         which members may call 24 hours a day, 7 days a week. An answering
         service or other similar mechanism, which allows callers to obtain
         information from a live person, may be used for after-hours and weekend
         coverage.

         3.7.2.1 HMO must provide coverage for the following services at least
         during HMO's regular business hours (a minimum of 9 hours a day,
         between 8 a.m. and 6 p.m.), Monday through Friday:

                  1.   Member ID information

                  2.   PCP Change

                  3.   Benefit understanding

                  4.   PCP verification

                  5.   Access issues (including referrals to specialists)

                  6.   Unavailability of PCP

                  7.   Member eligibility

                  8.   Complaints

                  9.   Service area issues (including when member is temporarily
                       out-of-service area)

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

                  10.  Other services covered by member services.

         3.7.2.2 HMO must provide HHSC with policies and procedures indicating
         how the HMO will meet the needs of members who are unable to contact
         HMO during regular business hours.

         3.7.3 HMO must ensure that PCPs are available 24 hours a day, 7 days a
         week (see Article 7.8). This includes PCP telephone coverage (see 28
         TAC 11.2001(a)1A).

         3.7.4 Behavioral Health Hotline Services. HMO must have emergency and
         crisis Behavioral Health hotline services available 24 hours a day, 7
         days a week, toll-free throughout the service area. Crisis hotline
         staff must include or have access to qualified behavioral health
         professionals to assess behavioral health emergencies. Emergency and
         crisis behavioral health services may be arranged through mobile crisis
         teams. It is not acceptable for an emergency intake line to be answered
         by an answering machine. Hotline services must meet the requirements
         described in Article 3.7.1

SECTION 2.06 MODIFICATION TO SECTION 4.10, CLAIMS PROCESSING REQUIREMENTS

     Section 4.10, Claims Processing Requirements, is modified to be consistent
     with the STAR contract, as follows:

         4.10.1 HMO and claims processing subcontractors must comply with 28 TAC
         Sections 21.2801 through 21.2816 "Submission of Clean Claims", to the
         extent they are not in conflict with provisions of this contract.

         4.10.2 HMO must use a HHSC approved or identified claim format that
         contains all data fields for final adjudication of the claim. The
         required data fields must be complete and accurate. The HHSC required
         data fields are identified in HHSC's "HMO Encounter Data Claims
         Submission Manual."

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

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

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

         4.10.6 All provider clean claims must be adjudicated (finalized as paid
         or denied adjudicated) within 30 days from the date the claim is
         received by HMO. HMO must pay providers interest on a clean claim which
         is not adjudicated within 30 days from the date the claim is received
         by HMO or becomes clean at a rate of 1.5% per month (18% annual) for
         each month the clean claim remains unadjudicated. HMO will be held to a
         minimum performance level of 90% of all clean claims paid or denied
         within 30 days of receipt and 99"/0 of all clean claims paid or denied
         within 90 days of receipt. Failure to meet these performance levels is
         a default under this contract and could lead to damages or sanctions as
         outlined in Article 17. The performance levels are subject to changes
         if required to comply with federal and state laws or regulations.

         4.10.6.1 All claims and appeals submitted to HMO and claims processing
         subcontractors must be paid-adjudicated (clean claims),
         denied-adjudicated (clean claims), or denied for additional

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

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

         4.10.6.2 Claims that are suspended (pended internally) must be
         subsequently paid adjudicated, denied adjudicated, or denied for
         additional information (pended externally) within 30 days from date of
         receipt. No claim can be suspended for a period exceeding 30 days from
         date of receipt of the claim.

         4.10.6.3 HMO must identify each data field of each claim form that is
         required from the provider in order for HMO to adjudicate the claim.
         HMO must inform all network providers about the required fields no
         later than 30 days prior to the effective date of the contract or as a
         provision within HMO/provider contract. Out-of-network providers must
         be informed of all required fields if the claim is denied for
         additional information. The required fields must include those required
         by HMO and HHSC.

         4.10.7 HMO is subject to Article 16, Default and Remedies, for claims
         that are not processed on a timely basis as required by this contract
         and the Claims Manual. Notwithstanding the provisions of Articles
         4.10.4, 4.10.4.1 and 4.10.4.2, HMO's failure to adjudicate (paid,
         denied, or external pended) at least ninety percent (90%) of all claims
         within thirty (30) days of receipt and ninety-nine percent (99%) within
         ninety (90) days of receipt for the contract year to date is a default
         under Article 16 of this contract.

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

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

SECTION 2.07 MODIFICATION OF ARTICLE 5, STATUTORY AND REGULATORY COMPLIANCE
REQUIREMENTS

     Article 5, Statutory and Regulatory Compliance Requirements, is modified as
follows:

         5.5. NON-DISCRIMINATION

         5.5.1 Title VI of the Civil Rights Act of 1964, Section 504 of the
         Rehabilitation Act of 1973, the Americans with Disabilities Act of
         1990, and all requirements imposed by the regulations implementing
         these acts and all amendments to the laws and regulations. The
         regulations provide in part that no person in the United States shall
         on the grounds of race, color, national origin, sex, age, disability,
         political beliefs or religion be excluded from participation in, or
         denied, any aid, care, service or other benefits, or be subjected to
         any discrimination under any program or activity receiving federal
         funds.

     Section 5.6.2 of Section 5.6, Historically Under-utilized Business (HUBS)
     is amended as follows.

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

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

     Section 5.7, Affirmative Action, is replaced 6y Section 5.7, Buy Texas to
     be consistent with the STAR contract.

         5.7 BUY TEXAS

         HMO agrees to "Buy Texas" products and materials when they are
         available at a comparable price and in a comparable period of time, as
         required by Section 48 of Article 9 of the General Appropriations Act
         of 1995.

     Section 5.8, Buy Texas, is replaced by Section 5.8, Child Support.

         5.8 CHILD SUPPORT

         5.8.1 The Texas Family Code Section 231.006 requires HHSC to withhold
         contract payments from any for-profit entity or individual who is at
         least 30 days delinquent in child support obligations. It is HMO's
         responsibility to determine and verify that no owner, partner, or
         shareholder who has at least at 25% ownership interest is delinquent in
         child support obligations. HMO must attach a list of the names and
         Social Security numbers of all shareholders, partners or owners who
         have at least a 25% ownership interest in HMO.

         5.8.2 Under Section 231.006 of the Family Code, the contractor
         certifies that the contractor is not ineligible to receive the
         specified grant, loan, or payment and acknowledges that this contract
         may be terminated and payment may be withheld if this certification is
         inaccurate. A child support obligor who is more than 30 days delinquent
         in paying child support or a business entity in which the obligor is a
         sole proprietor, partner, shareholder, or owner with an ownership
         interest of at least 25% is not eligible to receive the specified
         grant, loan or payment.

         5.8.3 If HHSC is informed and verifies that a child support obligor who
         is more than 30 days delinquent is a partner, shareholder, or owner
         with at least a 25% ownership interest, it will withhold any payments
         due under this contract until it has received satisfactory evidence
         that the obligation has been satisfied or that the obligor has entered
         into a written repayment request.

     Section 5.9 Child Support, is replaced with Section 5.9, Request for Public
     Information, to be consistent with the STAR contract.

         5.9 REQUESTS FOR PUBLIC INFORMATION

         5.9.1 This contract and all network provider and subcontractor
         contracts are subject to public disclosure under the Public Information
         Act (Texas Government Code, Chapter 552). HHSC may receive Public
         Information requests related to this contract, information submitted as
         part of the compliance of the contract and HMO's application upon which
         this contract was awarded. HHSC agrees that it will promptly deliver a
         copy of any request for Public Information to HMO.

         5.9.2 HHSC may, in its sole discretion, request a decision from the
         Office of the Attorney General (AG opinion) regarding whether the
         information requested is excepted from required public disclosure. HHSC
         may rely on HMO's written representations in preparing any AG opinion
         request, in accordance with Texas Government Code Section 552.305. HHSC
         is not liable for failing to request an AG opinion or for releasing
         information that is not deemed confidential by law, if HMO fails to
         provide HHSC with specific reasons why the requested information is
         exempt from the required public disclosure. HHSC or the Office of the
         Attorney General will notify all interested parties if an AG opinion is
         requested.

         5.93 If HMO believes that the requested information qualifies as a
         trade secret or as commercial or financial information, HMO must notify
         HHSC within three (3) working days after HHSC gives notice that a
         request has been made for public information and request HHSC to submit
         the request for public information to the Attorney General for an Open
         Records Opinion. The HMO

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         will be responsible for presenting all exceptions to public disclosure
         to the Attorney General if an opinion is requested.

         Section 5.9 Request for Public Information is renumbered 5.8 to reflect
         STAR contract. Section 5.11 Notice and Appeal is renumbered 5.10 to
         reflect STAR contract. Section 5.11 is added as follows:

     Section 5.10, Request for Public Information, is replaced by Section 5.10,
     Notice and Appeals to be consistent with the STAR contract.

         5.10 NOTICE AND APPEAL

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

     Article 5, Statutory and Regulatory Compliance Requirements, is modified by
     adding Section 5.11, Data Certification, to be consistent with the STAR
     contract.

         5.11 DATA CERTIFICATION

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

         (a) encounter data;

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

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

         5.11.3  The certification must:

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

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

SECTION 2.08 MODIFICATION TO SECTION 6.1, SCOPE OF SERVICES

     Section 6.1.2, Scope of Services, is being replaced with Section 6.1.2,
     Scope of Services.

         Section 6.1.2 Not applicable to STAR+PLUS.

     Section 6.1.3 through 6.1.3.2 is being replaced with 6.1.3, Scope of
     Services, to be consistent with the STAR contract.

         6.1.3 HMO must provide covered services described in the 1999 Texas
         Medicaid Provider Procedures Manual (Provider Procedures Manual),
         subsequent editions of the Provider Procedures Manual also in effect
         during the contract period, and all Texas Medicaid Bulletins which
         update the 1999 Provider Procedures Manual and subsequent editions of
         the Provider Procedures Manual published during the contract period.

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     Section 6.1.9, Scope of Services, is added as follows:

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

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

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

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

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

     Section 6.1.10, Scope of Services, is added (this section was formerly
     6.1.3 through 6.3.1.2) to be consistent with the STAR contract.

         6.1.10 Long Term Care covered services include attendant care, day
         activity and health services, and required services under the 1915 (R)
         waiver.

         6.1.10.1 HMO is responsible for the Medicare co-payments for days
         21-100 in a skilled nursing facility.

         6.1.10.2 HMO must provide covered services described in the 2002 Texas
         Medicaid Procedures Manual (Provider Procedures Manual), subsequent
         editions of the Provider Procedures Manual also in effect during the
         contract period, and all Texas Medicaid Bulletins which update the 2002
         Provider Procedures Manual and subsequent editions of the Provider
         Manual published during the contract period.

SECTION 2.09 SECTION 2.09 ADDITION TO SECTION 6.4, CONTINUITY OF CARE AND
OUT-OF-NETWORK PROVIDERS

         Section 6.4, Continuity of Care and Out-of-Network Providers, is
         modified to add new Sections 6.4.6 and 6.4.7 as follows:

         6.4.6 HMO must provide Members with timely and adequate access to
         out-of-network services for as long as those services are necessary and
         covered benefits not available within the network, in accordance with
         42 C.F.R. Section 438.206(6)(4). or until services can be covered by a
         network provider. HMO will not be obligated to provide a Member with
         access to out-of network services if such services become available
         from a network provider.

         6.4.7 HMO must require through contract provisions or the provider
         manual that each Member have access to a second opinion regarding the
         use of any health care service. A Member must be allowed access to a
         second opinion from a network provider or out-of network provider if a
         network provider is not available, at no additional cost to the Member,
         in accordance with 42 C.F.R. Section 438.206(6)(3)."

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SECTION 2.10 MODIFICATION OF SECTION 6.5, EMERGENCY SERVICES

     Section 6.5, Emergency Services, is deleted in its entirety and replaced
     with the following language to be consistent with the STAR contract as
     follows:

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

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

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

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

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

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

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

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

         6.5.6 Stabilization Services. When the medical screening examination
         determines that an emergency medical condition exists, HMO must pay for
         emergency services performed to stabilize the Member. To stabilize is
         to provide such medical care as to assure within reasonable medical
         probability that no deterioration of the condition is likely to result
         from, or occur from, or occur during discharge, transfer, or admission
         of the Member. The emergency physician must document these services in
         the Member's medical record. HMOs must reimburse for both the
         physician's and hospital's emergency stabilization services including
         the emergency room and its ancillary services.

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

         (a) the HMO does not respond to a request for pre-approval within 1
         hour;

         (b) the HMO cannot be contacted;

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

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

SECTION 2.11 SECTION 2.11 MODIFICATION OF SECTION 6.6, BEHAVIORAL HEALTH
SERVICES - SPECIFIC REQUIREMENTS

     Section 6.6.12, Behavioral Health Services - Specific Requirements, is
     replaced with the following language and 6.6.13 is added to be consistent
     with the STAR contract, as follows:

         HMO must comply with 28 TAC Section 3.8001 et seq., regarding
         utilization review of chemical dependency treatment.

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

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SECTION 2.12 MODIFICATIONS TO SECTION 6.8, TEXAS HEALTH STEPS

     Section 6.8.7 through 6.8.11 is replaced with the following language to be
     consistent with the STAR contract, as follows:

         6.8.7 Newborn Checkups. HMO must have mechanisms in place to ensure
         that all newborn Members have an initial newborn checkup before
         discharge from the hospital and again within two weeks from the time of
         birth. HMO must require providers to send all THSteps newborn screens
         to the TDH Bureau of Laboratories or a TDH certified laboratory.
         Providers must include detailed identifying information for all
         screened newborn Members and the Member's mother to allow HHSC to link
         the screens performed at the hospital with screens performed at the
         two-week follow-up.

         Laboratory Tests: All laboratory specimens collected as a required
         component of a THSteps checkup (see Medicaid Provider Procedures Manual
         for age-specific requirements) must be submitted to the HHSC Laboratory
         for analysis. HMO must educate providers about THSteps program
         requirements for submitting laboratory tests to the HHSC Bureau of
         Laboratories.

         6.8.8 Coordination and Cooperation. HMO must make an effort to
         coordinate and cooperate with existing community and school-based
         health and education programs that offer services to school-aged
         children in a location that is both familiar and convenient to the
         Members. HMO must make a good faith effort to comply with Head Start's
         requirement that Members participating in Head Start receive their
         THSteps checkup no later than 45 days after enrolling into either
         program.

         6.8.9 Immunizations. HMO must educate providers on the Immunization
         Standard Requirements set forth in Chapter 161, Health and Safety Code;
         the standards in the ACIP Immunization Schedule; and the AAP
         Periodicity Schedule.

         6.8.9.1 ImmTrac Compliance. HMO must educate providers about and
         require providers to comply with the requirements of Chapter 161,
         Health and Safety Code, relating to the Texas Immunization Registry
         (ImmTrac), to include parental consent on the Vaccine Information
         Statement.

         6.8.10 Claim Forms. HMO must require all THSteps providers to submit
         claims for services paid (either on a capitated or fee-for service
         basis) on the HCFA 1500 claim form and use the unique procedure coding
         required by HHSC.

         6.8.11 Compliance with THSteps Performance Benchmark. HHSC will
         establish performance benchmarks against which HMO's full compliance
         with the THSteps periodicity schedule will be measured. The performance
         benchmarks will establish minimum compliance measures, which will
         increase over time. HMO must meet all performance benchmarks required
         for THSteps services.

         6.8.12 Validation of Encounter Data. Encounter data will be validated
         by chart review of a random sample of THSteps eligible Members against
         monthly encounter data reported by HMO. Chart reviews will be conducted
         by HHSC to validate that all screens are performed when due and as
         reported, and that reported data is accurate and timely. Substantial
         deviation between reported and charted encounter data could result in
         HMO and/or network providers being investigated for potential fraud and
         abuse without notice to HMO or the provider.

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SECTION 2.13 MODIFICATION OF SECTION 6.9, PERINATAL SERVICES

     Section 6.9.3, Perinatal Services, is replaced with the following language:

         6.9.3 HMO must have a process to expedite scheduling a prenatal
         appointment for an obstetrical exam for a TP40 member no later than two
         weeks after receiving the daily enrollment file verifying enrollment of
         the member into the HMO.

     Section 6.9.3.1 of Section 6.9, Perinatal Services, is modified as follows:

         6.9.3.1 [Deleted]

     Section 6.9.3.2 of Section 6.9, Perinatal Services, is modified as follows:

         6.9.3.2 [Deleted]

         6.9.4 HMO must have procedures in place to contact and assist a
         pregnant/delivering Member in selecting a PCP for her baby either
         before the birth or as soon as the baby is born.

     Section 6.9, Perinatal Services, is modified to add the following sections
     (6.9.5 through 6.9.6.2) to be consistent with the STAR contract:

         6.9.5 HMO must provide inpatient care and professional services related
         to labor and delivery for its pregnant/delivering members and neonatal
         care for its newborn members (see Article 14.3.1) at the time of
         delivery and for up to 48 hours following an uncomplicated vaginal
         delivery and 96 hours following an uncomplicated Caesarian delivery.

         6.9.5.1 HMO must reimburse in-network providers, out-of-network
         providers, and specialty physicians who are providing call coverage,
         routine, and/or specialty consultation services for the period of time
         covered in Article 6.9.5.

         6.9.5.1.1 HMO must adjudicate provider claims for services provided to
         a newborn member in accordance with HHSC's claims processing
         requirements using the proxy ID number or State-issued Medicaid ID
         number (see Article 4.10). HMO cannot deny claims based on provider
         non-use of State-issued Medicaid ID number for a newborn member. HMO
         must accept provider claims for newborn services based on mother's name
         and/or Medicaid ID number with accommodations for multiple births, as
         specified by the HMO.

         6.9.5.2 HMO cannot require prior authorization or PCP assignment to
         adjudicate newborn claims for the period of time covered by Article
         6.9.5

         6.9.6 HMO may require prior authorization requests for hospital or
         professional services provided beyond the time limits in Article 6.9.5.
         HMO must respond to these prior authorizations within the requirements
         of 28 TAC 19.1710 - 19.1712 and Article 21.58a of the Texas Insurance
         Code.

         6.9.6.1 HMO must notify providers involved in the care of
         pregnant/delivering women and newborns (including out-of-network
         providers and hospitals) regarding the HMO's prior authorization
         requirements.

         6.9.6.2 HMO cannot require a prior authorization for services provided
         to a pregnant/delivering Member or newborn Member for a medical
         condition which requires emergency services, regardless of when the
         emergency condition arises (see Article 6.5.6).

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SECTION 2.14 MODIFICATION OF 6.11 SPECIAL, SUPPLEMENTAL NUTRITION PROGRAM FOR
WOMEN, INFANTS AND CHILDREN (WIC) - SPECIFIC REQUIREMENTS

     Section 6.11.1, Special, Supplemental Nutrition Program for Women, Infants
     and Children (WIC) - Specific Requirements, was amended as follows to be
     consistent with STAR Language:

         6.11.1 HMO must coordinate with WIC to provide certain medical
         information which is necessary to determine WIC eligibility, such as
         height, weight, hematocrit or hemoglobin (see Article 7.16.3.2).

SECTION 2.15 MODIFICATION OF SECTION 6.12.4.3, TUBERCULOSIS.

     Section 6.12.4.3, Tuberculosis, was amended to be consistent with STAR
     contract language as follows:

         6.12.4.3 HMO may contract with the local TB control programs to perform
         any of the capitated services required in Article 6.12.

SECTION 2.16 MODIFICATION OF SECTION 6.13, HEALTH EDUCATION AND WELLNESS AND
PREVENTION PLAN

     Section 6.13, Health Education and Wellness and Prevention Plan, is
     replaced with 6.13, People with Disabilities, Special Health Care Needs, or
     Chronic or Complex Conditions to be consistent with the STAR contract.

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

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

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

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

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         the primary care provider's medical records, that Member agrees to that
         plan of care, and that the plan is updated as often as the Member's
         needs change, but at least annually.

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

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

         6.13.6 HMO must provide information, education and training programs to
         Members, families, PCPs, specialty physicians, and community agencies
         about the care and treatment available in HMO's plan for Members with
         disabilities, special health care needs, or chronic or complex
         conditions.

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

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

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

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

         6.13.9.1  Participate in hospital discharge planning;

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

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

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

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

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

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

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

SECTION 2.17 MODIFICATION TO SECTION 6.14, CARE COORDINATION AND TRANSITION PLAN
FOR LONG TERM CARE SERVICES

     Section 6.14, Care Coordination and Transition Plan for Long Term Care
     Services, is replaced with Section 6.14, Health Education and Wellness and
     Prevention Plan to be consistent with the STAR contract as follows:

         6.14 HEALTH EDUCATION AND WELLNESS AND PREVENTION PLANS

         6.14.1 Health Education Plan. HMO must develop and implement a Health
         Education plan. The health education plan must tell Members how HMO
         system operates, how to obtain services, including emergency care and
         out-of-plan services. The plan must emphasize the value of screening
         and preventive care and must contain disease-specific information and
         educational materials.

         6.14.2 Wellness Promotion Programs. HMO must conduct wellness promotion
         programs to improve the health status of its Members. HMO may
         cooperatively conduct Health Education classes for all enrolled STAR
         Members with one or more HMOs also contracting with HHSC in the service
         area to provide services to Medicaid recipients in all counties of the
         service area. Providers and HMO staff must integrate health education,
         wellness and prevention training into the care of each Member. HMO must
         provide a range of health promotion and wellness information and
         activities for Members in formats that meet the needs of all Members.
         HMO must:

         1. develop, maintain and distribute health education services
         standards, policies and procedures to providers;

         2. monitor provider performance to ensure the standards for health
         education services are complied with;

         3. inform providers in writing about any non-compliance with the plan
         standards, policies or procedures;

         4. establish systems and procedures that ensure that provider's medical
         instruction and education on preventive services provided to the Member
         are documented in the Member's medical record; and

         5. establish mechanisms for promoting preventive care services to
         Members who do not access care, e.g. newsletters, reminder cards, and
         mail-outs.

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         6.14.3 Health Education Activities Report. HMO must submit, upon
         request, a Health Education Activities Schedule to HHSC or its designee
         listing the time and location of classes, health fairs or other events
         conducted during the time period of the request.

SECTION 2.18 MODIFICATION OF SECTION 6.15, 1915(c) WAIVER SERVICE (COMMUNITY
BASED ALTERNATIVES)

     Section 6.15, 1915(c) Waiver Service (Community Based Alternatives), is
     replaced with Section 6.15, Sexually Transmitted Diseases (STDS) and Human
     Immunodeficiency Virus (HIV), to be consistent with the STAR contract.

         6.15  SEXUALLY TRANSMITTED DISEASES (STDS) AND HUMAN IMMUNODEFICIENCY
         VIRUS (HIV)

         HMO must provide STD services that include STD/HIV prevention,
         screening, counseling, diagnosis, and treatment. HMO is responsible for
         implementing procedures to ensure that Members have prompt access to
         appropriate services for STDs, including HIV.

         6.15.1 HMO must allow Members access to STD services and HIV diagnosis
         services without prior authorization or referral by PCP. HMO must
         comply with Texas Family Code '32.003, relating to consent to treatment
         by a child.

         6.15.2 HMO must provide all covered services required to form the basis
         for a diagnosis and treatment plan for STD/HIV by the provider.

         6.15.3 HMO must consult with TDH regional public health authority to
         ensure that Members receiving clinical care of STDs, including HIV, are
         managed according to a protocol, which has been approved by HHSC (see
         Article 7.16.1 relating to cooperative agreements with public health
         authorities).

         6.15.4 HMO must make education available to providers and Members on
         the prevention, detection and effective treatment of STDs, including
         HIV.

         6.15.5 HMO must require providers to report all confirmed cases of
         STDs, including HIV, to the local or regional health authority
         according to 25 TAC Section 97.131 - 97.134, using the required forms
         and procedures for reporting STDs.

         6.15.6 HMO must coordinate with the HHSC regional health authority to
         ensure that Members with confirmed cases of syphilis, chancroid,
         gonorrhea, chlamydia and HIV receive risk reduction and partner
         elicitation/notification counseling. Coordination must be included in
         the subcontract required by Article 7.16.1. HMO may contract with local
         or regional health authorities to perform any of the covered services
         required in Article 6.15.

         6.15.7 HMO's PCPs may enter into contracts or agreements with
         traditional HIV service providers in the service area to provide
         services such as case management, psychosocial support and other
         services. If the service provided is a covered service under this
         contract, the contract or agreement must include payment provisions.

         6.15.8 The subcontract with the respective HHSC regional offices and
         city and county health departments, as described in Article 7.16.1,
         must include, but not be limited to, the following topics:

         6.15.8.1 Access for Case Investigation. Procedures must be established
         to make Member records available to public health agencies with
         authority to conduct disease investigation, receive confidential Member
         information, and follow up.

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         6.15.8.2 Medical Records and Confidentiality. HMO must require that
         providers have procedures in place to protect the confidentiality of
         Members provided STD/HIV services. These procedures must include, but
         are not limited to, the manner in which medical records are to be
         safeguarded; how employees are to protect medical information; and
         under what conditions information can be shared. HMO must inform and
         require its providers who provide STD/HIV services to comply with all
         state laws relating to communicable disease reporting requirements. HMO
         must implement policies and procedures to monitor provider compliance
         with confidentiality requirements.

         6.15.8.3 Partner Referral and Treatment. Members who are named as
         contacts to an STD, including HIV, should be evaluated and treated
         according to HMO's protocol. All protocols must be approved by HHSC.
         HMO's providers must coordinate referral of non-Member partners to
         local and regional health department STD staff.

         6.15.8.4 Informed Consent and Counseling. HMO must have policies and
         procedures in place regarding obtaining informed consent and counseling
         Members. The subcontracts with providers who treat HIV patients must
         include provisions requiring the provider to refer Members with HIV
         infection to public health agencies for in-depth prevention counseling,
         ongoing partner elicitation and notification services and other
         prevention support services. The subcontracts must also include
         provisions that require the provider to direct-counsel or refer an
         HIV-infected Member about the need to inform and refer all sex and/or
         needle-sharing partners that might have been exposed to the infection
         for prevention counseling and antibody testing.

SECTION 2.19 MODIFICATION OF SECTION 6.16, BLIND AND DISABLED MEMBERS

     Section 6.16, Blind and Disabled Members, is amended with the language
     below to be consistent with the STAR contract.

         6.16   BLIND AND DISABLED MEMBERS

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

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

         6.16.2 HMO must perform the same administrative services and functions
         as are performed for mandatory Members under this contract. These
         administrative services and functions include, but are not limited to:

         6.16.2.1  Prior authorization of services;

         6.16.2.2 All customer services functions offered Members in mandatory
         participation categories, including the complaint process, enrollment
         services, and hotline services;

         6.16.2.3 Linguistic services, including providing Member materials in
         alternative formats for the blind and disabled;

         6.16.2.4  Health education;

         6.16.2.5 Utilization management using HHSC Claims Administrator
         encounter data to provide appropriate interventions for Members through
         administrative case management;

         Quality assurance activities as needed and Focused Studies as required
         by HHSC; and

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         6.16.2.7 Coordination to link Blind and Disabled Members with
         applicable community resources and targeted case management programs
         (see Non-Capitated Services in Article 6.1.8).

         6.16.3 HMO must require network providers to submit claims for health
         and health-related services to HHSC's Claims Administrator for claims
         adjudication and payment.

         6.16.4 HMO must provide services to Blind and Disabled Members within
         HMO's network unless necessary services are unavailable within network.
         HMO must also allow referrals to out-of-network providers if necessary
         services are not available within HMO's network. Records must be
         forwarded to Member's PCP following a referral visit.

SECTION 2.20 ADDITION TO ARTICLE 6, SCOPE OF SERVICES

     Article 6, Scope of Services, is amended by adding Section 6.17, Care
     Coordination and Transition Plans for Long Term Care Services as follows:

         6.17 Care Coordination and Transition Plans For Long Term Care Services

         6.17.1 For STAR+PLUS Members that are receiving all preventive,
         primary, acute, and long term care services from the same HMO (this
         includes Members that are eligible for Medicaid only and Members that
         are Medicare eligible who select the STAR+PLUS HMO to also provide
         Medicare covered services), HMO shall ensure that each Member has a
         qualified PCP who is responsible for overall clinical direction and
         serves as a central point of integration and coordination of covered
         primary, acute, and long term care services. HMO will furnish a Care
         Coordinator to all Members who request one, or when HMO has determined
         through an assessment of the Member's health and support needs, that a
         Care Coordinator is required. The Care Coordinator shall be responsible
         for working with the Member or his representative and service providers
         to develop a seamless package of care in which primary, acute, and long
         term care service needs are met through a single, understandable,
         rational plan. Each Member's plan must also be well coordinated with
         the Member's family and community support systems. The Care Coordinator
         shall work as a team with the PCP, and coordinate all STAR+PLUS
         services with the PCP. HMO must identify and train certain Members or
         their families to coordinate their own care, to the extent of the
         Member's capability. HMO must empower its Care Coordinators to
         authorize and refer Members for all long term care services.

         6.17.2 For dually eligible Members who obtain their Medicare services
         outside the STAR+PLUS HMO's Medicare network, HMO is responsible for
         meeting the Member's long term care service needs. HMO's Care
         Coordinator shall be responsible for providing a seamless package of
         long term care services for each Member, and for coordinating
         preventive, primary, and acute care services provided elsewhere into an
         integrated, single, understandable, rational plan. Each Member's plan
         must also be coordinated with the Member's family and community support
         systems. In integrating each Member's care, the Care Coordinator shall
         work with the Members physician as a team in furnishing and
         coordinating a comprehensive long term care package. HMO must empower
         its Care Coordinators to authorize and refer Members for all long term
         care services. In order to integrate the Members acute and primary
         care, and stay abreast of the Members needs and condition, the Care
         Coordinator shall also actively involve and coordinate with the Members
         primary and specialty care providers and work cooperatively together.

         6.17.3 HMO shall provide information about and referral to community
         organizations that may not be providing STAR+PLUS covered services, but
         are otherwise important to the health and well-being of Members. These
         organizations include, but are not limited to:

         1) State/Federal agencies (e.g., those agencies with jurisdiction over
         children's services, aging, protective services, public health,
         substance abuse, mental health/retardation, rehabilitation,

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         developmental disabilities, income support, nutritional assistance,
         school districts, family support agencies, etc.);

         2) Social Service agencies (e.g., Area Agencies on Aging, residential
         support agencies, independent living centers, supported employment
         agencies, etc.) and ECI providers;

         3) City and County agencies (e.g., welfare departments, Women, Infants,
         and Children (WIC), housing programs, etc.);

         4) Civic and religious organizations; and

         5) Consumer groups, advocates, and councils (e.g., legal aid offices,
         consumer/family support groups, permanency planning, etc.).

         6.17.4 HMO must have a protocol for quickly assessing the needs of
         Members who are discharged from a hospital or other care or treatment
         facility. HMO must ensure that social workers and discharge planners in
         hospitals and hospital care coordinators are knowledgeable about the
         mandatory requirement for Medicaid Members to receive their long term
         care services under managed care. HMO Care Coordinator must work with
         the Members PCP (whether or not the PCP is in HMOs network), the
         hospital discharge planner(s), the Member, and the Members family to
         assess and plan for the Members discharge. When long term care is
         needed, HMO must ensure that the Members discharge plan includes
         arrangements for receiving community-based care whenever possible. HMO
         must ensure that the Member, the Members family, and the Members PCP
         are all well-informed of all service options that are available to meet
         the Members needs in the community.

         6.17.5 Within thirty (30) days of receiving the Member's enrollment
         package, HMO must review the screening information and any existing
         care plan, and develop a transition plan for that Member Until such
         time as HMO contacts the Member and coordinates modifications to the
         Members current treatment/long term care services plan, HMO must ensure
         that the current services continue and that there are no breaks in
         services/treatment.

         6.17.6 HMO must have assessment instruments. For infants and children,
         HMO must have an instrument appropriate for the assessment of children.
         The instrument(s) must be used to identify Members with significant
         health problems, requiring immediate attention, and which can be used
         to identify Members who need or are at risk of needing long term care
         services. The appropriate Minimum Data Set (MDS) instrument must be
         completed and electronically submitted to the State in the specified
         format initially and annually for every Member receiving long term care
         services, either in the community or in a facility, in addition to any
         assessment instrument HMO might use with the exception that for
         children under 21 do not have to be assessed using the MDS-HC. The
         instrument may be completed by HMO Subcontractor, or service provider,
         but HMO remains responsible for the data recorded. As specialized MDS
         instruments are developed for other living arrangements (e.g., assisted
         living), TDHS will notify HMO of the availability of the instrument and
         the date by which data collection for using the instrument would be
         required.

         6.17.7 For Members residing in nursing facilities, HMO must ensure that
         the NF provider uses the MDS version required by CMS regulations for
         assessment and care planning and submits the MDS data electronically to
         TDHS

         6.17.8 All Members who qualify for nursing facility level of care must
         be given the freedom to choose their setting of care, i.e., nursing
         facility, within HMO's network. HMO shall ensure that the Member or his
         representative is aware of all available options.

         6.17.9 HMO must ensure that Members needing home and community based
         long term care services are identified and referred to services in a
         timely manner.

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         No individual under 21 should be admitted to a nursing facility without
         completion of the following:

         1) Information about all available community-based long-term care
         services appropriate to the individual's needs provided to the
         individual and parent/guardian; and

         2) A Community Resource Coordination Group (CRCG) meeting has been held
         in which all other available options have been considered and rejected.

         6.17.10 When a need for nursing facility level of care is indicated,
         HMO must refer the Member to TDHS for determination of Members
         eligibility. HMO, at its discretion, may provide this level of rare to
         Members not determined eligible by TDHS.

         6.17.11 HMO must develop a system to have a centralized record for each
         Member reflecting current service plan and showing all services
         received by the Member from providers within HMO network and from
         providers external to the network. The centralized record will ensure
         that all Plan providers, including specialty and long term care service
         providers, make appropriate and timely entries regarding care provided,
         diagnosis, medications prescribed, and treatment plans developed. The
         PCP, or when applicable, the Care Coordinator, shall determine the
         appropriate physical location of the Member record. In most cases, the
         most appropriate location will be with the PCP or the Care Coordinator.
         However, the location may vary depending on residence (e.g., nursing
         homes or group homes) and particular care needs of the Member. The HMO
         shall ensure that the organization of and documentation included in the
         centralized Member record shall meet all applicable professional
         standards ensuring confidentiality of Member records, referrals, and
         documentation of information.

         HMO must have a systematic process for generating or receiving
         referrals and sharing confidential medical, treatment, and planning
         information across providers.

         6.17.12 HMO must assure that the Member is involved in the assessment
         process and fully informed about options, is included in the
         development of the service plan and is in agreement with the plan of
         care that is developed. 6.17.13 HMO must provide a transition plan for
         Members currently receiving Medicaid services. TDHS and/or previous
         health plan will provide current HMO with detailed service plans, names
         of current providers, etc. for Members receiving long term care
         services at the time of enrollment. The transition planning process
         includes, but is not limited to, the following:

         (a) Review of existing TDHS care plans;

         (b) Preparation of a transition plan that ensures continuous care under
         the Member's current care plan during the transfer into HMO's network
         while HMO conducts an appropriate assessment and development of a new
         plan if needed; and

         (c) If Durable Medical Equipment had been ordered prior to enrollment
         but not received by the time of enrollment, coordination and follow
         through to ensure that the Member receives other necessary supportive
         equipment and supplies without undue delay.

         6.17.14 HMO will hire Care Coordinators persons experienced in meeting
         the needs of vulnerable populations who have chronic or complex
         conditions. These include, but are not limited to, persons with an
         undergraduate and/or graduate degree in either social work or nursing
         with relevant work experience. HMO may subcontract the Care
         Coordination function to other entities or agencies, as long as the
         Subcontractor's Care Coordinators meet these requirements. HMO staff
         providing Care Coordination functions must be located within the
         STAR+PLUS Service Delivery Area.

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         6.17.15 The HMO will ensure that Home and Community Support Services
         (HCSS) agencies providing services to members will hire personal
         assistance services and community support services providers chosen by
         the participant, or the participants legal authorized representative
         provided the individual who will provide the services:

         (1) meets minimum qualifications for the service,

         (2) is willing to be employed as an attendant by the HCSS provider
         agency; and

         (3) is willing, and determined competent by the HCSS nurse, to deliver
         the service(s) according to the clients individual service plan (ISP)

         (4) HMO staff providing Care Coordination functions must be located
         within the STAR+PLUS Service Delivery Area.

SECTION 2.21      ADDITION TO-ARTICLE 6, SCOPE OF SERVICES

     Article 6, Scope of Services, is amended to add Section 6.18, 1915 (c)
     Waiver Service (Community Based Alternatives) as follows:

         6.18 The HMO must provide to members the array of services allowable
         through the CMS approved 1915 (c) waiver. TDHS and the HMO mutually
         agree to the terms and conditions set forth herein and to the
         provisions of the applicable state and federal regulations, applicable
         licensure, to the terms set forth in the Community Based Alternative
         (CBA) Provider Manual, a copy of which has been furnished to HMO and
         that is incorporated herein by reference as part of this contract, and
         to any subsequent additions, deletions or amendments to such
         regulations, to any policy letters and/or subsequent revisions to the
         CBA Provider Manual that are provided to HMO, and the pertinent rules
         published by TDHS and/or the single state Medicaid agency.

         6.18.1.1 1915 (c) Waiver services must be available to all members who
         meet Community Based Alternatives (CBA) eligibility requirements based
         on their assessment and medical necessity.

         6.18.1.2 1915 (c) Waiver services may be made available to members who
         do not meet the CBA eligibility requirements based on assessment and
         medical necessity as a value added service.

         6.18.2 Waiver Service eligibility for members of the HMO

         6.18.2.1 The HMO must notify TDHS when CBA eligibility testing is
         initiated on a member of the HMO.

         6.18.2.2 The HMO must apply risk criteria, complete the Form 3652 for
         medical necessity determination, complete the assessment documentation
         and prepare a CBA Individual Service Plan (ISP) for each member
         requesting CBA services or for members identified as needing CBA
         services.

         6.18.2.3 The HMO must provide TDHS the results of the assessment
         activities.

         6.18.2.4 TDHS will notify the member and the HMO of the results of
         their eligibility determination based on the information provider by
         the HMO.

         6.18.2.4.1 If the member is eligible, the member will be notified of
         the effective date of eligibility. A copy of the notice will be sent to
         the HMO.

         6.18.2.4.2 If the member is not eligible, the notification will provide
         information on the member's right to appeal the adverse determination.
         A copy of the notice will be sent to the HMO.

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         6.18.3 Waiver Service eligibility for Medical Assistance Only
         non-member applicants.

         6.18.3.1 TDHS will inform the applicant that services are provided
         through an HMO and allow the applicant to select the HMO.

         6.19.3.2 TDHS will notify the selected HMO to initiate pre-enrollment
         assessment services required under the waiver for the non-member.

         6.18.3.3 The HMO must complete Form 3652 for medical necessity
         determination, complete the assessment documentation and prepare a CBA
         Individual Service Plan (ISP) for each applicant referred by TDHS.

         6.18.3.4 The HMO must provide information to TDHS reflecting the
         results of the assessment activities.

         6.18.3.5 The HMO will be authorized payment for the assessment
         activities in accordance with the fee-for-services schedule in effect
         at the time of the assessment regardless of final determination of
         applicant eligibility.

         6.18.3.6 TDHS will notify the client and the HMO of the results of
         their eligibility determination.

         6.18.3.6.1 If the applicant is eligible,

         6.18.3.6.1.1 The HMO will be notified of their eligibility and the
         effective date of eligibility will be the first day of the month
         following the determination of eligibility.

         6.18.3.6.1.2 The HMO will be notified of client eligibility and the
         client will be enrolled in the HMO on the date that eligibility is
         effective. The HMO will initiate the ISP on the date of enrollment.

         6.18.3.6.2 If the applicant is not eligible, the notification will
         provide information on the applicant's right to appeal the adverse
         determination. Notification will be sent to the HMO if the client is
         not eligible for CBA services.

         6.18.3.7 Rider 7 applies to ongoing current CBA Members receiving
         STAR+PLUS services. Rider 7 does not apply to initial STAR+PLUS
         applicants. The HMO may not disallow or jeopardize community services
         for CBA eligible members currently receiving STAR+PLUS services if
         those services are required for that Member to live in the most
         integrated setting and the exemption complies with the CMS
         cost-effectiveness requirement.

         6.18.4 Annual Reassessment. Prior to the end date of the annual ISP,
         the HMO must initiate the annual reassessment to determine and validate
         continued eligibility for CBA services for each CBA client. The HMO
         will be expected to complete the same activities and submit the same
         documentation to TDHS for the annual reassessment as required for the
         initial determination of eligibility. The HMO is responsible for
         assessment activities for members and no additional compensation will
         be paid for the annual reassessment for members.

SECTION 2.22      ADDITION TO ARTICLE 6, SCOPE OF SERVICES

     Article 6, Scope of Services, is amended to add Section 6.19, Consumer
     Directed Services, as follows:

         6.19 CONSUMER DIRECTED SERVICES

         6.19.1 The HMO must make available the Consumer Directed Services (CDS)
         option to all members desiring that option. The HMO will provide
         information on CDS.

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         6.19.1.1 At initial assessment for attendant care services,

         6.19.1.2 At annual reassessment for attendant care services,

         6.19.1.3 And at any time when a member/client so requests that
         information.

         6.19.2 The HMO must contract with providers who are able to offer
         Consumer Directed Services. To participate as a provider of Consumer
         Directed Services, the provider must:

         6.19.2.1 Have entered into a contract with TDHS for the delivery of
         those services.

         6.19.2.2 Be licensed for the delivery of attendant care services.

         6.19.3 The HMO must assure compliance with the Texas Administrative
         Code as found at Title 40, Social Services & Assistance, Part I, Texas
         Department of Human Services Chapter 41, Vendor Fiscal Intermediary
         Payments - TAC Section Numbers 41.101, 41.103, and 41.105. In addition,
         the HMO must comply with the Consumer Directed Services in STAR+PLUS
         Guidelines which are hereby incorporated by reference.

SECTION 2.23      MODIFICATION OF SECTION 7.1, NETWORK PROVIDER DIRECTORY

     Section 7.1, Network Provider Directory, is replaced with Section 7.1,
     Provider Accessibility, to be consistent with the STAR contract and to be
     compliant with BBA.

         7.1 PROVIDER ACCESSIBILITY

         7.1.1 HMO must enter into written contracts with properly credentialed
         health care service providers. The names of all providers must be
         submitted to HHSC as part of HMO subcontracting process. HMO must have
         its own credentialing process to review, approve and periodically
         recertify the credentials of all participating providers in compliance
         with 28 TAC 11.1902, relating to credentialing of providers in HMOs.

         7.1.2 HMO must require tax I.D. numbers from all providers. HMO is
         required to do backup withholding from all payments to providers who
         fail to give tax I.D. numbers or who give incorrect numbers.

         7.1.3 Timeframes for Access Requirements. HMO must have sufficient
         network providers and establish procedures to ensure Members have
         access to routine, urgent, and emergency services; telephone
         appointments; advice and Member service lines. These services must be
         accessible to Members within the following timeframes:

         7.1.3.1 Urgent Care within 24 hours of request;

         7.1.3.2 Routine care within 2 weeks of request;

         7.1.3.3 Physical Wellness Exams for adults must be provided within 8 to
         10 weeks of the request;

         7.1.3.4 HMO must establish policies and procedures to ensure that
         THSteps Checkups be provided within 90 days of new enrollment, except
         newborn Members should be seen within 2 weeks of enrollment, and in all
         cases for all Members be consistent with the American Academy of
         Pediatrics and THSteps periodicity schedule which is based on the
         American Academy of Pediatrics schedule and delineated in the Texas
         Medicaid Provider Procedures Manual and the Medicaid bi-monthly
         bulletins (see Article 6.1, Scope of Services). If the Member does not
         request a checkup, HMO must establish a procedure for contacting the
         Member to schedule the checkup.

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         7.1.3.5 Prenatal Care within 2 weeks of request.

         7.1.4 HMO is prohibited from requiring a provider or provider group to
         enter into an exclusive contracting arrangement with HMO as a condition
         for participation in its provider network.

SECTION 2.24      MODIFICATION OF SECTION 7.2, PROVIDER ACCESSIBILITY

     Section 7.2, Provider Accessibility is replaced with Section 7.2, Provider
     Contracts to be consistent with STAR contract as follows:

         7.2 PROVIDER CONTRACTS

         7.2.1 All providers must have a written contract, either with an
         intermediary entity or an HMO, to participate in the Medicaid program
         (provider contract). HMO must make all contracts available to HHSC upon
         request, at the time and location requested by HHSC. All standard
         formats of provider contracts must be submitted to HHSC for approval no
         later than 60 days after the effective date of this contract, unless
         previously filed with HHSC. HMO must submit one paper copy and one
         electronic copy in a form specified by HHSC. Any change to the standard
         format must be submitted to HHSC for approval no later than 30 days
         prior to the implementation of the new standard format. All provider
         contracts are subject to the terms and conditions of this contract and
         must contain the provisions of Article 5, Statutory and Regulatory
         Compliance, and the provisions contained in Article 3.2.4.

         7.2.1.1 HHSC has 15 working days to review the materials and recommend
         any suggestions or required changes. If HHSC has not responded to HMO
         by the fifteenth day, HMO may execute the contract. HHSC reserves the
         right to request HMO to modify any contract that has been deemed
         approved.

         7.2.2 Primary Care Provider (PCP) contracts and specialty care
         contracts must contain provisions relating to the requirements of the
         provider types found in this contract. For example, PCP contracts must
         contain the requirements of Article 7.8 relating to Primary Care
         Providers.

         7.2.3 Provider contracts that are requested by any agency with
         authority to investigate and prosecute fraud and abuse must be produced
         at the time and place required by HHSC or the requesting agency.
         Provider contracts requested in response to a Public Information
         request must be produced within 48 hours of the request. Requested
         contracts and all related records must be provided free-of-charge to
         the requesting agency.

         7.2.4 The form and substance of all provider contracts are subject to
         approval by HHSC. HHSC retains the authority to reject or require
         changes to any contract that do not comply with the requirements or
         duties and responsibilities of this contract. HMO REMAINS RESPONSIBLE
         FOR PERFORMING AND FOR ANY FAILURE TO PERFORM ALL DUTIES,
         RESPONSIBILITIES AND SERVICES UNDER THIS CONTRACT REGARDLESS OF WHETHER
         THE DUTY, RESPONSIBILITY OR SERVICE IS CONTRACTED TO ANOTHER FOR ACTUAL
         PERFORMANCE.

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

         7.2.6 HMO must not restrict a provider's ability to provide opinions or
         counsel to a Member with respect to benefits, treatment options, and
         provider's change in network status.

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         7.2.7 To the extent feasible within HMO's existing claims processing
         systems, HMO should have a single or central address to which providers
         must submit claims. If a central processing center is not possible
         within HMO's existing claims processing system, HMO must provide each
         network provider a complete list of all entities to whom the providers
         must submit claims for processing and/or adjudication. The list must
         include the name of the entity, the address to which claims must be
         sent, explanation for determination of the correct claims payer based
         on services rendered, and a phone number the provider may call to make
         claims inquiries. HMO must notify providers in writing of any changes
         in the claims filing list at least 30 days prior to effective date of
         change. If HMO is unable to provide 30 days notice, providers must be
         given a 30-day extension on their claims filing deadline to ensure
         claims are routed to correct processing center.

         7.2.8 HMO, all IPAs, and other intermediary entities must include
         contract language which substantially complies with the following
         standard contract provisions in each Medicaid provider contract. This
         language must be included in each contract with an actual provider of
         services, whether through a direct contract or through intermediary
         provider contracts:

         7.2.8.1 [Provider] is being contracted to deliver Medicaid managed care
         under the HHSC STAR program. HMO must provide copies of the HHSC/HMO
         Contract to the [Provider] upon request. [Provider] understands that
         services provided under this contract are funded by State and federal
         funds under the Medicaid program. [Provider] is subject to all state
         and federal laws, rules and regulations that apply to all persons or
         entities receiving state and federal funds. [Provider] understands that
         any violation by a provider of a State or federal law relating to the
         delivery of services by the provider under this HMO/Provider contract,
         or any violation of the HHSC/HMO contract could result in liability for
         money damages, and/or civil or criminal penalties and sanctions under
         state and/or federal law.

         7.2.8.2 [Provider] understands and agrees that HMO has the sole
         responsibility for payment of covered services rendered by the provider
         under HMO/Provider contract. In the event of HMO insolvency or
         cessation of operations, [Provider's] sole recourse is against HMO
         through the bankruptcy, conservatorship, or receivership estate of HMO.

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

         7.2.8.3 [Provider] understands and agrees HHSC is not liable or
         responsible for payment for any Medicaid covered services provided to
         mandatory Members under HMO/Provider contract. Federal and State laws
         provide severe penalties for any provider who attempts to collect any
         payment from or bill a Medicaid recipient for a covered service.

         7.2.8.4 [Provider] agrees that any modification, addition, or deletion
         of the provisions of this contract will become effective no earlier
         than 30 days after HMO notifies HHSC of the change in writing. If HHSC
         does not provide written approval within 30 days from receipt of
         notification from HMO, changes can be considered provisionally
         approved, and will become effective. Modifications, additions or
         deletions which are required by HHSC or by changes in state or federal
         law are effective immediately.

         7.2.8.5 This contract is subject to all state and federal laws and
         regulations relating to fraud and abuse in health care and the Medicaid
         program. [Provider] must cooperate and assist HHSC and any state or
         federal agency that is charged with the duty of identifying,
         investigating, sanctioning or prosecuting suspected fraud and abuse.
         [Provider] must provide originals and/or copies of any and all
         information, allow access to premises and provide records to HHSC or
         its authorized agent(s), HHSC, CMS, the U.S. Department of Health and
         Human Services, FBI, TDI, and the Texas Attorney General's Medicaid
         Fraud Control Unit, upon request, and free-of-charge. [Provider] must
         report any suspected fraud or abuse including any suspected fraud and
         abuse committed by HMO or a Medicaid recipient to HHSC for referral to
         HHSC.7.2.8.6 [Provider] is

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         required to submit proxy claims forms to HMO for services provided to
         all STAR Members that are capitated by HMO in accordance with the
         encounter data submissions requirements established by HMO and HHSC.

         7.2.8.7 HMO is prohibited from imposing restrictions upon the
         [Provider's] free communication with Members about a Member's medical
         conditions, treatment options, HMO referral policies, and other HMO
         policies, including financial incentives or arrangements and all STAR
         managed care plans with whom [Provider] contracts.

         7.2.8.8 The Texas Medicaid Fraud Control Unit must be allowed to
         conduct private interviews of [Providers] and the [Providers']
         employees, contractors, and patients. Requests for information must be
         complied with, in the form and language requested. [Providers] and
         their employees and contractors must cooperate fully in making
         themselves available in person for interviews, consultation, grand jury
         proceedings, pre-trial conference, hearings, trial and in any other
         process, including investigations. Compliance with this Article is at
         HMO's and [Provider's] own expense.

         7.2.8.9 HMO must include the method of payment and payment amounts in
         all provider contracts.

         7.2.8.10 All provider clean claims must be adjudicated within 30 days.
         HMO must pay provider interest on all clean claims that are not paid
         within 30 days at a rate of 1.5% per month (18% annual) for each month
         the claim remains unadjudicated.

         7.2.8.11 HMO must prohibit network providers from interfering with or
         placing liens upon the state's right or HMO's right, acting as the
         state's agent, to recovery from third party resources. HMO must
         prohibit network providers from seeking recovery in excess of the
         Medicaid payable amount or otherwise violating state and federal laws.

         7.2.9 HMO must follow the procedures outlined in article 20A.18A of the
         Texas Insurance Code if terminating a contract with a provider,
         including an STP. At least 30 days before the effective date of the
         proposed termination of the provider's contract, HMO must provide a
         written explanation to the provider of the reasons for termination. HMO
         may immediately terminate a provider contract if the provider presents
         imminent harm to patient health, actions against a license or practice,
         or fraud.

         7.2.9.1 Within 60 days of the termination notice date, a provider may
         request a review of HMO's proposed termination by an advisory review
         panel, except in a case in which there is imminent harm to patient
         health, an action against a private license, or fraud. The advisory
         review panel must be composed of physicians and providers, as those
         terms are defined in article 20A.02(r) and (t), including at least one
         representative in the provider's specialty or a similar specialty, if
         available, appointed to serve on the standing quality assurance
         committee or utilization review committee of HMO. The decision of the
         advisory review panel must be considered by HMO but is not binding on
         HMO. HMO must provide to the affected provider, on request, a copy of
         the recommendation of the advisory review panel and HMO's
         determination.

         7.2.9.2 A provider who is terminated is entitled to an expedited review
         process by HMO on request by the provider. HMO must provide
         notification of the provider's termination to HMO's Members receiving
         care from the terminated provider at least 30 days before the effective
         date of the termination. If a provider is terminated for reasons
         related to imminent harm to patient health, HMO may notify its Members
         immediately.

         7.2.10 HMO must notify HHSC no later than 90 days prior to terminating
         any subcontract affecting a major performance function of this
         contract. If HMO seeks to terminate a provider's contract for imminent
         harm to patient health, actions against a license or practice, or
         fraud, contract termination may be immediate. HHSC will require
         assurances that any contract termination will not result in an
         interruption of an essential service or major contract function.

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         7.2.11 HMO must include a complaint and appeals process which complies
         with the requirements of Article 20A.12 of the Texas Insurance Code
         relating to Complaint Systems in all provider contracts. HMO's
         complaint and appeals process must 6e the same for all providers.

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

SECTION 2.25      MODIFICATION TO SECTION 7.3, PROVIDER CONTRACTS

     Section 7.3, Provider Contracts, is replaced with Section 7.3, Physician
     Incentive Plans, to be consistent with the STAR contract.

         7.3 PHYSICIAN INCENTIVE PLANS

         7.3.1 HMO may operate a physician incentive plan only if: (1) no
         specific payment may be made directly or indirectly under a physician
         incentive plan to a physician or physician group as an inducement to
         reduce or limit medically necessary services furnished to a Member; and
         (2) the stop-loss protection, enrollee surveys and disclosure
         requirements of this Article are met.

         7.3.2 HMO must disclose to HHSC information required by federal
         regulations found at 42 C.F.R. Section 417.479. The information must be
         disclosed in sufficient detail to determine whether the incentive plan
         complies with the requirements at 42 C.F.R.'417.479. The disclosure
         must contain the following information:

         7.3.2.1 Whether services not furnished by a physician or physician
         group (referral services) are covered by the incentive plan. If only
         services furnished by the physician or physician group are covered by
         the incentive plan, disclosure of other aspects of the incentive plan
         are not required to be disclosed.

         7.3.2.2 The type of incentive arrangement (e.g. withhold, bonus,
         capitation).

         7.3.2.3 The percent of the withhold or bonus, if the incentive plan
         involves a withhold bonus.

         7.3.2.4 Whether the physician or physician group has evidence of a
         stop-loss protection, including the amount and type of stop-loss
         protection.

         7.3.2.5 The panel size and the method used for pooling patients, if
         patients are pooled.

         7.3.2.6 The results of Member and disenrollee surveys, if HMO is
         required under 42 C.F.R. '417.479 to conduct Member and disenrollee
         surveys.

         7.3.3 HMO must submit the information required in Articles 7.3.2.1 -
         7.3.2.5 to HHSC by the effective date of this contract and each
         anniversary date of the contract.

         7.3.4 HMO must submit the information required in Article 7.3.2.6 one
         year after the effective date of initial contract or effective date of
         renewal contract, and annually each subsequent year under the contract.
         HMO's who put physicians or physician groups at substantial financial
         risk must conduct a survey of all Members who have voluntarily
         disenrolled in the previous year. A list of voluntary disenrollees may
         be obtained from the Enrollment Broker.

         7.3.5 HMO must provide Members with information regarding Physician
         Incentive Plans upon request. The information must include the
         following:

         7.3.5.1 whether HMO uses a physician incentive plan that covers
         referral services;

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         7.3.5.2 the type of incentive arrangement (i.e., withhold, bonus,
         capitation);

         7.3.5.3 whether stop-loss protection is provided; and

         7.3.5.4 results of enrollee and disenrollee surveys, if required under
         42 C.F.R '417.479.

         7.3.5.5 HMO must ensure that IPAs and ANHCs with whom HMO contracts
         comply with the requirements above. HMO is required to meet the
         requirements above for all levels of subcontracting.

SECTION 2.26      MODIFICATION TO SECTION 7.4, PHYSICIAN INCENTIVE PLAN

     Section 7.4, Physician Incentive Plan, is replaced with Section 7.4,
     Provider Manual and Provider Training to be consistent with the STAR
     contract as follows:

         7.4 PROVIDER MANUAL AND PROVIDER TRAINING

         7.4.1 HMO must prepare and issue a Provider Manual(s), including any
         necessary specialty manuals (e.g. behavioral health) to the providers
         in the HMO network and to newly contracted providers in the HMO network
         within five (5) working days from inclusion of the provider into the
         network. The Provider Manual must contain sections relating to special
         requirements of the STAR Program as required under this contract. See
         Appendix D, Required Critical Elements, for specific details regarding
         content requirements.

         Provider Manual and any revisions must be approved by HHSC prior to
         publication and distribution to providers (see Article 3.4.1 regarding
         the process for plan materials review).

         7.4.2 HMO must provide training to all network providers and their
         staff regarding the requirements of the HHSC/HMO contract and special
         needs of STAR Members.

         7.4.2.1 HMO training for all providers must be completed no later than
         30 days after placing a newly contracted provider on active status. HMO
         must provide on-going training to new and existing providers as
         required by HMO or HHSC to comply with this contract.

         7.4.2.2 HMO must include in all PCP training how to screen for and
         identify behavioral health disorders, HMO's referral process to
         behavioral health care services and clinical coordination requirements
         for behavioral health. HMO must include in all training for behavioral
         health providers how to identify physical health disorders, HMO's
         referral process to primary care and clinical coordination requirements
         between physical medicine and behavioral health providers. HMO must
         include training on coordination and quality of care such as behavioral
         health screening techniques for PCPs and new models of behavioral
         health interventions.

         7.4.3 HMO must provide primary care and behavioral health providers
         with screening tools and instruments approved by HHSC.

         7.4.4 HMO must maintain and make available upon request enrollment or
         attendance rosters dated and signed by each attendee or other written
         evidence of training of each network provider and their staff.

         7.4.5 HMO must have its written policies and procedures for the
         screening, assessment and referral processes between behavioral health
         providers and physical medicine providers available for HHSC review
         prior to the effective date of the contract.

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SECTION 2.27      MODIFICATION TO SECTION 7.5, PROVIDER MANUAL AND PROVIDER
                  TRAINING

     Section 7.5, Provider Manual and Provider Training, is replaced with
     Section 7.5, Member Panel Reports to be consistent with the STAR contract.

         7.5 MEMBER PANEL REPORTS

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

SECTION 2.28      MODIFICATION TO SECTION 7.6, MEMBER PANEL REPORTS

     Section 7.6, Member Panel Reports is replaced with Section 7.6, Provider
     Complaint and Appeal Procedures.

         7.6 PROVIDER COMPLAINT AND APPEAL PROCEDURES

         7.6.1 HMO must develop, implement and maintain a provider complaint
         system. The complaint and appeal procedures must be in compliance with
         all applicable state and federal law or regulations. All Member
         complaints and/or appeals of an adverse determination requested by the
         enrollee, or any person acting on behalf of the enrollee, or a
         physician or provider acting on behalf of the enrollee must comply with
         the provisions of this Article. Modifications and amendments to the
         complaint system must be submitted to HHSC no later than 30 days prior
         to the implementation of the modification or amendment.

         7.6.2 HMO must include the provider complaint and appeal procedure in
         all network provider contracts or in the provider manual.

         7.6.3 HMO's complaint and appeal process cannot contain provisions
         requiring a provider to submit a complaint or appeal to HHSC for
         resolution in lieu of the HMO's process.

         7.6.4 HMO must establish mechanisms to ensure that network providers
         have access to a person who can assist providers in resolving issues
         relating to claims payment, plan administration, education and
         training, and complaint procedures.

SECTION 2.29      MODIFICATION OF SECTION 7.7, PROVIDER COMPLAINT AND APPEAL
                  PROCEDURES

     Section 7. 7, Provider Complaint and Appeal Procedures, is replaced with
     Section 7.7, Provider Qualifications-General. Section 7.7 is retitled
     Section 7.7.1 and new Section 7.7.2, Provider Credentialing and
     Recredentialing is added:

         7.7.1 PROVIDER QUALIFICATIONS - GENERAL

<TABLE>
<CAPTION>
PROVIDER                                QUALIFICATION
--------------------------------------------------------------------------------
<S>               <C>
Hospital          An institution licensed as a general or special hospital by
                  the State of Texas under Chapter 241 of the Health and Safety
                  Code, which is enrolled as a provider in the Texas Medicaid
                  Program. HMO will require that all facilities in the network
                  used for acute inpatient specialty care for people under age
                  21 with disabilities, special health care needs, or chronic or
                  complex conditions will have a designated pediatric unit; 24
                  hour laboratory and blood bank availability; pediatric
                  radiological capability, meet JCAHO standards; and have
                  discharge planning and social service units. HMO may request
                  exceptions to this requirement for specific hospitals within
                  their networks, from HHSC.
--------------------------------------------------------------------------------
</TABLE>

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         7.7.2 PROVIDER CREDENTIALING AND RECREDENTIALING

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

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

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

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

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

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

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

         b) Valid DEA or CDS certificate, as applicable;

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

         d) Work history;

         e) Professional liability claims history;

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

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

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

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

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

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

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

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

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         n) Any history of chemical dependency/substance abuse;

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

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

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

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

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

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

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

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

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

         7.7.2.12 Retention of Credentialing Authority. MCO retains the right to
         approve new providers and sites and to terminate or suspend individual
         providers. MCO has policies and procedures for the suspension,
         reduction or termination of practitioner privileges.

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

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

SECTION 2.30      MODIFICATION OF SECTION 7.8, PROVIDER QUALIFICATIONS - GENERAL

         Section 7.8. Provider Qualifications- General, is replaced with
         Sections 7.8, Primary Care Providers, to be consistent with STAR
         contract.

         7.8 PRIMARY CARE PROVIDERS

         7.8.1.1 HMO must provide supporting documentation, as specified and
         requested by the State, to verify that their provider network meets the
         requirements of this contract at the time the HMO enters into a
         contract and at the time of a significant change as required by 42
         C.F.R. Section 438.207(b).

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         A significant change can be, but is not limited to, change in ownership
         (purchase, merger, acquisition), new start-up, bankruptcy, and/or a
         major subcontractor change directly affecting a provider network such
         as (IPA's, BHO, medical groups, etc.).

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

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

         7.8.1 HMO must have a system for monitoring Member enrollment into its
         plan to allow HMO to effectively plan for future needs and recruit
         network providers as necessary to ensure adequate access to primary
         care and specialty care. The Member enrollment monitoring system must
         include the length of time required for Members to access care within
         the network. The monitoring system must also include monitoring
         after-hours availability and accessibility of PCPs.

         7.8.2 HMO must maintain a primary care provider network in sufficient
         numbers and geographic distribution to serve a minimum of forty-five
         percent (45%) of the mandatory STAR eligibles in each county of the
         service area. HMO is required to increase the capacity of the network
         as necessary to accommodate enrollment growth beyond the forty-fifth
         percentile (45%).

         7.8.3 HMO must maintain a provider network that includes pediatricians
         and physicians with pediatric experience in sufficient numbers and
         geographic distribution to serve eligible children and adolescents in
         the service area and provide timely access to the full scope of
         benefits, especially THSteps checkups and immunizations.

         7.8.4 HMO must comply with the access requirements as established by
         the Texas Department of Insurance for all HMOs doing business in Texas,
         except as otherwise required by this contract.

         7.8.5 HMO must have physicians with board eligibility/certification in
         pediatrics available for referral for Members under the age of 21.

         7.8.5.1 Individual PCPs may serve more than 2,000 Members. However, if
         HHSC determines that a PCP's Member enrollment exceeds the PCP's
         ability to provide accessible, quality care, HHSC may prohibit the PCP
         from receiving further enrollments. HHSC may direct HMOs to assign or
         reassign Members to another PCP's panel.

         7.8.6 HMO must have PCPs available throughout the service area to
         ensure that no Member must travel more than 30 miles to access the PCP,
         unless an exception to this distance requirement is made by HHSC.

         7.8.7 HMO's primary care provider network may include providers from
         any of the following practice areas: General Practitioners; Family
         Practitioners; Internists; Pediatricians; Obstetricians/Gynecologists
         (OB/GYN); Pediatric and Family Advanced Practice Nurses (APNs), and
         Certified Nurse Midwives Women Health (CNMs) practicing under the
         supervision of a physician; Physician Assistants (PAs) practicing under
         the supervision of a physician specializing

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         in Family Practice, Internal Medicine, Pediatrics or
         Obstetrics/Gynecology who also qualifies as a PCP under this contract;
         or Federally Qualified Health Centers (FQHCs), Rural Health Clinics
         (RHCs) and similar community clinics; and specialists who are willing
         to provide medical homes to selected Members with special needs and
         conditions (see Article 7.9.4).

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

         7.8.9 PCPs must either have admitting privileges at a hospital, which
         is part of HMO network of providers, or make referral arrangements with
         an HMO provider who has admitting privileges to a network hospital.

         7.8.10 HMO must require, through contract provisions, that PCPs are
         accessible to Members 24 hours a day, 7 days a week. The following are
         acceptable and unacceptable phone arrangements for contacting PCPs
         after normal business hours.

         Acceptable:

         1.   Office phone is answered after-hours by an answering service,
              which meets language requirements of the major population groups
              and which can contact the PCP or another designated medical
              practitioner. All calls answered by an answering service must be
              returned within 30 minutes.

         2.   Office phone is answered after normal business hours by a
              recording in the language of each of the major population groups
              served directing the patient to call another number to reach the
              PCP or another provider designated by the PCP. Someone must be
              available to answer the designated provider's phone. Another
              recording is not acceptable.

         3.   Office phone is transferred after office hours to another location
              where someone will answer the phone and be able to contact the PCP
              or another designated medical practitioner, who can return the
              call within 30 minutes.

         Unacceptable:

         1.   Office phone is only answered during office hours.

         2.   Office phone is answered after-hours by a recording which tells
              patients to leave a message.

         3.   Office phone is answered after-hours by a recording which directs
              patients to go to an Emergency Room for any services needed.

         4.   Returning after-hours calls outside of 30 minutes.

         7.8.11 HMO must require PCPs, through contract provisions or provider
         manual, to provide primary care services and continuity of care to
         Members who are enrolled with or assigned to the PCP. Primary care
         services are all services required by a Member for the prevention,
         detection, treatment and cure of illness, trauma, disease or disorder,
         which are covered and/or required services under this contract. All
         services must be provided in compliance with generally accepted medical
         and behavioral health standards for the community in which services are
         rendered. HMO must require PCPs, through contract provisions or
         provider manual, to provide children under the age of 21 services in
         accordance with the American Academy of Pediatric recommendations and

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         the THSteps periodicity schedule and provide adults services in
         accordance with the U.S. Preventive Services Task Force's publication
         "Put Prevention Into Practice".

         7.8.11.1 HMO must require PCPs, through contract provisions or provider
         manual, to assess the medical needs of Members for referral to
         specialty care providers and provide referrals as needed. PCP must
         coordinate care with specialty care providers after referral.

         7.8.11.2 HMO must require PCPs, through contract provisions or provider
         manual, to make necessary arrangements with home and community support
         services to integrate the Member's needs. This integration may be
         delivered by coordinating the care of Members with other programs,
         public health agencies and community resources that provide medical,
         nutritional, behavioral, educational and outreach services available to
         Members.

         7.8.11.3 HMO must require, through contract provisions or provider
         manual, that the Member's PCP or HMO provider through whom PCP has made
         arrangements, be the admitting or attending physician for inpatient
         hospital care, except for emergency medical or behavioral health
         conditions or when the admission is made by a specialist to whom the
         Member has been referred by the PCP. HMO must require, through contract
         provisions or provider manual, that PCP assess the advisability and
         availability of outpatient treatment alternatives to inpatient
         admissions. HMO must require, through contract provisions or provider
         manual, that PCP provide or arrange for pre-admission planning for
         non-emergency inpatient admissions, and discharge planning for Members.
         PCP must call the emergency room with relevant information about the
         Member. PCP must provide or arrange for follow-up care after emergency
         or inpatient care.

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

         7.8.12 PCP Selection and Changes. All Medicaid recipients who are
         eligible for participation in the STAR program have the right to select
         their PCP and HMO.-Medicaid recipients who are mandatory STAR
         participants who do not select a PCP and/or HMO during the time period
         allowed will be assigned to a PCP and/or HMO using the HHSC default
         process. Members may change PCPs at any time, but these changes are
         limited to four (4) times per year.

         7.8.12.1 Voluntary SSI Members. PCP changes cannot be performed
         retroactively for voluntary SSI Members. If an SSI Member requests a
         PCP change on or before the 15th of the month, the change will be
         effective the fast day of the next month. If an SSI Member requests a
         PCP change after the 15th of the month, the change will be effective
         the first day of the second month that follows. Exceptions to this
         policy will be allowed for reasons of medical necessity or other
         extenuating circumstances.

         7.8.12.2 Mandatory Members. Retroactive changes to a Member's PCP
         should only be made if it is medically necessary or there are other
         circumstances which necessitate a retroactive change. HMO must pay
         claims for services provided by the original PCP. If the original PCP
         is paid on a capitated basis and services were provided during the
         period for which capitation was paid, HMO cannot recoup the capitation.

SECTION 2.31      MODIFICATION TO SECTION 7.9, PRIMARY CARE PROVIDERS

     Section 7.9, Primary Care Providers, is being replaced with Section 7.9,
     OB/GYN Providers, to be consistent with the STAR contract

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         7.9 OB/GYN PROVIDERS

         HMO must allow a female Member to select an OB/GYN within its provider
         network or within a limited provider network in addition to a PCP, to
         provide health care services within the scope of the professional
         specialty practice of a properly credentialed OB/GYN. See Article
         21.53D of the Texas Insurance Code and 28 TAC Sections 11.506, 11.1600
         and 11.1608. A Member who selects an OB/GYN must be allowed direct
         access to the health care services of the OB/GYN without a referral by
         the woman's PCP or a prior authorization or precertification from HMO.
         HMO must allow Members to change OB/GYNs up to four times per year.
         Health care services must include, but not be limited to:

         7.9.1 One well-woman examination per year;

         7.9.2 Care related to pregnancy;

         7.9.3 Care for all active gynecological conditions; and

         7.9.4 Diagnosis, treatment, and referral for any disease or condition
         within the scope of the professional practice of a properly
         credentialed obstetrician or gynecologist.

         7.9.5 HMOs which allow its Members to directly access any OB/GYN
         provider within its network, must ensure that the provisions of
         Articles 7.9.1 through 7.9.4 continue to be met.

         7.9.6 OB/GYN providers must comply with HMO's procedures contained in
         HMO's provider manual or provider contract for OB/GYN providers,
         including but not limited to prior authorization procedures.

SECTION 2.32      MODIFICATION TO SECTION 7.10, OB/GYN PROVIDERS

     Section 7.10, OB/GYN Providers, is being replaced with Section 7.10,
     Specialty Care Providers consistent with the STAR contract.

         7.10 SPECIALTY CARE PROVIDERS

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

         7.10.2 HMO must require, through contract provisions or provider
         manual, that specialty providers send a record of consultation and
         recommendations to a Member's PCP for inclusion in Member's medical
         record and report encounters to the PCP and/or HMO.

         7.10.3 HMO must ensure availability and accessibility to appropriate
         specialists.

         7.10.4 HMO must ensure that no Member is required to travel in excess
         of 75 miles to secure initial contact with referral specialists;
         special hospitals, psychiatric hospitals; diagnostic and therapeutic
         services; and single service health care physicians, dentists or
         providers. Exceptions to this requirement may be allowed when an HMO
         has established, through utilization data provided to HHSC, that a
         normal pattern for securing health care services within an area exists
         or HMO is providing care of a higher skill level or specialty than the
         level which is available within the service area such as, but not
         limited to, treatment of cancer, bums, and cardiac diseases.

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SECTION 2.33      MODIFICATION TO SECTION 7.11, SPECIALTY CARE PROVIDERS

     Section 7.11, Specialty Care Providers is being replaced with Section 7.11,
     Special Hospitals and Specialty Care Facilities to be consistent with the
     STAR contract.

         7.11 SPECIAL HOSPITALS AND SPECIALTY CARE FACILITIES

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

         7.11.2 HMO must include requirements for pre-admission and discharge
         planning in its contracts with network hospitals. Discharge plans for a
         Member must be provided by HMO or the hospital to the Member/family,
         the PCP and specialty care physicians.

         7.11.3 HMO must have appropriate multidisciplinary teams for people
         with disabilities or chronic or complex medical conditions. These teams
         must include the PCP and any individuals or providers involved in the
         day-to-day or on-going care of the Member.

         7.11.4 HMO must include in its provider network a HHSC-designated
         perinatal care facility, as established by Section 32.042, Texas Health
         and Safety Code, once the designated system is finalized and perinatal
         care facilities have been approved for the service area (see Article
         6.9.1).

SECTION 2.34      MODIFICATION TO SECTION 7.11, SPECIAL HOSPITALS AND SPECIALTY
                  CARE FACILITIES

         Section 7.12, Special Hospitals And Specialty Care Facilities, is being
         replaced with Section 7.12 Behavioral health- Local Mental Health
         Authority (LMHA,) to be consistent with the STAR contract.

         7.12 BEHAVIORAL HEALTH - LOCAL MENTAL HEALTH AUTHORITY (LMHA)

         7.12.1 Assessment to determine eligibility for rehabilitative and
         targeted MHMR case management services is a function of the LMHA. HMO
         must provide all covered services described in detail in the Texas
         Medicaid Provider Procedures Manual (Provider Procedures Manual) and
         the Texas Medicaid Bulletins which is the bi-monthly update to the
         Provider Procedures Manual. Clinical information regarding covered
         services are published by the Texas Medicaid program in the Texas
         Medicaid Service Delivery Guide. Covered services must be provided to
         Members with SPMI and SED, when medically necessary, whether or not
         they are also receiving targeted case management or rehabilitation
         services through the LMHA.

         7.12.2 HMO will coordinate with the LMHA and state psychiatric facility
         regarding admission and discharge planning, treatment objectives and
         projected length of stay for Members committed by a court of law to the
         state psychiatric facility.

         7.12.3 HMO must enter into written agreements with all LMHAs in the
         service area which describes the process(es) which HMO and LMHA will
         use to coordinate services for STAR Members with SPMI or SED. The
         agreement will contain the following provisions:

         7.12.3.1 Describe the behavioral health covered services indicated in
         detail in the Provider Procedures Manual and the Texas Medicaid
         Bulletins which is the bi-monthly update to the Provider Procedures
         Manual. Clinical information regarding covered services are published
         by the Texas Medicaid program in the Texas Medicaid Service Delivery
         Guide. Also include the amount, duration, and scope of basic and
         value-added services, and HMO's responsibility to provide these
         services;

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         7.12.3.2 Describe criteria, protocols, procedures and instrumentation
         for referral of STAR Members from and to HMO and LMHA;

         7.12.3.3 Describe processes and procedures for referring Members with
         SPMI or SED to LMHA for assessment and determination of eligibility for
         rehabilitation or targeted case management services;

         7.12.3.4 Describe how the LMHA and HMO will coordinate providing
         behavioral health care services to Members with SPMI or SED;

         7.12.3.5 Establish clinical consultation procedures between HMO and
         LMHA including consultation to effect referrals and on-going
         consultation regarding the Member's progress;

         7.12.3.6 Establish procedures to authorize release and exchange of
         clinical treatment records;

         7.12.3.7 Establish procedures for coordination of assessment,
         intake/triage, utilization review/utilization management and care for
         persons with SPMI or SED;

         7.12.3.8 Establish procedures for coordination of inpatient psychiatric
         services (including court ordered commitment of Members under 21) in
         state psychiatric facilities within the LMHA's catchment area;

         7.12.3.9 Establish procedures for coordination of emergency and urgent
         services to Members; and

         7.123.10 Establish procedures for coordination of care and transition
         of care for new HMO Members who are receiving treatment through the
         LMHA.

         7.12.4 HMO must offer licensed practitioners of the healing arts, who
         are part of the Member's treatment team for rehabilitation services,
         the opportunity to participate in HMO's network. The practitioner must
         agree to accept the standard provider reimbursement rate, meet the
         credentialing requirements, comply with all the terms and conditions of
         the standard provider contract of HMO.

         7.12.5 Members receiving rehabilitation services must be allowed to
         choose the licensed practitioners of the healing arts who are currently
         a part of the Member's treatment team for rehabilitation services . If
         the Member chooses to receive these services from licensed
         practitioners of the healing arts who are part of the Member's
         rehabilitation services treatment team, HMO must reimburse the LMHA at
         current Medicaid fee-for-service amounts.

SECTION 2.35      MODIFICATION TO SECTION 7.13, BEHAVIORAL HEALTH- LOCAL MENTAL
                  HEALTH AUTHORITY (LMHA)

     Section 7.13, Behavioral health- Local Mental Health Authority (LMHA), is
     being replaced with Section 7.13, Significant Traditional Providers (STPS)
     to be consistent with the STAR contract.

         7.13 SIGNIFICANT TRADITIONAL PROVIDERS (STPS)

         HMO must seek participation in its provider network from:

         7.13.l Each health care provider in the service area who has
         traditionally provided care to Medicaid recipients;

         7.13.2 Each hospital in the service area that has been designated as a
         disproportionate share hospital under Medicaid; and

         7.13.3 Each specialized pediatric laboratory in the service area,
         including those laboratories located in children's hospitals.

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SECTION 2.36      MODIFICATION OF SECTION 7.14, SIGNIFICANT TRADITIONAL
                  PROVIDERS (STPS)

     Section 7.14, Significant Traditional Providers (STPS), is being replaced
     with Section 7.14, Rural Health Providers, to be consistent with the STAR
     contract.

         7.14 RURAL HEALTH PROVIDERS

         7.14.1 In rural areas of the service area, HMO must seek the
         participation in its provider network of rural hospitals, physicians,
         home and community support service agencies, and other rural health
         care providers who:

         7.14.1.1 are the only providers located in the service area; and

         7.14.1.2 are Significant Traditional Providers.

         7.14.2 In order to contract with HMO, rural health providers must:

         7.142.1 agree to accept the prevailing provider contract rate of HMO
         based on provider type; and

         7.142.2 have the credentials required by HMO, provided that lack of
         board certification or accreditation by JCAHO may not be the only
         grounds for exclusion from the provider network.

         7.14.3 HMO must reimburse rural hospitals with 100 or fewer licensed
         beds in counties with fewer than 50,000 persons for acute care services
         at a rate calculated using the higher of the prospective payment system
         rate or the cost reimbursed methodology authorized under the Tax Equity
         and Fiscal Responsibility Act of 1982 (TEFRA). Hospitals reimbursed
         under TEFRA cost principles shall be paid without the imposition of the
         TEFRA cap.

         7.14.4 HMO must reimburse physicians who practice in rural counties
         with fewer than 50,000 persons at a rate using the current Medicaid fee
         schedule, including negotiated fee-for-service.

SECTION 2.37      ADDITION TO ARTICLE 7, PROVIDER NETWORK REQUIREMENTS

     Article 7 is amended to add Section 7.16, Coordination with Public Health,
     to be consistent with the STAR contract.

         7.16 COORDINATION WITH PUBLIC HEALTH

         7.16.1 REIMBURSED ARRANGEMENTS. HMO must make a good faith effort to
         enter into a subcontract for the covered health care services as
         specified below with HHSC Public Health Regions, city and/or county
         health departments or districts in each county of the service area that
         will be providing these services to the Members (Public Health
         Entities), who will be paid for services by HMO, including any or all
         of the following services or any covered service which the public
         health department and HMO have agreed to provide:

         7.16.1.1 Sexually Transmitted Diseases (STDs) Services (see Article
         6.15);

         7.16.1.2 Confidential HIV Testing (see Article 6.15);

         7.16.1.3 Immunizations;

         7.16.1.4 Tuberculosis (TB) Care (see Article 6.12);

         7.16.1.5 Family Planning Services (see Article 6.7);

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         7.16.1.6 THSteps checkups (see Article 6.8); and

         7.16.1.7 Prenatal services (see Article 6.9).

         7.16.2 HMO must make a good faith effort to enter into subcontracts
         with public health entities in the service area. The subcontracts must
         be available for review by HHSC or its designated agent(s) on the same
         basis as all other subcontracts. If any changes are made to the
         contract, it must be resubmitted to HHSC. If an HMO is unable to enter
         into a contract with public health entities, HMO must document current
         and past efforts to HHSC. Documentation must be submitted no later than
         120 days after the execution of this contract. Public health
         subcontracts must include the following areas:

         7.16.2.1 The general relationship between HMO and the Public Health
         entity. The subcontracts must specify the scope and responsibilities of
         both parties, the methodology and agreements regarding billing and
         reimbursements, reporting responsibilities, Member and provider
         educational responsibilities, and the methodology and agreements
         regarding sharing of confidential medical record information between
         the public health entity and the PCP.

         7.16.2.2 Public Health Entity responsibilities:

         (1)  Public health providers must inform Members that confidential
              health care information will be provided to the PCP.

         (2)  Public health providers must refer Members back to PCP for any
              follow-up diagnostic, treatment, or referral services.

         (3)  Public health providers must educate Members about the importance
              of having a PCP and accessing PCP services during office hours
              rather than seeking care from Emergency Departments, Public Health
              Clinics, or other Primary Care Providers or Specialists.

         (4)  Public health entities must identify a staff person to act as
              liaison to HMO to coordinate Member needs, Member referral, Member
              and provider education, and the transfer of confidential medical
              record information.

         7.16.2.3 HMO Responsibilities:

         (1)  HMO must identify care coordinators who will be available to
              assist public health providers and PCPs in getting efficient
              referrals of Members to the public health providers, specialists,
              and health-related service providers either within or outside
              HMO's network.

         (2)  HMO must inform Members that confidential healthcare information
              will be provided to the PCP.

         (3)  HMO must educate Members on how to better utilize their PCPs,
              public health providers, emergency departments, specialists, and
              health-related service providers.

         7.16.2.4 Existing contracts must include the provisions in Articles
         7.16.2.1 through 7.16.2.3.

         7.16.3 NON-REIMBURSED ARRANGEMENTS WITH PUBLIC HEALTH ENTITIES.

         7.16.3.1 Coordination with Public Health Entities. HMOs must make a
         good faith effort to enter into a Memorandum of Understanding (MOU)
         with Public Health Entities in the service area regarding the provision
         of services for essential public health care services. These MOUs must
         be entered into in each service area and are subject to HHSC approval.
         If any changes are made to the MOU, it must be resubmitted to HHSC. If
         an HMO is unable to enter into an MOU with a public health entity, HMO
         must document current and past efforts to HHSC. Documentation must be
         submitted no later than 120 days after the execution of this contract.
         MOUs must contain the roles and responsibilities of HMO and the public
         health department for the following services:

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         (1)  Public health reporting requirements regarding communicable
              diseases and/or diseases which are preventable by immunization as
              defined by state law;

         (2)  Notification of and referral to the local Public Health Entity, as
              defined by state law, of communicable disease outbreaks involving
              Members;

         (3)  Referral to the local Public Health Entity for TB contact
              investigation and evaluation and preventive treatment of persons
              whom the Member has come into contact;

         (4)  Referral to the local Public Health Entity for STD/HIV contact
              investigation and evaluation and preventive treatment of persons
              whom the Member has come into contact; and,

         (5)  Referral for WIC services and information sharing;

         (6)  Coordination and follow-up of suspected or confirmed cases of
              childhood lead exposure.

         7.16.3.2 Coordination with Other Health and Human Services (HHS)
         Programs. HMOs must make a good faith effort to enter into a Memorandum
         of Understanding (MOU) with other HHSC programs regarding the provision
         of services for essential public health care services. These MOUs must
         be entered into in each service area and are subject to HHSC approval.
         If any changes are made to the MOU, it must be resubmitted to HHSC. If
         an HMO is unable to enter into an MOU with other HHSC programs, HMO
         must document current and past efforts to HHSC. Documentation must be
         submitted no later than 120 days after the execution of this contract.
         MOUs must delineate the roles and responsibilities of HMO and the HHSC
         programs for the following services:

         (1)  Use of the TDH laboratory for THSteps newborn screens; lead
              testing; and hemoglobin/hematocrit tests;

         (2)  Availability of vaccines through the Vaccines for Children
              Program;

         (3)  Reporting of immunizations provided to the statewide ImmTrac
              Registry including parental consent to share data;

         (4)  Referral for WIC services and information sharing;

         (5)  Pregnant, Women and Infant (PWI) Targeted Case Management;

         (6)  THSteps outreach, informing and Medical Case Management;

         (7)  Participation in the community based coalitions with the
              Medicaid-funded case management programs in MHMR, ECI, TCB, and
              TDH (PWI, CIDC and THSteps Medical Case Management);

         (8)  Referral to the TDH Medical Transportation Program;

         (9)  Cooperation with activities required of public health authorities
              to conduct the annual population and community based needs
              assessment; and

         (10) Coordination and follow-up of suspected or confirmed cases of
              childhood lead exposure.

         7.16.4 All public health contracts must contain provider network
         requirements in Article VII, as applicable.

SECTION 2.38      ADDITION TO ARTICLE 7, PROVIDER NETWORK REQUIREMENTS

     Article 7 is amended to add Section 7.17, Coordination with Texas
     Department of Protective and Regulatory Services, to be consistent with the
     STAR contract.

         7.17 COORDINATION WITH TEXAS DEPARTMENT OF PROTECTIVE AND REGULATORY
              SERVICES

         7.17.1 HMO must cooperate and coordinate with the Texas Department of
         Protective and.

         Regulatory Services (TDPRS) for the care of a child who is receiving
         services from or has been placed in the conservatorship of TDPRS.

         7.17.2 HMO must comply with all provisions of a Court Order or TDPRS
         Service Plan with respect to a child in the conservatorship of TDPRS
         (Order) entered by a Court of Continuing

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         Jurisdiction placing a child under the protective custody of TDPRS or a
         Service Plan voluntarily entered into by the parents or person having
         legal custody of a minor and TDPRS, which relates to the health and
         behavioral health care services required to be provided to the Member.

         7.17.3 HMO cannot deny, reduce, or controvert the medical necessity of
         any health or behavioral health care services included in an Order
         entered by a court. HMO may participate in the preparation of the
         medical and behavioral care plan prior to TDPRS submitting the health
         care plan to the Court. Any modification or termination of court
         ordered services must be presented and approved by the court with
         jurisdiction over the matter.

         7.17.4 A Member or the parent or guardian whose rights are subject to
         an Order or Service Plan cannot appeal the necessity of the services
         ordered through HMO's complaint or appeal processes, or to HHSC for a
         Fair Hearing.

         7.17.5 HMO must include information in its provider training and
         manuals regarding:

         7.17.5.1 providing medical records;

         7.17.5.2 scheduling medical and behavioral health appointments within
         14 days unless requested earlier by TDPRS; and

         7.17.5.3 recognition of abuse and neglect and appropriate referral to
         TDPRS.

         7.17.6 HMO must continue to provide all covered services to a Member
         receiving services from or in the protective custody of TDPRS until the
         Member has been disenrolled from HMO as a result of loss of eligibility
         in Medicaid managed care or placement into foster care.

SECTION 2.39      ADDITION TO ARTICLE 7, PROVIDER NETWORK REQUIREMENTS

     Article 7, Provider Network Requirements, is amended to add Section 7.18,
     Delegated Networks (IPAs, Limited Provider Networks, and ANHCs)

         7.18 DELEGATED NETWORKS (IPAs, LIMITED PROVIDER NETWORKS AND ANHCs)

         7.18.1 All HMO contracts with any of the entities described in Texas
         Insurance Code Article 20A.02(ce) and a group of providers who are
         licensed to provide the same health care services or an entity that is
         wholly-owned or controlled by one or more hospitals and physicians
         including a physician-hospital organization (delegated network
         contracts) must:

         7.18.1.1 contain the mandatory contract provisions for all
         subcontractors in Article 3.2 of this contract;

         7.18.1.2 comply with the requirements, duties and responsibilities of
         this contract;

         7.18.1.3 not create a barrier for full participation to significant
         traditional providers;

         7.18.1.4 not interfere with HHSC's oversight and audit responsibilities
         including collection and validation of encounter data; or

         7.18.1.5 be consistent with the federal requirement for simplicity in
         the administration of the Medicaid program.

         7.18.2 In addition to the mandatory provisions for all subcontracts
         under Articles 3.2. and 7.2, all HMO/delegated network contracts must
         include the following mandatory standard provisions:

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         7.18.2.1 HMO is required to include subcontract provisions in its
         delegated network contracts which require the UM protocol used by a
         delegated network to produce substantially similar outcomes, as
         approved by HHSC, as the UM protocol employed by the contracting HMO.
         The responsibilities of an HMO in delegating UM functions to a
         delegated network will be governed by Article 16.3.12 of this contract.

         7.18.2,2 Delegated networks that are delegated claims payment
         responsibilities by HMO must also have the responsibility to submit
         encounter, utilization, quality, and financial data to HMO. HMO remains
         responsible for integrating all delegated network data reports into
         HMO's reports required under this contract. If HMO is not able to
         collect and report all delegated network data for HMO reports required
         by this contract, HMO must not delegate claims processing to the
         delegated network.

         7.18.2.3 The delegated network must comply with the same records
         retention and production requirements, including Open Records
         requirements, as the HMO under this contract.

         7.18.2.4 The delegated network is subject to the same marketing
         restrictions and requirements as the HMO under this contract.

         7.18.2.5 HMO is responsible for ensuring that delegated network
         contracts comply with the requirements and provisions of the HHSC/HMO
         contract. HHSC will impose appropriate sanctions and remedies upon HMO
         for any default under the HHSC/HMO contract which is caused directly or
         indirectly by the acts or omissions of the delegated network.

         7.18.3 HMO cannot enter into contracts with delegated networks to
         provide services under this contract which require the delegated
         network to enter into exclusive contracts with HMO as a condition for
         participation with HMO.

         7.18.3.1 Article 17.18.3 does not apply to providers who are employees
         or participants in limited provider networks.

         7.18.4 All delegated networks that limit Member access to those
         providers contracted with the delegated network (closed or limited
         panel networks) with whom HMO contracts must either independently meet
         the access provisions of 28 Texas Administrative Code '11.1607,
         relating to access requirements for those Members enrolled or assigned
         to the delegated network, or HMO must provide for access through other
         network providers outside the closed panel delegated network.

         7.18.5 HMO cannot delegate to a delegated network the enrollment,
         re-enrollment, assignment or reassignment of a Member.

         7.18.6 In addition to the above provision HMO and approved Non-Profit
         Health Corporations must comply with all of the requirements contained
         in 28 TAC Section 11.1604, relating to Requirements of Certain
         Contracts between Primary HMOs and ANHCs and Primary HMOs and Provider
         HMOs.

         7.18.7 HMO remains responsible for performing all duties,
         responsibilities and services under this contract regardless of whether
         the duty, responsibility or service is contracted or delegated to
         another. HMO must provide a copy of the contract provisions that set
         out HMO's duties, responsibilities, and services to any provider
         network or group with whom HMO contracts to provide health care
         services on a risk sharing or capitated basis or to provide health care
         services.

SECTION 2.40      MODIFICATION OF SECTION 8.2, MEMBER HANDBOOK

     Section 8.2.4 is amended to add the following language to be consistent
     with the STAR contract.

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

SECTION 2.41      MODIFICATION OF SECTION 8.5, MEMBER HOTLINE

         Current Section 8.5, Member Hotline, is replaced with Section 8.5,
         Member Complaint Process, to be consistent with the STAR Contract.

         8.5 MEMBER COMPLAINT PROCESS

         8.5.1 HMO must develop, implement and maintain a Member complaint
         system that complies with the requirements of Article 20A.12 of the
         Texas Insurance Code, relating to the Complaint System, except where
         otherwise provided in this contract and in applicable federal law. The
         complaint and appeals procedure must be the same for all Members and
         must comply with Texas Insurance Code, Article 20A.12 or applicable
         federal law. Modifications and amendments must be submitted to HHSC at
         least 30 days prior to the implementation of the modification or
         amendment.

         8.5.2 HMO must have written policies and procedures for receiving,
         tracking, reviewing, and reporting and resolving of Member complaints.
         The procedures must be reviewed and approved in writing by HHSC. Any
         changes or modifications to the procedures must be submitted to HHSC
         for approval thirty (30) days prior to the effective date of the
         amendment.

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

         8.5.4 HMO must have a routine process to detect patterns of complaints
         and disenrollments and involve management and supervisory staff to
         develop policy and procedural improvements to address the complaints.
         HMO must cooperate with HHSC and HHSC's Enrollment Broker in Member
         complaints relating to enrollment and disenrollment.

         8.5.5 HMO's complaint procedures must be provided to Members in writing
         and in alternative communication formats. A written description of
         HMO's complaint procedures must be in appropriate languages and easy
         for Members to understand. HMO must include a written description in
         the Member Handbook. HMO must maintain at least one local and one
         toll-free telephone number for making complaints.

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

         8.5.7 HMO's process must include a requirement that the Governing Body
         of HMO reviews the written records (logs) for complaints and appeals.

         8.5.8 HMO is prohibited from discriminating against a Member because
         that Member is making or has made a complaint.

         8.5.9 HMO cannot process requests for disenrollments through HMO's
         complaint procedures. Requests for disenrollments must be referred to
         HHSC within five (5) business days after the Member makes a
         disenrollment request.

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         8.5.10 HMO must develop, implement and maintain an appeal of adverse
         determination procedure that complies with the requirements of Article
         21.58A of the Texas Insurance Code, relating to the utilization review,
         except where otherwise provided in this contract and in applicable
         federal law. The appeal of an adverse determination procedure must be
         the same for all Members and must comply with Texas Insurance Code,
         Article 21.58A or applicable federal law. Modifications and amendments
         must be submitted to HHSC no less than 30 days prior to the
         implementation of the modification or amendment. When an enrollee, a
         person acting on behalf of an enrollee, or an enrollee's provider of
         record expresses orally or in writing any dissatisfaction or
         disagreement with an adverse determination, HMO or UR agent must regard
         the expression of dissatisfaction as a request to appeal an adverse
         determination.

         8.5.11 If a complaint or appeal of an adverse determination relates to
         the denial, delay, reduction, termination or suspension of covered
         services by either HMO or a utilization review agent contracted to
         perform utilization review by HMO, HMO must inform Members they have
         the right to access the HHSC Fair Hearing process at any time in lieu
         of the internal complaint system provided by HMO. HMO is required to
         comply with the requirements contained in 1 TAC Chapter 357, relating
         to notice and Fair Hearings in the Medicaid program, whenever an action
         is taken to deny, delay, reduce, terminate or suspend a covered
         service.

         8.5.12 If Members utilize HMO's internal complaint or appeal of adverse
         determination system and the complaint relates to the denial, delay,
         reduction, termination or suspension of covered services by either HMO
         or a utilization review agent contracted to perform utilization review
         by HMO, HMO must inform the Member that they continue to have a right
         to appeal the decision through the HHSC Fair Hearing process.

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

         8.5.14 HMO will cooperate with the Enrollment Broker and HHSC to
         resolve all Member complaints. Such cooperation may include, but is not
         limited to, participation by HMO or Enrollment Broker and/or HHSC
         internal complaint committees.

         8.5.15 HMO must have policies and procedures in place outlining the
         role of HMO's Medical Director in the Member Complaint System and
         appeal of an adverse determination. The Medical Director must have a
         significant role in monitoring, investigating and hearing complaints.

         8.5.16 HMO must provide Member Advocates to assist Members in
         understanding and using HMO's complaint system and appeal of an adverse
         determination.

         8.5.17 HMO's Member Advocates must assist Members in writing or filing
         a complaint or appeal of an adverse determination and monitoring the
         complaint or appeal through the Contractor's complaint or appeal of an
         adverse determination process until the issue is resolved.

SECTION 2.42      MODIFICATION TO SECTION 8.6, MEMBER COMPLAINT PROCESS

     Section 8.6, Member Complaint Process, is replaced with Section 8.6, Member
     Notice, Appeals and Fair Hearings, to be consistent with STAR contract
     language.

         8.6 MEMBER NOTICE, APPEALS AND FAIR HEARINGS

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         8.6.1 HMO must send Members the notice required by 1 Texas
         Administrative Code Section 357.5, whenever HMO takes an action to
         deny, delay, reduce or terminate covered services to a Member. The
         notice must be mailed to the Member no less than 10 days before HMO
         intends to take an action. If an emergency exists, or if the time
         within which the service must be provided makes giving 10 days notice
         impractical or impossible, notice must be provided by the most
         expedient means reasonably calculated to provide actual notice to the
         Member, including by phone, direct contact with the Member, or through
         the provider's office.

         8.6.2 The notice must contain the following information:

         8.6.2.1 Member's right to immediately access HHSC's Fair Hearing
         process;

         8.6.2.2 a statement of the action HMO will take;

         8.6.2.3 the date the action will be taken; 8.6.2.4 an explanation of
         the reasons HMO will take the action;

         8.6.2.5 a reference to the state and/or federal regulations which
         support HMO's action;

         8.6.2.6 an address where written requests may be sent and a toll-free
         number Member can call to: request the assistance of a Member
         representative, or file a complaint, or request a Fair Hearing;

         8.6.2.7 a procedure by which Member may appeal HMO's action through
         either HMO's complaint process or HHSC's Fair Hearings process;

         8.6.2.8 an explanation that Members may represent themselves, or be
         represented by HMO's representative, a friend, a relative, legal
         counsel or another spokesperson;

         8.6.2.9 an explanation of whether, and under what circumstances,
         services may be continued if a complaint is filed or a Fair Hearing
         requested;

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

         8.6.2.11 a statement explaining that HMO must make its decision within
         30 days from the date the complaint is received by HMO; and

         8.6.2.12 a statement explaining that a final decision must be made by
         HHSC within 90 days from the date a Fair Hearing is requested.

SECTION 2.43      MODIFICATION OF SECTION 8.7, MEMBER NOTICES, APPEALS, AND FAIR
                  HEARINGS

     Section 8.7, Member Notices, Appeals, and Fair Hearings is replaced with
     Section 8.7, Member Advocates, to be consistent with STAR language.

         8.7 MEMBER ADVOCATES

         8.7.1 HMO must provide Member Advocates to assist Members. Member
         Advocates must be physically located within the service area. Member
         Advocates must inform Members of their rights and responsibilities, the
         complaint process, the health education and the services available to
         them, including preventive services.

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         8.7.2 Member Advocates must assist Members in writing complaints and
         are responsible for monitoring the complaint through HMO's complaint
         process until the Member's issues are resolved or a HHSC Fair Hearing
         requested (see Articles 8.6.15, 8.6.16, and 8.6.17).

         8.7.3 Member Advocates are responsible for making recommendations to
         management on any changes needed to improve either the care provided or
         the way care is delivered. Member Advocates are also responsible for
         helping or referring Members to community resources available to meet
         Member needs that are not available from HMO as Medicaid covered
         services.

         8.7.4 Member Advocates must provide outreach to Members and participate
         in HHSC sponsored enrollment activities.

SECTION 2.44      ADDITION TO ARTICLE 8, MEMBER SERVICES REQUIREMENTS

     Article 8, Member Services Requirements, is amended to add Section 8.9,
     Certification Dale, to be consistent with STAR contract.

         8.9 CERTIFICATION DATE

         8.9.1 On the date of the new Member's enrollment, HHSC will provide
         HMOs with the Member's Medicaid certification date.

     Article 8, Member Services Requirements, is amended to add Section 8.10.
     Member Hotline, to be consistent with STAR contract.

         8.10 MEMBER HOTLINE.

         8.10.1 HMO must maintain a toll-free Member telephone hotline 24 hours
         a day, seven days a week for Members to obtain assistance in accessing
         services under this contract.

SECTION 2.45      MODIFICATION TO SECTION 9.2 ADHERENCE TO MARKETING GUIDELINES
                  WITH  MARKETING ORIENTATION AND TRAINING

     Section 9.2, Adherence to Marketing Guidelines with Marketing Orientation
     and Training, is being modified to be consistent with STAR contract
     language as follows:

         9.2 MARKETING ORIENTATION AND TRAINING

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

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

SECTION 2.46      ADDITION TO ARTICLE 9, MARKETING AND PROHIBITED PRACTICES

     Article 9, Marketing and Prohibited Practices, is being amended to add
     Section 9.3, Prohibited Marketing Practices, to be consistent with STAR
     contract language.

         9.3 PROHIBITED MARKETING PRACTICES

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         9.3.1 HMO and its agents, subcontractors and providers are prohibited
         from engaging in the following marketing practices:

         9.3.1.1 conducting any direct-contact marketing to prospective Members
         except through HHSC-sponsored enrollment events;

         9.3.1.2 making any written or oral statement containing material
         misrepresentations of fact or law relating to HMO's plan or the STAR
         program;

         9.3.1.3 making false, misleading or inaccurate statements relating to
         services or benefits of HMO or the STAR program;

         9.3.1.4 offering prospective Members anything of material or financial
         value as an incentive to enroll with a particular PCP or HMO; and

         9.3.1.5 discriminating against an eligible Member because of race,
         creed, age, color, sex, religion, national origin, ancestry, marital
         status, sexual orientation, physical or mental handicap, health status,
         or requirements for health care services.

         HMO may offer nominal gifts with a retail value of no more than $10
         and/or free health screening to potential Members, as long as these
         gifts and free health screenings are offered whether or not the
         potential Member enrolls in their HMO. Free health screenings cannot be
         used to discourage less healthy potential Members from joining HMO. All
         gifts must be approved by HHSC prior to distribution to Members. The
         results of free screenings must be shared with the Member's PCP if the
         Member enrolls with HMO providing the screen.

         9.3.3 Marketing representatives may not conduct or participate in
         marketing activities for more than one HMO.

     Article 9, Marketing and Prohibited Practices, is being amended to add
     Section 9.4, Network Provider Directory, to be consistent with STAR
     contract language.

         9.4 NETWORK PROVIDER DIRECTORY

         9.4.1 The provider directory and any revisions must be approved by HHSC
         prior to publication and distribution to prospective Members (see
         Article 3.4.1 regarding the process for plan materials review). The
         directory must contain all critical elements specified by HHSC. See
         Appendix D, Required Critical Elements, for specific details regarding
         content requirements.

         9.4.2 If HMO contracts with limited provider networks, the provider
         directory must comply with the requirements of 28 TAC 11.1600(b)(11),
         relating to the disclosure and notice of limited provider networks.

         9.4.3 Updates to the provider directory must be provided to the
         Enrollment Broker at the beginning of each State fiscal year quarter.
         This includes the months of September, December, March and June. HMO is
         responsible for submitting draft updates to HHSC only if changes other
         than PCP information are incorporated. HMO is responsible for sending
         three final paper copies and one electronic copy of the updated
         provider directory to HHSC each quarter. If an electronic format is not
         available, five paper copies must be sent. HHSC will forward two
         updated provider directories, along with its approval notice, to the
         Enrollment Broker to facilitate the distribution of the directories.

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SECTION 2.47      MODIFICATION OF SECTION 10.1, MODEL MIS REQUIREMENTS

         Section 10.1.3.3 of Section 10.1, Model MIS Requirements, is being
         amended to be consistent with STAR contract language.

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

         Section 10.1.7 of Section 10.1, Model MIS Requirements, is being
         amended to be consistent with STAR contract language.

         10.1.7 HMO must notify HHSC of any changes to HMO's MIS department
         dedicated to or supporting this contract by Phase I of Renewal Review.
         Any updates to the organizational chart and the description of
         responsibilities must be provided to HHSC at least 30 days prior to the
         effective date of the change. Official points of contact must be
         provided to HHSC on an on-going basis. An Internet E-mail address must
         be provided for each point of contact.

SECTION 2.48      MODIFICATION OF SECTION 10.7, UTILIZATION/QUALITY IMPROVEMENT
                  SUBSYSTEM

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

SECTION 2.49      MODIFICATION OF ARTICLE 11, QUALITY ASSESSMENT AND PERFORMANCE
                  IMPROVEMENT PROGRAM

     Section 11.1, Quality Improvement Program (QIP) System, is amended to be
     consistent with the STAR contract as follows:

         11.1 QUALITY IMPROVEMENT PROGRAM (QIP) SYSTEM

         HMO must develop, maintain, and operate a Quality Improvement Program
         (QIP) system, which complies with federal regulations relating to
         Quality Assurance systems, found at 42 C.F.R. Section 434.34. The
         system must meet the Standards for Quality Improvement Programs
         contained in Appendix A.

     Section 11.2, Written QIP Plan, is amended to be consistent with the STAR
     contract as follows:

         11.2 WRITTEN QIP PLAN

         HMO must have on file with HHSC an approved plan describing its Quality
         Improvement Plan (QIP), including how HMO will accomplish the
         activities pertaining to each Standard (I-XVI) in Appendix A.
         Modifications and amendments must be submitted to HHSC no later than 60
         days prior to the implementation of the modification or amendment.

     Section 11.3, Q1P Subcontracting, is amended to be consistent with the STAR
     contract as follows:

         11.3 QIP SUBCONTRACTING

         If HMO subcontracts any of the essential functions or reporting
         requirements of QIP to another entity, HMO must maintain a file of the
         subcontractors. The file must be available for review by HHSC or its
         designee upon request. HMO must notify HHSC no later than 90 days prior
         to terminating any subcontract affecting a major performance function
         of this contract (see Article 3.2.1.2).

     Section 11.4, Behavioral Health Integration into QIP, is amended to be
     consistent with the STAR contract as follows.

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         11.4 ACCREDITATION

         If HMO is accredited by an external accrediting agency, documentation
         of accreditation must be provided to HHSC. HMO must provide HHSC with
         their accreditation status upon request.

     Section 11.5, QIP Reporting Requirement, is amended to be consistent with
     the STAR contract as follows.

         11.5 BEHAVIORAL HEALTH INTEGRATION INTO QIP

         HMO must integrate behavioral health into its QIP system and include a
         systematic and ongoing process for monitoring, evaluating, and
         improving the quality and appropriateness of behavioral health care
         services provided to Members. HMO's QIP must enable HMO to collect
         data, monitor and evaluate for improvements to physical health outcomes
         resulting from behavioral health integration into the overall care of
         the Member.

     Article 11, Quality Assessment and Performance Improvement Program, is
     amended to add Section 11.6, QIP Report Requirements, to be consistent with
     STAR contract language.

         11.6 QIP REPORTING REQUIREMENTS

         HMO must meet all of the QIP Reporting Requirements contained in
         Article XII.

SECTION 2.50      MODIFICATION OF SECTION 12.1, FINANCIAL REPORTS.

     Sections 12.1, Financial Reports, is amended to be consistent with the STAR
     contract as follows.

         12.1 FINANCIAL REPORTS

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

         12.1.2 Deleted.

         12.1.3 Deleted.

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

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

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

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

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

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         12.1.5 Administrative expenses reported in the monthly and Final MCFS
         Reports must be reported in accordance with Appendix L, Cost Principles
         for Administrative Expenses. Indirect administrative expenses must be
         based on an allocation methodology for Medicaid managed care activities
         and services that is developed or approved by HHSC.

         12.1.6 Affiliate Report. HMO must submit an Affiliate Report to HHSC if
         this information has changed since the last report was submitted. The
         report must contain the following information:

         12.1.6.1 A listing of all Affiliates; and

         12.1.6.2 A schedule of all transactions with Affiliates which, under
         the provisions of this Contract, will be allowable as expenses in Part
         1 of the MCFS Report for services provided to HMO by the Affiliates for
         the prior approval of HHSC. Include financial terms, a detailed
         description of the services to be provided, and an estimated amount,
         which will be incurred by HMO for such services during the Contract
         period.

         12.1.7 Deleted.

         12.1.8 Form HCFA-1513. HMO must file an updated Form HCFA-1513
         regarding control, ownership, or affiliation of HMO 30 days prior to
         the end of the contract year. An updated Form HCFA-1513 must also be
         filed no later than 30 days after any change in control, ownership, or
         affiliation of HMO. Forms may be obtained from HHSC.

         12.1.9 Section 1318 Financial Disclosure Report. HMO must file an
         updated CMS Public Health Service (PHS) "Section 1318 Financial
         Disclosure Report" no later than 30 days after the end of the contract
         year and no later than 30 days after entering into, renewing, or
         terminating a relationship with an affiliated party. These forms may be
         obtained from HHSC.

         12.1.10 Deleted.

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

         12.1.12 Third Party Recovery (TPR) Reports. HMO must file quarterly
         Third Party Recovery (TPR) Reports in accordance with the format
         developed by HHSC. TPR reports must include total dollars recovered
         from third party payers for services to HMO's Members for each month
         and the total dollars recovered through coordination of benefits,
         subrogation, and worker's compensation.

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

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

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         contract renewal. If the HMO revises the Bonus and/or Incentive Payment
         Plan, the HMO must submit the revised plan to HHSC for approval prior
         to implementing the plan.

SECTION 2.51 MODIFICATION OF SECTION 12.2, STATISTICAL REPORTS

     Sections 12.2, Statistical Reports, is amended to be consistent with the
     STAR contract as follows.

         12.2.1 HMO must electronically file the following monthly reports: (1)
         encounter; (2) encounter detail; (3) institutional; (4) institutional
         detail; and (5) claims detail for cost reimbursed services filed, if
         any, with HMO. Encounter data must include the data elements, follow
         the format, and use the transmission method specified by HHSC in the
         Encounter Data Submission Manual. Encounters must be submitted by HMO
         to HHSC no later than 45 days after the date of adjudication
         (finalization) of the claims.

         12.2.2 Monthly reports must include current month encounter data and
         encounter data adjustments to the previous month's data.

         12.2.3 Data quality standards will be developed jointly by HMO and
         HHSC. Encounter data must meet or exceed data quality standards. Data
         that does not meet quality standards must be corrected and returned
         within the period specified by HHSC. Original records must be made
         available to validate all encounter data.

         12.2.4 HMO cannot submit newborn encounters to HHSC until the State
         issued Medicaid ID number is received for a newborn. HMO must match the
         proxy ID number issued by the HMO with the State issued Medicaid ID
         number prior to submission of encounters to HHSC and submit the
         encounter in accordance to the HMO Encounter Data Submission Manual.
         The encounter must include the State issued Medicaid ID number.
         Exceptions to the 45 day deadline will be granted in cases in which the
         Medicaid ID number is not available for a newborn Member.

         12.2.5 HMO must require providers to submit claims and encounter data
         to HMO no later than 95 days after the date services are provided.

         12.2.6 HMO must use the procedure codes, diagnosis codes and other
         codes contained in the most recent edition of the Texas Medicaid
         Provider Procedures Manual and as otherwise provided by HHSC.
         Exceptions or additional codes must be submitted for approval before
         HMO uses the codes.

         12.2.7 HMO must use its HHSC-specified identification numbers on all
         encounter data submissions. Please refer to the HHSC Encounter Data
         Submission Manual for further specifications.

         12.2.8 HMO must validate all encounter data using the encounter data
         validation methodology prescribed by HHSC prior to submission of
         encounter data to HHSC.

         12.2.9 All Claims Summary Report. HMO must submit the "All Claims
         Summary Report" identified in the Texas Managed Care Claims Manual as a
         contract year-to-date report. The report must be submitted quarterly by
         the last day of the month following the reporting period. The reports
         must be submitted to HHSC in a format specified by HHSC.

         12.2.10 Medicaid Disproportionate Share Hospital (DSH) Reports. HMO
         must file preliminary and final Medicaid Disproportionate Share
         Hospital (DSH) reports, required by HHSC to identify and reimburse
         hospitals that qualify for Medicaid DSH funds. The preliminary and
         final DSH reports must include the data elements and be submitted in
         the form and format specified by HHSC. The preliminary DSH reports are
         due on or before June 1 of the year following the state

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         fiscal year for which data is being reported. The final DSH reports are
         due no later than July 15 of the year following the state fiscal year
         for which data is being reported.

SECTION 2.52 MODIFICATION OF SECTION 12.8, UTILIZATION MANAGEMENT REPORTS --
BEHAVIORAL HEALTH

     Section 12.8, Utilization Management Reports -- Behavioral Health is
     modified to reflect STAR contract language as follows:

         Section 12.8 Behavioral health (BH) utilization management reports are
         required on a semiannual basis. Refer to Appendix H for the
         standardized reporting format for each report and detailed instructions
         for obtaining the specific data required in the report.

     Section 12.8.1 is added to reflect STAR contract language as follows:

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

SECTION 2.53 SECTION 2.53 MODIFICATION OF SECTION 12.9, UTILIZATION MANAGEMENTS
REPORTS -- PHYSICAL HEALTH

     Section 12.9, Utilization Management Reports -- Physical Health, is
     modified to reflect STAR Contract as follows:

         12.9 UTILIZATION MANAGEMENT REPORTS - PHYSICAL HEALTH

         Physical health (PH) utilization management reports are required on a
         semi-annual basis. Refer to Appendix J for the standardized reporting
         format for each report and detailed instructions for obtaining specific
         data required in the report.

         Section 12.91 added to reflect STAR Contract as follows:

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

SECTION 2.54 MODIFICATION OF SECTION 12.10 UTILIZATION MANAGEMENT REPORTS --
LONG TERM CARE

     Section 12.10, Utilization Management Reports- Long Term Care is replaced
     with 12.10, Quality Improvement Report to be consistent with the STAR
     contract.

         12.10 QUALITY IMPROVEMENT REPORTS

         12.10.1 Not applicable to STAR+PLUS

         12.10.2 Not applicable to STAR+PLUS

         12.10.3 Annual QIP Summary Report. An annual QIP summary report must be
         conducted yearly based on the state fiscal year. The annual QIP summary
         report must be submitted by March 31 of each year. This report must
         provide summary information on HMO's QIP system and include the
         following:

                  1.       Executive summary of QIP - include results of all QI
                           reports and interventions.

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                  2.       Activities pertaining to each standard (I through
                           XVI) in Appendix A. Report must list each standard.

                  3.       Methodologies for collecting, assessing data and
                           measuring outcomes.

                  4.       Tracking and monitoring quality of care.

                  5.       Role of health professionals in QIP review.

                  6.       Methodology for collection data and providing
                           feedback to provider and staff.

                  7.       Outcomes and/or action plan.

         12.10.4 Provider Medical Record Audit and Report. HMO is required to
         conform to commonly accepted medical record standards such as those
         used by, NCQA, JCAHO, or those used for credentialing review such as
         the Texas Environment of Care Assessment Program (TECAP), and have
         documentation on file at HMO for review by HHSC or its designee during
         an on-site review.

SECTION 2.55 MODIFICATION OF SECTION 12.11 QUALITY IMPROVEMENT REPORTS

     Section 12.11, Quality Improvement Reports is replaced with 12.11, HUB
     Reports, to be consistent with the STAR contract.

         12.11 HUB REPORTS

         HMO must submit quarterly reports documenting HMO's HUB program efforts
         and accomplishments. The report must include a narrative description of
         HMO's program efforts and a financial report reflecting payments made
         to HUB. HMO must use the format included in Appendix B for HUB
         quarterly reports. For HUB Certified Entities: HMO must include the
         General Service Commission (GSC) Vendor Number and the ethnicity/gender
         under which a contracting entity is registered with GSC. For HUB
         Qualified (but not certified) Entities: HMO must include the
         ethnicity/gender of the major owner(s) (51%) of the entity. Any
         entities for which HMO cannot provide this information, cannot be
         included in the HUB report. For both types of entities, an entity will
         not be included in the HUB report if HMO does not list ethnicity/gender
         information.

SECTION 2.56 MODIFICATION OF SECTION 12.12, HUB QUARTERLY REPORTS

     Section 12.12, HUB Quarterly Reports, is replaced with Section 11.12,
     THSteps Reports, to be consistent with STAR contract language.

         12.12 THSTEPS REPORTS

         Minimum reporting requirements. HMO must submit, at a minimum, 80a/o of
         all THSteps checkups on HCFA 1500 claim forms as part of the encounter
         file submission to the HHSC Claims Administrator no later then thirty
         (30) days after the date of final adjudication (finalization) of the
         claims. Failure to comply with these minimum reporting requirements
         will result in Article 18 sanctions and money damages.

SECTION 2.57 MODIFICATION OF SECTION 11.13 THSTEPS REPORTS

     Section 12.13 THSteps Reports, is deleted.

SECTION 2.58 MODIFICATION OF SECTION 12.14, CBA STATUS REPORT

     Section 11.14, CBA Status Report, is replaced with Section 12.14, Member
     Hotline Performance Report to be consistent with STAR contract as follows:

         12.14 MEMBER HOTLINE PERFORMANCE REPORT

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

SECTION 2.59 MODIFICATION OF SECTION 12.15, SUBMISSION OF STAR+PLUS
DELIVERABLES/REPORTS

     Section 12.15, Submission of STAR+PLUS Deliverables/Reports, is being
     modified to be consistent with STAR contract as follows.

     Section 12.15.2 is renumbered to Section 12.15.1.2

     Section 12.15.3 is renumbered to Section 12.15.2

     Section 12.15.4 is renumbered to Section 12.15.3

     Section 12.15.5 is renumbered to Section 12.15.4

     Section 12.15.6 is renumbered to Section 12.15.5

         12.15.1.2 Electronic Mail Restrictions

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

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

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

                  -        2 digit plan code identification number;

                  -        Julian date; and then

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

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

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

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

         General mail:

         Texas Department of Human Services
         STAR+PLUS Contract Manager, MC-W-516
         P.O.Box 149030
         Austin, Texas 78714-9030

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         Overnight Mail:

         Texas Department of Human Services
         STAR+PLUS Contract Manager, MC-W-516
         701 West 71st Street
         Austin, Texas 78751

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

SECTION 2.60 ADDITION TO ARTICLE 12, REPORTING REQUIREMENTS

     Article 12, Reporting Requirements, is amended to add Section 12.16, CBA
     Status Report to be consistent with the STAR contract as follows.

         Section 12.16 CBA Status Report.

         HMO will provide HHSC with a weekly report on initial CBA assessments.
         HMO will provide HHSC with a monthly status report on annual CBA
         reassessments in a format specified by the state.

SECTION 2.61 MODIFICATION TO SECTION 13.2, CAPITATION AMOUNTS

     Section 13.1.2, Capitation Amounts, is modified to reflect the effective
     capitation rates for FY 2004.

         Section 13.1.2

         The capitation amount by Member risk group has been calculated to be
         less than the amount payable for providing the same services for an
         actuarially equivalent population in the regular Medicaid
         fee-for-service program. The following capitation payments will be
         effective during the term of this contract amendment The monthly
         capitation amounts for the Harris County Service Area are as follows:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                               FY 2004
                                                         MONTHLY CAPITATION
                                                               AMOUNTS           INITIALS
             MEMBER RISK GROUPS                          9/1/2003-8/31/2004
--------------------------------------------------------------------------------
<S>                                                      <C>                     <C>
115 CBA Waiver Clients - Dual Eligible                        $1,504.10          MCO
-----------------------------------------------------------------------------------------
111 CBA Waiver Clients - Medicaid Only                        $3,553.50          HHSC
-----------------------------------------------------------------------------------------
114 Other Community Clients - Dual Eligible                   $  152.12
--------------------------------------------------------------------------------
100 Other Community Clients - Medicaid Only                   $  686.52
--------------------------------------------------------------------------------
119 Nursing Facility Clients - Dual Eligible                  $  152.12
--------------------------------------------------------------------------------
118 Nursing Facility Clients -  Medicaid Only                 $  686.52
--------------------------------------------------------------------------------
</TABLE>

SECTION 2.62 MODIFICATION TO SECTION 13.2, EXPERIENCE REBATE TO STATE

     Section 13.2, Experience Rebate to State, is replaced with the following
     language to be consistent with the STAR contract.

         13.2 For the Contract Period, HMO must pay to HHSC as experience rebate
         calculated in accordance with the tiered rebate method listed below
         based on the excess of allowable HMO

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         STAR revenues over allowable HMO STAR expenses as set forth in Appendix
         I, as reviewed and confirmed by HHSC. HHSC reserves the right to have
         an independent audit performed to verify the information provided by
         HMO.

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

         13.2.2 Not applicable to STAR+PLUS

         13.2.2.1 Not applicable to STAR+PLUS

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

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

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

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SECTION 2.63 MODIFICATION TO SECTION 13.3, ADJUSTMENTS TO PREMIUM

     Section 13.3, Adjustments to Premium, is replaced by Section 13.3,
     Performance Objectives, to be consistent with the STAR contract.

         13.3 PERFORMANCE OBJECTIVES

         13.3.1 Not applicable to STAR+PLUS

         13.3.2 Not applicable to STAR+PLUS

         13.3.3 Not applicable to STAR+PLUS

         13.3.4 Not applicable to STAR+PLUS

         13.3.5 Not applicable to STAR+PLUS

         13.3.6 Not applicable to STAR+PLUS

         13.3.7 Not applicable to STAR+PLUS

         13.3.8 Not applicable to STAR+PLUS

         13.3.9 Not applicable to STAR+PLUS

         13.3.10 Not applicable to STAR+PLUS

         13.3.10.1 Not applicable to STAR+PLUS

SECTION 2.64 MODIFICATION TO SECTION 13.4, CBA REASSESSMENT PACKET

     Section 13.4, CBA Reassessment Packet, is replaced with Section 13.4,
     Adjustment to Premium, to be consistent with STAR contract language

         13.4 ADJUSTMENTS TO PREMIUM

         13.4.1 HHSC may recoup premiums paid to HMO in error. Error may be
         either human or machine error on the part of HHSC or an agent or
         contractor of HHSC. HHSC may recoup premiums paid to HMO if a Member is
         enrolled into HMO in error, and HMO provided no covered services to
         Member for the period of time for which premium was paid. If services
         were provided to Member as a result of the error, recoupment will not
         be made.

         13.4.2 HHSC may recoup premium paid to HMO if a Member for whom premium
         is paid moves outside the United States, and HMO has not provided
         covered services to the Member for the period of time for which premium
         has been paid. HHSC will not recoup premium if HMO has provided covered
         services to the Member during the period of time for which premium has
         been paid.

         13.4.3 HHSC may recoup premium paid to HMO if a Member for whom premium
         is paid dies before the first day of the month for which premium is
         paid.

         13.4.4 HHSC may recoup or adjust premium paid to HMO for a Member if
         the Member's eligibility status or program type is changed, corrected
         as a result of error, or is retroactively adjusted.

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         13.4.5 Recoupment or adjustment of premium under Articles 13.4.1
         through 13.4.4 may be appealed using the HHSC dispute resolution
         process.

         13.4.6 HHSC may adjust premiums for all Members within an eligibility
         status or program type if adjustment is required by reductions in
         appropriations and/or if a benefit or category of benefits is excluded
         or included as a covered service. Adjustment must be made by amendment
         as required by Article 15.2. Adjustment to premium under this
         subsection may not be appealed using the HHSC dispute resolution
         process.

SECTION 2.65 ADDITION TO ARTICLE 13, PAYMENT PROVISIONS

     Article 13 is amended to add Section 13.5, Newborn and Pregnant Women
     Payment Provisions.

         13.5 NEWBORN AND PREGNANT WOMEN PAYMENT PROVISIONS

         13.5.1 Not applicable to STAR+PLUS.

         13.5.1.1 Not applicable to STAR+PLUS

         13.5.2 Not applicable to STAR+PLUS

         13.5.3 Not applicable to STAR+PLUS

         13.5.4 Not applicable to STAR+PLUS

         13.5.5 Not applicable to STAR+PLUS

         13.5.6 Not applicable to STAR+PLUS

     Article 13 is amended to add Section 13.6, CBA Reassessment Packet.

         13.6 CBA Reassessment Packet

         13.6.1 HMO must submit a complete CBA reassessment packet, including
         approved Form 3652-A, Client Assessment, Review, and Evaluation (CARE,
         for medical necessity, and the Individual Service Plan (ISP) and other
         required assessment forms, 30 days prior to the annual renewal date to
         receive the CBA capitation rate. The process to begin the annual CBA
         assessment may be started as soon as four months prior to the annual
         renewal date.

SECTION 2.66 MODIFICATION OF SECTION 14.1, ELIGIBILITY DETERMINATION

     Section 14.1, Eligibility Determination, is being modified to be consistent
     with the STAR contract:

         14.1 ELIGIBILITY DETERMINATION

         14.1.1 HHSC will identify Medicaid recipients who are eligible for
         participation in the STAR+PLUS program using the eligibility status
         described below.

         14.1.2 MANDATORY - Individuals in the following categories who reside
         in any part of the Service Area must enroll in one of the health plans
         providing services in the Service Areas:

         14.1.2.1 Not Applicable to STAR+PLUS

         14.1.2.2 Not Applicable to STAR+PLUS

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         14.1.2.3 Not Applicable to STAR+PLUS

         14.1.2.4 Not Applicable to STAR+PLUS

         14.1.2.5 Not Applicable to STAR+PLUS

         14.1.2.6 Not Applicable to STAR+PLUS

         14.1.2.7 Not Applicable to STAR+PLUS

         14.1.2.8 Not Applicable to STAR+PLUS

         14.1.2.9 Not Applicable to STAR+PLUS

         14.1.2.10 SUPPLEMENTAL SECURITY INCOME (SSI) RECIPIENTS 21 AND OLDER
         SSI Eligible clients 21 and older living in the community, except for
         those individuals listed as "voluntary" or "non-participant."

         14.1.2.11 CLIENTS IN SOCIAL SECURITY (RSDI) EXCLUSIONS PROGRAMS Clients
         denied SSI because of specified increases (e.g., cost-of-living
         adjustments, etc.) in Social Security (RSDI or Title II) benefits.

         14.1.2.12 CLIENTS ENTERING TITLE XIX NURSING FACILITIES (NFs) HMO
         members entering Title XIX NFs who qualify for nursing facility
         level-of-care, as determined by TDHS after the date of implementation.
         Eligibility will continue for 120 days after admission, then these
         members will be disenrolled.

         14.1.2.13 COMMUNITY BASED ALTERNATIVES (CBA) WAIVER Clients who qualify
         for nursing facility level-of-care, as determined by TDHS, but who
         elect to receive services in the community.

         14.1.2.14 SPEND DOWN CLIENTS Adult clients in nursing facilities who
         spend down the Medicaid eligibility (SSr/MAO) in less than twelve (12)
         months after date of implementation and qualify for nursing facility
         level-of-care as determined by TDHS.

         14.1.3 VOLUNTARY - The following individuals are not required to enroll
         in a STAR+PLUS HMO but have the option to enroll in an HMO. HMO will be
         required to accept enrollment of those Medicaid recipients from this
         group who elect to enroll in HMO.

         14.1.3.1 Not Applicable to STAR+PLUS

         14.1.3.2 Not Applicable to STAR+PLUS.

         14.1.3.3 SSI ELIGIBLE CHILDREN

         SSI eligible children under age 21 may choose two types of managed care
         models (HMO or PCCM).

         14.1.4 During the period after which the Medicaid eligibility
         determination has been made but prior to enrollment in HMO, members
         will be enrolled under the traditional Medicaid program. All
         Medicaid-eligible recipients will remain in the fee-for-service
         Medicaid program until enrolled in or assigned to an HMO.

         14.1.5 NON-PARTICIPANTS - The following individuals are not affected by
         STAR+PLUS and will not be included in the project:

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                  -        COMMUNITY LIVING ASSISTANCE AND SUPPORT SERVICES
                           (CLASS) WAIVER CLIENTS

                  -        Individuals receiving CLASS waiver services.

                  -        MEDICALLY DEPENDENT CHILDREN'S WAIVER PROGRAM (MDCP)
                           CLIENTS

                  -        Individuals receiving MDCP waiver services.

                  -        HOME AND COMMUNITY SERVICES (HCS and HCS-O) WAIVER
                           CLIENTS

                  -        Individuals receiving HCS services.

                  -        DEAF-BLIND MULTIPLE DISABLED (DBMD) WAIVER CLIENTS

                  -        Individuals receiving DBMD services.

                  -        HOSPICE - Individuals who exercise their option to
                           participate in a Hospice program who are not
                           receiving CBA services.

                  -        NURSING FACILITIES - Clients who are in a nursing
                           facility prior to enrollment in STAR+PLUS.

                  -        ICF/MR - Clients who are currently in an ICF/MR
                           facility.

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

         14.1.2.9 [Deleted]

SECTION 2.67 MODIFICATION OF SECTION 14.3, PLAN CHANGES FROM HMO AND
DISENROLLMENT FROM MANAGED CARE

     Section 14.3, Plan Changes from HMO and Disenrollment from Managed Care, is
     replaced with Section 14.3, Newborn Enrollment to be consistent with STAR
     contract as follows:

         14.3 NEWBORN ENROLLMENT

         14.3.1 Not Applicable to STAR+PLUS

         14.3.1.1 Not Applicable to STAR+PLUS

         14.3.2 Not Applicable to STAR+PLUS

         14.3.2.1 Not Applicable to STAR+PLUS

         14.3.2.2. Not Applicable to STAR+PLUS

         14.3.2.3 Not Applicable to STAR+PLUS

         14.3.3 Not Applicable to STAR+PLUS

SECTION 2.68 MODIFICATION OF SECTION 14.4, AUTOMATIC RE-ENROLLMENT

     Section 14.4, Automatic Re-enrollment, is replaced by Section 14.4,
     Disenrollment, to be consistent with the STAR contract.

         14.4 DISENROLLMENT

         14.4.1 HMO has a limited right to request a member be disenrolled from
         HMO without the member's consent. HHSC must approve any HMO request for
         disenrollment of a member for cause. Disenrollment of a member maybe
         permitted under the following circumstances:

         14.4.1.1 Member misuses or loans member's HMO membership card to
         another person to obtain services.

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         14.4.1.2 Member is disruptive, unruly, threatening or uncooperative to
         the extent that member's membership seriously impairs HMO's or
         provider's ability to provide services to member or to obtain new
         members, and member's behavior is not caused by a physical or
         behavioral health condition.

         14.4.1.3 Member steadfastly refuses to comply with managed care
         restrictions (e.g., repeatedly using emergency room in combination with
         refusing to allow HMO to treat the underlying medical condition).

         14.4.2.1 HMO must take reasonable measures to correct member behavior
         prior to requesting disenrollment. Reasonable measures may include
         providing education and counseling regarding the offensive acts or
         behaviors.

         14.4.3 HMO must notify the member of HMO's decision to disenroll the
         member if all reasonable measures have failed to remedy the problem.

         14.4.4 If the member disagrees with the decision to disenroll the
         member from HMO, HMO must notify the member of the availability of the
         complaint procedure and HHSC's Fair Hearing process.

         14.4.5 HMO cannot request a disenrollment based on adverse change in
         the member's health status or utilization of services that are
         medically necessary for treatment of a member's condition.

SECTION 2.69 MODIFICATION OF SECTION 14.5, ENROLLMENT REPORTS

     Section 14.5, Enrollment Reports, is replaced with Section 14.5, Automatic
     Re-enrollment, to be consistent with the STAR contract.

         14.5 AUTOMATIC RE-ENROLLMENT

         14.5.1 Members who are disenrolled because they are temporarily
         ineligible for Medicaid will be automatically re-enrolled into the same
         health plan. Temporary loss of eligibility is defined as a period of 6
         months or less.

         14.5.2 HMO must inform its members of the automatic re-enrollment
         procedure. Automatic re-enrollment must be included in the Member
         Handbook (see Article 8.2.1).

SECTION 2.70 ADDITION TO ARTICLE 14, ELIGIBILITY, ENROLLMENT, AND DISENROLLMENT

     Article 14, Eligibility, Enrollment, and Disenrollment, is amended by
     adding Section 14.6, Enrollment Reports.

         14.6 ENROLLMENT REPORTS

         14.6.1 HHSC will provide HMO enrollment reports listing all STAR+PLUS
         members who have enrolled in or were assigned to HMO during the initial
         enrollment period.

         14.6.2 HHSC will provide monthly HMO Enrollment Reports to HMO on or
         before the first of the month.

         14.6.3 HHSC will provide member verification to HMO and network
         providers through telephone verification or TexMedNet.

SECTION 2.71 ADDITION TO ARTICLE 15, GENERAL PROVISIONS

     Article 15, General Provisions, is modified by adding Section 15.14, Global
     Drafting Conventions, as follows:

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

         15.14 GLOBAL DRAFTING CONVENTIONS.

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

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

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

SECTION 2.72 MODIFICATION OF SECTION 16.3, DEFAULT BY HMO

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

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

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

SECTION 2.73 MODIFICATION TO APPENDIX A, VALUE ADDED SERVICES

         Appendix A, Value Added Services is replaced with Appendix A, Quality
         Assessment and Performance Improvement Programs and Appendix A-A to
         remain consistent with the STAR contract.

SECTION 2.74 MODIFICATION OF APPENDIX E, COST PRINCIPLES FOR ADMINISTRATIVE
EXPENSES

         Appendix E, Cost Principles for Administrative Expenses is replaced
         with the attached Appendix E, Transplant Facilities for Texas Medicaid
         to remain consistent with the STAR contract.

SECTION 2.75 MODIFICATION TO APPENDIX K, PERFORMANCE OBJECTIVES

         Appendix K Not applicable to STAR+PLUS

SECTION 2.76 ADDITION OF APPENDIX L, VALUE ADDED SERVICES

         Appendix L, Value Added Services is added to remain consist with the
         STAR contract

SECTION 2.77 ADDITION OF APPENDIX M, COST PRINCIPLES FOR ADMINISTRATIVE EXPENSES

         Appendix M, Cost Principles for Administrative Expenses is added to
         remain consistent with the STAR contract.

SECTION 2.78 ADDITION OF NEW APPENDIX O, STANDARD FOR MEDICAL RECORDS

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

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STAR+PLUS BBA Amendment                     Health and Human Services Commission

             ARTICLE 3. REPRESENTATIONS AND AGREEMENT OF THE PARTIES

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

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

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

                                             HEALTH & HUMAN SERVICES COMMISSION

     By: /s/ James D. Donovan, Jr.           By: _______________________________
        -------------------------                Albert Hawkins
                                                 Commissioner

     Date: 8/7/2003______________________    Date: ______________________

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