Document:

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                                                                  EXHIBIT 10.6.1

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                        AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that the contract shall be
amended, effective August 1, 2003, as follows:

<PAGE>

Dental/Chiropractic Extension - August 1, 2003

1.       ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1;
         4.1.1(G)3; 4.1.2(A)14; 4.1.2(A)23; 4.1.4(B); 4.1.9(S); 4.1.9(T);
         4.2.1(B)3; 4.5.4(D); 4.6.2(P); 4.6.5(D); 4.8.8(I) and 4.8.8(M)2 shall
         be amended as reflected in Article 4, Sections 4.1; 4.1.1(G)3;
         4.1.2(A)14; 4.1.2(A)23; 4.1.4(B); 4.1.9(S); 4.1.9(T); 4.2.1(B)3;
         4.5.4(D); 4.6.2(P); 4.6.5(D); 4.8.8(I) and 4.8.8(M)2 attached hereto
         and incorporated herein.

2.       ARTICLE 5, "ENROLLEE SERVICES," Sections 5.10.2(A)2(a)vi, vii (new);
         5.15.2(B)6; 5.15.2(B)7 and 5.16.1(K) shall be amended as reflected in
         Article 5, Sections 5.10.2(A)2(a)vi, vii; 5.15.2(B)6; 5.15.2(B)7 and
         5.16.1(K) attached hereto and incorporated herein.

3.       ARTICLE 6, "PROVIDER INFORMATION," Section 6.5(B)1 shall be amended as
         reflected in Article 6, Section 6.5(B)1 attached hereto and
         incorporated herein.

4.       ARTICLE 7, "TERMS AND CONDITIONS," Sections 7.16.8.1 (E) and 7.38 shall
         be amended as reflected in Article 7, Sections 7.16.8.1(E) and 7.38
         attached hereto and incorporated herein.

5.       ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1; 8.5.2.1; 8.5.2.2;
         8.5.2.4; 8.5.2.6; 8.5.2.8; 8.5.2.9; 8.5.2.10(deleted); 8.5.4; 8.5.5 and
         8.5.6 shall be amended as reflected in Sections 8.5.1; 8.5.2.1;
         8.5.2.2; 8.5.2.4; 8.5.2.6; 8.5.2.8; 8.5.2.9; 8.5.2.10; 8.5.4; 8.5.5 and
         8.5.6 attached hereto and incorporated herein.

6.       APPENDIX, SECTION A, "REPORTS"

         A.4.1 - Provider Network File Electronic Media Provider Files,
         Attachment A, Attachment B & Attachment D, shall be amended as
         reflected in Appendix, Section A, A.4.1, Attachments A, B and D
         attached hereto and incorporated herein.

7.       APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected
         in SFY 2004 Capitation Rates attached hereto and incorporated herein

<PAGE>

Dental/Chiropractic Extension - August 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

   AMERIGROUP                                     STATE OF NEW JERSEY
   NEW JERSEY, INC.                          DEPARTMENT OF HUMAN SERVICES

BY: /S/ [ILLEGIBLE]                          BY: /S/ DAVID C. HEINS
    ------------------------                     ----------------------
                                                     DAVID C. HEINS

TITLE: PRESIDENT AND CEO                     TITLE: ACTING DIRECTOR, DMAHS

DATE: JULY 17,2003                           DATE: 7/28/03

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: /S/ [ILLEGIBLE]
    --------------------------
    DEPUTY ATTORNEY GENERAL

DATE: 7/25/03

<PAGE>

ARTICLE FOUR: PROVISION OF HEALTH CARE SERVICES

4.1      COVERED SERVICES

         For enrollees who are eligible through Title V, Title XIX or the NJ
         FamilyCare program the contractor shall provide or arrange to have
         provided comprehensive, preventive, and diagnostic and therapeutic,
         health care services to enrollees that include all services that
         Medicaid/NJ FamilyCare beneficiaries are entitled to receive under
         Medicaid/NJ FamilyCare, subject to any limitations and/or excluded
         services as specified in this Article. Provision of these services
         shall be equal in amount, duration, and scope as established by the
         Medicaid/NJ FamilyCare program, in accordance with medical necessity
         and without any predetermined limits, unless specifically stated, and
         as set forth in 42 C.F.R. Part 440; 42 C.F.R. Part 434; Part 438 the
         Medicaid State Plan; the Medicaid Provider Manuals: The New Jersey
         Administrative Code, Title 10, Department of Human Services Division of
         Medical Assistance and Health Services; Medicaid/NJ FamilyCare Alerts;
         Medicaid/NJ FamilyCare Newsletters; and all applicable federal and
         State statutes, rules, and regulations.

4.1.1    GENERAL PROVISIONS AND CONTRACTOR RESPONSIBILITIES

         A.       With the exception of certain emergency services described in
                  Article 4.2.1 of this contract, all care covered by the
                  contractor pursuant to the benefits package must be provided,
                  arranged, or authorized by the contractor or a participating
                  provider.

         B.       The contractor and its providers shall furnish all covered
                  services required to maintain or improve health in a manner
                  that maximizes coordination and integration of services, and
                  in accordance with professionally recognized standards of
                  quality and shall ensure that the care is appropriately
                  documented to encompass all health care services for which
                  payment is made.

         C.       For beneficiaries eligible solely through the NJ FamilyCare
                  Plan A the contractor shall provide the same managed care
                  services and products provided to enrollees who are eligible
                  through Title XIX. For beneficiaries eligible solely through
                  the NJ FamilyCare Plans B and C the contractor shall provide
                  the same managed care services and products provided to
                  enrollees who are eligible through Title XIX with the
                  exception of limitations on EPSDT coverage as indicated in
                  Articles 4.1.2A.3 and 4.2.6A.2. NJ FamilyCare Plan D and other
                  plans have a different service package specified in Articles
                  4.1.6 and 4.1.7.

         D.       Out-of-Area Coverage. The contractor shall provide or arrange
                  for out-of-area coverage of contracted benefits in emergency
                  situations and non-emergency situations when travel back to
                  the service area is not possible, is impractical, or when
                  medically necessary services could only be provided elsewhere.
                  Except for full-time students, the contractor shall not be
                  responsible for out-of-state coverage for care if the enrollee
                  resides out-of-state for more than 30 days. In this instance,
                  the individual will be disenrolled. This does not apply to
                  situations when the

                                                                            IV-1

<PAGE>

                  enrollee is out of State for care provided/authorized by the
                  contractor, for example, prolonged hospital care for
                  transplants. For full time students attending school and
                  residing out of the country, the contractor shall not be
                  responsible for health care benefits while the individual is
                  in school.

         E.       Existing Plans of Care. The contractor shall honor and pay for
                  plans of care for new enrollees, including prescriptions,
                  durable medical equipment, medical supplies, prosthetic and
                  orthotic appliances, and any other on-going services initiated
                  prior to enrollment with the contractor. Services shall be
                  continued until the enrollee is evaluated by his/her primary
                  care physician and a new plan of care is established with the
                  contractor.

                  The contractor shall use its best efforts to contact the new
                  enrollee or, where applicable, authorized person and/or
                  contractor care manager. However, if after documented,
                  reasonable outreach (i.e., mailers, certified mail, use of
                  MEDM system provided by the State, contact with the Medical
                  Assistance Customer Center (MACC), DDD, or DYFS to confirm
                  addresses and/or to request assistance in locating the
                  enrollee) the enrollee fails to respond within 20 working days
                  of certified mail, the contractor may cease paying for the
                  pre-existing service until the enrollee or, where applicable,
                  authorized person, contacts the contractor for re-evaluation.

         F.       Routine Physicals. The contractor shall provide for routine
                  physical examinations required for employment, school, camp or
                  other entities/programs that require such examinations as a
                  condition of employment or participation.

         G.       Non-Participating Providers.

                  1.       The contractor shall pay for services furnished by
                           non-participating providers to whom an enrollee was
                           referred, even if erroneously referred, by his/her
                           PCP or network specialist. Under no circumstances
                           shall the enrollee bear the cost of such services
                           when referral errors by the contractor or its
                           providers occur. It is the sole responsibility of the
                           contractor to provide regular updates on complete
                           network information to all its providers as well as
                           appropriate policies and procedures for provider
                           referrals.

                  2.       The contractor may pay an out-of-network hospital
                           provider, located outside the State of New Jersey,
                           the New Jersey Medicaid fee-for-service rate for the
                           applicable services rendered.

                  3.       Whenever the contractor authorizes services by
                           out-of-network providers, the contractor shall
                           require those out-of-network providers to coordinate
                           with the contractor with respect to payment. Further,
                           the contractor shall ensure that [Reserved] the cost
                           [Reserved] to the enrollee is no greater than it
                           would be if the services were furnished within the
                           network.

                                                                            IV-2

<PAGE>

                           retrovirals, blood clotting factors VIII and IX, and
                           coverage of protease inhibitors and certain other
                           anti-retrovirals under NJ FamilyCare, see Article 8.

                  10.      Family Planning Services and Supplies

                  11.      Audiology

                  12.      Inpatient Rehabilitation Services

                  13.      Podiatrist Services

                  14.      Chiropractor Services [Reserved]

                  15.      Optometrist Services

                  16.      Optical Appliances

                  17.      Hearing Aid Services

                  18.      Home Health Agency Services - Not a
                           contractor-covered benefit for the non-dually
                           eligible ABD population. All other services provided
                           to any enrollee in the home, including but not
                           limited to pharmacy and DME services, are the
                           contractor's fiscal and medical management
                           responsibility.

                  19.      Hospice Services--are covered in the community as
                           well as in institutional settings. Room and board
                           services are included only when services are
                           delivered in an institutional (non-private residence)
                           setting.

                  20.      Durable Medical Equipment (DME)/Assistive Technology
                           Devices in accordance with existing Medicaid
                           regulations.

                  21.      Medical Supplies

                  22.      Prosthetics and Orthotics including certified shoe
                           provider.

                  23.      Dental Services [Reserved]

                  24.      Organ Transplants - includes donor and recipient
                           costs. Exception: The contractor will not be
                           responsible for transplant-related donor and
                           recipient inpatient hospital costs for an individual
                           placed on a transplant list while in the Medicaid FFS
                           program prior to enrollment into the contractor's
                           plan.

                                                                            IV-5

<PAGE>

                           05130
                           05130-22
                           05140
                           05140-22

                  3.       Extraction Procedure Codes to be paid by Medicaid FFS
                           up to 120 days from last date of preliminary
                           extractions after first time New Jersey Care 2000+
                           enrollment in conjunction with the following codes
                           (05130, 05130-22,05140,05140-22):

                           07110
                           07130
                           07210

4.1.4    MEDICAID COVERED SERVICES NOT PROVIDED BY CONTRACTOR

        A.        Mental Health/Substance Abuse. The following mental
                  health/substance abuse services (except for the conditions
                  listed in 4.1.2.B) will be managed by the State or its agent
                  for non-DDD enrollees, including all NJ FamilyCare enrollees.
                  (The contractor will retain responsibility for furnishing
                  mental health/substance abuse services, excluding the cost of
                  the drugs listed below, to Medicaid enrollees who are clients
                  of the Division of Developmental Disabilities).

                  -        Substance Abuse Services--diagnosis, treatment, and
                           detoxification

                  -        Costs for Methadone and its administration

                  -        Mental Health Services

         B.       Drugs. The following drugs will be paid fee-for-service by the
                  Medicaid program for all DMAHS enrollees:

                  [Reserved]

                  -        Atypical antipsychotic drugs within the Specific
                           Therapeutic Drug Classes H7T and H7X

                  -        Methadone - cost and its administration. Except as
                           provided in Article 4.4, the contractor will remain
                           responsible for the medical care of enrollees
                           requiring substance abuse treatment

                  -        Genetically-equivalent drug products of the drugs
                           listed in this section.

        C.       Up to twelve (12) inpatient hospital days required for social
                 necessity in accordance with Medicaid regulations.

                                                                            IV-9

<PAGE>

                  M.       Services or items furnished for any condition or
                           accidental injury arising out of and in the course of
                           employment for which any benefits are available under
                           the provisions of any workers' compensation law,
                           temporary disability benefits law, occupational
                           disease law, or similar legislation, whether or not
                           the Medicaid beneficiary claims or receives benefits
                           thereunder, and whether or not any recovery is
                           obtained from a third-party for resulting damages.

                  N.       That part of any benefit which is covered or payable
                           under any health, accident, or other insurance policy
                           (including any benefits payable under the New Jersey
                           no-fault automobile insurance laws), any other
                           private or governmental health benefit system, or
                           through any similar third-party liability, which also
                           includes the provision of the Unsatisfied Claim and
                           Judgment Fund.

                  O.       Any services or items furnished for which the
                           provider does not normally charge.

                  P.       Services furnished by an immediate relative or member
                           of the Medicaid beneficiary's household.

                  Q.       Services billed for which the corresponding health
                           care records do not adequately and legibly reflect
                           the requirements of the procedure described or
                           procedure code utilized by the billing provider.

                  R.       Services or items reimbursed based upon submission of
                           a cost study when there are no acceptable records or
                           other evidence to substantiate either the costs
                           allegedly incurred or beneficiary income available to
                           offset those costs. In the absence of financial
                           records, a provider may substantiate costs or
                           available income by means of other evidence
                           acceptable to the Division.

                  [Reserved]

4.2      SPECIAL PROGRAM REQUIREMENTS

4.2.1    EMERGENCY SERVICES

         A.       For purposes of this contract, "emergency" means an onset of a
                  medical or behavioral condition, the onset of which is sudden,
                  that manifests itself by symptoms of sufficient severity,
                  including severe pain, that a prudent layperson, who possesses
                  an average knowledge of medicine and health, could reasonably
                  expect the absence of immediate medical attention to result
                  in:

                  1.       Placing the health of the person or others in serious
                           jeopardy;

                  2.       Serious impairment to such person's bodily functions;

                                                                           IV-20

<PAGE>

                  3.       Serious dysfunction of any bodily organ or part of
                           such person; or

                  4.       Serious disfigurement of such person.

                  With respect to a pregnant woman who is having contractions,
                  an emergency exists where there is inadequate time to effect a
                  safe transfer to another hospital before delivery or the
                  transfer may pose a threat to the health or safety of the
                  woman or the unborn child.

         B.       The contractor shall be responsible for emergency services,
                  both within and outside the contractor's enrollment area, as
                  required by an enrollee in the case of an emergency. Emergency
                  services shall also include:

                  1.       Medical examination at an Emergency Room which is
                           required by N.J.A.C. 10:122D-2.5(b) when a foster
                           home placement of a child occurs after business
                           hours.

                  2.       Examinations at an Emergency Room for suspected
                           physical/child abuse and/or neglect.

                  3.       Post-Stabilization of Care. The contractor shall
                           comply with 42 C.F.R. Section 422. [Reserved] 113(c).
                           The contractor must cover post-stabilization services
                           without requiring authorization and regardless of
                           whether the enrollee obtains the services within or
                           outside the contractor's network if:

                           a.       The services were pre-approved by the
                                    contractor or its providers; or

                           b.       The services were not pre-approved by the
                                    contractor because the contractor did not
                                    respond to the provider of
                                    post-stabilization care services' request
                                    for pre-approval within one (1) hour after
                                    being requested to approve such care; or

                           c.       The contractor could not be contacted for
                                    pre-approval.

         C.       Access Standards. The contractor shall ensure that all covered
                  services, that are required on an emergency basis are
                  available to all its enrollees, twenty-four (24) hours per
                  day, seven (7) days per week, either in the contractor's own
                  provider network or through arrangements approved by DMAHS.
                  The contractor shall maintain twenty-four (24) hours per day,
                  seven (7) days per week on-call telephone coverage, including
                  Telecommunication Device for the Deaf (TDD)/Tech Telephone
                  (TT) systems, to advise enrollees of procedures for emergency
                  and urgent care and explain procedures for obtaining non-
                  emergent/non-urgent care during regular business hours within
                  the enrollment area as well as outside the enrollment area.

         D.       Non-Participating Providers.

                                                                           IV-21

<PAGE>

                  frequency of interaction with the enrollee and other members
                  of the treatment team will also be greater. The care manager
                  shall contact the enrollee bi-weekly or as needed.

                  1.       At a minimum, the care manager for this level of care
                           management shall include, but is not limited to,
                           individuals who hold current RN licenses with at
                           least three (3) years experience serving enrollees
                           with special needs or a graduate degree in social
                           work with at least two (2) years experience serving
                           enrollees with special needs.

                  2.       The contractor shall ensure that the care manager's
                           caseload is adjusted, as needed, to accommodate the
                           work and level of effort needed to meet the needs of
                           the entire case mix of assigned enrollees including
                           those determined to be high risk.

                   3.      The contractor should include care managers with
                           experience working with pediatric as well as adult
                           enrollees with special needs.

         D.       IHCPs. The contractor through its care manager shall ensure
                  that an Individual Health Care Plan (IHCP) is developed and
                  implemented as soon as possible, according to the
                  circumstances of the enrollee. The contractor shall ensure the
                  full participation and consent of the enrollee or, where
                  applicable, authorized person and participation of the
                  enrollee's PCP, consultation with any specialists caring for
                  the enrollee, and other case managers identified through the
                  Complex Needs Assessment (e.g. DDD case manager) in the
                  development of the plan.

         E.       The contractor shall provide written notification to the
                  enrollee, or authorized person, of the name of the care
                  manager as soon as the IHCP is completed. The contractor shall
                  have a mechanism to allow for changing levels of care
                  management as needs change.

         F.       Offering of Service. The contractor shall offer and document
                  the enrollee's response for this higher level care management
                  to enrollees (or, where applicable, authorized persons) who,
                  upon completion of a Complex Needs Assessment, are determined
                  to have complex needs which merit development of an IHCP and
                  comprehensive service coordination by a care manager.
                  Enrollees shall have the right to decline coordination of care
                  services; however, such refusal does not preclude the
                  contractor from case managing the enrollee's care.

4.5.5    CHILDREN WITH SPECIAL HEALTH CARE NEEDS

         A.       The contractor shall provide services to children with special
                  health care needs, who may have or are suspected of having
                  serious or chronic physical, developmental, behavioral, or
                  emotional conditions (short-term, intermittent, persistent, or
                  terminal), who manifest some degree of delay or disability in
                  one or more of the following areas: communication, cognition,
                  mobility, self-direction,

                                                                           IV-55

<PAGE>

         L.       Emergency Care. The contractor shall have methods to track
                  emergency care utilization and to take follow-up action,
                  including individual counseling, to improve appropriate use of
                  urgent and emergency care settings.

         M.       New Medical Technology. The contractor shall have policies and
                  procedures for criteria which are based on scientific evidence
                  for the evaluation of the appropriate use of new medical
                  technologies or new applications of established technologies
                  including medical procedures, drugs, devices, assistive
                  technology devices, and DME.

         N.       Informed Consent. The contractor is required and shall require
                  all participating providers to comply with the informed
                  consent forms and procedures for hysterectomy and
                  sterilization as specified in 42 C.F.R. Part 441, Sub-part B,
                  and shall include the annual audit for such compliance in its
                  quality assurance reviews of participating providers. Copies
                  of the forms are included in Section B.4.15 of the Appendices.

         O.       Continuity of Care. The contractor's Quality Management Plan
                  shall include a continuity of care system including a
                  mechanism for tracking issues over time with an emphasis on
                  improving health outcomes, as well as preventive services and
                  maintenance of function for enrollees with special needs.

         P.       HEDIS. The contractor shall submit annually, on a date
                  specified by the State, HEDIS 3.0 data or more updated
                  version, aggregate population data as well as, if available,
                  the contractor's commercial and Medicare enrollment HEDIS data
                  for its aggregate, enrolled commercial and Medicare population
                  in the State or region (if these data are collected and
                  reported to DHSS, a copy of the report should be submitted
                  also to DMAHS) the following clinical indicator measures:

<TABLE>
<CAPTION>
HEDIS                                                               Report Period
Reporting Set Measures                                              by Contract Year
----------------------                                              ----------------
<S>                                                                 <C>
Childhood Immunization Status                                           annually
Adolescent Immunization Status                                          annually
Well-Child Visits in first 15 months of life                            annually
Well-Child Visits in the 3rd, 4th, 5th and 6th  year of life            annually
Adolescent Well-Care Visits                                             annually
Prenatal and Postpartum Care                                            annually
Frequency of Ongoing Prenatal Care                                      annually
Breast Cancer Screening                                                 annually
</TABLE>

                  Childhood & Adolescent Immunization HEDIS data for NJ
                  FamilyCare enrollees up to the age of 19 years must be
                  reported separately.

         Q.       Quality Improvement Projects (QIPs). The contractor shall
                  participate in QIPs defined annually by the State with input
                  from the contractor. The State will, with

                                                                           IV-64

<PAGE>

                  g.       Determination of willingness and capacity of family
                           members or, where applicable, authorized persons and
                           others to provide informal support

                  h.       Condition and proximity to services of current
                           housing, and access to appropriate transportation

                  i.       Identification of current or potential long term
                           service needs

                  j.       Need for medical supplies and DME

         2.       When any of the following conditions are met, the contractor
                  shall ensure that a Complex Needs Assessment is conducted, or
                  an existing assessment is reviewed, within a time frame that
                  meets the needs of the enrollee but within no more than
                  forty-five (45) days:

                  a.       Special needs are identified at the time of
                           enrollment or any time thereafter;

                  b.       An enrollee or authorized person requests an
                           assessment;

                  c.       The enrollee's PCP requests an assessment;

                  d.       A State agency involved with an enrollee requests an
                           assessment; or

                  e.       An enrollee's status otherwise indicates.

         D.       Plan of Care. The contractor, through its care manager, shall
                  ensure that a plan of care is developed and implementation has
                  begun within thirty (30) business days of the date of a needs
                  assessment, or sooner, according to the circumstances of the
                  enrollee. The contractor shall ensure the full participation
                  and consent of the enrollee or, where applicable, authorized
                  person and participation of the enrollee's PCP, consultation
                  with any specialists caring for the enrollee, and other case
                  managers identified through the Complex Needs Assessment
                  (e.g., DDD case manager) in the development of the plan. The
                  plan shall specify treatment goals, identify medical service
                  needs, relevant social and support services, appropriate
                  linkages and timeframe as well as provide an ongoing accurate
                  record of the individual's clinical history. The care manager
                  shall be responsible for implementing the linkages identified
                  in the plan and monitoring the provision of services
                  identified in the plan. This includes making referrals,
                  coordinating care, promoting communication, ensuring
                  continuity of care, and conducting follow-up. The care manager
                  shall also be responsible for ensuring that the plan is
                  updated as needed, but at least annually. This includes early
                  identification of changes in the enrollee's needs.

         E.       Referrals. The contractor shall have policies and procedures
                  to process and respond within ten (10) business days to care
                  management referrals from network providers, state agencies,
                  private agencies under contract with DDD, self-referrals, or,
                  where applicable, referrals from an authorized person.

         F.       Continuity of Care

                                                                           IV-85

<PAGE>

         I.       Provider Network Access Standards and Ratios

<TABLE>
<CAPTION>
Specialty                      A - Miles per 2     B - Miles per 1    Min. No. Per County              Capacity Limit
                             Urban     Non-Urban  Urban   Non-urban   Except Where Noted               Per Provider
------------------------------------------------------------------------------------------------------------------------
<S>                          <C>       <C>        <C>     <C>         <C>                              <C>
PCP Children       GP         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
                   FP         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
                   Peds       6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
    Adults         GP         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
                   FP         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
                   IM         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
CNP/CNS                       6        15         2        10         2                                1:          1,000
------------------------------------------------------------------------------------------------------------------------
CNM                          12        25         6        15         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
Dentist, Primary Care         6        15         2        10         2                                1:          1,500
------------------------------------------------------------------------------------------------------------------------
Allergy                      15        25        10        15         2                                1:         75,000
------------------------------------------------------------------------------------------------------------------------
Anesthesiology               15        25        10        15         2                                1:         17,250
------------------------------------------------------------------------------------------------------------------------
Cardiology                   15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Cardiovascular surgery       15        25        10        15         2                                1:        166,000
------------------------------------------------------------------------------------------------------------------------
Chiropractor                 15        25        10        15         1                                1:         20,000
------------------------------------------------------------------------------------------------------------------------
Colorectal surgery           15        25        10        15         2                                1:         30,000
------------------------------------------------------------------------------------------------------------------------
Dermatology                  15        25        10        15         2                                1:         75,000
------------------------------------------------------------------------------------------------------------------------
Emergency Medicine           15        25        10        15         2                                1:         19,000
------------------------------------------------------------------------------------------------------------------------
Endocrinology                15        25        10        15         2                                1:        143,000
------------------------------------------------------------------------------------------------------------------------
Endodontia                   15        25        10        15         1 (where available)              1:         30,000
------------------------------------------------------------------------------------------------------------------------
Gastroenterology             15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
General Surgery              15        25        10        15         2                                1:         30,000
------------------------------------------------------------------------------------------------------------------------
Geriatric Medicine           15        25        10        15         1                                1:         10,000
------------------------------------------------------------------------------------------------------------------------
Hematology                   15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Infectious Disease           15        25        10        15         2                                1:        125,000
------------------------------------------------------------------------------------------------------------------------
Neonatology                  15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Nephrology                   15        25        10        15         2                                1:        125,000
------------------------------------------------------------------------------------------------------------------------
Neurology                    15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Neurological Surgery         15        25        10        15         2                                1:        166,000
------------------------------------------------------------------------------------------------------------------------
Obstetrics/Gynecology        15        25        10        15         2                                1:          7,100
------------------------------------------------------------------------------------------------------------------------
Oncology                     15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Ophthalmology                15        25        10        15         2                                1:         60,000
------------------------------------------------------------------------------------------------------------------------
Optometrist                  15        25        10        15         2                                1:          8,000
------------------------------------------------------------------------------------------------------------------------
Oral Surgery                 15        25        10        15         2                                1:         20,000
------------------------------------------------------------------------------------------------------------------------
Orthodontia                  15        25        10        15         1                                1:         20,000
------------------------------------------------------------------------------------------------------------------------
Orthopedic Surgery           15        25        10        15         2                                1:         28,000
------------------------------------------------------------------------------------------------------------------------
Otolaryngology(ENT)          15        25        10        15         2                                1:         53,000
------------------------------------------------------------------------------------------------------------------------
Periodontia                  15        25        10        15         1 (where available)              1:         30,000
------------------------------------------------------------------------------------------------------------------------
Physical Medicine            15        25        10        15         [Reserved] (where applicable)    1:         75,000
------------------------------------------------------------------------------------------------------------------------
Plastic Surgery              15        25        10        15         2                                1:        250,000
------------------------------------------------------------------------------------------------------------------------
Podiatrist                   15        25        10        15         2                                1:         20,000
------------------------------------------------------------------------------------------------------------------------
Prosthodontia                15        25        10        15         1 (where available)              1:         30,000
------------------------------------------------------------------------------------------------------------------------
Psychiatrist                 15        25        10        15         2                                1:         30,000
------------------------------------------------------------------------------------------------------------------------
Psychologist                 15        25        10        15         [Reserved]                       1:         30,000
------------------------------------------------------------------------------------------------------------------------
Pulmonary Disease            15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Radiation Oncology           15        25        10        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Radiology                    15        25        10        15         2                                1:         25,000
------------------------------------------------------------------------------------------------------------------------
Rheumatology                 15        25        10        15         2                                1:        150,000
------------------------------------------------------------------------------------------------------------------------
[Reserved] Audiology         12        25         6        15         2                                1:        100,000
------------------------------------------------------------------------------------------------------------------------
Thoracic Surgery             15        25        10        15         2                                1:        150,000
------------------------------------------------------------------------------------------------------------------------
Urology                      15        25        10        15         2                                1:         60,000
------------------------------------------------------------------------------------------------------------------------
Fed Qual Health Ctr                                                   1                                1/county if
                                                                                                         available
------------------------------------------------------------------------------------------------------------------------
Hospital                     20        35        10        15         2                                2 per county
                                                                                                       (where applicable)
------------------------------------------------------------------------------------------------------------------------
Pharmacies                   10        15         5        12                                          1:          1,000
------------------------------------------------------------------------------------------------------------------------
Laboratory                   N/A       N/A        7        12
------------------------------------------------------------------------------------------------------------------------
DME/Med Supplies             12        25         6        15         1                                1:         50,000
------------------------------------------------------------------------------------------------------------------------
Hearing Aid                  12        25         6        15         1                                1:         50,000
------------------------------------------------------------------------------------------------------------------------
Optical Appliance            12        25         6        15         2                                1:         50,000
------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                          IV-107

<PAGE>

                  12.      The Department will make the final decision on the
                           appropriateness of increasing the ratio limits and
                           what the limit will be.

         M.       Regional/Statewide Networks

                  1.   The contractor shall pay for organ transplants in
                       accordance with Article 4.1.2 and shall contract with or
                       refer to organ transplant providers/centers. The
                       contractor shall provide the name and address of a
                       transplant center for each type of organ transplant
                       required under this contract.

                  2.   The providers/specialists listed below may be included in
                       the contractor's provider network on a regional or
                       statewide basis. The contractor shall indicate for each
                       group whether the services by each provider are provided
                       statewide or by region, specifying the counties in the
                       region. The contractor shall provide documentation
                       (license/certification) and certify that the providers
                       [Reserved] are willing, capable, and authorized (through
                       licensure or certification) to serve multiple counties or
                       statewide.

                           a.   Medical Toxicology

                           b.   Developmental & Behavioral Pediatrics

                           c.   Medical Genetics

                           d.   Specialty Centers (Centers of Excellence)

                           e.   Other Specialty Centers/Providers

                           f.   DME providers

                           g.   Medical suppliers

                           h.   Prosthetists, orthotists, pedorthists

                           i.   Hearing aid suppliers

                           j.   Transportation providers

                  3.   Specialists. The contractor shall submit specific
                       provider information with the monthly network file with a
                       certification of the unavailability of the American Board
                       of Medical Specialists (ABMS) diplomates in the county,
                       the provider who shall provide the service and
                       documentation that the provider is able, willing, and
                       authorized to provide the service. The contractor shall
                       notify the DMAHS if the alternate provider terminates.
                       The contractor shall assure that the specialist or
                       alternate provider has privileges in a network hospital
                       or shall authorize and pay for services provided by the
                       specialist or alternate provider at an out of network
                       hospital provider. Where there is neither, a certified
                       specialist or acceptable alternative provider for a
                       particular specialty service, the contractor may refer an
                       enrollee out of county. For the physician specialist
                       types listed below, where there is documentation of
                       limited access or unavailability in a county of a
                       specific type of specialist, the contractor may indicate
                       the name of a contracted provider as an alternative for
                       the following:

                       a)   Colon & Rectal surgeon - A general surgeon with
                            privileges to perform this surgery may be
                            substituted for a certified subspecialist in this
                            field

                                                                          IV-112

<PAGE>

                                    ii.      Enrollee has filed a
                                             grievance/appeal with the
                                             contractor pursuant to the
                                             applicable grievance/appeal
                                             procedure and has not received a
                                             response within the specified time
                                             period stated therein, or in a
                                             shorter time period required by
                                             federal law;

                                    iii.     Documented grievance/appeal, by the
                                             enrollee against the contractor's
                                             plan without satisfaction.

                                    iv.      Enrollee is subject to enrollment
                                             exemption as set forth in Article
                                             5.3.2. If an exemption situation
                                             exists within the contractor's plan
                                             but another contractor can
                                             accommodate the individual's needs,
                                             a transfer may be granted.

                                    v.       Enrollee has substantially more
                                             convenient access to a primary care
                                             physician who participates in
                                             another MCE in the same enrollment
                                             area.

                                    vi.      Poor quality of care.

                                    vii.     Other for cause reasons pursuant to
                                             42 CFR 438.56

         B.       Voluntary Disenrollment. The contractor shall assure that
                  enrollees who disenroll voluntarily are provided with an
                  opportunity to identify, in writing, their reasons for
                  disenrollment. The contractor shall further:

                  1.       Require the return, or invalidate the use of the
                           contractor's identification card; and

                  2.       Forward a copy of the disenrollment request or refer
                           the beneficiary to DMAHS/HBC by the eighth (8th) day
                           of the month prior to the month in which
                           disenrollment is to become effective.

         C.       HBC Role. All enrollee requests to disenroll must be made
                  through the Health Benefits Coordinator. The contractor may
                  not induce, discuss or accept disenrollments. Any enrollee
                  seeking to disenroll should be directed to contact the HBC.
                  This applies to both mandatory and voluntary enrollees.
                  Disenrollment shall be completed by the HBC at facilities and
                  in a manner so designated by DMAHS.

         D.       Effective Date. The effective date of disenrollment or
                  transfer shall be no later than the first day of the month
                  immediately following the full calendar month the
                  disenrollment is initiated by DMAHS. Notwithstanding anything
                  herein to the contrary, the remittance tape, along with any
                  changes reflected in the weekly register or agreed upon by
                  DMAHS and the contractor in writing, shall serve as official
                  notice to the contractor of disenrollment of an enrollee.

                                                                            V-25

<PAGE>

                  1.       Information to enrollees on how to file
                           complaints/grievances/appeals

                  2.       Identification of who is responsible for processing
                           and reviewing grievances/appeals

                  3.       Local or toll-free telephone number for filing of
                           complaints/grievances/appeals

                  4.       Information on obtaining grievance/appeal forms and
                           copies of grievance/appeal procedures for each
                           primary medical/dental care site

                  5.       Expected timeframes for acknowledgment of receipt of
                           grievances/appeals

                  6.       Expected timeframes for disposition of
                           grievances/appeals in accordance with N.J.A.C. 8:38
                           et seq. and 42 CFR 438.408

                  7.       Extensions of the grievance/appeal process if needed
                           and time frames in accordance with N.J.A.C. 8:38 et
                           seq. and [Reserved] 2 CFR- [Reserved] 438.408

                  8.       Fair hearing procedures including the Medicaid
                           enrollee's right to access the Medicaid Fair Hearing
                           process at any time to request resolution of a
                           grievance/appeal

                  9.       DHSS process for use of Independent Utilization
                           Review Organization (IURO)

         C.       A description of the process under which an enrollee may file
                  an appeal shall include at a minimum:

                  1.       Title of person responsible for processing appeal

                  2.       Title of person(s) responsible for resolution of
                           appeal

                  3.       Time deadlines for notifying enrollee of appeal
                           resolution

                  4.       The right to request a Medicaid Fair Hearing/DHSS
                           IURO processes where applicable to specific enrollee
                           eligibility categories

5.15.3   GRIEVANCE/APPEAL PROCEDURES

         A.       Availability. The contractor's grievance/appeal procedure
                  shall be available to all enrollees or, where applicable, an
                  authorized person, or permit a provider acting on behalf of an
                  enrollee and with the enrollee's consent. The procedure shall
                  assure that grievances/appeals may be filed verbally directly
                  with the contractor.

                                                                          V - 37

<PAGE>

                  of this contract, N.J.A.C. 11:17, 11:2-11, 11:4-17, 8:38-13.2,
                  N.J.S.A. 17:22 A-1, 26:2J-16, and the marketing standards
                  described in Article 5.16.

         K.       The contractor shall ensure that marketing representatives are
                  versed in and adhere to Medicaid policy regarding beneficiary
                  enrollment and disenrollment as stated in 42 C.F.R. Section
                  438.56. This policy includes, but is not limited to,
                  requirements that enrollees do not experience unreasonable
                  barriers to disenroll, and that the contractor shall not act
                  to discriminate on the basis of adverse health status or
                  greater use or need for health care services.

         L.       Door-to-door canvassing, telephone, telemarketing, or "cold
                  call" marketing of enrollment activities, by the contractor
                  itself or an agent or independent contractor thereof, shall
                  not be permitted. For NJ FamilyCare (Plans B, C, D),
                  telemarketing shall be permitted after review and prior
                  approval by DMAHS of the contractor's marketing plan, scripts
                  and methods to use this approach.

         M.       Contractor employees or agents shall not present themselves
                  unannounced at an enrollee's home for marketing or
                  "educational" purposes. This shall not limit such visits for
                  medical emergencies, urgent medical care, clinical outreach,
                  and health promotion for known enrollees.

         N.       Under no conditions shall a contractor use DMAHS'
                  client/enrollee data base or a provider's patient/customer
                  database to identify and market its plan to Medicaid or NJ
                  FamilyCare beneficiaries. No lists of Medicaid/NJ FamilyCare
                  beneficiary names, addresses, telephone numbers, or
                  Medicaid/NJ FamilyCare numbers of potential Medicaid/NJ
                  FamilyCare enrollees shall be obtained by a contractor under
                  any circumstances. Neither shall the contractor violate
                  confidentiality by sharing or selling enrollee lists or
                  enrollee/beneficiary data with other persons or organizations
                  for any purpose other than performance of the contractor's
                  obligations pursuant to this contract. For NJ FamilyCare and
                  ABD marketing only, general population lists such as census
                  tracts are permissible for marketing outreach after review and
                  prior approval by DMAHS.

         O.       The contractor shall allow unannounced, on-site monitoring by
                  DMAHS of its enrollment presentations to prospective
                  enrollees, as well as to attend scheduled, periodic meetings
                  between DMAHS and contractor marketing staff to review and
                  discuss presentation content, procedures, and technical
                  issues.

         P.       The contractor shall explain that all health care benefits as
                  specified in Article 4.1 must be obtained through a PCP.

         Q.       The contractor shall periodically review and assess the
                  knowledge and performance of its marketing representatives.

                                                                          V - 43

<PAGE>

         B.       Response time. The contractor shall respond to after hours
                  telephone calls regarding medical care within the following
                  timeframes: fifteen (15) minutes for crisis situations;
                  forty-five (45) minutes for non-emergent, symptomatic issues;
                  same day for non-symptomatic concerns.

         C.       At no time shall providers wait more than five (5) minutes on
                  hold.

6.5      PROVIDER GRIEVANCES/APPEALS

         A.       Payment Disputes. The contractor shall establish and utilize a
                  procedure to resolve billing, payment, and other
                  administrative disputes between health care providers and the
                  contractor for any reason including, but not limited to: lost
                  or incomplete claim forms or electronic submissions; requests
                  for additional explanation as to services or treatment
                  rendered by a health care provider; inappropriate or
                  unapproved referrals initiated by the providers; or any other
                  reason for billing disputes. The procedure shall include an
                  appeal process and require direct communication between the
                  provider and the contractor and shall not require any action
                  by the enrollee.

         B.       Complaints, Grievances/Appeals. The contractor shall establish
                  and maintain provider complaint, grievance/appeal procedures
                  for any provider who is not satisfied with the contractor's
                  policies and procedures, or with a decision made by the
                  contractor, or disagrees with the contractor as to whether a
                  service, supply, or procedure is a covered benefit, is
                  medically necessary, or is performed in the appropriate
                  setting. The contractor procedure shall satisfy the following
                  minimum standards:

                  1.       The contractor shall have in place an informal
                           complaint process which network providers can use to
                           make verbal complaints, to ask questions, to request
                           medical necessity reviews for administrative denials,
                           and get problems resolved without going through the
                           formal, written grievance/appeal process.

                  2.       The contractor shall have in place a formal
                           grievance/appeal process which network providers and
                           non-participating providers can use to complain in
                           writing. The contractor shall issue a written
                           response to a grievance within 30 days. With respect
                           to appeals, the contractor shall also issue a written
                           response within 30 days.

                  3.       Such procedures shall not be applicable to any
                           disputes that may arise between the contractor and
                           any provider regarding the terms, conditions, or
                           termination or any other matter arising under
                           contract between the provider and contractor.

                                                                            VI-4

<PAGE>

7.16.8.1 FEDERAL STATUTES

         Pursuant to 42 U.S.C. Section 1396b(m)(5)(A), the Secretary of the
         Department of Health and Human Services may impose substantial monetary
         and/or criminal penalties on the contractor when the contractor:

         A.       Fails to substantially provide an enrollee with required
                  medically necessary items and services, required under law or
                  under contract to be provided to an enrolled beneficiary, and
                  the failure has adversely affected the enrollee or has
                  substantial likelihood of adversely affecting the enrollees.

         B.       Imposes premiums or charges on enrollees in violation of this
                  contract, which provides that no premiums, deductibles,
                  co-payments or fees of any kind may be charged to Medicaid
                  enrollees.

         C.       Engages in any practice that discriminates among enrollees on
                  the basis of their health status or requirements for health
                  care services by expulsion or refusal to re-enroll an
                  individual or engaging in any practice that would reasonably
                  be expected to have the effect of denying or discouraging
                  enrollment by eligible persons whose medical condition or
                  history indicates a need for substantial future medical
                  services.

         D.       Misrepresents or falsifies information that is furnished to 1)
                  the Secretary, 2) the State, or 3) to any person or entity.

         E.       Fails to comply with the requirements for physician incentive
                  plans found in 42 U.S.C. Section 1876(i)(8), Section B.7.1 of
                  the Appendices, and at 42 C.F.R. Section 417.479, or fails to
                  submit to the Division its physician incentive plans as
                  required or requested in 42 C.F.R. Section [Reserved] 438.
                  6(h), 422.208, and 422.210.

         F.       Violates the prohibition of restricting provider-enrollee
                  communications.

         G.       Distributes directly or indirectly through any agent or
                  independent contracted entity, marketing materials that have
                  not been approved by DHS or that contain false or materially
                  misleading information.

         H.       Violates any of the requirements of sections 1903(m) or 1932
                  of the Social Security Act, and any implementing regulations.

7.16.8.2 FEDERAL PENALTIES

         A.       The Secretary may provide, in addition to any other remedies
                  available under the law, for any of the following remedies:

                  1.       Civil money penalties of not more than $25,000 for
                           each determination above; or,

                                                                          VII-31

<PAGE>

7.38     FRAUD AND ABUSE

                  The contractor shall have arrangements and procedures that
                  comply with all state and federal statutes and regulations,
                  including 42 CFR 438.608, governing fraud and abuse
                  requirements.

7.38.1   ENROLLEES

         A.       Policies and Procedures. The contractor shall establish
                  written policies and procedures for identifying potential
                  enrollee fraud and abuse. Proven cases are to be referred to
                  the Department for screening for advice and/or assistance on
                  follow-up actions to be taken. Referrals are to be accompanied
                  by all supporting case documentation.

         B.       Typical Cases. The most typical cases of fraud or abuse
                  include but are not limited to: the alteration of an
                  identification card for possible expansion of benefits; the
                  loaning of an identification card to others; use of forged or
                  altered prescriptions; and mis-utilization of services.

7.38.2   PROVIDERS

         A.       Policies and Procedures. The contractor shall establish
                  written policies and procedures for identifying,
                  investigating, and taking appropriate corrective action
                  against fraud and abuse (as defined in 42 C.F.R. Section
                  455.2) in the provision of health care services. The policies
                  and procedures will include, at a minimum:

                  1.       Written notification to DMAHS within five (5)
                           business days of intent to conduct an investigation
                           or to recover funds, and approval from DMAHS prior to
                           conducting the investigation or attempting to recover
                           funds. Details of potential investigations shall be
                           provided to DMAHS and include the data elements in
                           Section A.7.2.B of the Appendices. Representatives of
                           the contractor may be required to present the case to
                           DMAHS. DMAHS, in consultation with the contractor,
                           will then determine the appropriate course of action
                           to be taken.

                  2.       Incorporation of the use of claims and encounter data
                           for detecting potential fraud and abuse of services.

                  3.       A means to verify services were actually provided.

                  4.       Reporting investigation results within twenty (20)
                           business days to DMAHS.

                  5.       Specifications of, and reports generated by, the
                           contractor's prepayment and postpayment surveillance
                           and utilization review systems, including prepayment
                           and postpayment edits.

                                                                          VII-47
<PAGE>
Rates for DYFS, NJ FamilyCare Plans B, C, [Reserved] D, and H and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for
[Reserved] all other premium groups are regional in each of the following
regions:

         -    Region 1: Bergen, Hudson, Hunterdon, Morris, Passaic, Somerset,
              Sussex, and Warren counties

         -    Region 2: Essex, Union, Middlesex, and Mercer counties

         -    Region 3: Atlantic, Burlington, Camden, Cape May, Cumberland,
              Gloucester, Monmouth, Ocean, and Salem counties

         Contractors may contract for one or more regions but, except as
         provided in Article 2, may not contract for part of a region.

8.5.2    MAJOR PREMIUM GROUPS

         The following is a list of the major premium groups. The individual
         rate groups (e.g. children under 2 years, etc.) with their respective
         rates are presented in the rate tables in the appendix.

8.5.2.1  AFDC/TANF, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN

         This grouping includes capitation rates for Aid to Families with
         Dependent Children (AFDC)/Temporary Assistance for Needy Families
         (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare
         Plan A children ( [Reserved] includes individuals under 21 in PSC
         380), but excludes individuals who have AIDS or are clients of DDD.

8.5.2.2  NJ FAMILYCARE PLANS B & C

         This grouping includes capitation rates for NJ FamilyCare Plans B and C
         enrollees, excluding individuals with AIDS and/or DDD clients.

8.5.2.3  NJ FAMILYCARE PLAN D CHILDREN

         This grouping includes capitation rates for NJ FamilyCare Plan D
         children, excluding individuals with AIDS.

8.5.2.4  NJ FAMILYCARE PLAN D PARENTS/CARETAKERS

         This grouping includes capitation rates for NJ FamilyCare Plan D
         parents/caretakers, excluding individuals with AIDS, and include only
         enrollees 19 years of age or older.

                                                                          VIII-6

<PAGE>

8.5.2.5  DYFS AND AGING OUT FOSTER CHILDREN

         This grouping includes capitation rates for Division of Youth and
         Family Services, excluding individuals with AIDS and clients of DDD.

8.5.2.6  ABD WITHOUT MEDICARE

         Compensation to the contractor for the ABD individuals without Medicare
         will be risk-adjusted using the Health Based Payments System (HBPS),
         which is described in Article 8.6. [Reserved] HBPS adjusts for the
         diagnosis of AIDS; therefore, separate AIDS rates are not necessary for
         this population. Finally, the HBPS adjusts for age and sex so separate
         rates for age and sex within this population are not necessary.

8.5.2.7  ABD WITH MEDICARE

         This grouping includes capitation rates for the ABD with Medicare
         population, excluding individuals with AIDS and clients of DDD.

8.5.2.8  CLIENTS OF DDD

         This grouping includes all enrollees except ABD individuals without
         Medicare. The contractor shall be paid separate, statewide rates for
         subgroups of the DDD population, excluding individuals with AIDS. These
         rates include MH/SA services.

8.5.2.9  ENROLLEES WITH AIDS

         This grouping includes all enrollees except ABD individuals without
         Medicare.

         A.       The contractor shall be paid special statewide capitation
                  rates for enrollees with AIDS.

         B.       The contractor will be reimbursed double the AIDS rate, once
                  in a member lifetime, in the first month of payment for a
                  recorded diagnosis of AIDS, prospective and newly diagnosed.
                  This is a one-time-only-per-member payment, regardless of MCE.

8.5.2.10          RESERVED

                  [Reserved]

                                                                          VIII-7

<PAGE>

8.5.3    NEWBORN INFANTS

         The contractor shall be reimbursed for newborns from the date of birth
         through the first 60 days after the birth through the period ending at
         the end of the month in which the 60th day falls by a supplemental
         payment as part of the supplemental maternity payment. Thereafter,
         capitation payments will be made prospectively, i.e., only when the
         baby's name and ID number are accreted to the Medicaid eligibility file
         and formally enrolled in the contractor's plan.

8.5.4    SUPPLEMENTAL PAYMENT PER PREGNANCY OUTCOME

         Because costs for pregnancy outcomes were not included in the
         capitation rates, the contractor shall be paid supplemental payments
         for pregnancy outcomes for all eligibility categories.

         Payment for pregnancy outcome shall be a single, predetermined lump sum
         payment. This amount shall supplement the existing capitation rate
         paid. The Department will make a supplemental payment to contractors
         following pregnancy outcome. For purposes of this Article, pregnancy
         outcome shall mean each live birth, still birth or miscarriage
         occurring at the thirteenth (13th) or greater week of gestation. This
         supplemental payment shall reimburse the contractor for its inpatient
         hospital, antepartum, and postpartum costs incurred in connection with
         delivery. Costs for care of the baby for the first 60 days after the
         birth plus through the end of the month in which the 60th day falls are
         included (See Section 8.5.3). Regional [Reserved] payment shall be
         made by the State to the contractor based on submission of appropriate
         encounter data [Reserved] as specified by DMAHS.

8.5.5    PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS

         The contractor shall be paid separately for factor VIII and IX blood
         clotting factors. Payment will be made by DMAHS to the contractor based
         on: 1) submission of appropriate encounter data; and 2) notification
         from the contractor to DMAHS within 12 months of the date of service of
         identification of individuals with factor VII or IX hemophilia. Payment
         for these products will be the lesser of: 1) Average Wholesale Price
         (AWP) minus [Reserved] 12.5% and 2) rates paid by the contractor.

8.5.6    PAYMENT FOR HIV/AIDS DRUGS

         The contractor shall be paid separately for protease inhibitors and
         other anti-retroviral agents (First Data Bank Specific Therapeutic
         Class Codes W5C, W5B, W5I, WSJ, W5K, W5L, W5M, W5N) for all eligibility
         groups. Payment for protease inhibitors shall be made by DMAHS to the
         contractor based on: 1) submission of appropriate encounter data; and
         2) notification from the contractor to DMAHS within 12 months of the
         date of service of identification of individuals with HIV/AIDS. Payment
         for these products will be the lesser of: 1) Average Wholesale Price
         (AWP) minus [Reserved] 12.5% and 2) rates paid by the contractor.

                                                                          VIII-8

<PAGE>

                                  ATTACHMENT A

              New Jersey Department of Human Services, Division of
               Medical Assistance, Office of Managed Health Care
           HMO Non-Institutional Provider Network File Specifications

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                               When
Field    Field Name    Size  Required                           Definition                                  Example
--------------------------------------------------------------------------------------------------------------------------
<S>    <C>             <C>   <C>       <C>                                                           <C>
 1     Last Name       22       A      Individual Provider's Surname; may include Jr. or III         Jones, Jr.
--------------------------------------------------------------------------------------------------------------------------
 2     First Name      15       A      Provider's First Name; should include middle initial          Tom T.
--------------------------------------------------------------------------------------------------------------------------
 3     SSN              9       A      Provider's Social Security Number                             150999999
--------------------------------------------------------------------------------------------------------------------------
 4     Tax ID           9       B      Provider's Tax ID Number                                      229999999
--------------------------------------------------------------------------------------------------------------------------
 5     Degree           5       A      MD, DO, etc. Do not use periods.                              DO
--------------------------------------------------------------------------------------------------------------------------
 6     Primary          1       A      Is this a primary care provider? (Y or N)                     Y
                                       Do not indicate Y for dental providers.
--------------------------------------------------------------------------------------------------------------------------
 7     Practice Name   45       B      Name of Practice if different than provider's last name       Jones Family Practice
--------------------------------------------------------------------------------------------------------------------------
 8     Address 1       60       A      Place where services are rendered. Always start with street   225 Main St.
                                       number if one is contained in the actual address of the
                                       practice.
--------------------------------------------------------------------------------------------------------------------------
 9     Address 2       30       B      Building Name, PO Box etc.                                    Suite 3
--------------------------------------------------------------------------------------------------------------------------
 10    City            22       A      Proper Name for Municipality in which practice office is      South Orange
                                       located. No abbreviations.
--------------------------------------------------------------------------------------------------------------------------
 11    State            2       A      Two Character State Abbreviation, NJ or other with rare       NJ
                                       exceptions
--------------------------------------------------------------------------------------------------------------------------
 12    Zip              5       A      5 Digit Zip Code                                              08888
--------------------------------------------------------------------------------------------------------------------------
 13    Phone           15       A      Include Area Code, Prefix & Number. No spaces or dashes.      6095882705
--------------------------------------------------------------------------------------------------------------------------
 14    County           2       A      Two digit code for county in which office is actually         07
                                       located
--------------------------------------------------------------------------------------------------------------------------
 15    Office Hours    60       A      List days and hours when patients can be seen at this site.   M9-5,Tl-5,Th1-7,
--------------------------------------------------------------------------------------------------------------------------
 16    Specialty Code  30       A      See list. List all that apply. Include one for each Record    [Reserverd] 123
                                       Type "s" per provider. No Spaces, Commas, Slashes, etc.
--------------------------------------------------------------------------------------------------------------------------
 17    Age             40       B      4 spaces per specialty in sequence with specialty code in     [Reserverd] 1234
       Restrictions                    string field 16, 1st 2 = min. age, 2nd 2 = max. age, 0000
                                       if none for a specialty. Omit if no specialty is limited.
--------------------------------------------------------------------------------------------------------------------------
 18    Hosp Affll      35       B      Hospital where provider has admitting privileges.             Newark-Beth Israel
                                       *Required for PhysiciansPodiatrists & Oral Surgeons.
--------------------------------------------------------------------------------------------------------------------------
 19    Hosp Affl2      35       B      If more than One
--------------------------------------------------------------------------------------------------------------------------
 20    Hosp Affl3      35       B      If more than Two
--------------------------------------------------------------------------------------------------------------------------
 21    Hosp Affl4      35       B      If more than Three
--------------------------------------------------------------------------------------------------------------------------
 22    Hosp Affl5      35       B      If more than Four
--------------------------------------------------------------------------------------------------------------------------
 23    Languages       10       A      Must be at least one even if English; See code list. No       EFG9
                                       Spaces/Commas/Slashes/Hyphens, etc.
--------------------------------------------------------------------------------------------------------------------------
 24    Plan Code        3       A      Three Digit Plan Code                                         099
--------------------------------------------------------------------------------------------------------------------------
 25    Panel Status     1       A      O = Open, F = Frozen (no new patients)                        O
--------------------------------------------------------------------------------------------------------------------------
 26    Specialty Name  30       A      Show one narrative specialty name per record.                 Family Practice
--------------------------------------------------------------------------------------------------------------------------
 27    Panel Capacity   4       B      Potential Number of Members: PCPs & General Dentists          1500
--------------------------------------------------------------------------------------------------------------------------
 28    Members          4       B      Actual Number of Members Assigned: PCPs & Dentists            900
       Assigned
--------------------------------------------------------------------------------------------------------------------------
 29    Record Type      3       B      a = addition of record to file (excludes d)                   s a
                                       d = deletion of record from file (excludes a & c)
                                       s = multiple listing of provider, unique specialty
                                       1 = multiple listing of provider, unique location
                                       Use all that apply. No commas. Spaces allowed.
--------------------------------------------------------------------------------------------------------------------------
 30    Date            10       A      Fill with date Network Update File or Application Network     06/01/2000
                                       File was submitted to OMHC mm/dd/yyyy.
--------------------------------------------------------------------------------------------------------------------------
 31    Servicing        2       B      If other than actual county; include a record for each
       County                          county served. Out-of-county physicians may not be
                                       considered in applications except in rural counties
--------------------------------------------------------------------------------------------------------------------------
 32    Total Hours      2       A      Total number of hours for record. Round down.                 20
--------------------------------------------------------------------------------------------------------------------------
 33    Medicaid ID      7       B      Provider's Medicaid ID                                        1234567
--------------------------------------------------------------------------------------------------------------------------
 34    Special Needs    5       A      Indicates provider has expertise serving specific
       Indicator                       populations. Use all OMHC special needs codes that apply to
                                       provider.
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                            A-15

<PAGE>

                                  ATTACHMENT B

          New Jersey Department of Human Services, Division of Medical
                    Assistance, Office of Managed Health Care
             HMO Institutional Provider Network File Specifications

<TABLE>
<CAPTION>
                                When
Field    Field Name     Size  Required                          Definition                              Example
-----------------------------------------------------------------------------------------------------------------
<S>    <C>              <C>   <C>       <C>                                                           <C>
 1     Provider Name     45      A                                                                   Doc's Drugs
-----------------------------------------------------------------------------------------------------------------
 2     Provider Type     30      A                                                                   Pharmacy
-----------------------------------------------------------------------------------------------------------------
 3     Provider Tax ID    9      A      "Provider's Tax ID Number                                    229999999
-----------------------------------------------------------------------------------------------------------------
 4     Address 1         60      A      Always start with street number if one is contained in the   22 Main St.
                                        actual address of the practice.
-----------------------------------------------------------------------------------------------------------------
 5     Address2          30      B      Building Name, PO Box etc.                                   Suite 3
-----------------------------------------------------------------------------------------------------------------
 6     City              22      A      Proper Name for Municipality in which practice office is     South Orange
                                        located. Use no abbreviations
-----------------------------------------------------------------------------------------------------------------
 7     State              2      A      Two Character State Abbreviation, NJ with rare exceptions.   NJ
-----------------------------------------------------------------------------------------------------------------
 8     Zip                5      A      5 Digit Zip Codes                                            08888
-----------------------------------------------------------------------------------------------------------------
 9     Phone             15      A      Include Area Code, Prefix & Number. Don't include spaces or  6095882705
                                        dashes.
-----------------------------------------------------------------------------------------------------------------
 10    County             2      A      Two digit code for county in which office is actually        07
                                        located.
-----------------------------------------------------------------------------------------------------------------
 11    Plan Code          3      A      Three Digit Plan Code.                                       099
-----------------------------------------------------------------------------------------------------------------
 12    Specialty Code     3      A      See code list. Use one.                                      500
-----------------------------------------------------------------------------------------------------------------
 13    Servicing          2      B      If other than actual county; include a record for each
       County                           county served.
-----------------------------------------------------------------------------------------------------------------
 14    Date              10      A      Fill with date Network Update File or Application Network    06/01/2000
                                        File was submitted to OMHC mm/dd/yyyy
-----------------------------------------------------------------------------------------------------------------
 15    Record Type        1      B      a = addition of record to file (excludes d)                  a
                                        d = deletion of record from file (excludes a)
-----------------------------------------------------------------------------------------------------------------
 16    Medicaid ID        7      B      Provider's Medicaid ID                                       1234567
-----------------------------------------------------------------------------------------------------------------
 17    Hospital Code     35      B      Unique Hospital Code                                         99999
-----------------------------------------------------------------------------------------------------------------
</TABLE>

A = Always Required
B = Required When Applicable

                                                                            A-17

<PAGE>

                                  ATTACHMENT D

                               NJDHS, DMAHS, OMHC
                           Provider Network File Codes

Language Codes

A      Arabic
B      Hebrew
C      Chinese
D      Greek
E      English
F      French
G      German
H      Hindi
I      Italian
J      Hungarian
K      Korean
L      Polish
M      Tagalog
N      Japanese
O      Pakistani
P      Portuguese
Q      Indian
R      Filipino
S      Persian
T      Russian
U      Danish
V      Spanish/No English
W      Turkish
X      Vietnamese
Y      Yugoslavian
Z      Other
0      American Sign Language
1      Swedish
2      Spanish/Understands English
3      Ukranian
4      Dutch
5      Urdu
6      Romanian
7      Mandann
8      Iranian
9      Thai

County Codes

01     Atlantic
02     Bergen
03     Burlington
04     Camden
05     Cape May
06     Cumberland
07     Essex
08     Gloucester
09     Hudson
10     Hunterdon
11     Mercer
12     Middlesex
13     Monmouth
14     Morris
15     Ocean
16     Passaic
17     Salem
18     Somerset
19     Sussex
20     Union
21     Warren
99     Out of State

                                                                            A-21
<PAGE>

STATE OF NEW JERSEY                                                 CONFIDENTIAL

                             CRCS DRAFT VERSION 3.7A

               DENTAL SERVICES INCORPORATED FOR ALL PLAN A ADULTS
            CHIROPRACTIC SERVICES INCORPORATED FOR ALL PLAN A ADULTS
               PHARMACY SERVICES INCORPORATED FOR ALL POPULATIONS

<TABLE>
<CAPTION>

                          CATEGORY                                         AGE/SEX
                          --------                                         -------
<S>                                                                 <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)                    Newborn
AFDC / KidCare A / FamilyCare Children (PSC 380)                    < 2 M&F (consolidated)
AFDC / KidCare A / FamilyCare Children (PSC 380)                    2 - 20.99 M&F (consolidated)
------------------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)            21 - 44.99 Female
AFDC                                                                21 - 44.99 Male
AFDC/NJCPW                                                          45 + M&F
------------------------------------------------------------------------------------------------
Aged with Medicare                                                  All
Blind/Disabled with Medicare                                        < 45 M&F (consolidated)
Blind/Disabled with Medicare                                        45 + M&F
------------------------------------------------------------------------------------------------
Maternity                                                           All
------------------------------------------------------------------------------------------------
ABD-DDD with Medicare                                               All (consolidated)
------------------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                               Newborn
ABD (Including AIDS) without Medicare                               All (consolidated)
ABD-DDD without Medicare                                            All (consolidated)
Non ABD-DDD (Including Home Health Add-On)                          All (consolidated)
------------------------------------------------------------------------------------------------
DYFS                                                                Newborn
DYFS                                                                < 2 M&F (consolidated)
DYFS                                                                Youth
------------------------------------------------------------------------------------------------
KidCare B&C                                                         Newborn
KidCare B&C                                                         < 2 M&F (consolidated)
KidCare B&C                                                         Youth
------------------------------------------------------------------------------------------------
KidCare D                                                           Newborn
KidCare D                                                           < 2 M&F (consolidated)
KidCare D                                                           Youth
------------------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                          19 - 44 Female
FamilyCare Adults 0 - 100%                                          19 - 44 Male
FamilyCare Adults 0 - 100%                                          45 + M&F
------------------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                               21 - 44 Female
FamilyCare Parents 0 - 133% (PSC 380)                               21 - 44 Male
FamilyCare Parents 0 - 133% (PSC 380)                               45 + M&F
------------------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                       19 - 44 Female
FamilyCare Parents 134 - 200%                                       19 - 44 Male
FamilyCare Parents 134 - 200%                                       45 + M&F
------------------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                            All (consolidated)
AIDS - Non-ABD                                                      All (consolidated)
AIDS - ABD with Medicare DDD (Including Behavioral Health Add-On)   All (consolidated)
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)             All (consolidated)
------------------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                                  All
Add-On - Behavioral Health - DDD w/ Medicare                        All
Add-On - Behavioral Health - DDD w/o Medicare                       All
------------------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)         All
Newborn for one month age last birthday (May and June 2003 births)  All
------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                              SFY04 RATES
                                                                         CONTRACT PERIOD: AUGUST 1, 2003 - AUGUST 31, 2003
                          CATEGORY                                    NORTHERN        CENTRAL        SOUTHERN       STATEWIDE
                          --------                                    --------        -------        --------       ---------
<S>                                                                 <C>             <C>            <C>            <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $          -    $         -    $          -
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $     174.17    $    182.07    $     191.03
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $      90.06    $     86.52    $      93.37
--------------------------------------------------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)            $     157.74    $    163.55    $     168.55
AFDC                                                                $     148.81    $    139.49    $     151.79
AFDC/NJCPW                                                          $     277.80    $    301.14    $     355.05
--------------------------------------------------------------------------------------------------------------------------------
Aged with Medicare                                                  $     299.92    $    301.45    $     306.66
Blind/Disabled with Medicare                                        $     282.37    $    300.09    $     278.41
Blind/Disabled with Medicare                                        $     387.95    $    405.82    $     408.16
--------------------------------------------------------------------------------------------------------------------------------
Maternity                                                           $   9,716.07    $ 10,206.34    $  10,204.12
--------------------------------------------------------------------------------------------------------------------------------
ABD-DDD with Medicare                                                                                             $       268.01
--------------------------------------------------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                                                                             $            -
ABD (Including AIDS) without Medicare                                                                             $       590.17
ABD-DDD without Medicare                                                                                          $       564.40
Non ABD-DDD (Including Home Health Add-On)                                                                        $       648.77
--------------------------------------------------------------------------------------------------------------------------------
DYFS                                                                                                              $            -
DYFS                                                                                                              $       444.55
DYFS                                                                                                              $       120.77
--------------------------------------------------------------------------------------------------------------------------------
KidCare B&C                                                                                                       $            -
KidCare B&C                                                                                                       $       159.10
KidCare B&C                                                                                                       $        89.74
--------------------------------------------------------------------------------------------------------------------------------
KidCare D                                                                                                         $            -
KidCare D                                                                                                         $       175.66
KidCare D                                                                                                         $        76.07
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                                                                         see attached
FamilyCare Adults 0 - 100%                                                                                         see attached
FamilyCare Adults 0 - 100%                                                                                         see attached
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       149.31
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       115.48
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       255.85
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                                                      see attached
FamilyCare Parents 134 - 200%                                                                                      see attached
FamilyCare Parents 134 - 200%                                                                                      see attached
--------------------------------------------------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                                                                          $       925.66
AIDS - Non-ABD                                                                                                    $     1,455.66
AIDS - ABD with Medicare DDD (Including Behavioral Health Add-On)                                                 $       962.54
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)                                                           $     1,529.76
--------------------------------------------------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                                                                                $        84.37
Add-On - Behavioral Health - DDD w/ Medicare                                                                      $        36.65
Add-On - Behavioral Health - DDD w/o Medicare                                                                     $        74.19
--------------------------------------------------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)                                                       $       747.34
Newborn for one month age last birthday (May and June 2003 births)                                                $       271.67
--------------------------------------------------------------------------------------------------------------------------------

<CAPTION>
                                                                                              SFY03 RATES
                                                                           CONTRACT PERIOD: MARCH 1, 2003 - JUNE 30, 2003
                          CATEGORY                                    NORTHERN        CENTRAL        SOUTHERN       STATEWIDE
                          --------                                    --------        -------        --------       ---------
<S>                                                                 <C>             <C>            <C>            <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $          -    $         -    $          -
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $     247.98    $    273.29    $     265.31
AFDC / KidCare A / FamilyCare Children (PSC 380)                    $      88.49    $     85.71    $      87.98
--------------------------------------------------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)            $     149.31    $    151.77    $     151.08
AFDC                                                                $     140.40    $    128.03    $     134.67
AFDC/NJCPW                                                          $     274.24    $    292.82    $     331.32
--------------------------------------------------------------------------------------------------------------------------------
Aged with Medicare                                                  $     315.26    $    314.88    $     330.45
Blind/Disabled with Medicare                                        $     282.53    $    300.89    $     278.38
Blind/Disabled with Medicare                                        $     399.59    $    418.57    $     426.63
--------------------------------------------------------------------------------------------------------------------------------
Maternity                                                           $   6,605.95    $  6,919.46    $   6,875.41
--------------------------------------------------------------------------------------------------------------------------------
ABD-DDD with Medicare                                                                                             $       274.54
--------------------------------------------------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                                                                             $            -
ABD (Including AIDS) without Medicare                                                                             $       592.76
ABD-DDD without Medicare                                                                                          $       588.95
Non ABD-DDD (Including Home Health Add-On)                                                                        $       671.77
--------------------------------------------------------------------------------------------------------------------------------
DYFS                                                                                                              $            -
DYFS                                                                                                              $       344.89
DYFS                                                                                                              $       113.85
--------------------------------------------------------------------------------------------------------------------------------
KidCare B&C                                                                                                       $            -
KidCare B&C                                                                                                       $       158.93
KidCare B&C                                                                                                       $        76.25
--------------------------------------------------------------------------------------------------------------------------------
KidCare D                                                                                                         $            -
KidCare D                                                                                                         $       157.35
KidCare D                                                                                                         $        69.39
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                                                                        $       216.07
FamilyCare Adults 0 - 100%                                                                                        $       181.07
FamilyCare Adults 0 - 100%                                                                                        $       354.16
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       134.09
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       101.64
FamilyCare Parents 0 - 133% (PSC 380)                                                                             $       239.37
--------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                                                     $       140.11
FamilyCare Parents 134 - 200%                                                                                     $       114.73
FamilyCare Parents 134 - 200%                                                                                     $       266.36
--------------------------------------------------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                                                                          $       941.96
AIDS - Non-ABD                                                                                                    $     1,521.19
AIDS - ABD with Medicare DDD (Including Behavioral Health Add-On)                                                 $       976.05
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)                                                           $     1,593.79
--------------------------------------------------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                                                                                $        62.62
Add-On - Behavioral Health - DDD w/ Medicare                                                                      $        36.09
Add-On - Behavioral Health - DDD w/o Medicare                                                                     $        72.61
--------------------------------------------------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)
Newborn for one month age last birthday (May and June 2003 births)
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:

-        Reported capitation rates reflect the contract period August 1, 2003
         through August 31, 2003

-        SFY04 capitation rates are not reported here for the FamilyCare Adults
         0-100% FPL and Parents 134-200% FPL populations. Please refer to the
         tab FamilyCare.

                                  Page 1 of 1
<PAGE>

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                       AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that certain sections of the
contract amendment, which were to be effective August 1, 2003 shall be amended
to take effect September 1, 2003, as set out below:

1.       ARTICLE 1, "DEFINITIONS" section - for the following definitions:

                  -    Copayment;

                  -    NJ FamilyCare Plan D;

                  -    NJ FamilyCare Plan H (DELETED)

         shall be amended as reflected in the relevant pages of Article 1
         attached hereto and incorporated herein.

<PAGE>

(NJ FamilyCare Extension through 8/31/03)

2.       ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES" Section 4.1.7 (DELETED),
         renumber remaining sections, shall be amended as reflected in Article
         4, Section 4.1.7 attached hereto and incorporated herein.

3.       ARTICLE 5, "ENROLLEE SERVICES" Section 5.2(A)8 (DELETED) shall be
         amended as reflected in Article 5, Section 5.2(A)8 attached hereto and
         incorporated herein.

4.       ARTICLE 8, "FINANCIAL PROVISIONS" Sections 8.5.1; 8.5.4(deleted);
         8.5.6; 8.5.8-Reserved (deleted) and 8.7(J)1 shall be amended as
         reflected in Article 8, Sections 8.5.1, 8.5.4, 8.5.6, 8.5.8-Reserved
         and 8.7(J)1 attached hereto and incorporated herein.

5.       APPENDIX, SECTION B, "REFERENCE MATERIALS"

         B.5.2 - Cost-Sharing Requirements for NJ FamilyCare Plan C and Plan D
         Beneficiaries: Title; Plan H (DELETED); "No copayments shall be charged
         for the following services" (DELETED) shall be amended as reflected in
         Appendix, Section B, B.5.2 attached hereto and incorporated herein.

6.       APPENDIX, SECTION C, "CAPITATION RATES" shall be revised as reflected
         in SFY 2004 Capitation Rates attached hereto and incorporated herein.

<PAGE>

(NJ FamilyCare Extension through 8/31/03)

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

      AMERIGROUP                                      STATE OF NEW JERSEY

    NEW JERSEY, INC.                              DEPARTMENT OF HUMAN SERVICES

BY:_______________________                        BY:________________________

                                                        KATHRYN A. PLANT

TITLE:____________________                        TITLE: DIRECTOR, DMAHS

DATE:_____________________                        DATE:______________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY:_______________________

   DEPUTY ATTORNEY GENERAL

DATE:_____________________
<PAGE>

         CONTRACTOR--the Health Maintenance Organization with a valid
         Certificate of Authority in New Jersey that contracts hereunder with
         the State for the provision of comprehensive health care services to
         enrollees on a prepaid, capitated basis.

         CONTRACTOR'S PLAN--all services and responsibilities undertaken by the
         contractor pursuant to this contract.

         CONTRACTOR'S REPRESENTATIVE--the individual legally empowered to bind
         the contractor, using his/her signature block, including his/her title.
         This individual will be considered the Contractor's Representative
         during the life of any contract entered into with the State unless
         amended in writing pursuant to Article 7.

         COPAYMENT--the part of the cost-sharing requirement for NJ FamilyCare
         Plan D [Reserved] enrollees in which a fixed monetary amount is paid
         for certain services/items received from the contractor's providers.

         COST AVOIDANCE--a method of paying claims in which the provider is not
         reimbursed until the provider has demonstrated that all available
         health insurance has been exhausted.

         COST NEUTRAL--the mechanism used to smooth data, share risk, or adjust
         for risk that will recognize both higher and lower expected costs and
         is not intended to create a net aggregate gain or loss across all
         payments.

         COVERED SERVICES--see "BENEFITS PACKAGE"

         CREDENTIALING--the contractor's determination as to the qualifications
         and ascribed privileges of a specific provider to render specific
         health care services.

         CULTURAL COMPETENCY--a set of interpersonal skills that allow
         individuals to increase their understanding, appreciation, acceptance
         of and respect for cultural differences and similarities within, among
         and between groups and the sensitivity to how these differences
         influence relationships with enrollees. This requires a willingness and
         ability to draw on community-based values, traditions and customs, to
         devise strategies to better meet culturally diverse enrollee needs, and
         to work with knowledgeable persons of and from the community in
         developing focused interactions, communications, and other supports.

         CWA OR COUNTY WELFARE AGENCY ALSO KNOWN AS COUNTY BOARD OF SOCIAL
         SERVICES--the agency within the county government that makes
         determination of eligibility for Medicaid and financial assistance
         programs.

         DAYS--calendar days unless otherwise specified.

         DBI--the New Jersey Department of Banking and Insurance in the
         executive branch of New Jersey State government.

         DEFAULT--see "AUTOMATIC ASSIGNMENT"

                                                                             I-6

<PAGE>

         Jersey Care...Special Medicaid Programs, to uninsured children below
         the age of 19 with family incomes above 150 percent and up to and
         including 200 percent of the federal poverty level. Eligibles are
         required to participate in cost-sharing in the form of monthly premiums
         and a personal contribution to care for most services. Exception - Both
         Eskimos and Native American Indians under the age of 19 years old,
         identified by Race Code 3, shall not participate in cost sharing, and
         shall not be required to pay a personal contribution to care. In
         addition to covered managed care services, eligibles under this program
         may access certain other services which are paid fee-for-service and
         not covered under this contract.

         NJ FAMILYCARE PLAN D--means the State-operated program which provides
         managed care coverage to uninsured:

         -    Parents/caretakers[Reserved] -with children below the age of 19
              who do not qualify for AFDC Medicaid with family incomes up to and
              including [Reserved] 133 percent of the federal poverty level; and

              [Reserved]

         -    Children below the age of 19 with family incomes between 201
              percent and up to and including 350 percent of the federal poverty
              level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services with the exception of both
         Eskimos and Native American Indians under the age of 19 years. These
         groups are identified by Program Status Codes (PSCs) or Race Code on
         the eligibility system as indicated below. For clarity, the Program
         Status Codes or Race Code, in the case of Eskimos and Native American
         Indians under the age of 19 years, related to Plan D non-cost sharing
         groups are also listed.

<TABLE>
<CAPTION>
   PSC                        PSC                            Race Code
Cost Sharing            No Cost Sharing                    No Cost Sharing
------------            ---------------                    ---------------
<S>                     <C>                                <C>
 [Reserved]               [Reserved]                             3
    493                       380
    494                   [Reserved]
    495
 [Reserved]
</TABLE>

         In addition to covered managed care services, eligibles under these
         programs may access certain services which are paid fee-for-service and
         not covered under this contract.

[Reserved]

[Reserved]

                                                                            I-19

<PAGE>

         [Reserved]

         [Reserved]

         [Reserved]

         NJ FAMILYCARE PLAN I--means the State-operated program that provides
         certain benefits on a fee-for-service basis through the DMAHS for Plan
         D parents/caretakers with a program status code of 380.

         N.J.S.A.--New Jersey Statutes Annotated.

         NON-COVERED CONTRACTOR SERVICES--services that are not covered in the
         contractor's benefits package included under the terms of this
         contract.

         NON-COVERED MEDICAID SERVICES--all services that are not covered by the
         New Jersey Medicaid State Plan.

         NON-PARTICIPATING PROVIDER--a provider of service that does not have a
         contract with the contractor.

         OIT--the New Jersey Office of Information Technology.

         OTHER HEALTH COVERAGE--private non-Medicaid individual or group
         health/dental insurance. It may be referred to as Third Party Liability
         (TPL) or includes Medicare.

         OUT OF AREA SERVICES--all services covered under the contractor's
         benefits package included under the terms of the Medicaid contract
         which are provided to enrollees outside the defined basic service area.

         OUTCOMES--the results of the health care process, involving either the
         enrollee or provider of care, and may be measured at any specified
         point in time. Outcomes can be medical, dental, behavioral, economic,
         or societal in nature.

         OUTPATIENT CARE--treatment provided to an enrollee who is not admitted
         to an inpatient hospital or health care facility.

                                                                            I-20

<PAGE>

                  2.       Dental services

                  3.       DME

                  4.       Hearing aids

                  5.       Medical supplies

                  6.       Orthotics

                  7.       TMJ treatment.

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                  [Reserved]

                                                                           IV-15
<PAGE>

[Reserved]
<PAGE>

[Reserved]
<PAGE>

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

         [Reserved]

4.1.7    SUPPLEMENTAL BENEFITS

         Any service, activity or product not covered under the State Plan may
         be provided by the contractor only through written approval by the
         Department and the cost of which shall be borne solely by the
         contractor.

4.1.8    CONTRACTOR AND DMAHS SERVICE EXCLUSIONS

         Neither the contractor nor DMAHS shall be responsible for the
         following:

        A.       All services not medically necessary, provided, approved or
                 arranged by a contractor's physician or other provider (within
                 his/her scope of practice) except emergency services.

        B.       Cosmetic surgery except when medically necessary and approved.

        C.       Experimental organ transplants.

                                                                           IV-18

<PAGE>

5.2      AID CATEGORIES ELIGIBLE FOR CONTRACTOR ENROLLMENT

         A.       Except as specified in Article 5.3, all persons who are not
                  institutionalized, belong to one of the following eligibility
                  categories, and reside in any of the enrollment areas, as
                  identified in Article 5.1, are in mandatory aid categories and
                  shall be eligible for enrollment in the contractor's plan in
                  the manner prescribed by this contract.

                  1.       Aid to Families with Dependent Children
                           (AFDC)/Temporary Assistance for Needy Families
                           (TANF);

                  2.       AFDC/TANF-Related, New Jersey Care...Special Medicaid
                           Program for Pregnant Women and Children;

                  3.       SSI-Aged, Blind, Disabled, and Essential Spouses;

                  4.       New Jersey Care...Special Medicaid programs for Aged,
                           Blind, and Disabled;

                  5.       Division of Developmental Disabilities Clients
                           including the Division of Developmental Disabilities
                           Community Care Waiver;

                  6.       Medicaid only or SSI-related Aged, Blind, and
                           Disabled;

                  7.       Uninsured parents/caretakers and children who are
                           covered under NJ FamilyCare;

                  [Reserved]

         B.       The contractor shall enroll the entire Medicaid case, i.e.,
                  all individuals included under the ten digit Medicaid
                  identification number.

         C.       DYFS. Individuals who are eligible through the Division of
                  Youth and Family Services may enroll voluntarily. All
                  individuals eligible through DYFS shall be considered a unique
                  Medicaid case and shall be issued an individual 12 digit
                  Medicaid identification number, and may be enrolled in his/her
                  own contractor.

         D.       The contractor shall be responsible for keeping its network of
                  providers informed of the enrollment status of each enrollee.

         E.       Dual eligibles (Medicaid-Medicare) may voluntarily enroll.

5.3      EXCLUSIONS AND EXEMPTIONS

         Persons who belong to one of the eligible populations (defined in 5.2A)
         shall not be subject to mandatory enrollment if they meet one or more
         criteria defined in this Article. Persons who fall into an "excluded"
         category (Article 5.3.1A) shall not be eligible to enroll in the
         contractor's plan. Persons falling into the categories under Article
         5.3.1B are eligible to enroll on a voluntary basis. Persons falling
         into a category under Article 5.3.2 may be eligible for enrollment
         exemption, subject to the Department's review.

                                                                           V - 2

<PAGE>

                       be considered direct medical expenditures. The
                       contractor's reporting shall be based only on the
                       approved Medical Cost Ratio -- Direct Medical
                       Expenditures Plan (Report on Table 6c).

         Calculation of MCR. The calculation of MCR will be made using
         information submitted by each contractor on the quarterly reports -
         Statement of Revenues and Expenses (Section A.7.8 of the Appendices
         (Tables 6a, 6b and 6c)). The costs related to 8.4.1. A 1-3 are to be
         reported on Table 6c and the allowable amount will be added to the
         calculation of Medical and Hospital Expenses. The sum of all applicable
         quarters for Total Medical and Hospital Expenses (line 28) less
         Coordination of Benefits (COB) (line 6) and less reinsurance recoveries
         (line 7) will be divided by the sum of all applicable quarters of
         Medicaid/NJ FamilyCare premiums (line 4) to arrive at the ratio.

8.4.2    RESERVED

8.4.3    DAMAGES

The Department shall have the right to impose damages on a contractor that has
failed to maintain an appropriate MCR. The damages shall be assessed when MCR is
below 80% and an underexpenditure occurs. The formula for imposing damages
follows:

<TABLE>
<CAPTION>
  ACTUAL MCR                1ST OFFENSE            2ND OFFENSE
----------------------------------------------------------------
<S>                       <C>                    <C>
80% or above                   NONE                    NONE

78.00-79.99%                 .15 times              .15 times
                          underexpenditure       underexpenditure

75.00-77.99%               .50 times                 .50 times
                          underexpenditure       underexpenditure

74.99 or below             .90 times                 1.00 times
                          underexpenditure       underexpenditure
</TABLE>

If the contractor fails to meet the MCR requirement and a penalty is applied, a
plan of corrective action shall be required.

8.5      REGIONS, PREMIUM GROUPS, AND SPECIAL PAYMENT PROVISIONS

8.5.1    REGIONS

Rates for DYFS, NJ FamilyCare Plans B, C, and D [Reserved], and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates have been
set for each premium group in each of the following regions:

                                                                          VIII-5

<PAGE>

[Reserved]

                                                                               7
<PAGE>

[Reserved]

                                                                          VIII 8
<PAGE>

8.5.3    NEWBORN INFANTS

         The contractor shall be reimbursed for newboms from the date of birth
         through the first 60 days after the birth through the period ending at
         the end of the month in which the 60th day falls by a supplemental
         payment as part of the supplemental maternity payment. Thereafter,
         capitation payments will be made prospectively, i.e., only when the
         baby's name and ID number are accreted to the Medicaid eligibility
         file and formally enrolled in the contractor's plan.

8.5.4    SUPPLEMENTAL PAYMENT PER PREGNANCY OUTCOME

         Because costs for pregnancy outcomes were not included in the
         capitation rates, the contractor shall be paid supplemental payments
         for pregnancy outcomes for all eligibility categories.

         Payment for pregnancy outcome shall be a single, predetermined lump sum
         payment. This amount shall supplement the existing capitation rate
         paid. The Department will make a supplemental payment to contractors
         following pregnancy outcome. For purposes of this Article, pregnancy
         outcome shall mean each live birth, still birth or miscarriage
         occurring at the thirteenth (13th) or greater week of gestation. This
         supplemental payment shall reimburse the contractor for its inpatient
         hospital, antepartum, and postpartum costs incurred in connection with
         delivery. Costs for care of the baby for the first 60 days after the
         birth plus through the end of the month in which the 60th day falls are
         included (See Section 8.5.3). Payment shall be made by the State to the
         contractor based on submission of appropriate encounter data and use of
         a special indicator on the claim as specified by DMAHS.

8.5.5    PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS

         The contractor shall be paid separately for factor VIII and IX blood
         clotting factors. Payment will be made by DMAHS to the contractor based
         on: 1) submission of appropriate encounter data; and 2) notification
         from the contractor to DMAHS within 12 months of the date of service of
         identification of individuals with factor VIII or IX hemophilia.
         Payment for these products will be the lesser of: 1) Average Wholesale
         Price (AWP) minus 15% and 2) rates paid by the contractor.

[Reserved]8.5.6    PAYMENT FOR HIV/AIDS DRUGS

         The contractor shall be paid separately for protease inhibitors and
         other anti-retroviral agents (First Data Bank Specific Therapeutic
         Class Codes W5C, W5B, W5I, W5J, W5K, W5L, [Reserved] W5M, W5N) for all
         eligibility groups. [Reserved] Payment for protease inhibitors shall be
         made by DMAHS to the contractor based on: 1) submission of appropriate
         encounter data; and 2)

                                                                         VIII-11

<PAGE>

         notification from the contractor to DMAHS within 12 months of the date
         of service of identification of individuals with HIV/AIDS. Payment for
         these products will be the lesser of: 1) Average Wholesale Price (AWP)
         minus 15% and 2) rates paid by the contractor.

         [Reserved]

8.5.7    EFSDT INCENTIVE PAYMENT

                                                                         VIII-12

<PAGE>

         7.       Any references to Medicare coverage in this Article shall
                  apply to both Medicare/Medicaid dual eligibles and Qualified
                  Medicare Beneficiaries.

j.       Other Protections for Medicaid Enrollees.

         1.       The contractor shall not impose, or allow its participating
                  providers or subcontractors to impose cost-sharing charges of
                  any kind upon Medicaid beneficiaries enrolled in the
                  contractor's plan pursuant to this contract. This Article does
                  not apply to individuals eligible solely through the NJ
                  FamilyCare Program Plan C,or D, [Reserved] for whom providers
                  will be required to collect cost-sharing for certain services.

         2.       The contractor's obligations under this Article shall not be
                  imposed upon the enrollees, although the contractor shall
                  require enrollees to cooperate in the identification of
                  any and all other potential sources of payment for services,
                  Instances of non-cooperation shall be referred to the State.

         3.       The contractor shall neither encourage nor require a Medicaid
                  enrollee to reduce or terminate TPL coverage.

         4.       Unless otherwise permitted or required by federal and State
                  law, health care services cannot be denied to a Medicaid
                  enrollee because of a third party's potential liability to
                  pay for the services, and the contractor shall ensure that
                  its cost avoidance efforts do not prevent an enrollee from
                  receiving medically necessary services.

                                                                         VIII-20

<PAGE>

B.5.2   Cost-Sharing Requirements for NJ FamilyCare Plan C, and Plan D
[Reserved] Beneficiaries

                                                                           B-195
<PAGE>

                          COST-SHARING REQUIREMENTS FOR
                        NJ FAMILYCARE PLAN D [RESERVED]

COPAYMENTS FOR NJ FAMILYCARE - PLAN D [RESERVED]

Copayments will be required of parents/caretakers solely eligible through NJ
FamilyCare Plan D whose family income is between 151% and up to including 200%
of the federal poverty level. The same copayments will be required of children
solely eligible through NJ FamilyCare Plan D whose family income is between 201%
and up to and including 350% of the federal poverty level. Exception - Both
Eskimos and Native American Indians under the age of 19 are not required to pay
copayments.

The total family limit (regardless of family size) on all cost-sharing may not
exceed 5% of the annual family income.

Below is listed the services requiring copayments and the amount of each
copayment.

<TABLE>
<CAPTION>
                 SERVICE                                      AMOUNT OF COPAYMENT
                 -------                                      -------------------
<S>                                                <C>
1. Outpatient Hospital Clinic Visits,              $5 copayment for each outpatient clinic visit
   including Diagnostic Testing                    that is not for preventive services

2. Hospital Outpatient Mental Health Visits        $25 copayment for each visit

3. Outpatient Substance Abuse Services for         $5 copayment for each visit
   Detoxification

4. Hospital Outpatient Emergency Services          $35 copayment; no copayment is required if
   Covered for Emergency Services only,            the member was referred to the Emergency
   including services provided in an               Room by his/her primary care provider for
   outpatient hospital department or an urgent     services that should have been rendered in the
   care facility. [Note: Triage and medical        primary care provider's office or if the
   screenings must be covered in all               member is admitted into the hospital.
   situations.]

5. Primary Care Provider Services provided         $5 copayment for each visit (except for well-
   during normal office hours                      child visits in accordance with the recommended
                                                   schedule of the American Academy of Pediatrics;
                                                   lead screening and treatment; age-appropriate
                                                   immunizations; prenatal care; or preventive
                                                   dental services). The $5 copayment shall only
                                                   apply to the first
</TABLE>

                                                                           B-198

<PAGE>

                                    SECTION C
                                CAPITATION RATES

                                                                             C-l

<PAGE>

STATE OF NEW JERSEY                                                 CONFIDENTIAL

  FAMILYCARE RATES FOR ADULTS 0-100% AND PARENTS 134-200% (INCLUDES APPLICABLE
                                ALIENS AND HANJ)
         TERMS OF ELIGIBILITY - TWO MONTHS OF ELIGIBILITY DURING SFY04

TWO MONTH EXTENSION

<TABLE>
<CAPTION>
---------------------------------------------------
           CATEGORY                     AGE/SEX
---------------------------------------------------
<S>                                  <C>
FamilyCare Adults 0 - 100%           19 - 44 Female
FamilyCare Adults 0 - 100%           19 - 44 Male
FamilyCare Adults 0 - 100%           45+ M&F
---------------------------------------------------
FamilyCare Parents 134 - 200%        19 - 44 Female
FamilyCare Parents 134 - 200%        19 - 44 Male
FamilyCare Parents 134 - 200%        45+ M&F
---------------------------------------------------
</TABLE>

                                   SFY04 RATES
                CONTRACT PERIOD: JULY 1, 2003 - AUGUST 31, 2004

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
           CATEGORY             NORTHERN         CENTRAL         SOUTHERN       STATEWIDE
-----------------------------------------------------------------------------------------
<S>                             <C>              <C>             <C>            <C>
FamilyCare Adults 0 - 100%                                                      $  256.28
FamilyCare Adults 0 - 100%                                                      $  216.63
FamilyCare Adults 0 - 100%                                                      $  410.27
-----------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                   $  155.14
FamilyCare Parents 134 - 200%                                                   $  127.42
FamilyCare Parents 134 - 200%                                                   $  286.56
-----------------------------------------------------------------------------------------
</TABLE>

                                   SFY03 RATES
                 CONTRACT PERIOD: MARCH 1, 2003 - JUNE 30, 2003

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
         CATEGORY               NORTHERN         CENTRAL         SOUTHERN       STATEWIDE
-----------------------------------------------------------------------------------------
<S>                             <C>              <C>             <C>            <C>
FamilyCare Adults 0 - 100%                                                      $  215.97
FamilyCare Adults 0 - 100%                                                      $  181.07
FamilyCare Adults 0 - 100%                                                      $  354.16
-----------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                   $  140.11
FamilyCare Parents 134 - 200%                                                   $  114.73
FamilyCare Parents 134 - 200%                                                   $  266.36
-----------------------------------------------------------------------------------------
</TABLE>

Mercer Government Human Services Consulting

                                   Page 1 of 1

<PAGE>

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                       AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that certain sections of the
contract amendment, which were to be effective July 1, 2003 shall be amended to
take effect August 1, 2003, as set out below:

1.       ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES" Section 4.1.2(A)14;
         4.1.2(A)23; 4.1.8(S) and 4.1.8(T) shall be amended as reflected in
         Article 4, Section 4.1.2(A)14, 4.1.2(A)23, 4.1.8(S) and 4.1.8(T)
         attached hereto and incorporated herein.

2.       APPENDIX, SECTION C, "CAPITATION RATES" shall be revised as reflected
         in SFY 2004 Capitation Rates attached hereto and incorporated herein.

<PAGE>

Extension of Dental and Chiropractic Services - August 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

             AMERIGROUP                           STATE OF NEW JERSEY

          NEW JERSEY, INC.                    DEPARTMENT OF HUMAN SERVICES

BY:______________________________             BY:_________________________

                                                      KATHRYN A. PLANT

TITLE:___________________________             TITLE: DIRECTOR, DMAHS

DATE:____________________________             DATE:_______________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY:______________________________

     DEPUTY ATTORNEY GENERAL

DATE:____________________________

<PAGE>

                  9.       Prescription Drugs (legend and non-legend covered by
                           the Medicaid program) - For payment method for
                           Protease Inhibitors, certain other anti-retrovirals,
                           blood clotting factors VIII and IX, and coverage of
                           protease inhibitors and certain other anti-retro
                           virals under NJ FamilyCare, see Article 8.

                  10.      Family Planning Services and Supplies

                  11.      Audiology

                  12.      Inpatient Rehabilitation Services

                  13.      Podiatrist Services

                  14.      Chiropractor Services for children under 21 years of
                           age and pregnant women only

                  15.      Optometrist Services

                  16.      Optical Appliances

                  17.      Hearing Aid Services

                  18.      Home Health Agency Services - Not a
                           contractor-covered benefit for the non-dually
                           eligible ABD population. All 'other services provided
                           to any enrollee in the home, including but not
                           limited to pharmacy and DME services, are the
                           contractor's fiscal and medical management
                           responsibility.

                  19.      Hospice Services--are covered in the community as
                           well as in institutional settings. Room and board
                           services are included only when services are
                           delivered in an institutional (non-private residence)
                           setting.

                  20.      Durable Medical Equipment (DME)/Assistive Technology
                           Devices in accordance with existing Medicaid
                           regulations.

                  21.      Medical Supplies

                  22.      Prosthetics and Orthotics including certified shoe
                           provider.

                  [Reserved]
                  23.      Dental Services for children under 21 years of age
                           and pregnant women only.

                  24.      Organ Transplants - includes donor and recipient
                           costs. Exception: The contractor will not be
                           responsible for transplant-related donor and
                           recipient inpatient hospital costs for an individual
                           placed on a transplant

                                                                            IV-5

<PAGE>

                  system, or through any similar third-party liability, which
                  also includes the provision of the Unsatisfied Claim and
                  Judgment Fund.

         O.       Any services or items furnished for which the provider does
                  not normally charge.

         P.       Services furnished by an immediate relative or member of the
                  Medicaid beneficiary's household.

         Q.       Services billed for which the corresponding health care
                  records do not adequately and legibly reflect the requirements
                  of the procedure described or procedure code utilized by the
                  billing provider.

         R.       Services or items reimbursed based upon submission of a cost
                  study when there are no acceptable records or other evidence
                  to substantiate either the costs allegedly incurred or
                  beneficiary income available to offset those costs. In the
                  absence of financial records, a provider may substantiate
                  costs or available income by means of other evidence
                  acceptable to the Division.

         S.       Chiropractor services for individuals 21 years of age or older
                  other than pregnant women.

         T.       Dental services for individuals 21 years of age or older other
                  than pregnant women.

4.2      SPECIAL PROGRAM REQUIREMENTS

4.2.1    EMERGENCY SERVICES

         A.       For purposes of this contract, "emergency" means an onset of a
                  medical or behavioral condition, the onset of which is sudden,
                  that manifests itself by symptoms of sufficient severity,
                  including severe pain, that a prudent layperson, who possesses
                  an average knowledge of medicine and health, could reasonably
                  expect the absence of immediate medical attention to result
                  in:

                  1.       Placing the health of the person or others in serious
                           jeopardy;

                  2.       Serious impairment to such person's bodily functions;

                  3.       Serious dysfunction of any bodily organ or part of
                           such person; or

                  4.       Serious disfigurement of such person.

                  With respect to a pregnant woman who is having contractions,
                  an emergency exists where there is inadequate time to effect a
                  safe transfer to another hospital before delivery or the
                  transfer may pose a threat to the health or safety of the
                  woman or the unborn child.

                                                                           IV-20

<PAGE>

STATE OF NEW JERSEY                                                 CONFIDENTIAL

                             CRCS DRAFT VERSION 3.6A

               DENTAL SERVICES INCORPORATED FOR ALL PLAN A ADULTS
            CHIROPRACTIC SERVICES INCORPORATED FOR ALL PLAN A ADULTS
               PHARMACY SERVICES INCORPORATED FOR ALL POPULATIONS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                    CATEGORY                                           AGE/SEX
-----------------------------------------------------------------------------------------
<S>                                                          <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)             Newborn
AFDC / KidCare A / FamilyCare Children (PSC 380)             < 2 M&F (consolidated)
AFDC / KidCare A / FamilyCare Children (PSC 380)             2 - 20.99 M&F (consolidated)
-----------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)     21 - 44.99 Female
AFDC                                                         21 - 44.99 Male
AFDC / NJCPW                                                 45+ M&F
-----------------------------------------------------------------------------------------
Aged with Medicare                                           All
Blind/Disabled with Medicare                                 < 45 M&F (consolidated)
Blind/Disabled with Medicare                                 45+ M&F
-----------------------------------------------------------------------------------------
Maternity                                                    All
-----------------------------------------------------------------------------------------
ABD-DDD with Medicare                                        All (consolidated)
-----------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                        Newborn
ABD (Including AIDS) without Medicare                        All (consolidated)
ABD-DDD without Medicare                                     All (consolidated)
Non ABD-DDD (Including Home Health Add-On)                   All (consolidated)
-----------------------------------------------------------------------------------------
DYFS                                                         Newborn
DYFS                                                         < 2 M&F (consolidated)
DYFS                                                         Youth
-----------------------------------------------------------------------------------------
KidCare B&C                                                  Newborn
KidCare B&C                                                  < 2 M&F (consolidated)
KidCare B&C                                                  Youth
-----------------------------------------------------------------------------------------
KidCare D                                                    Newborn
KidCare D                                                    < 2 M&F (consolidated)
KidCare D                                                    Youth
-----------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                   19 - 44 Female
FamilyCare Adults 0 - 100%                                   19 - 44 Male
FamilyCare Adults 0 - 100%                                   45+ M&F
-----------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                        21 - 44 Female
FamilyCare Parents 0 - 133% (PSC 380)                        21 - 44 Male
FamilyCare Parents 0 - 133% (PSC 380)                        45+ M&F
-----------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                19 - 44 Female
FamilyCare Parents 134 - 200%                                19 - 44 Male
FamilyCare Parents 134 - 200%                                45+ M&F
-----------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                     All (consolidated)
AIDS - Non-ABO                                               All (consolidated)
AIDS - ABD with Medicare DDD (Including Behavioral
  Health Add-On)                                             All (consolidated)
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)      All (consolidated)
-----------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                           All
Add-On - Behavioral Health - DDD w/ Medicare                 All
Add-On - Behavioral Health - DDD w/o Medicare                All
-----------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)  All
Newborn for one month age last birthday (May and June
  2003 births)                                               All
-----------------------------------------------------------------------------------------
</TABLE>

                                   SFY04 RATES
                  CONTRACT PERIOD: July 1, 2003 - July 31, 2003

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                    CATEGORY                                   NORTHERN         CENTRAL         SOUTHERN          STATEWIDE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>              <C>             <C>               <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)            $           -    $          -    $           -
AFDC / KidCare A / FamilyCare Children (PSC 380)            $      172.84    $     180.64    $      189.62
AFDC / KidCare A / FamilyCare Children (PSC 380)            $       90.52    $      86.11    $       92.92
-------------------------------------------------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)    $      156.88    $     162.66    $      167.85
AFDC                                                        $      146.02    $     138.74    $      150.99
AFDC / NJCPW                                                $      276.24    $     299.49    $      353.07
-------------------------------------------------------------------------------------------------------------------------------
Aged with Medicare                                          $      297.81    $     299.34    $      304.52
Blind/Disabled with Medicare                                $      280.17    $     297.78    $      276.22
Blind/Disabled with Medicare                                $      385.03    $     402.81    $      403.10
-------------------------------------------------------------------------------------------------------------------------------
Maternity                                                   $    9,683.12    $  10,171.55    $   10,169.88
-------------------------------------------------------------------------------------------------------------------------------
ABD-DDD with Medicare                                                                                          $         264.32
-------------------------------------------------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                                                                          $              -
ABD (Including AIDS) without Medicare                                                                          $         585.98
ABD-DDD without Medicare                                                                                       $         581.33
Non ABD-DDD (Including Home Health Add-On)                                                                     $         645.49
-------------------------------------------------------------------------------------------------------------------------------
DYFS                                                                                                           $              -
DYFS                                                                                                           $         442.61
DYFS                                                                                                           $         120.20
-------------------------------------------------------------------------------------------------------------------------------
KidCare B&C                                                                                                    $              -
KidCare B&C                                                                                                    $         158.32
KidCare B&C                                                                                                    $          89.31
-------------------------------------------------------------------------------------------------------------------------------
KidCare D                                                                                                      $              -
KidCare D                                                                                                      $         174.81
KidCare D                                                                                                      $          75.71
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                                                                         see FC Sheet
FamilyCare Adults 0 - 100%                                                                                         see FC Sheet
FamilyCare Adults 0 - 100%                                                                                         see FC Sheet
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         148.44
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         114.83
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         254.32
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                                                      see FC Sheet
FamilyCare Parents 134 - 200%                                                                                      see FC Sheet
FamilyCare Parents 134 - 200%                                                                                      see FC Sheet
-------------------------------------------------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                                                                       $         916.08
AIDS - Non-ABO                                                                                                 $       1,442.69
AIDS - ABD with Medicare DDD (Including Behavioral
  Health Add-On)                                                                                               $         952.85
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)                                                        $       1,516.67
-------------------------------------------------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                                                                             $          84.18
Add-On - Behavioral Health - DDD w/ Medicare                                                                   $          38.77
Add-On - Behavioral Health - DDD w/o Medicare                                                                  $          73.98
-------------------------------------------------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)                                                    $         747.34
Newborn for one month age last birthday (May and June
  2003 births)                                                                                                 $         271.67
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                   SFY03 RATES
                 CONTRACT PERIOD: March 1, 2003 - June 30, 2003

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                    CATEGORY                                  NORTHERN         CENTRAL         SOUTHERN          STATEWIDE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>             <C>                <C>
AFDC / KidCare A / FamilyCare Children (PSC 380)           $           -    $          -    $           -
AFDC / KidCare A / FamilyCare Children (PSC 380)           $      247.98    $     273.29    $      265.31
AFDC / KidCare A / FamilyCare Children (PSC 380)           $       88.49    $      85.71    $       87.96
-------------------------------------------------------------------------------------------------------------------------------
AFDC / KidCare A / NJCPW / FamilyCare Children (PSC 380)   $      149.31    $     151.77    $      151.08
AFDC                                                       $      140.40    $     128.03    $      134.67
AFDC / NJCPW                                               $      274.24    $     292.82    $      331.32
-------------------------------------------------------------------------------------------------------------------------------
Aged with Medicare                                         $      315.28    $     314.88    $      330.45
Blind/Disabled with Medicare                               $      282.63    $     300.89    $      278.38
Blind/Disabled with Medicare                               $      390.59    $     418.57    $      426.63
-------------------------------------------------------------------------------------------------------------------------------
Maternity                                                  $    6,605.95    $   6,919.48    $    6,875.41
-------------------------------------------------------------------------------------------------------------------------------
ABD-DDD with Medicare                                                                                          $         274.54
-------------------------------------------------------------------------------------------------------------------------------
ABD (Including AIDS) without Medicare                                                                          $              -
ABD (Including AIDS) without Medicare                                                                          $         592.75
ABD-DDD without Medicare                                                                                       $         588.95
Non ABD-DDD (Including Home Health Add-On)                                                                     $         671.77
-------------------------------------------------------------------------------------------------------------------------------
DYFS                                                                                                           $              -
DYFS                                                                                                           $         344.69
DYFS                                                                                                           $         113.85
-------------------------------------------------------------------------------------------------------------------------------
KidCare B&C                                                                                                    $              -
KidCare B&C                                                                                                    $         158.92
KidCare B&C                                                                                                    $          78.25
-------------------------------------------------------------------------------------------------------------------------------
KidCare D                                                                                                      $              -
KidCare D                                                                                                      $         157.35
KidCare D                                                                                                      $          69.39
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Adults 0 - 100%                                                                                     $         215.97
FamilyCare Adults 0 - 100%                                                                                     $         181.07
FamilyCare Adults 0 - 100%                                                                                     $         354.16
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         134.09
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         101.64
FamilyCare Parents 0 - 133% (PSC 380)                                                                          $         239.37
-------------------------------------------------------------------------------------------------------------------------------
FamilyCare Parents 134 - 200%                                                                                  $         140.11
FamilyCare Parents 134 - 200%                                                                                  $         114.73
FamilyCare Parents 134 - 200%                                                                                  $         266.36
-------------------------------------------------------------------------------------------------------------------------------
AIDS - ABD with Medicare                                                                                       $         941.96
AIDS - Non-ABO                                                                                                 $       1,521.19
AIDS - ABD with Medicare DDD (Including Behavioral
  Health Add-On)                                                                                               $         978.05
AIDS - Non-ABD DDD (Including Behavioral Health Add-On)                                                        $       1,593.79
-------------------------------------------------------------------------------------------------------------------------------
Add-On - Home Health - Non-ABD DDD                                                                             $          82.82
Add-On - Behavioral Health - DDD w/ Medicare                                                                   $          36.09
Add-On - Behavioral Health - DDD w/o Medicare                                                                  $          72.61
-------------------------------------------------------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003 births)
Newborn for one month age last birthday (May and June
  2003 births)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTES:

-  Reported capltalton rates reflect the contract period July 1, 2003 through
   July 31, 2003

-  SFY04 capitation rates are not reported here for the FamilyCare Adults 0-100%
   FPL and Parents 134-200% FPL populations. Please refer to the FamilyCare Rate
   Summary Sheet.

Mercer Government Human Services Consulting

                                   Page 1 of 1

<PAGE>

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                        AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that certain sections of the
contract shall be amended to be effective September 1, 2003, as follows:

<PAGE>

NJ FamilyCare Extension - September 1, 2003

1.       Article 1, "Definitions" section - for the following definitions:

         -        Copayment;

         -        NJ Family Care Plan D;

         -        NJ FamilyCare Plan H (RESTORED)

         shall be amended as reflected in the relevant pages of Article 1
         attached hereto and incorporated herein.

2.       ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1.2(A)9;
         4.1.3(A)10 and 4.1.7 (RESTORED); renumber remaining sections, shall be
         amended as reflected in Article 4, Sections 4.1.2(A)9, 4.1.3(A)10, and
         4.1.7 (RESTORED) attached hereto and incorporated herein.

3.       ARTICLE 5, "ENROLLEE SERVICES," Section 5.2(A)8 (RESTORED); 5.3.1 (C)2;
         5.3.2; 5.4(B); 5.4(C); 5.5(G)1(d); 5.8.2(WW); 5.8.5(B); 5.10.2(A)1 and
         5.15.1(A) shall be amended as reflected in Article 5, Section 5.2(A)8,
         5.3.1(C)2, 5.3.2, 5.4(B), 5.4(C), 5.5(G)1(d), 5.8.2(WW), 5.8.5(B),
         5.10.2(A)1 and 5.15.1(A) attached hereto and incorporated herein.

4.       ARTICLE 6, "PROVIDER INFORMATION," Section 6.5(B)1 shall be amended as
         reflected in Article 6, Section 6.5 (B)1, attached hereto and
         incorporated herein.

5.       ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.6; 8.7(A)1; 8.7(A)2
         (NEW); 8.7(B); 8.7(C); 8.7(D)1; 8.7(D)1 (a); 8.7(D)2; 8.7(D)2(a);
         8.7(E)1; 8.7(E)3 (NEW); 8.7(F)4 (DELETED); 8.7(G)1; 8.7(G)2; 8.7(H)1
         and 8.8(M) shall be amended as reflected in Article 8, Sections 8.5.6,
         8.7(A)1, 8.7(A)2, 8.7(B), 8.7(C), 8.7(D)1, 8.7(D)1 (a), 8.7(D)2,
         8.7(D)2(a), 8.7(E)1, 8.7(E)3, 8.7(F)4, 8.7(G)1, 8.7(G)2, 8.7(H)1 and
         8.8(M), attached hereto and incorporated herein.

6.       APPENDIX, SECTION A, "THIRD PARTY LIABILITY"

         A.8.2; A.8.3 (NEW) shall be amended as reflected in Appendix A, A.8.2
         and A.8.3 attached hereto and incorporated herein.

<PAGE>

Dental/Chiropractic Extension - September 1, 2003

7.       APPENDIX, SECTION B, "REFERENCE MATERIALS"

         B.5.2 - Cost-Sharing Requirements for NJ FamilyCare Plan D and Plan H
         Beneficiaries; Plan H (RESTORED) shall be amended as reflected in
         Appendix, Section B, B.5.2, attached hereto and incorporated herein.

8.       APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected
         in SFY 2004 Capitation Rates attached hereto and incorporated herein.

<PAGE>

NJ FamilyCare Extension - September 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

        AMERIGROUP                                    STATE OF NEW JERSEY

        NEW JERSEY, INC.                          DEPARTMENT OF HUMAN SERVICES

BY: _______________________                     BY: _______________________

                                                       MATTHEW D. D'ORIA

TITLE: ____________________                     TITLE: ACTING DIRECTOR, DHAHS

DATE: _____________________                     DATE: _____________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: _______________________

    DEPUTY ATTORNEY GENERAL

DATE: _____________________

<PAGE>

         CONTRACTOR'S PLAN--all services and responsibilities undertaken by the
         contractor pursuant to this contract.

         CONTRACTOR'S REPRESENTATIVE--the individual legally empowered to bind
         the contractor, using his/her signature block, including his/her
         title. This individual will be considered the Contractor's
         Representative during the life of any contract entered into with the
         State unless amended in writing pursuant to Article 7.

         COPAYMENT--the part of the cost-sharing requirement for NJ FamilyCare
         Plan D and H enrollees in which a fixed monetary amount is paid for
         certain services/items received from the contractor's providers.

         COST AVOIDANCE--a method of paying claims in which the provider is not
         reimbursed until the provider has demonstrated that all available
         health insurance has been exhausted.

         COST NEUTRAL--the mechanism used to smooth data, share risk, or adjust
         for risk that will recognize both higher and lower expected costs and
         is not intended to create a net aggregate gain or loss across all
         payments.

         COVERED SERVICES--see "BENEFITS PACKAGE"

         CREDENTIALING--the contractor's determination as to the qualifications
         and ascribed privileges of a specific provider to render specific
         health care services.

         CULTURAL COMPETENCY--a set of interpersonal skills that allow
         individuals to increase their understanding, appreciation, acceptance
         of and respect for cultural differences and similarities within, among
         and between groups and the sensitivity to how these differences
         influence relationships with enrollees. This requires a willingness and
         ability to draw on community-based values, traditions and customs, to
         devise strategies to better meet culturally diverse enrollee needs, and
         to work with knowledgeable persons of and from the community in
         developing focused interactions, communications, and other supports.

         CWA OR COUNTY WELFARE AGENCY ALSO KNOWN AS COUNTY BOARD OF SOCIAL
         SERVICES-- the agency within the county government that makes
         determination of eligibility for Medicaid and financial assistance
         programs.

         Days--calendar days unless otherwise specified.

         DBI--the New Jersey Department of Banking and Insurance in the
         executive branch of New Jersey State government.

         DEFAULT--see "AUTOMATIC ASSIGNMENT"

         DELIVERABLE--a document/report/manual to be submitted to the Department
         by the contractor pursuant to this contract.

                                                                            I-6

<PAGE>

         NJ FAMILYCARE PLAN D--means the State-operated program which provides
         managed care coverage to uninsured:

         -        Parents/caretakers with children below the age of 19 who do
                  not qualify for AFDC Medicaid with family incomes up to and
                  including 200 [Reserved] percent of the federal poverty level;
                  and

         -        Parents/caretakers with children below the age of 23 years and
                  children from the age of 19 through 22 years who are full time
                  students who do not qualify for AFDC medicaid with family
                  incomes up to and including 250 percent of the federal poverty
                  level; and

         -        Children below the age of 19 with family incomes between 201
                  percent and up to and including 350 percent of the federal
                  poverty level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services with the exception of both
         Eskimos and Native American Indians under the age of 19 years. These
         groups are identified by Program Status Codes (PSCs) or Race Code on
         the eligibility system as indicated below. For clarity, the Program
         Status Codes or Race Code, in the case of Eskimos and Native American
         Indians under the age of 19 years, related to Plan D non-cost sharing
         groups are also listed.

<TABLE>
<CAPTION>
    PSC                     PSC                              Race Code
Cost Sharing           No Cost Sharing                     No Cost Sharing
------------           ---------------                     ---------------
<S>                    <C>                                 <C>
    301                     300                                   3
    493                     380
    494                     497
    495
    498
</TABLE>

         In addition to covered managed care services, eligibles under these
         programs may access certain services which are paid fee-for-service and
         not covered under this contract.

         NJ FamilyCare Plan H--means the State-operated program which provides
         managed care administrative services coverage to uninsured:

         -        Adults and couples without dependent children under the age of
                  19 with family incomes up to and including 100 percent of the
                  federal poverty level;

         -        Adults and couples without dependent children under the age of
                  23 years, who do not qualify for AFDC medicaid, with family
                  incomes up to and including 250 percent of the federal poverty
                  level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services. These groups are identified
         by the program status code (PSC) indicated below. For clarity, the
         program status codes related to Plan H non-cost sharing groups are also
         listed.

                                                                            I-19

<PAGE>

<TABLE>
<CAPTION>
    PSC                                    PSC
COST SHARING                         No COST SHARING
------------                         ---------------
<S>                                  <C>
    701                                    763
                                           700
</TABLE>

         NJ FAMILYCARE PLAN I - means the State-operated program that provides
         certain benefits on a fee-for-service basis through the DMAHS for Plan
         D parents/caretakers with a program status code of 380.

         N.J.S.A.--New Jersey Statutes Annotated.

         NON-COVERED CONTRACTOR SERVICES--services that are not covered in the
         contractor's benefits package included under the terms of this
         contract.

         NON-COVERED MEDICAID SERVICES--all services that are not covered by the
         New Jersey Medicaid State Plan.

         NON-PARTICIPATING PROVIDER--a provider of service that does not have a
         contract with the contractor.

         OIT--the New Jersey Office of Information Technology.

         OTHER HEALTH COVERAGE--private non-Medicaid individual or group
         health/dental insurance. It may be referred to as Third Party Liability
         (TPL) or includes Medicare.

         OUT OF AREA SERVICES--all services covered under the contractor's
         benefits package included under the terms of the Medicaid contract
         which are provided to enrollees outside the defined basic service area.

         OUTCOMES--the results of the health care process, involving either the
         enrollee or provider of care, and may be measured at any specified
         point in time. Outcomes can be medical, dental, behavioral, economic,
         or societal in nature.

         OUTPATIENT CARE--treatment provided to an enrollee who is not admitted
         to an inpatient hospital or health care facility.

         P FACTOR (P7)--the grade of service for the telephone system. The digit
         following the P (e.g., 7) indicates the number of calls per hundred
         that are or can be blocked from the system. In this sample, P7 means
         seven (7) calls in a hundred may be blocked, so the system is designed
         to meet this criterion. Typically, the grade of service is designed to
         meet the peak busy hour, the busiest hour of the busiest day of the
         year.

         PARTICIPATING PROVIDER--a provider that has entered into a provider
         contract with the contractor to provide services.

         PARTIES-the DMAHS, on behalf of the DHS, and the contractor.

                                                                           I-20

<PAGE>

                  either a physician specialist or oral surgeon may perform the
                  procedure and when, where, and how authorization, if needed,
                  shall be promptly obtained.

         P.       Out-of-Network Services. If the contractor is unable to
                  provide in-network necessary services, covered under the
                  contract to a particular enrollee, the contractor must
                  adequately and timely cover those services out-of-network for
                  the enrollee, for as long as the contractor is unable to
                  provide them in-network.

4.1.2    BENEFIT PACKAGE

         A.       The following categories of services shall be provided by the
                  contractor for all Medicaid and NJ FamilyCare Plans A, B, and
                  C enrollees, except where indicated. See Section B.4.1 of the
                  Appendices for complete definitions of the covered services.

                  1.       Primary and Specialty Care by physicians and, within
                           the scope of practice and in accordance with State
                           certification/licensure requirements, standards and
                           practices, by Certified Nurse Midwives, Certified
                           Nurse Practitioners, Clinical Nurse Specialists, and
                           Physician Assistants

                  2.       Preventive Health Care and Counseling and Health
                           Promotion

                  3.       Early and Periodic Screening, Diagnosis, and
                           Treatment (EPSDT) Program Services

                           For NJ FamilyCare Plans B and C participants,
                           coverage includes early and periodic screening and
                           diagnosis medical examinations, dental, vision,
                           hearing, and lead screening services. It includes
                           only those treatment services identified through the
                           examination that are available under the contractor's
                           benefit package or specified services under the FFS
                           program.

                  4.       Emergency Medical Care

                  5.       Inpatient Hospital Services including acute care
                           hospitals, rehabilitation hospitals, and special
                           hospitals.

                  6.       Outpatient Hospital Services

                  7.       Laboratory Services [Except routine testing related
                           to administration of Clozapine and the other
                           psychotropic drugs listed in Article 4.1.4B for
                           non-DDD clients.]

                  8.       Radiology Services - diagnostic and therapeutic

                  9.       Prescription Drugs (legend and non-legend covered by
                           the Medicaid program) - For payment method for
                           Protease Inhibitors, certain other anti-

                                                                            IV-4

<PAGE>

                           retrovirals, blood clotting factors VIII and IX, and
                           coverage of protease inhibitors and certain other
                           anti-retrovirals under NJ FamilyCare, see Article 8.
                           Exception: not a contractor-covered benefit for the
                           non-dually eligible abd population.

                  10.      Family Planning Services and Supplies

                  11.      Audiology

                  12.      Inpatient Rehabilitation Services

                  13.      Podiatrist Services

                  14.      Chiropractor Services

                  15.      Optometrist Services

                  16.      Optical Appliances

                  17.      Hearing Aid Services

                  18.      Home Health Agency Services - Not a
                           contractor-covered benefit for the non-dually
                           eligible ABD population. All other services provided
                           to any enrollee in the home, including but not
                           limited to pharmacy and DME services, are the
                           contractor's fiscal and medical management
                           responsibility.

                  19.      Hospice Services--are covered in the community as
                           well as in institutional settings. Room and board
                           services are included only when services are
                           delivered in an institutional (non-private residence)
                           setting.

                  20.      Durable Medical Equipment (DME)/Assistive Technology
                           Devices in accordance with existing Medicaid
                           regulations.

                  21.      Medical Supplies

                  22.      Prosthetics and Orthotics including certified shoe
                           provider.

                  23.      Dental Services

                  24.      Organ Transplants - includes donor and recipient
                           costs. Exception: The contractor will not be
                           responsible for transplant-related donor and
                           recipient inpatient hospital costs for an individual
                           placed on a transplant list while in the Medicaid FFS
                           program prior to enrollment into the contractor's
                           plan.

                                                                           IV-5

<PAGE>

                  7.       Services Provided by New Jersey MH/SA and DYFS
                           Residential Treatment Facilities or Group Homes. For
                           enrollees living in residential facilities or group
                           homes where ongoing care is provided, contractor
                           shall cooperate with the medical, nursing, or
                           administrative staff person designated by the
                           facility to ensure that the enrollees have timely and
                           appropriate access to contractor providers as needed
                           and to coordinate care between those providers and
                           the facility's employed or contracted providers of
                           health services. Medical care required by these
                           residents remains the contractor's responsibility
                           providing the contractor's provider network and
                           facilities are utilized.

                  8.       Family Planning Services and Supplies when furnished
                           by a non-participating provider.

                  9.       Home health agency services for the non-dually
                           eligible ABD population.

                  10.      Prescription drugs (legend and non-legend covered by
                           the medicaid program) for non-dually eligible ABD
                           population.

         B.       Dental Services. For those dental services specified below
                  that are initiated by a Medicaid non-New Jersey Care 2000+
                  provider prior to first time New Jersey Care 2000+ enrollment,
                  an exemption from contractor-covered services based on the
                  initial managed care enrollment date will be provided and the
                  services paid by Medicaid FFS. The exemption shall only apply
                  to those beneficiaries who have initially received these
                  services during the 60 or 120 day period immediately prior to
                  the initial New Jersey Care 2000+ enrollment date.

                  1.       Procedure Codes to be paid by Medicaid FFS up to 60
                           days after first time New Jersey Care 2000+
                           enrollment:

<TABLE>
<S>               <C>               <C>
02710             02792             03430
02720             02950             05110
02721             02952             05120
02722             02954             05211
02750             03310             05211-52
02751             03320             05212
02752             03330             05212-52
02790             03410-22          05213
02791             03411             05214
</TABLE>

                  2.       Procedure Codes to be paid by Medicaid FFS up to 120
                           days from date of last preliminary extractions after
                           patient enrolls in New Jersey Care 2000+ (applies to
                           tooth codes 5-12 and 21-28 only):

                           05130

                                                                            IV-8

<PAGE>

4.1.7    BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H

         A.       Services Included In The Contractor's Benefits Package for NJ
                  FamilyCare Plan H. The following services shall be provided
                  and case managed by the contractor:

                  1.       Primary Care

                           a.       All physicians services, primary and
                                    specialty

                           b.       In accordance with state certification/
                                    licensure requirements, standards, and
                                    practices, primary care providers shall also
                                    include access to certified nurse midwives -
                                    non-maternity, certified nurse
                                    practitioners, clinical nurse specialists,
                                    and physician assistants

                           c.       Services rendered at independent clinics
                                    that provide ambulatory services

                           d.       Federally Qualified Health Center primary
                                    care services

                  2.       Emergency room services

                  3.       Family planning services, including medical history
                           and physical examinations (including pelvic and
                           breast), diagnostic and laboratory tests, drugs and
                           biologicals, medical supplies and devices,
                           counseling, continuing medical supervision,
                           continuity of care and genetic counseling.

                           Services provided primarily for the diagnosis and
                           treatment of infertility, including sterilization
                           reversals, and related office (medical and clinic)
                           visits, drugs, laboratory services, radiological and
                           diagnostic services and surgical procedures are not
                           covered by the NJ FamilyCare program. Obtaining
                           family planning services from providers outside the
                           contractor's provider network is not available to NJ
                           FamilyCare Plan H Enrollees.

                  4.       Home Health Care Services -- Limited to skilled
                           nursing for a home bound beneficiary which is
                           provided or supervised by a registered nurse, and
                           home health aide when the purpose of the treatment is
                           skilled care; and medical social services which are
                           necessary for the treatment of the beneficiary's
                           medical condition

                  5.       Hospice Services

                                                                           IV-15

<PAGE>

                  6.       Inpatient Hospital Services, including general
                           hospitals, special hospitals, and rehabilitation
                           hospitals. the contractor shall not be responsible
                           when the primary admitting diagnosis is mental health
                           or substance abuse related.

                  7.       Outpatient Hospital Services, including outpatient
                           surgery

                  8.       Laboratory Services -- All laboratory testing sites
                           providing services under this contract must have
                           either a clinical Laboratory Improvement Act (CLIA)
                           certificate of waiver or a certificate of
                           registration along with a CLIA identification number.
                           those providers with certificates of waiver shall
                           provide only the types of tests permitted under the
                           terms of their waiver. laboratories with certificates
                           of registration may perform a full range of
                           Laboratory services.

                  9.       radiology services -- diagnostic and therapeutic

                  10.      Optometrist Services, including one routine eye
                           examination per year

                  11.      Optical Appliances-- Limited to one pair of glasses
                           (or contact lenses) per 24 month period or as
                           medically necessary

                  12.      Organ transplant services which are non-experimental
                           or non-investigational

                  13.      Prescription drugs, excluding over-the-counter drugs
                           exception: See Article 8 regarding Protease
                           Inhibitors and other Antiretrovirals.

                  14.      Podiatrist Services -- Excludes routine hygienic care
                           of the feet, including the treatment of corns and
                           calluses, the trimming of nails, and other hygienic
                           care such as cleaning or soaking feet, in the absence
                           of a pathological condition

                  15.      Prosthetic appliances -- Limited to the initial
                           provision of a prosthetic device that temporarily or
                           permanently replaces all or part of an external body
                           part lost or impaired as a result of disease, injury,
                           or congenital defect. repair and replacement services
                           are covered when due to congenital growth.

                  16.      Private duty nursing -- Only when authorized by the
                           contractor.

                  17.      Transportation Services -- Limited to ambulance for
                           medical emergency only.

                                                                           IV-16
<PAGE>

                  18.      Maternity and related newborn care.

                  19.      Diabetic supplies and equipment

         B.       Services Available To NJ FamilyCare Plan H Under
                  Fee-For-Service. The following services are available to NJ
                  Familycare Plan H enrollees under fee-for-service:

                  1.       Outpatient mental health services, limited to 60 days
                           per calendar year.

                  2.       Abortion services.

                  3.       Outpatient rehabilitation services Physical therapy,
                           Occupational therapy, and Speech therapy for
                           non-chronic conditions and acute illnesses and
                           injuries. Limited to treatment for a 60-day (that is,
                           60 business days) consecutive period per incident of
                           illness of injury, beginning with the first day of
                           treatment per contract year. Speech therapy services
                           rendered for treatment delays in speech development,
                           unless resulting from disease, injury, or congenital
                           defects are not covered.-

         C.       Exclusions. The following services not covered for NJ
                  FamilyCare Plan H participants either by the contractor or the
                  Department include, but are not limited to:

                  1.       Non-medically necessary services.

                  2.       Intermediate Care Facilities/Mental Retardation

                  3.       Private duty nursing unless authorized by the
                           CONTRACTOR

                  4.       Personal Care Assistant Services

                  5.       Medical Day Care Services

                  6.       Chiropractic Services

                  7.       Dental services

                  8.       Orthotic devices

                  9.       Targeted Case Management for the chronically ill

                  10.      Residential treatment center psychiatric programs

                  11.      Religious non-medical institutions care and services

                  12.      Durable Medical Equipment

                  13.      Early and Periodic Screening, Diagnosis and Treatment
                           (EPSDT) services (except for well child care,
                           including immunizations and lead screening and
                           treatments)

                  14.      Transportation Services, including non-emergency
                           ambulance, invalid coach, and lower mode
                           transportation

                  15.      Hearing Aid Services

                  16.      Blood and Blood Plasma, except administration of
                           blood, processing of blood, processing fees and fees
                           related to autologous blood donations are covered.

                                                                           IV-17

<PAGE>

                  17.      Cosmetic Services

                  18.      Custodial Care

                  19.      Special Remedial and Educational Services

                  20.      Experimental and Investigational Services

                  21.      Medical Supplies (except diabetic supplies)

                  22.      Infertility Services

                  23.      Rehabilitative Services for Substance Abuse

                  24.      Weight reduction programs or dietary supplements,
                           except operations, procedures or treatment of
                           obesity when approved by the contractor

                  25.      Acupuncture and acupuncture therapy, except when
                           performed as a form of anesthesia in connection with
                           covered surgery

                  26.      Temporomandibular joint disorder treatment, including
                           treatment performed by prosthesis placed directly in
                           the teeth

                  27.      Recreational therapy

                  28.      Sleep therapy

                  29.      Court-ordered services

                  30.      Thermograms and thermography

                  31.      Biofeedback

                  32.      Radial keratotomy

                  33.      Respite Care

                  34.      Inpatient hospital services for mental health

                  35.      Inpatient and outpatient services for substance abuse

                  36.      Partial hospitalization

                  37.      Skilled nursing facility services

4.1.8    SUPPLEMENTAL BENEFITS

         Any service, activity or product not covered under the State Plan may
         be provided by the contractor only through written approval by the
         Department and the cost of which shall be borne solely by the
         contractor.

4.1.9    CONTRACTOR AND DMAHS SERVICE EXCLUSIONS

         Neither the contractor nor DMAHS shall be responsible for the
         following:

         A.       All services not medically necessary, provided, approved or
                  arranged by a contractor's physician or other provider (within
                  his/her scope of practice) except emergency services.

         B.       Cosmetic surgery except when medically necessary and approved.

         C.       Experimental organ transplants.

                                                                           IV-18
<PAGE>

5.2      AID CATEGORIES ELIGIBLE FOR CONTRACTOR ENROLLMENT

         A.       Except as specified in Article 5.3, all persons who are not
                  institutionalized, belong to one of the following eligibility
                  categories, and reside in any of the enrollment areas, as
                  identified in Article 5.1, are in mandatory aid categories and
                  shall be eligible for enrollment in the contractor's plan in
                  the manner prescribed by this contract.

                  1.       Aid to Families with Dependent Children
                           (AFDC)/Temporary Assistance for Needy Families
                           (TANF);

                  2.       AFDC/TANF-Related, New Jersey Care...Special Medicaid
                           Program for Pregnant Women and Children;

                  3.       SSI-Aged, Blind, Disabled, and Essential Spouses;

                  4.       New Jersey Care...Special Medicaid programs for Aged,
                           Blind, and Disabled;

                  5.       Division of Developmental Disabilities Clients
                           including the Division of Developmental Disabilities
                           Community Care Waiver;

                  6.       Medicaid only or SSI-related Aged, Blind, and
                           Disabled;

                  7.       Uninsured parents/caretakers and children who are
                           covered under NJ FamilyCare;

                  8.       Uninsured adults and couples without dependent
                           children under the age of 23 who are covered under NJ
                           FamilyCare.

         B.       The contractor shall enroll the entire Medicaid case, i.e.,
                  all individuals included under the ten digit Medicaid
                  identification number.

         C.       DYFS. Individuals who are eligible through the Division of
                  Youth and Family Services may enroll voluntarily. All
                  individuals eligible through DYFS shall be considered a unique
                  Medicaid case and shall be issued an individual 12 digit
                  Medicaid identification number, and may be enrolled in his/her
                  own contractor.

         D.       The contractor shall be responsible for keeping its network of
                  providers informed of the enrollment status of each enrollee.

         E.       Dual eligibles (Medicaid-Medicare) may voluntarily enroll.

5.3      EXCLUSIONS AND EXEMPTIONS

         Persons who belong to one of the eligible populations (defined in 5.2A)
         shall not be subject to mandatory enrollment if they meet one or more
         criteria defined in this Article. Persons who fall into an "excluded"
         category (Article 5.3.1 A) shall not be eligible to enroll in the
         contractor's plan. Persons falling into the categories under Article
         5.3.IB are eligible to enroll on a voluntary basis. Persons falling
         into a category under Article 5.3.2 may be eligible for enrollment
         exemption, subject to the Department's review.

                                                                           V - 2

<PAGE>

                  1.       Individuals whose Medicaid eligibility will terminate
                           within three (3) months or less after the projected
                           date of effective enrollment.

                  2.       Individuals in mandatory eligibility categories who
                           live in a county where mandatory enrollment is not
                           yet required based on a phase-in schedule determined
                           by DMAHS.

                  3.       Individuals enrolled in or covered by either a
                           Medicare or commercial HMO will not be enrolled in
                           New Jersey Care 2000+ contractor unless the New
                           Jersey Care 2000+ contractor and the
                           Medicare/commercial HMO are the same.

                  4.       Individuals in the Pharmacy Lock-in or Provider
                           Warning or Hospice programs.

                  5.       Individuals in eligibility categories other than
                           AFDC/TANF, AFDC/TANF-related New Jersey Care,
                           SSI-Aged, Blind and Disabled populations, the
                           Division of Developmental Disabilities Community Care
                           Waiver population, New Jersey Care - Aged, Blind and
                           Disabled, or NJ FamilyCare Plan A.

                  6.       Children awaiting adoption through a private agency.

                  7.       Individuals identified as having more than one active
                           eligible Medicaid number.

                  8.       DYFS Population.

         C.       The following individuals shall be excluded from the Automatic
                  Assignment process:

                  1.       Individuals included under the same Medicaid Case
                           Number where one or more household member(s) are
                           exempt.

                  2.       Individuals participating in NJ FamilyCare Plans B,
                           C, [Reserved] D, and H [Managed Care is the only
                           program option available for these individuals].

5.3.2    ENROLLMENT EXEMPTIONS

                  The contractor, its subcontractors, providers or agents shall
                  not coerce individuals to disenroll because of their health
                  care needs which may meet an exemption reason, especially when
                  the enrollees want to remain enrolled. Exemptions do not apply
                  to NJ FamilyCare Plan B, Plan C, [Reserved] Plan D (Except
                  Parents/Caretakers with PSC 380), [Reserved] and Plan H
                  individuals or to individuals who have been enrolled in any of
                  the contracted plans for greater than one hundred and eighty
                  (180) days. All exemption requests are reviewed by DMAHS on a
                  case by case basis.

                                                                           V - 4

<PAGE>

                  may also enroll and directly market to individuals eligible
                  for Aged, Blind, and Disabled (ABD) benefits. The contractor
                  shall not enroll any other Medicaid-eligible beneficiary
                  except as described in Article 5.16.1.(A).2. Except as
                  provided in 5.16, the contractor shall not directly market to
                  or assist managed care eligibles in completing enrollment
                  forms. The duties of the HBC will include, but are not limited
                  to, education, enrollment, disenrollment, transfers,
                  assistance through the contractor's grievance/appeal process
                  and other problem resolutions with the contractor, and
                  communications. The duties of the contractor, when enrolling
                  ABD beneficiaries will include education and enrollment, as
                  well as other activities required within this contract. The
                  contractor shall cooperate with the HBC in developing
                  information about its plan for dissemination to Medicaid/NJ
                  FamilyCare beneficiaries.

         B.       Individuals eligible under NJ FamilyCare [Reserved] may
                  request an application via a toll-free number operated under
                  contract for the State, through an outreach source, or from
                  the contractor. The applications, including ABD applications
                  taken by the contractor, may be mailed back to a State vendor.
                  Individuals eligible under Plan A also have the option of
                  completing the application either via a mail-in process or on
                  site at the county welfare agency. Individuals eligible under
                  Plan B, Plan C, [Reserved] Plan D, and Plan H have the option
                  of requesting assistance from the State vendor, the contractor
                  or one of the registered servicing centers in the community.
                  Assistance will also be made available at State field offices
                  (e.g. the [Reserved] Medical Assistance Customer Centers) and
                  county offices (e.g. Offices on Aging for grandparent
                  caretakers).

         C.       Automatic Assignment. Medicaid eligible persons who reside in
                  enrollment areas that have been designated for mandatory
                  enrollment, who qualify for AFDC/TANF, ABD, New Jersey
                  Care...Special Medicaid programs eligibility categories, NJ
                  FamilyCare Plan A, and SSI populations, who do not meet the
                  exemption criteria, and who do not voluntarily choose
                  enrollment in the contractor's plan, shall be assigned
                  automatically by DMAHS to a contractor.

5.5      ENROLLMENT AND COVERAGE REQUIREMENTS

         A.       General. The contractor shall comply with DMAHS enrollment
                  procedures. The contractor shall accept for enrollment any
                  individual who selects or is assigned to the contractor's
                  plan, whether or not they are subject to mandatory enrollment,
                  without regard to race, ethnicity, gender, sexual or
                  affectional preference or orientation, age, religion, creed,
                  color, national origin, ancestry, disability, health status or
                  need for health services and will not use any policy or
                  practice that has the effect of discrimination on the basis of
                  race, color, or national origin.

         B.       Coverage commencement. Coverage of enrollees shall commence at
                  12:00 a.m., Eastern Time, on the first day of the calendar
                  month as specified by the DMAHS

                                                                           V - 6

<PAGE>

                                    (other than "liveborn infant"). The
                                    contractor shall be responsible for
                                    notifying DMAHS when a newborn who has been
                                    hospitilized and has not been accreted to
                                    its enrollment roster after twelve (12)
                                    weeks from the date of birth.

                           ii.      DYFS. Newborns who are placed under the
                                    jurisdiction of the Division of Youth and
                                    Family Services are the responsibility of
                                    the MCE that covered the mother on the date
                                    of birth for medically necessary newborn
                                    care. Such children shall become FFS upon
                                    their placement in a DYFS-approved
                                    out-of-home placement.

                           iii.     NJ FamilyCare. Newborn infants born to NJ
                                    FamilyCare Plans B, C, and D mothers shall
                                    be the responsibility of the MCE that
                                    covered the mother on the date of birth for
                                    a minimum of 60 days after the birth through
                                    the period ending at the end of the month in
                                    which the 60th day falls unless the child is
                                    determined eligible beyond this time period.
                                    The contractor shall notify DMAHS of the
                                    birth immediately in order to assure payment
                                    for this period.

                  d.       Enrollee no longer in contract area. If an enrollee
                           moves out of the contractor's enrollment area and
                           would otherwise still be eligible to be enrolled in
                           the contractor's plan, the contractor shall continue
                           to provide or arrange benefits to the enrollee until
                           the DMAHS can disenroll him/her. The contractor shall
                           ask DMAHS to disenroll the enrollee due to the change
                           of residence as soon as it becomes aware of the
                           enrollee's relocation. This provision does not apply
                           to persons with disabilities, who may elect to remain
                           with the contractor, or to NJ FamilyCare Plans B,
                           C, [Reserved] D, and H enrollees, who remain enrolled
                           until the end of the month in which the 60th day
                           after the request falls.

         H.       Enrollment Roster. The enrollment roster and weekly
                  transaction register generated by DMAHS shall serve as the
                  official contractor enrollment list. However, enrollment
                  changes can occur between the time when the monthly roster is
                  produced and capitation payment is made. The contractor shall
                  only be responsible for the provision and cost of care for an
                  enrollee during the months on which the enrollee's name
                  appears on the roster, except as indicated in Article 8.8.
                  DMAHS shall make available data on eligibility determinations
                  to the contractor to resolve discrepancies that may arise
                  between the roster and contractor enrollment files. If DMAHS
                  notifies the contractor in writing of changes in the roster,
                  the contractor shall rely upon that written notification in
                  the same manner as the roster. Corrective action shall be
                  limited to one (1) year from the date that the change was
                  effective.

                                                                           V - 9

<PAGE>

         TT.      An explanation of the enrollee's rights and responsibilities
                  which should include, at a minimum, the following, as well as
                  the provisions found in Standard X in NJ modified QARI/QISMC
                  in Section B.4.14 of the Appendices.

                  1.       Provision for "Advance Directives," pursuant to 42
                           C.F.R. Part 422 and Part 489, Subpart I; must also
                           include a description of State law and any changes in
                           State law. Such changes must be made and issued no
                           later than 90 days after the effective date of the
                           change;

                  2.       Participation in decision-making regarding their
                           health care;

                  3.       Provision for the opportunity for enrollees or, where
                           applicable, an authorized person to offer suggestions
                           for changes in policies and procedures; and

                  4.       A policy on the treatment of minors.

         UU.      Notification that prior authorization for emergency services,
                  either in-network or out-of-network, is not required;

         VV.      Notification that the costs of emergency screening
                  examinations will be covered by the contractor when the
                  condition appeared to be an emergency medical condition to a
                  prudent layperson;

         WW.      For beneficiaries subject to cost-sharing (i.e., those
                  eligible through NJ FamilyCare Plan C, [Reserved] D, and H;
                  See Section B.5.2 of the Appendices), information that
                  specifically explains:

                  1.       The limitation on cost-sharing;

                  2.       The dollar limit that applies to the family based on
                           the reported income;

                  3.       The need for the family to keep track of the
                           cost-sharing amounts paid; and

                  4.       Instructions on what to do if the cost-sharing
                           requirements are exceeded.

         XX.      An explanation on how to access WIC services;

         YY.      Any other information essential to the proper use of the
                  contractor's plan as may be required by the Division;

         ZZ.      Inform enrollees of the availability of care management
                  services;

         AAA.     Enrollee right to adequate and timely information related to
                  physician incentives;

                                                                          V - 18

<PAGE>

         BBB.     An explanation that Medicaid benefits received after age 55
                  may be reimbursable to the State of New Jersey from the
                  enrollee's estate. The recovery may include premium payments
                  made on behalf of the beneficiary to the managed care
                  organization in which the beneficiary enrolls; and

         CCC.     Information on how to obtain continued services during a
                  transition, i.e., from the Medicaid FFS program to the
                  contractor's plan, from one MCO to another MCO, from the
                  contractor's plan to Medicaid FFS, when applicable.

5.8.3    ANNUAL INFORMATION TO ENROLLEES

         The contractor shall distribute an updated handbook which will include
         the information specified in Article 5.8.2 to each enrollee or
         enrollee's family unit and to all providers at least once every twelve
         (12) months.

5.8.4    NOTIFICATION OF CHANGES IN SERVICES

         The contractor shall revise and distribute the information specified in
         Article 5.8 at least thirty (30) calendar days prior to any changes
         that the contractor makes in services provided or in the locations at
         which services may be obtained, or other changes of a program nature or
         in administration, to each enrollee and all providers affected by that
         change.

5.8.5    ID CARD

         A.       Except as set forth in Section 5.9.1C. the contractor shall
                  deliver to each new enrollee prior to the effective enrollment
                  date but no later than seven (7) days after the enrollee's
                  effective date of enrollment a contractor Identification Card
                  for those enrollees who have selected a PCP. The
                  Identification Card shall have at least the following
                  information:

                  1.       Name of enrollee

                  2.       Issue Date for use in automated card replacement
                           process

                  3.       Primary Care Provider Name (may be affixed by
                           sticker)

                  4.       Primary Care Provider Phone Number (may be affixed by
                           sticker)

                  5.       What to do in case of an emergency and that no prior
                           authorization is required

                  6.       Relevant copayments/Personal Contributions to Care

                  7.       Contractor 800 number - emergency message

                  Any additional information shall be approved by DMAHS prior to
                  use on the ID card.

         B.       For children and individuals eligible solely through the NJ
                  FamilyCare Program, the identification card must clearly
                  indicate "NJ FamilyCare"; for children and individuals who are
                  participating in NJ FamilyCare Plans C [Reserved] , D, and H
                  the

                                                                          V - 19

<PAGE>

                  in this contract. The contractor shall make provision for
                  continuing all management and administrative services until
                  the transition of enrollees is completed and all other
                  requirements of this contract are satisfied. The contractor
                  shall be responsible for the following:

                  1.       Identification and transition of chronically ill,
                           high risk and hospitalized enrollees, and enrollees
                           in their last four weeks of pregnancy.

                  2.       Transfer of requested medical records.

5.10.2   DISENROLLMENT FROM THE CONTRACTOR'S PLAN AT THE ENROLLEE'S REQUEST

         A.       An individual enrolled in a contractor's plan may be subject
                  to the enrollment Lock-In period provided for in this Article.
                  The enrollment Lock-In provision does not apply to SSI and New
                  Jersey Care ABD individuals, clients of DDD or to individuals
                  eligible to participate through the Division of Youth and
                  Family Services.

                  1.       An enrollee subject to the enrollment Lock-In period
                           may initiate disenrollment or transfer for any reason
                           during the first ninety (90) days after the latter of
                           the date the individual is enrolled or the date they
                           receive notice of enrollment with a new contractor
                           and at least every twelve (12) months thereafter
                           without cause. NJ FamilyCare Plans B, C, [Reserved]
                           D, and H enrollees will be subject to a twelve
                           (12)-month Lock-In period.

                           a.       The period during which an individual has
                                    the right to disenroll from the contractor's
                                    plan without cause applies to an
                                    individual's initial period of enrollment
                                    with the contractor. If that individual
                                    chooses to re-enroll with the contractor,
                                    his/her initial date of enrollment with the
                                    contractor will apply.

                           b.       Upon automatic re-enrollment of an
                                    individual who is disenrolled solely because
                                    he or she loses Medicaid eligibility for a
                                    period of 2 months or less, if the temporary
                                    loss of Medicaid eligibility has caused the
                                    individual to miss the annual disenrollment
                                    opportunity.

                  2.       An enrollee subject to the Lock-In period may
                           initiate disenrollment for good cause at any time.

                           a.       Good cause reasons for disenrollment or
                                    transfer shall include, unless otherwise
                                    defined by DMAHS:

                                    i.       Failure of the contractor to
                                             provide services including physical
                                             access to the enrollee in
                                             accordance with the terms of this
                                             contract;

                                                                          V - 24

<PAGE>

                  through NJ FamilyCare Plans B, C, [Reserved] D (except for
                  individuals with a program status code of 380), and H do not
                  have the right to a Medicaid Fair Hearing.

         B.       Complaints. The contractor shall have procedures for
                  receiving, responding to, and documenting resolution of
                  enrollee complaints that are received orally and are of a less
                  serious or formal nature. Complaints that are resolved to the
                  enrollee's satisfaction within three (3) business days of
                  receipt do not require a formal written response or
                  notification. The contractor shall call back an enrollee
                  within twenty-four hours of the initial contact if the
                  contractor is unavailable for any reason or the matter cannot
                  be readily resolved during the initial contact. Any complaint
                  that is not resolved within three business days shall be
                  treated as a grievance/appeal, in accordance with requirements
                  defined in Article 5.15.3.

         C.       HBC Coordination. The contractor shall coordinate its efforts
                  with the health benefits coordinator including referring the
                  enrollee to the HBC for assistance as needed in the management
                  of the complaint/grievance/appeal procedures.

         D.       DMAHS Intervention. DMAHS shall have the right to intercede on
                  an enrollee's behalf at any time during the contractor's
                  complaint/grievance/appeal process whenever there is an
                  indication from the enrollee, or, where applicable, authorized
                  person, or the HBC that a serious quality of care issue is not
                  being addressed timely or appropriately. Additionally, the
                  enrollee may be accompanied by a representative of the
                  enrollee's choice to any proceedings and grievances/appeals.

         E.       Legal Rights. Nothing in this Article shall be construed as
                  removing any legal rights of enrollees under State or federal
                  law, including the right to file judicial actions to enforce
                  rights.

5.15.2   NOTIFICATION TO ENROLLEES OF GRIEVANCE/APPEAL PROCEDURE

         A.       The contractor shall provide all enrollees or, where
                  applicable, an authorized person, upon enrollment in the
                  contractor's plan, and annually thereafter, pursuant to this
                  contract, with a concise statement of the contractor's
                  grievance/appeal procedure and the enrollees' rights to a
                  hearing by the Independent Utilization Review Organization
                  (IURO) per NJAC 8:38-8.7 as well as their right to pursue the
                  Medicaid Fair Hearing process described in N.J.A.C. 10:49-10.1
                  et seq. The information shall be provided through an annual
                  mailing, a member handbook, or any other method approved by
                  DMAHS. The contractor shall prepare the information orally and
                  in writing in English, Spanish, and other bilingual
                  translations and a format accessible to the visually impaired,
                  such as Braille, large print, or audio tapes.

         B.       Written information to enrollees regarding the
                  grievance/appeal process shall include at a minimum:

                                                                          V - 36

<PAGE>

         B.       Response time. The contractor shall respond to after hours
                  telephone calls regarding medical care within the following
                  timeframes: fifteen (15) minutes for crisis situations;
                  forty-five (45) minutes for non-emergent, symptomatic issues;
                  same day for non-symptomatic concerns.

         C.       At no time shall providers wait more than five (5) minutes on
                  hold.

6.5      PROVIDER GRIEVANCES/APPEALS

         A.       Payment Disputes. The contractor shall establish and utilize a
                  procedure to resolve billing, payment, and other
                  administrative disputes between health care providers and the
                  contractor for any reason including, but not limited to: lost
                  or incomplete claim forms or electronic submissions; requests
                  for additional explanation as to services or treatment
                  rendered by a health care provider; inappropriate or
                  unapproved referrals initiated by the providers; or any other
                  reason for billing disputes. The procedure shall include an
                  appeal process and require direct communication between the
                  provider and the contractor and shall not require any action
                  by the enrollee.

         B.       Complaints, Grievances/Appeals. The contractor shall establish
                  and maintain provider complaint, grievance/appeal procedures
                  for any provider who is not satisfied with the contractor's
                  policies and procedures, or with a decision made by the
                  contractor, or disagrees with the contractor as to whether a
                  service, supply, or procedure is a covered benefit, is
                  medically necessary, or is performed in the appropriate
                  setting. The contractor procedure shall satisfy the following
                  minimum standards:

                  1.       The contractor shall have in place an informal
                           complaint process which network providers can use to
                           make verbal complaints, to ask questions,[Reserved]
                           and get problems resolved without going through the
                           formal, written grievance/appeal process.

                  2.       The contractor shall have in place a formal
                           grievance/appeal process which network providers and
                           non-participating providers can use to complain in
                           writing. The contractor shall issue a written
                           response to a grievance within 30 days. With respect
                           to appeals, the contractor shall also issue a written
                           response within 30 days.

                  3.       Such procedures shall not be applicable to any
                           disputes that may arise between the contractor and
                           any provider regarding the terms, conditions, or
                           termination or any other matter arising under
                           contract between the provider and contractor.

                                                                            VI-4

<PAGE>

8.5.4    SUPPLEMENTAL PAYMENT PER PREGNANCY OUTCOME

         Because costs for pregnancy outcomes were not included in the
         capitation rates, the contractor shall be paid supplemental payments
         for pregnancy outcomes for all eligibility categories.

         Payment for pregnancy outcome shall be a single, predetermined lump sum
         payment. This amount shall supplement the existing capitation rate
         paid. The Department will make a supplemental payment to contractors
         following pregnancy outcome. For purposes of this Article, pregnancy
         outcome shall mean each live birth, still birth or miscarriage
         occurring at the thirteenth (13th) or greater week of gestation. This
         supplemental payment shall reimburse the contractor for its inpatient
         hospital, antepartum, and postpartum costs incurred in connection with
         delivery. Costs for care of the baby for the first 60 days after the
         birth plus through the end of the month in which the 60th day falls are
         included (See Section 8.5.3). Regional payment shall be made by the
         State to the contractor based on submission of appropriate encounter
         data as specified by DMAHS.

8.5.5    PAYMENT FOR CERTAIN BLOOD CLOTTING FACTORS

         The contractor shall be paid separately for factor VIII and DC blood
         clotting factors. Payment will be made by DMAHS to the contractor based
         on: 1) submission of appropriate encounter data; and 2) notification
         from the contractor to DMAHS within 12 months of the date of service of
         identification of individuals with factor VIII or IX hemophilia.
         Payment for these products will be the lesser of: 1) Average Wholesale
         Price (AWP) minus 12.5% and 2) rates paid by the contractor.

8.5.6    PAYMENT FOR HIV/AIDS DRUGS

         The contractor shall be paid separately for protease inhibitors and
         other anti-retroviral agents (First Data Bank Specific Therapeutic
         Class Codes W5C, W5B, W5I, WSJ, W5K, W5L, W5M, W5N) for all eligibility
         groups. Payment for protease inhibitors shall be made by DMAHS to the
         contractor based on: 1) submission of appropriate encounter data; and
         2) notification from the contractor to DMAHS within 12 months of the
         date of service of identification of individuals with HIV/AIDS. Payment
         for these products will be the lesser of: 1) Average Wholesale Price
         (AWP) minus 12.5% and 2) rates paid by the contractor.

         Individuals eligible through NJ FamilyCare with a program status code
         of 380 and all children groups shall receive protease inhibitors and
         other anti-retroviral agents under the contractor's plan. All other
         individuals eligible through NJ FamilyCare with program status codes of
         497-498, 300-301, 700-701, [Reserved] and 763 shall receive protease
         inhibitors and other anti-retrovirals [Reserved] (First Data Bank
         Specific Therapeutic Class Codes W5C, W5B, W51, W5J, W5K, W5L, W5M and
         W5N) through Medicaid fee for service and/or the AIDS Drug Distribution
         Program (ADDP).

8.5.7    EPSDT INCENTIVE PAYMENT

                                                                          VIII-8

<PAGE>

         -        Compilation of case scores for each beneficiary for whom
                  requisite data are available and establishment of criteria to
                  assign case scores to those without claims and eligibility
                  data.

         -        Based on the monthly enrollment, calculation of an average
                  case mix for each participating contractor. This average case
                  mix is normalized and used in conjunction with the base
                  capitation rate to determine the actual reimbursement to the
                  contractor for the risk-adjusted population, contemporaneous
                  with the monthly remittance.

8.7      THIRD PARTY LIABILITY

         A.       General. The contractor, and by extension its providers and
                  subcontractors, hereby agree to:

                  1.       Utilize, within sixty (60) days of learning of such
                           sources, for claims cost avoidance purposes
                           [Reserved], other available public or private sources
                           of payment for services rendered to enrollees in the
                           contractor's plan. "Third party", for the purposes of
                           this Article, shall mean any person or entity who is
                           or may be liable to pay for the care and services
                           rendered to a Medicaid beneficiary (See N.J.S.A.
                           30:4D-3m). Examples of a third party include a
                           beneficiary's health insurer, casualty insurer, a
                           managed care organization, Medicare, or an employer
                           administered ERISA plan. Federal and State law
                           requires that Medicaid payments be last dollar
                           coverage and should be utilized only after all other
                           sources of third party liability (TPL) are exhausted,
                           subject to the exceptions in Section F below.

                  2.       Report such information to the State by no later than
                           the fifteenth (15th) day after the close of the month
                           during which the contractor learns of such
                           information using the TPL-1 form (Found in the
                           Appendix, Section A.8.1) hard copy or diskette using
                           standard software (i.e. Microsoft Excel or Access) or
                           a delimited text file.

         B.       Third Party Coverage Unknown. If coverage through health or
                  casualty insurance is not known or is unavailable at the time
                  the claim is filed, then the claim must be paid by the
                  contractor and postpayment recovery [Reserved] will be
                  initiated by the state.[Reserved]

         C.       Capitation Rates. The State will not take into account
                  historical and/or anticipated cost avoidance and recovery
                  due to the existence of liable third parties in setting
                  capitation rates. [Reserved] Additionally, [Reserved] these
                  factors do not include any reductions due to tort recoveries,
                  or to recoveries made by the State from the estates of
                  deceased Medicaid beneficiaries. [Reserved] The State
                  [Reserved] will initiate [Reserved] TPL recoveries, and retain
                  all monies derived therefrom For Claims not cost-avoided by
                  the contractor.

                                                                         VIII-10

<PAGE>

         D.       Categories. Third party resources are categorized as 1) health
                  insurance, 2) casualty insurance, 3) legal causes of action
                  for damages, and 4) estate recoveries.

                  1.       Health Insurance. The [Reserved] State shall pursue
                           and collect payments from health insurers when health
                           insurance coverage is available. [Reserved] "Health
                           insurance" shall include, but not be limited to,
                           coverage by any health care insurer, HMO, Medicare,
                           or an employer-administered ERISA plan. Funds so
                           collected shall be retained solely by the [Reserved]
                           State. [Reserved] The contractor shall cooperate with
                           the State in all Collection efforts, and shall also
                           direct its providers and subcontractors to do so.
                           State collections Resulting From Such Recovery
                           Actions Will Be Retained By The State.

                           a.       [Reserved]

                                    The contractor shall submit, on a one-time
                                    basis, an electronic file of all paid,
                                    pended, and denied claims for the previous
                                    two (2) years, including those of its
                                    subcontractors to the State, or its
                                    designee, by no later than the thirtieth
                                    (30th) day after the effective date of this
                                    amendment. Thereafter, the contractor shall
                                    submit, an electronic file of all paid,
                                    pended, and denied claims for the month,
                                    including those of its subcontractors, to
                                    the State, or its designee, by no later than
                                    the fifteenth (15th) day after the close of
                                    the month during which the contractor pays,
                                    pends, or denies the claims. If the
                                    contractor fails to provide the data, the
                                    contractor shall pay an assessment equal to
                                    one hundred percent (100%) of the cost of
                                    the services provided for which cost
                                    avoidance could have been effected.

                  2.       Casualty Insurance. The [Reserved] State shall pursue
                           and collect payment from casualty insurance available
                           to the enrollee. [Reserved] "Casualty insurance"
                           shall include, but not be limited to, no fault auto
                           insurance benefits, worker's compensation benefits,
                           and medical payments coverage through a homeowner's
                           insurance policy. Funds so collected shall be
                           retained solely by the [Reserved] State. [Reserved]
                           The contractor shall cooperate with

                                                                         VIII-11

<PAGE>

                           the state in all collection efforts, and shall also
                           direct its providers and subcontractors to do so.
                           State collections resulting from such recovery action
                           will be retained by the State.

                           a.       [Reserved]

                                    The contractor shall submit, on a one-time
                                    basis, an electronic file of all paid,
                                    pended, and denied claims for the previous
                                    two (2) years, including those of its
                                    subcontractors to the State, or its
                                    designee, by no later than the thirtieth
                                    (30th) day after the effective date of this
                                    amendment. Thereafter, the contractor shall
                                    submit, an electronic file of all paid,
                                    pended, and denied claims for the month,
                                    including those of its subcontractors, to
                                    the State, or its designee, by no later than
                                    the fifteenth (15th) day after the close of
                                    the month during which the contractor pays,
                                    pends, or denies the claims. If the
                                    contractor fails to provide the data, the
                                    contractor shall pay an assessment equal to
                                    one hundred percent (100%) of the cost of
                                    the services provided for which cost
                                    avoidance could have been effected.

                  3.       Legal Causes of Action for Damages. The State shall
                           have the sole and exclusive right to pursue and
                           collect payments made by the contractor when a legal
                           cause of action for damages is instituted on behalf
                           of a Medicaid enrollee against a third party or when
                           the State receives notice that legal counsel has been
                           retained by or on behalf of any enrollee. The
                           contractor shall cooperate with the State in all
                           collection efforts, and shall also direct its
                           providers to do so. State collections identified as
                           contract or related resulting from such legal actions
                           will be retained by the State.

                  4.       Estate Recoveries. The State shall have the sole and
                           exclusive right to pursue and recover correctly paid
                           benefits from the estate of a deceased Medicaid
                           enrollee in accordance with federal and State law.
                           Such recoveries will be retained by the State.

         E.       Cost Avoidance.

                  1.       When the contractor is aware of health or casualty
                           insurance coverage prior to paying for a health care
                           service, it shall avoid payment by rejecting a
                           provider's claim and directing that the claim be
                           submitted first to the appropriate third party, or by
                           directing its [Reserved] subcontractor to withhold
                           payments to a [Reserved] provider for the same
                           purpose.

                                                                         VIII-12

<PAGE>

                  2.       If insurance coverage is not available, or if one of
                           the exceptions to the cost avoidance rule discussed
                           below applies, then payment must be made and a claim
                           made against the third party, if it is determined
                           that the third party is or may be liable.

                  3.       If the contractor fails to cost avoid claims subject
                           to TPL according to the provisions of 8.7.E & 8.7.F
                           and time frames in 8.7.A or fails to notify the State
                           of TPL within the time frames stated in 8.7.A and the
                           State must recover the cost of the claim through its
                           TPL agent, the State shall levy the amount of the
                           collection fee assessed by the agent for such
                           recovery, in addition to the cost of the claim as
                           described in 8.7.D.

         F.       Exceptions to the Cost Avoidance Rule.

                  1.       In the following situations, the contractor must
                           first pay its providers and then coordinate with the
                           liable third party, unless prior approval to take
                           other action is obtained from the State.

                           a.       The coverage is derived from a parent whose
                                    obligation to pay support is being enforced
                                    by the Department of Human Services.

                           b.       The claim is for prenatal care for a
                                    pregnant woman or for preventive pediatric
                                    services (including EPSDT services) that are
                                    covered by the Medicaid program.

                           c.       The claim is for labor, delivery, and
                                    post-partum care and does not involve
                                    hospital costs associated with the inpatient
                                    hospital stay.

                           d.       The claim is for a child who is in a DYFS
                                    supported out of home placement.

                           e.       The claim involves coverage or services
                                    mentioned in 1.a, 1.b, 1.c, or 1.d, above
                                    in combination with another service.

                  2.       If the contractor knows that the third party will
                           neither pay for nor provide the covered service, and
                           the service is medically necessary, the contractor
                           shall neither deny payment for the service nor
                           require a written denial from the third party.

                  3.       If the contractor does not know whether a particular
                           service is covered by the third party, and the
                           service is medically necessary, the contractor shall
                           contact the third party and determine whether or not
                           such service is covered rather than requiring the
                           enrollee to do so. Further, the contractor shall
                           require the provider or subcontractor to bill the
                           third party if coverage is available.

                                                                         VIII-13

<PAGE>

                  4.       [RESERVED]

         G.       Sharing of TPL Information by the State.

                  1.       By the fifteenth (15th) day [Reserved] after the
                           close of the month during which the State learns of
                           such information, the State may provide the
                           contractor with a list of all known health insurance
                           coverage information for the purpose of updating the
                           contractor's files. This information will be in the
                           format of the State's TPL Resource File.

                  2.       Additionally, by the fifteenth (15th) day after the
                           close of the calendar quarter the State may provide a
                           [Reserved] copy of the State's health insurer file to
                           the contractor that will contain all of the health
                           insurers that the State has on file as of the close
                           of the previous calendar quarter and related
                           information that is needed in order to file TPL
                           claims.

         H.       Sharing of TPL Information by the Contractor.

                  1.       The contractor shall notify the State [Reserved] by
                           the fifteenth (15th) day after the close of the month
                           during which the contractor learns that an enrollee
                           has health insurance coverage not reflected in the
                           State's health insurance coverage file, or casualty
                           insurance coverage, or of any change in an enrollee's
                           health insurance coverage using the format of the
                           TPL-1 form, hard copy or diskette. (See Section A.8.1
                           of the Appendices.) The contractor shall impose a
                           corresponding requirement upon its subcontractors and
                           servicing providers to notify it of any newly
                           discovered coverage, or of any changes in an
                           enrollee's health insurance coverage.

                  2.       When the contractor becomes aware that an enrollee
                           has retained counsel, who either may institute or has
                           instituted a legal cause of action for damages
                           against a third party, the contractor shall notify
                           the State in writing, including the enrollee's name
                           and Medicaid identification number, date of
                           accident/incident, nature of injury, name and address
                           of enrollee's legal representative, copies of
                           pleadings, and any other documents related to the
                           action in the contractor's possession or control.

                                                                         VIII-14

<PAGE>

         G.       Payments to Providers. Payments shall not be made on behalf of
                  an enrollee to providers of health care services other than
                  the contractor for the benefits covered in Article Four and
                  rendered during the term of this contract.

         H.       Time Period for Capitation Payment per Enrollee. The monthly
                  capitation payment per enrollee is due to the contractor from
                  the effective date of an enrollee's enrollment until the
                  effective date of termination of enrollment or termination of
                  this contract, whichever occurs first.

         I.       Payment If Enrollment Begins after First Day of Month. When
                  DMAHS' capitation payment obligation is computed, if an
                  enrollee's coverage begins after the first day of a month,
                  DMAHS will pay the contractor a fractional capitation payment
                  that is proportionate to the part of the month during which
                  the contractor provides coverage. Payments are calculated and
                  made to the last day of a calendar month except as noted in
                  this Article.

         J.       Risk Assumption. The capitation rates shall not include any
                  amount for recoupment of any losses suffered by the contractor
                  for risks assumed under this contract or any prior contract
                  with the Department.

         K.       Hospitalizations. For any eligible person who applies for
                  participation in the contractor's plan, but who is
                  hospitalized prior to the time coverage under the plan becomes
                  effective, such coverage shall not commence until the date
                  after such person is discharged from the hospital and DMAHS
                  shall be liable for payment for the hospitalization, including
                  any charges for readmission within forty-eight (48) hours of
                  discharge for the same diagnosis. If an enrollee's
                  disenrollment or termination becomes effective during a
                  hospitalization, the contractor shall be liable for
                  hospitalization until the date such person is discharged from
                  the hospital, including any charges for readmission within
                  forty-eight (48) hours of discharge for the same diagnosis.
                  The contractor must notify DMAHS of these occurrences to
                  facilitate payment to appropriate providers.

         L.       Continuation of Benefits. The contractor shall continue
                  benefits for all enrollees for the duration of the contract
                  period for which capitation payments have been made, including
                  enrollees in an inpatient facility until discharge. The
                  contractor shall notify DMAHS of these occurrences.

         M.       Drug Carve-Out Report. The DMAHS will provide the contractor
                  with a monthly electronic file of paid drug claims data for
                  non-dually eligible, ABD enrollees.

8.9      CONTRACTOR ADVANCED PAYMENTS AND PIPS TO PROVIDERS

         A.       The contractor shall make advance payments to its providers,
                  capitation, FFS, or other financial reimbursement arrangement,
                  based on a provider's historical billing or utilization of
                  services if the contractor's claims processing systems

                                                                         VIII-18
<PAGE>
                               STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                          TORT - ACCIDENT REFERRAL FORM
                       PLEASE USE OTHER SIDE IF NECESSARY

HMO___________________ HMO#_______________________ PHONE________________________

                            PART A:   IDENTIFICATION

CLIENT'S NAME ______________________________ HSP#_______________________________

SOCIAL SECURITY # ______________________________________________________________

DATE OF ACCIDENT/INCIDENT ______________________________________________________

NATURE OF INJURY          ______________________________________________________

TYPE OF ACCIDENT          ______________________________________________________
                              (auto - fall - med. malpractice, etc.)

ATTORNEY FOR CLIENT       ______________________________________________________
(NAME-ADDRESS-PHONE)      ______________________________________________________
                          ______________________________________________________

 Please attach: (1) Any copies of pleadings or any other documents in your
 possession including subpoenas or request for medical information from an
 attorney, insurance company or client; (2) HMO claim/payment information from
 date of accident to present.

                          PART B:  SERVICES

<TABLE>
<CAPTION>
                                        DIAGNOSIS        PROCEDURE
    SERVICE           PROVIDER            CODE &          CODE &             PROVIDER           HMO
    DATE(S)             NAME             DESCRIP          DESCRIP            CHARGES          PAYMENT
    -------             ----             -------          -------            -------          -------
<S>               <C>               <C>               <C>               <C>               <C>
________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________  ________________
</TABLE>

                            ________________________________________
                         NAME OF PERSON COMPLETING FORM - DATE

                                                                            A-93

<PAGE>

                               STATE OF NEW JERSEY
                          DEPARTMENT OF HUMAN SERVICES
               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                              ESTATE REFERRAL FORM

HMO Notification of deceased Members Age 55 and Older   Quarter Ending__________

HMO__________________________________HMO ID#____________________________________

This will serve as notification that the following members of our health care
plan age 55 or older have died.

<TABLE>
<CAPTION>
  MEMBER NAME           DOB               SS#          DATE OF DEATH     MEDICAID ID#
<S>               <C>               <C>               <C>               <C>
________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________

________________  ________________  ________________  ________________  ________________
</TABLE>

                                                                           A-105
<PAGE>

                         COST-SHARING REQUIREMENTS FOR
                        NJ FAMILYCARE PLAN D AND PLAN H

COPAYMENTS FOR NJ FAMILYCARE - PLAN D AND PLAN H

Copayments will be required of parents/caretakers solely eligible through NJ
FamilyCare Plan D whose family income is between 151% and up to including 200%
of the federal poverty level. The same copayments will be required of children
solely eligible through NJ FamilyCare Plan D whose family income is between 201%
and up to and including 350% of the federal poverty level. Exception - Both
Eskimos and Native American Indians under the age of 19 are not required to pay
copayments.

The total family limit (regardless of family size) on all cost-sharing may not
exceed 5% of the annual family income.

Below is listed the services requiring copayments and the amount of each
copayment.

<TABLE>
<CAPTION>
               SERVICE                                             AMOUNT OF COPAYMENT
               -------                                             -------------------
<S>                                                   <C>
1.  Outpatient Hospital Clinic Visits,                $5 copayment for each outpatient clinic visit
    including Diagnostic Testing                      that is not for preventive services

2.  Hospital Outpatient Mental Health Visits          $25 copayment for each visit

3.  Outpatient Substance Abuse Services for           $5 copayment for each visit
    Detoxification

4.  Hospital Outpatient Emergency Services            $35 copayment; no copayment is required if
    Covered for Emergency Services only,              the member was referred to the Emergency
    including services provided in an outpatient      Room by his/her primary care provider for
    hospital department or an urgent care             services that should have been rendered in the
    facility. [Note: Triage and medical               primary care provider's office or if the
    screenings must be covered in all                 member is admitted into the hospital.
    situations.]

5.  Primary Care Provider Services provided           $5 copayment for each visit (except for well-child
    during normal office hours                        visits in accordance with the recommended schedule
                                                      of the American Academy of Pediatrics; lead
                                                      screening and treatment; age-appropriate
                                                      immunizations; prenatal care; or preventive dental
                                                      services). The $5 copayment shall only apply to
                                                      the first prenatal visit.
</TABLE>

<PAGE>

State of New Jersey                                                 Confidential

                                  Rate Exhibit
                     Medicaid Managed Care Capitation Rates

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
                   CATEGORY                                    AGE/SEX
---------------------------------------------------------------------------------
<S>                                                     <C>
AFDC/KidCare A/FamilyCare Children (PSC 380)            Newborn
AFDC/KidCare A/FamilyCare Children (PSC 380)            < 2 M&F (consolidated)
AFDC/KidCare A/FamilyCare Children (PSC 380)            2-20.99 M&F (consolidated)
----------------------------------------------------------------------------------
AFDC/KidCare A/NJCPW/FamilyCare Children (PSC 380)      21-44.99 Female
AFDC                                                    21-44.99 Male
AFDC/NJCPW                                              45+ M&F
----------------------------------------------------------------------------------
Aged with Medicare                                      All
Blind/Disabled with Medicare                            < 45 M&F (consolidated)
Blind/Disabled with Medicare                            45+ M&F
----------------------------------------------------------------------------------
Maternity                                               All
----------------------------------------------------------------------------------
ABD-DDD with Medicare                                   All (consolidated)
----------------------------------------------------------------------------------
ABD (including AIDS) without Medicare                   Newborn
ABD (including AIDS) without Medicare                   All (consolidated)
ABD-DDD without Medicare                                All (consolidated)
Non ABD-DDD (including Home Health Add-On)              All (consolidated)
----------------------------------------------------------------------------------
DYFS                                                    Newborn
DYFS                                                    < 2 M&F (consolidated)
DYFS                                                    Youth
----------------------------------------------------------------------------------
KidCare B&C                                             Newborn
KidCare B&C                                             < 2 M&F (consolidated)
KidCare B&C                                             Youth
----------------------------------------------------------------------------------
KidCare D                                               Newborn
KidCare D                                               < 2 M&F (consolidated)
KidCare D                                               Youth
----------------------------------------------------------------------------------
FamilyCare Adults 0-100%                                19-44 Female
FamilyCare Adults 0-100%                                19-44 Male
FamilyCare Adults 0-100%                                45+ M&F
----------------------------------------------------------------------------------
FamilyCare Parents 0-133% (PSC 380)                     21-44 Female
FamilyCare Parents 0-133% (PSC 380)                     21-44 Male
FamilyCare Parents 0-133% (PSC 380)                     45+ M&F
----------------------------------------------------------------------------------
FamilyCare Parents 134-200%                             19-44 Female
FamilyCare Parents 134-200%                             19-44 Male
FamilyCare Parents 134-200%                             45+ M&F
----------------------------------------------------------------------------------
AIDS-ABD with Medicare                                  All (consolidated)
AIDS-Non-ABD                                            All (consolidated)
AIDS-ABD with Medicare DDD (including Behavioral
  Health Add-On)                                        All (consolidated)
AIDS-Non-ABD DDD (including Behavioral Health Add-On)   All (consolidated)
----------------------------------------------------------------------------------
Add-On-Home Health-Non-ABD DDD                          All
Add-On-Behavioral Health-DDD w/ Medicare                All
Add-On-Behavioral Health-DDD w/o Medicare               All
----------------------------------------------------------------------------------
Newborn for zero month age last birthday (June 2003
  births)                                               All
Newborn for one month age last birthday (May and June
  2003 births)                                          All
----------------------------------------------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment                                            All
----------------------------------------------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
 (excluding FamilyCare Adult Populations)               All
----------------------------------------------------------------------------------
Projected Costs
----------------------------------------------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
----------------------------------------------------------------------------------

<CAPTION>
                                                                           SFY04 RATES
                                                            CONTRACT PERIOD: 09/01/2003 - 06/30/2004
-----------------------------------------------------     -------------------------------------------
                   CATEGORY                               NORTHERN   CENTRAL   SOUTHERN    STATEWIDE
-----------------------------------------------------     --------   -------   --------    ----------
<S>                                                      <C>       <C>        <C>        <C>
AFDC/KidCare A/FamilyCare Children (PSC 380)             $       - $        - $        -
AFDC/KidCare A/FamilyCare Children (PSC 380)             $  179.85 $   188.26 $   197.69
AFDC/KidCare A/FamilyCare Children (PSC 380)             $   92.02 $    87.43 $    94.46
-----------------------------------------------------    ----------------------------------------------
AFDC/KidCare A/NJCPW/FamilyCare Children (PSC 380)       $  160.84 $   166.81 $   171.87
AFDC                                                     $  149.57 $   142.06 $   154.62
AFDC/NJCPW                                               $  284.36 $   308.07 $   363.59
-----------------------------------------------------    ----------------------------------------------
Aged with Medicare                                       $  309.51 $   311.05 $   316.40
Blind/Disabled with Medicare                             $  292.53 $   310.75 $   288.54
Blind/Disabled with Medicare                             $  401.72 $   420.00 $   420.62
-----------------------------------------------------    ----------------------------------------------
Maternity                                                $9,856.86 $10,355.21 $10,349.92
-----------------------------------------------------    ----------------------------------------------
ABD-DDD with Medicare                                                                    $       273.34
-----------------------------------------------------    ----------------------------------------------
ABD (including AIDS) without Medicare                                                    $            -
ABD (including AIDS) without Medicare                                                    $       408.69
ABD-DDD without Medicare                                                                 $       465.79
Non ABD-DDD (including Home Health Add-On)                                               $       551.30
-----------------------------------------------------    ----------------------------------------------
DYFS                                                                                     $            -
DYFS                                                                                     $       452.41
DYFS                                                                                     $       122.45
-----------------------------------------------------    ----------------------------------------------
KidCare B&C                                                                              $            -
KidCare B&C                                                                              $       161.80
KidCare B&C                                                                              $        90.75
-----------------------------------------------------    ----------------------------------------------
KidCare D                                                                                $            -
KidCare D                                                                                $       178.63
KidCare D                                                                                $        76.71
-----------------------------------------------------    ----------------------------------------------
FamilyCare Adults 0-100%                                                                 $       256.66
FamilyCare Adults 0-100%                                                                 $       216.75
FamilyCare Adults 0-100%                                                                 $       411.37
-----------------------------------------------------    ----------------------------------------------
FamilyCare Parents 0-133% (PSC 380)                                                      $       152.56
FamilyCare Parents 0-133% (PSC 380)                                                      $       117.63
FamilyCare Parents 0-133% (PSC 380)                                                      $       262.36
-----------------------------------------------------    ----------------------------------------------
FamilyCare Parents 134-200%                                                              $       158.63
FamilyCare Parents 134-200%                                                              $       129.92
FamilyCare Parents 134-200%                                                              $       293.99
-----------------------------------------------------    ----------------------------------------------
AIDS-ABD with Medicare                                                                   $       975.23
AIDS-Non-ABD                                                                             $     1,521.23
AIDS-ABD with Medicare DDD (including Behavioral
  Health Add-On)                                                                         $     1,012.69
AIDS-Non-ABD DDD (including Behavioral Health Add-On)                                    $     1,596.59
-----------------------------------------------------    ----------------------------------------------
Add-On-Home Health-Non-ABD DDD                                                           $        85.51
Add-On-Behavioral Health-DDD w/ Medicare                                                 $        37.46
Add-On-Behavioral Health-DDD w/o Medicare                                                $        75.36
-----------------------------------------------------    ----------------------------------------------
Newborn for zero month age last birthday (June 2003
  births)                                                                                $       747.34
Newborn for one month age last birthday (May and June
  2003 births)                                                                           $       271.67
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
 (excluding FamilyCare Adult Populations)
-----------------------------------------------------    ----------------------------------------------
Projected Costs                                                                               SFY04
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment                                                                             $1,087,133,213
-----------------------------------------------------    ----------------------------------------------

<CAPTION>
                                                                           SFY03 RATES
                                                            CONTRACT PERIOD: 03/01/03 - 06/30/03
-----------------------------------------------------    ----------------------------------------------
                   CATEGORY                               NORTHERN   CENTRAL   SOUTHERN    STATEWIDE
-----------------------------------------------------    ---------   -------   --------    ------------
<S>                                                      <C>       <C>        <C>        <C>
AFDC/KidCare A/FamilyCare Children (PSC 380)             $       - $        - $        -
AFDC/KidCare A/FamilyCare Children (PSC 380)             $  247.98 $   273.29 $   265.31
AFDC/KidCare A/FamilyCare Children (PSC 380)             $   88.49 $    85.71 $    87.96
-----------------------------------------------------    ----------------------------------------------
AFDC/KidCare A/NJCPW/FamilyCare Children (PSC 380)       $  149.31 $   151.77 $   151.08
AFDC                                                     $  140.40 $   128.03 $   134.67
AFDC/NJCPW                                               $  274.24 $   292.82 $   331.32
-----------------------------------------------------    ----------------------------------------------
Aged with Medicare                                       $  315.26 $   314.88 $   330.45
Blind/Disabled with Medicare                             $  282.53 $   300.89 $   278.38
Blind/Disabled with Medicare                             $  399.59 $   418.57 $   426.63
-----------------------------------------------------    ----------------------------------------------
Maternity                                                $6,605.95 $ 6,919.48 $ 6,875.41
-----------------------------------------------------    ----------------------------------------------
ABD-DDD with Medicare                                                                    $       274.54
-----------------------------------------------------    ----------------------------------------------
ABD (including AIDS) without Medicare                                                    $            -
ABD (including AIDS) without Medicare                                                    $       592.75
ABD-DDD without Medicare                                                                 $       588.95
Non ABD-DDD (including Home Health Add-On)                                               $       671.77
-----------------------------------------------------    ----------------------------------------------
DYFS                                                                                     $            -
DYFS                                                                                     $       344.69
DYFS                                                                                     $       113.85
-----------------------------------------------------    ----------------------------------------------
KidCare B&C                                                                              $            -
KidCare B&C                                                                              $       158.93
KidCare B&C                                                                              $        78.25
-----------------------------------------------------    ----------------------------------------------
KidCare D                                                                                $            -
KidCare D                                                                                $       157.35
KidCare D                                                                                $        69.39
-----------------------------------------------------    ----------------------------------------------
FamilyCare Adults 0-100%                                                                 $       215.97
FamilyCare Adults 0-100%                                                                 $       181.07
FamilyCare Adults 0-100%                                                                 $       354.16
-----------------------------------------------------    ----------------------------------------------
FamilyCare Parents 0-133% (PSC 380)                                                      $       134.09
FamilyCare Parents 0-133% (PSC 380)                                                      $       101.64
FamilyCare Parents 0-133% (PSC 380)                                                      $       239.37
-----------------------------------------------------    ----------------------------------------------
FamilyCare Parents 134-200%                                                              $       140.11
FamilyCare Parents 134-200%                                                              $       114.73
FamilyCare Parents 134-200%                                                              $       266.36
-----------------------------------------------------    ----------------------------------------------
AIDS-ABD with Medicare                                                                   $       941.96
AIDS-Non-ABD                                                                             $     1,521.19
AIDS-ABD with Medicare DDD (including Behavioral
  Health Add-On)                                                                         $       978.05
AIDS-Non-ABD DDD (including Behavioral Health Add-On)                                    $     1,593.79
-----------------------------------------------------    ----------------------------------------------
Add-On-Home Health-Non-ABD DDD                                                           $        82.82
Add-On-Behavioral Health-DDD w/ Medicare                                                 $        38.09
Add-On-Behavioral Health-DDD w/o Medicare                                                $        72.61
-----------------------------------------------------    ----------------------------------------------
Newborn for zero month age last birthday (June 2003
  births)
Newborn for one month age last birthday (May and June
  2003 births)
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment
 (excluding FamilyCare Adult Populations)
-----------------------------------------------------    ----------------------------------------------
Projected Costs                                                                               SFY03
-----------------------------------------------------    ----------------------------------------------
Composite, All Categories, based on Projected SFY04
  enrollment                                                                             $1,089,972,232
-----------------------------------------------------    ----------------------------------------------
</TABLE>

NOTES
------

1.   Capitation rates for Adult and Children populations reflect Dental and
     Chiropractic services as Included benefits.

2.   Capitation rates for FamilyCare Adults, 0-100% FPL represent rates for
     September 2003 only. Effective October 1,2003, these populations will
     receive services under an Administrative Services Only (ASO) Arrangement.

Mercer Government Human Services Consulting      Page 2 of 2
<PAGE>

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                        AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that certain sections of the
contract shall be amended to be effective October 1, 2003, as follows:

<PAGE>

NJ FamilyCare Extension - October 1, 2003

1. ARTICLE 1, "DEFINITIONS" section - for the following definition:

   - NJ FamilyCare Plan H

shall be amended as reflected in the relevant pages of Article 1 attached hereto
and incorporated herein.

2. ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1 and 8.7(F)4 shall be
amended as reflected in Article 8, Sections 8.5.1 and 8.7(F)4 attached hereto
and incorporated herein.

3. APPENDIX, SECTION C, "CAPITATION RATES," shall be revised as reflected in SFY
2004 Capitation Rates attached hereto and incorporated herein.

<PAGE>

NJ FamilyCare Extension -October 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

   AMERIGROUP                           STATE OF NEW JERSEY

NEW JERSEY, INC.                    DEPARTMENT OF HUMAN SERVICES

BY: [ILLEGIBLE]                    BY: ___________________________
                                          MATTHEW D. D'ORIA

TITLE: President and CEO           TITLE: ACTING DIRECTOR, DMAHS

DATE: August 27, 2003              DATE: _________________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY:_____________________________

   DEPUTY ATTORNEY GENERAL

DATE: __________________________

<PAGE>

         NJ FAMILYCARE PLAN D--means the State-operated program which provides
         managed care coverage to uninsured:

         -        Parents/caretakers with children below the age of 19 who do
                  not qualify for AFDC Medicaid with family incomes up to and
                  including 200 percent of the federal poverty level; and

         -        Parents/caretakers with children below the age of 23 years and
                  children from the age of 19 through 22 years who are full time
                  students who do not qualify for AFDC Medicaid with family
                  incomes up to and including 250 percent of the federal poverty
                  level; and

         -        Children below the age of 19 with family incomes between 201
                  percent and up to and including 350 percent of the federal
                  poverty level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services with the exception of both
         Eskimos and Native American Indians under the age of 19 years. These
         groups are identified by Program Status Codes (PSCs) or Race Code on
         the eligibility system as indicated below. For clarity, the Program
         Status Codes or Race Code, in the case of Eskimos and Native American
         Indians under the age of 19 years, related to Plan D non-cost sharing
         groups are also listed.

<TABLE>
<CAPTION>
    PSC                     PSC                 Race Code
Cost Sharing           No Cost Sharing       No Cost Sharing
------------           ---------------       ---------------
<S>                    <C>                   <C>
    301                     300                    3
    493                     380
    494                     497
    495
    498
</TABLE>

         In addition to covered managed care services, eligibles under these
         programs may access certain services which are paid fee-for-service and
         not covered under this contract.

         NJ FAMILYCARE PLAN H--means the State-operated program which provides
         managed care [Reserved] coverage to uninsured:

         -        Adults and couples without dependent children under the age of
                  19 with family incomes up to and including 100 percent of the
                  federal poverty level;

         -        Adults and couples without dependent children under the age of
                  23 years, who do not qualify for AFDC Medicaid, with family
                  incomes up to and including 250 percent of the federal poverty
                  level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services. These groups are identified
         by the program status code (PSC) indicated below. For clarity, the
         program status codes related to Plan H non-cost sharing groups are also
         listed.

                                                                            I-19

<PAGE>

Rates for DYFS, NJ FamilyCare Plans B, C, D, and Plan H and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all
other premium groups are regional in each of the following regions:

         -        Region 1: Bergen, Hudson, Hunterdon, Morris, Passaic,
                  Somerset, Sussex, and Warren counties

         -        Region 2: Essex, Union, Middlesex, and Mercer counties

         -        Region 3: Atlantic, Burlington, Camden, Cape May, Cumberland,
                  Gloucester, Monmouth, Ocean, and Salem counties

        Contractors may contract for one or more regions but, except as provided
        in Article 2, may not contract for part of a region.

8.5.2   MAJOR PREMIUM GROUPS

        The following is a list of the major premium groups. The individual rate
        groups (e.g. children under 2 years, etc.) with their respective rates
        are presented in the rate tables in the appendix.

8.5.2.1 AFDC/TANF, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN

        This grouping includes capitation rates for Aid to Families with
        Dependent Children (AFDC)/Temporary Assistance for Needy Families
        (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare
        Plan A children (includes individuals under 21 in PSC 380), but excludes
        individuals who have AIDS or are clients of DDD.

8.5.2.2 NJ FAMILYCARE PLANS B & C

        This grouping includes capitation rates for NJ FamilyCare Plans B and C
        enrollees, excluding individuals with AIDS and/or DDD clients.

8.5.2.3 NJ FAMILYCARE PLAN D CHILDREN

        This grouping includes capitation rates for NJ FamilyCare Plan D
        children, excluding individuals with AIDS.

8.5.2.4 NJ FAMILYCARE PLAN D PARENTS/CARETAKERS

        This grouping includes capitation rates for NJ FamilyCare Plan D
        parents/caretakers, excluding individuals with AIDS, and include only
        enrollees 19 years of age or older.

                                                                          VIII-6

<PAGE>
                           b.       The claim is for prenatal care for a
                                    pregnant woman or for preventive pediatric
                                    services (including EPSDT services) that are
                                    covered by the Medicaid program.

                           c.       The claim is for labor, delivery, and
                                    post-partum care and does not involve
                                    hospital costs associated with the
                                    inpatient hospital stay.

                           d.       The claim is for a child who is in a DYFS
                                    supported out of home placement.

                           e.       The claim involves coverage or services
                                    mentioned in 1.a, 1.b, 1.c, or 1.d, above
                                    in combination with another service.

                  2.       If the contractor knows that the third party will
                           neither pay for nor provide the covered service, and
                           the service is medically necessary, the contractor
                           shall neither deny payment for the service nor
                           require a written denial from the third party.

                  3.       If the contractor does not know whether a particular
                           service is covered by the third party, and the
                           service is medically necessary, the contractor shall
                           contact the third party and determine whether or not
                           such service is covered rather than requiring the
                           enrollee to do so. Further, the contractor shall
                           require the provider or subcontractor to bill the
                           third party if coverage is available.

                  4.       In certain circumstances, and with the prior approval
                           of the DMAHS, the contractor shall retain the ability
                           to initiate TPL recovery actions against health
                           insurance, as defined in section 8.7.D.1. These
                           circumstances include, but are not limited to,
                           information system failures, claims settlements, and
                           appeal resolutions. In these cases, all recovered
                           funds shall be retained by the contractor; a summary
                           level of the recovery experience, net of any vendor
                           fees directly related to the specific recovery
                           activity, will be reported to the State on a
                           quarterly basis; and the recoveries will be reflected
                           in claims adjustments that are submitted to the State
                           with the monthly claims files, referenced in section
                           8.7.D.l.a. The State will take into account these net
                           recoveries in setting capitation rates and
                           determining the payment amounts.

         G.       Sharing of TPL Information by the State.

                  1.       By the fifteenth (15th) day after the close of the
                           month during which the State learns of such
                           information, the State may provide the contractor
                           with a list of all known health insurance coverage
                           information for the purpose of updating the
                           contractor's files. This information will be in the
                           format of the State's TPL Resource File.

                                                                         VIII-13

<PAGE>

STATE OF NEW JERSEY                                                 CONFIDENTIAL

         FAMILYCARE RATES FOR ADULTS 0-100% (INCLUDES APPLICABLE HANJ)
                      TERMS OF ELIGIBILITY - OCTOBER 2003

ONE MONTH EXTENSION

<TABLE>
<CAPTION>
        CATEGORY                 AGE/SEX
<S>                           <C>
FamilyCare Adults 0 - 100%    19 - 44 Female
FamilyCare Adults 0 - 100%    19 - 44 Male
FamilyCare Adults 0 - 100%    45 + M&F
</TABLE>

                   SFY04 RATES
CONTRACT PERIOD: OCTOBER 1, 2003 - OCTOBER 31, 2003

<TABLE>
<CAPTION>
NORTHERN    CENTRAL   SOUTHERN     STATEWIDE
<S>         <C>       <C>          <C>
                                   $ 258.35
                                   $ 218.16
                                   $ 414.02
</TABLE>

                   SFY03 RATES
CONTRACT PERIOD: MARCH 1, 2003 - JUNE 30, 2003

<TABLE>
<CAPTION>
NORTHERN     CENTRAL    SOUTHERN     STATEWIDE
<S>          <C>        <C>          <C>
                                     $ 215.97
                                     $ 181.07
                                     $ 354.16
</TABLE>

Mercer Government Human Services Consulting   Page 1 of 1

<PAGE>

                               STATE OF NEW JERSEY

                          DEPARTMENT OF HUMAN SERVICES

               DIVISION OF MEDICAL ASSISTANCE AND HEALTH SERVICES

                                       AND

                           AMERIGROUP NEW JERSEY, INC.

                        AGREEMENT TO PROVIDE HMO SERVICES

In accordance with Article 7, section 7.11.2A and 7.11.2B of the contract
between AMERIGROUP New Jersey, Inc. and the State of New Jersey, Department of
Human Services, Division of Medical Assistance and Health Services (DMAHS),
effective date October 1, 2000, all parties agree that the contract shall be
amended, effective November 1, 2003, as follows:

<PAGE>

Non MCSA-November 1, 2003

1.  ARTICLE 1, "DEFINITIONS" section - for the following definitions:

    -   Contractor;

    -   Managed Care Service Administrator (NEW);

    -   NJ FamilyCare Plan H;

    -   Non-Risk Contract (NEW);

    -   Restricted Alien (NEW)

    shall be amended as reflected in the relevant pages of Article 1 attached
    hereto and incorporated herein.

2.  ARTICLE 4, "PROVISION OF HEALTH CARE SERVICES," Sections 4.1.1(E); 4.1.7;
    4.2.4(6)7 and 4.2.4(C) shall be amended as reflected in Article 4, Sections
    4.1.1(E), 4.1.7, 4.2.4(6)7 and 4.2.4(C) attached hereto and incorporated
    herein.

3.  ARTICLE 5, "ENROLLEE SERVICES," Sections 5.2(A)8 and 5.2(A)9 shall be
    amended as reflected in Article 5, Sections 5.2(A)8 and 5.2(A)9 attached
    hereto and incorporated herein.

4.  ARTICLE 7, "TERMS AND CONDITIONS," Sections 7.13(A); 7.26(C) and 7.26(K)
    shall be amended as reflected in Article 7, Sections 7.13(A), 7.26(C) and
    7.26(K) attached hereto and incorporated herein.

5.  ARTICLE 8, "FINANCIAL PROVISIONS," Sections 8.5.1; 8.5.9; 8.8(N); 8.8(O);
    8.8(P) shall be amended as reflected in Sections 8.5.1; 8.5.9 (NEW); 8.8(N)
    (NEW); 8.8(O) (NEW); 8.8(P) (NEW) attached hereto and incorporated herein.

6.  APPENDIX, SECTION B, "PROVISION OF HEALTH CARE SERVICES," B.4.1, Plan H
    Covered Durable Medical Equipment (new) shall be amended as reflected in
    Section B, B.4.1 attached hereto and incorporated herein.

<PAGE>

Non MCSA-November 1, 2003

All other terms and conditions of the October 1, 2000 contract and subsequent
amendments remain unchanged except as noted above.

The contracting parties indicate their agreement by their signatures.

   AMERIGROUP                                   STATE OF NEW JERSEY

NEW JERSEY, INC.                            DEPARTMENT OF HUMAN SERVICES

BY: NORINE                                  BY: ________________________
                                                   MATTHEW D. D'ORIA

TITLE: President and CEO                    TITLE: ACTING DIRECTOR, DMAHS

DATE: September 3, 2003                     DATE: _____________________

APPROVED AS TO FORM ONLY

ATTORNEY GENERAL

STATE OF NEW JERSEY

BY: ____________________________

    DEPUTY ATTORNEY GENERAL

DATE: _________________________

<PAGE>

         with the contractor. Marketing by an employee of the contractor is
         considered direct; marketing by an agent is considered indirect.

         COMMISSIONER--the Commissioner of the New Jersey Department of Human
         Services or a duly authorized representative.

         COMPLAINT--a protest by an enrollee as to the conduct by the contractor
         or any agent of the contractor, or an act or failure to act by the
         contractor or any agent of the contractor, or any other matter in which
         an enrollee feels aggrieved by the contractor, that is communicated to
         the contractor and that could be resolved by the contractor within
         three (3) business days.

         COMPLAINT RESOLUTION--completed actions taken to fully settle a
         complaint to the DMAHS' satisfaction.

         COMPREHENSIVE RISK CONTRACT--a risk contract that covers comprehensive
         services, that is, inpatient hospital services and any of the following
         services, or any three or more of the following services:

         1. Outpatient hospital services.

         2. Rural health clinic services.

         3. FQHC services.

         4. Other laboratory and X-ray services.

         5. Nursing facility (NF) services.

         6. Early and periodic screening, diagnosis and treatment (EPSDT)
            services.

         7. Family planning services.

         8. Physician services.

         9. Home health services.

         CONDITION--a disease, illness, injury, disorder, or biological or
         psychological condition or status for which treatment is indicated.

         CONTESTED CLAIM--a claim that is denied because the claim is an
         ineligible claim, the claim submission is incomplete, the coding or
         other required information to be submitted is incorrect, the amount
         claimed is in dispute, or the claim requires special treatment.

         CONTINUITY OF CARE--the plan of care for a particular enrollee that
         should assure progress without unreasonable interruption.

         CONTRACT--the written agreement between the State and the contractor,
         and comprises the contract, any addenda, appendices, attachments, or
         amendments thereto.

         CONTRACTING OFFICER--the individual empowered to act and respond for
         the State throughout the life of any contract entered into with the
         State.

         CONTRACTOR--the Health Maintenance Organization with a valid
         Certificate of Authority in New Jersey that contracts hereunder with
         the State for the provision of comprehensive health care services to
         enrollees on a prepaid, capitated basis, or for the provision of

                                                                             I-5

<PAGE>

         administrative services for a specified benefits package to specified
         enrollees on a non-risk, reimbursement basis.

         CONTRACTOR'S PLAN--all services and responsibilities undertaken by the
         contractor pursuant to this contract.

         CONTRACTOR'S REPRESENTATIVE--the individual legally empowered to bind
         the contractor, using his/her signature block, including his/her title.
         This individual will be considered the Contractor's Representative
         during the life of any contract entered into with the State unless
         amended in writing pursuant to Article 7.

         COPAYMENT--the part of the cost-sharing requirement for NJ FamilyCare
         Plan D and H enrollees in which a fixed monetary amount is paid for
         certain services/items received from the contractor's providers.

         COST AVOIDANCE--a method of paying claims in which the provider is not
         reimbursed until the provider has demonstrated that all available
         health insurance has been exhausted.

         COST NEUTRAL--the mechanism used to smooth data, share risk, or adjust
         for risk that will recognize both higher and lower expected costs and
         is not intended to create a net aggregate gain or loss across all
         payments.

         COVERED SERVICES--see "BENEFITS PACKAGE"

         CREDENTIALING--the contractor's determination as to the qualifications
         and ascribed privileges of a specific provider to render specific
         health care services.

         CULTURAL COMPETENCY--a set of interpersonal skills that allow
         individuals to increase their understanding, appreciation, acceptance
         of and respect for cultural differences and similarities within, among
         and between groups and the sensitivity to how these differences
         influence relationships with enrollees. This requires a willingness and
         ability to draw on community-based values, traditions and customs, to
         devise strategies to better meet culturally diverse enrollee needs, and
         to work with knowledgeable persons of and from the community in
         developing focused interactions, communications, and other supports.

         CWA OR COUNTY WELFARE AGENCY ALSO KNOWN AS COUNTY BOARD OF SOCIAL
         SERVICES--the agency within the county government that makes
         determination of eligibility for Medicaid and financial assistance
         programs.

         DAYS--calendar days unless otherwise specified.

         DBI--the New Jersey Department of Banking and Insurance in the
         executive branch of New Jersey State government.

         DEFAULT--see "AUTOMATIC ASSIGNMENT"

                                                                             I-6

<PAGE>

         IPN OR INDEPENDENT PRACTITIONER NETWORK--one type of HMO operation
         where member services are normally provided in the individual offices
         of the contracting physicians.

         LIMITED-ENGLISH-PROFICIENT POPULATIONS--individuals with a primary
         language other than English who must communicate in that language if
         the individual is to have an equal opportunity to participate
         effectively in and benefit from any aid, service or benefit provided by
         the health provider.

         MAINTENANCE SERVICES--include physical services provided to allow
         people to maintain their current level of functioning. Does not include
         habilitative and rehabilitative services.

         MANAGED CARE--a comprehensive approach to the provision of health care
         which combines clinical preventive, restorative, and emergency services
         and administrative procedures within an integrated, coordinated system
         to provide timely access to primary care and other medically necessary
         health care services in a cost effective manner.

         MANAGED CARE ENTITY--a managed care organization described in Section
         1903(m)(l)(A) of the Social Security Act, including Health Maintenance
         Organizations (HMOs), organizations with Section 1876 or
         Medicare+Choice contracts, provider sponsored organizations, or any
         other public or private organization meeting the requirements of
         Section 1902(w) of the Social Security Act, which has a risk
         comprehensive contract and meets the other requirements of that
         Section.

         MANAGED CARE ORGANIZATION (MCO)-- an entity that has, or is seeking to
         qualify for, a comprehensive risk contract, and that is-

         1.       A Federally qualified HMO that meets the advance directives
                  requirements of 42 CFR 489 subpart I; or

         2.       Any public or private entity that meets the advance directives
                  requirements and is determined to also meet the following
                  conditions:

                  (i)      Makes the services it provides to its Medicaid
                           enrollees as accessible (in terms of timeliness,
                           amount, duration, and scope) as those services are to
                           other Medicaid recipients within the area served by
                           the entity; and

                  (ii)     Meets the solvency standards of 42 CFR 438.116.

         Managed Care Service Administrator (MCSA) -- an entity in a non-risk
         based financial arrangement that contracts to provide a designated set
         of services for an administrative fee. Services provided may include,
         but are not limited to: medical management, claims processing, provider
         network maintenance.

         MANDATORY--the requirement that certain DMAHS beneficiaries, delineated
         in Article 5, must select, or be assigned to a contractor in order to
         receive Medicaid services.

                                                                            I-14

<PAGE>

         NJ FAMILYCARE PLAN D--means the State-operated program which provides
         managed care coverage to uninsured:

         -        Parents/caretakers with children below the age of 19 who do
                  not qualify for AFDC Medicaid with family incomes up to and
                  including 200 percent of the federal poverty level; and

         -        Parents/caretakers with children below the age of 23 years and
                  children from the age of 19 through 22 years who are full time
                  students who do not qualify for AFDC Medicaid with family
                  incomes up to and including 250 percent of the federal poverty
                  level; and

         -        Children below the age of 19 with family incomes between 201
                  percent and up to and including 350 percent of the federal
                  poverty level.

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services with the exception of both
         Eskimos and Native American Indians under the age of 19 years. These
         groups are identified by Program Status Codes (PSCs) or Race Code on
         the eligibility system as indicated below. For clarity, the Program
         Status Codes or Race Code, in the case of Eskimos and Native American
         Indians under the age of 19 years, related to Plan D non-cost sharing
         groups are also listed.

<TABLE>
<CAPTION>
    PSC                     PSC              Race Code
Cost Sharing           No Cost Sharing    No Cost Sharing
------------           ---------------    ---------------
<S>                    <C>                <C>
   301                      300                 3
   493                      380
   494                      497
   495
   498
</TABLE>

         In addition to covered managed care services, eligibles under these
         programs may access certain services which are paid fee-for-service and
         not covered under this contract.

         NJ FAMILYCARE PLAN H--means the State-operated program which provides
         managed care administrative services coverage to uninsured:

         -        Adults and couples without dependent children under the age of
                  19 with family incomes up to and including 100 percent of the
                  federal poverty level;

         -        Adults and couples without dependent children under the age of
                  23 years, who do not qualify for AFDC Medicaid, with family
                  incomes up to and including 250 percent of the federal poverty
                  level.

         -        Restricted alien parents not including pregnant women.

         Plan H eligibles will be identified by a capitation code. Capitation
         codes drive the service package. The Program Status Code drives the
         cost-sharing requirements.

         Any of the Program Status Codes listed below can include restricted
         alien parents. Therefore, it is necessary to rely on the capitation
         code to identify Plan H eligibles.

                                                                            I-19

<PAGE>

         Eligibles with incomes above 150 percent of the federal poverty level
         are required to participate in cost sharing in the form of monthly
         premiums and copayments for most services. These groups are identified
         by the program status code (PSC) indicated below. For clarity, the
         program status codes related to Plan H non-cost sharing groups are also
         listed.

<TABLE>
<CAPTION>
    PSC                                         PSC
Cost Sharing                              No Cost Sharing
------------                              ---------------
<S>                                 <C>
498 (w/corresponding                380, 310, 320, 330, 410, 420,
   cap code)                             430, 470, 497 (with
     701                              corresponding cap codes)
                                              700
                                              763
</TABLE>

         NJ FAMILYCARE PLAN I - means the State-operated program that provides
         certain benefits on a fee-for-service basis through the DMAHS for Plan
         D parents/caretakers with a program status code of 380.

         N.J.S.A. -- New Jersey Statutes Annotated.

         NON-COVERED CONTRACTOR SERVICES--services that are not covered in the
         contractor's benefits package included under the terms of this
         contract.

         NON-COVERED MEDICAID SERVICES--all services that are not covered by the
         New Jersey Medicaid State Plan.

         NON-PARTICIPATING PROVIDER--a provider of service that does not have a
         contract with the contractor.

         NON-RISK CONTRACT - a contract under which the contractor 1) is not at
         financial risk for changes in utilization or for costs incurred under
         the contract; and 2) may be reimbursed by the State on the basis of the
         incurred costs.

         OIT--the New Jersey Office of Information Technology.

         OTHER HEALTH COVERAGE--private non-Medicaid individual or group
         health/dental insurance. It may be referred to as Third Party Liability
         (TPL) or includes Medicare.

         OUT OF AREA SERVICES--all services covered under the contractor's
         benefits package included under the terms of the Medicaid contract
         which are provided to enrollees outside the defined basic service area.

         OUTCOMES--the results of the health care process, involving either the
         enrollee or provider of care, and may be measured at any specified
         point in time. Outcomes can be medical, dental, behavioral, economic,
         or societal in nature.

                                                                            I-20

<PAGE>

         REFERRAL SERVICES--those health care services provided by a health
         professional other than the primary care practitioner and which are
         ordered and approved by the primary care practitioner or the
         contractor.

                  Exception A: An enrollee shall not be required to obtain a
                  referral or be otherwise restricted in the choice of the
                  family planning provider from whom the enrollee may receive
                  family planning services.

                  Exception B: An enrollee may access services at a Federally
                  Qualified Health Center (FQHC) in a specific enrollment area
                  without the need for a referral when neither the contractor
                  nor any other contractor has a contract with the Federally
                  Qualified Health Center in that enrollment area and the cost
                  of such services will be paid by the Medicaid fee-for-service
                  program.

         REINSURANCE--an agreement whereby the reinsurer, for a consideration,
         agrees to indemnify the contractor, or other provider, against all or
         part of the loss which the latter may sustain under the enrollee
         contracts which it has issued.

         RESTRICTED ALIEN--An individual who would qualify for Medicaid or NJ
         FamilyCare, but for immigration status.

         RISK CONTRACT--a contract under which the contractor assumes risk for
         the cost of the services covered under the contract, and may incur a
         loss if the cost of providing services exceeds the payments made by the
         Department to the contractor for services covered under the contract.

         RISK POOL - an account(s) funded with revenue from which medical claims
         of risk pool members are paid. If the claims paid exceed the revenues
         funded to the account, the participating providers shall fund part or
         all of the shortfall. If the funding exceeds paid claims, part or all
         of the excess is distributed to the participating providers.

         RISK THRESHOLD--the maximum liability, if the liability is based on
         referral services, to which a physician or physician group may be
         exposed under a physician incentive plan without being at substantial
         financial risk.

         ROUTINE CARE--treatment of a condition which would have no adverse
         effects if not treated within 24 hours or could be treated in a less
         acute setting (e.g., physician's office) or by the patient.

         SAFETY-NET PROVIDERS OR ESSENTIAL COMMUNITY PROVIDERS--public-funded or
         government-sponsored clinics and health centers which provide
         specialty/specialized services which serve any individual in need of
         health care whether or not covered by health insurance and may include
         medical/dental education institutions, hospital-based programs,
         clinics, and health centers.

         SAP--Statutory Accounting Principles.

                                                                            I-24

<PAGE>

                  the individual will be disenrolled. This does not apply to
                  situations when the enrollee is out of State for care
                  provided/authorized by the contractor, for example, prolonged
                  hospital care for transplants. For full time students
                  attending school and residing out of the country, the
                  contractor shall not be responsible for health care benefits
                  while the individual is in school.

         E.       Existing Plans of Care. The contractor shall honor and pay for
                  plans of care for new enrollees, including prescriptions,
                  durable medical equipment, medical supplies, prosthetic and
                  orthotic appliances, and any other on-going services initiated
                  prior to enrollment with the contractor. Services shall be
                  continued until the enrollee is evaluated by his/her primary
                  care physician and a new plan of care is established with the
                  contractor.

                  The contractor shall use its best efforts to contact the new
                  enrollee or, where applicable, authorized person and/or
                  contractor care manager. However, if after documented,
                  reasonable outreach (i.e., mailers, certified mail, use of
                  MEDM system provided by the State, contact with the Medical
                  Assistance Customer Center. (MACC), DDD, or DYFS to confirm
                  addresses and/or to request assistance in locating the
                  enrollee) the enrollee fails to respond within 20 working
                  days of certified mail, the contractor may cease paying for
                  the pre-existing service until the enrollee or, where
                  applicable, authorized person, contacts the contractor for
                  re-evaluation.

                  For MCSA enrollees, the contractor shall case manage these
                  services (Not applicable to non-MCSA contractor).

         F.       Routine Physicals. The contractor shall provide for routine
                  physical examinations required for employment, school, camp or
                  other entities/programs that require such examinations as a
                  condition of employment or participation.

         G.       Non-Participating Providers.

                  1.       The contractor shall pay for services furnished by
                           non-participating providers to whom an enrollee was
                           referred, even if erroneously referred, by his/her
                           PCP or network specialist. Under no circumstances
                           shall the enrollee bear the cost of such services
                           when referral errors by the contractor or its
                           providers occur. It is the sole responsibility of the
                           contractor to provide regular updates on complete
                           network information to all its providers as well as
                           appropriate policies and procedures for provider
                           referrals.

                  2.       The contractor may pay an out-of-network hospital
                           provider, located outside the State of New Jersey,
                           the New Jersey Medicaid fee-for-service rate for the
                           applicable services rendered.

                                                                            IV-2

<PAGE>

                  3.       DME

                  4.       Hearing aids

                  5.       Medical supplies

                  6.       Orthotics

                  7.       TMJ treatment

4.1.7    BENEFIT PACKAGE FOR NJ FAMILYCARE PLAN H (Section 4.1.7 Not applicable
         to non-MCSA contractor).

         A.       Services Included In The Contractor's Benefits Package for NJ
                  FamilyCare Plan H. The following services shall be provided
                  and case managed by the contractor:

                   1.      Primary Care

                           a.       All physicians services, primary and
                                    specialty

                           b.       In accordance with state
                                    certification/licensure requirements,
                                    standards, and practices, primary care
                                    providers shall also include access to
                                    certified nurse midwives - non-maternity,
                                    certified nurse practitioners, clinical
                                    nurse specialists, and physician assistants

                           c.       Services rendered at independent clinics
                                    that provide ambulatory services

                           d.       Federally Qualified Health Center primary
                                    care services

                  2.       Emergency room services

                  3.       Home Health Care Services -- Limited to skilled
                           nursing for a home bound beneficiary which is
                           provided or supervised by a registered nurse, and
                           home health aide when the purpose of the treatment is
                           skilled care; and medical social services which are
                           necessary for the treatment of the beneficiary's
                           medical condition.

                  4.       Inpatient Hospital Services, including general
                           hospitals, special hospitals, and rehabilitation
                           hospitals. The contractor shall not be responsible
                           when the primary admitting diagnosis is mental health
                           or substance abuse related.

                  5.       Outpatient Hospital Services, including outpatient
                           surgery

                  6.       Laboratory Services -- All laboratory testing sites
                           providing services under this contract must have
                           either a Clinical Laboratory Improvement Act (CLIA)
                           certificate of waiver or a certificate of

                                                                           IV-15
<PAGE>

                           registration along with a CLIA identification number.
                           Those providers with certificates of waiver shall
                           provide only the types of tests permitted under the
                           terms of their waiver. Laboratories with certificates
                           of registration may perform a full range of
                           laboratory services.

                  7.       Radiology Services -- Diagnostic and therapeutic

                  8.       Prescription drugs, excluding over-the-counter drugs
                           Exception: See Article 8 regarding Protease
                           Inhibitors and other antiretrovirals.

                  9.       Transportation Services -- Limited to ambulance for
                           medical emergency only

                  10.      Diabetic supplies and equipment

                  11.      DME-limited benefit, only covered when medically
                           necessary part of inpatient hospital discharge plan -
                           (see Appendix, Section B.4.1 for list of covered
                           items)

         B.       Services Available To NJ FamilyCare Plan H Under
                  Fee-For-Service. The following services are available to NJ
                  FamilyCare Plan H enrollees under fee-for-service:

                  1.       Outpatient mental health services, limited to 60 days
                           per calendar year.

                  2.       Abortion services

         C.       Exclusions. The following services not covered for NJ
                  FamilyCare Plan H participants either by the contractor or the
                  Department include, but are not limited to:

                  1.       Non-medically necessary services.

                  2.       Intermediate Care Facilities/Mental Retardation

                  3.       Private duty nursing

                  4.       Personal Care Assistant Services

                  5.       Medical Day Care Services

                  6.       Chiropractic Services

                  7.       Dental services

                  8.       Orthotic devices

                  9.       Targeted Case Management for the chronically ill

                  10.      Residential treatment center psychiatric programs

                  11.      Religious non-medical institutions care and services

                                                                           IV-16

<PAGE>

                  12.      Durable Medical Equipment - excludes any equipment
                           not listed in Appendix, Section B.4.1 and not covered
                           if not part of inpatient hospital discharge plan

                  13.      Early and Periodic Screening, Diagnosis and Treatment
                           (EPSDT) services (except for well child care,
                           including immunizations and lead screening and
                           treatments)

                  14.      Transportation Services, including non-emergency
                           ambulance, invalid coach, and lower mode
                           transportation

                  15.      Hearing Aid Services

                  16.      Blood and Blood Plasma, except administration of
                           blood, processing of blood, processing fees and fees
                           related to autologous blood donations are covered.

                  17.      Cosmetic Services

                  18.      Custodial Care

                  19.      Special Remedial and Educational Services

                  20.      Experimental and Investigational Services

                  21.      Medical Supplies (except diabetic supplies)

                  22.      Infertility Services

                  23.      Rehabilitative Services for Substance Abuse

                  24.      Weight reduction programs or dietary supplements,
                           except operations, procedures or treatment of obesity
                           when approved by the contractor

                  25.      Acupuncture and acupuncture therapy, except when
                           performed as a form of anesthesia in connection with
                           covered surgery

                  26.      Temporomandibular joint disorder treatment, including
                           treatment performed by prosthesis placed directly in
                           the teeth

                  27.      Recreational therapy

                  28.      Sleep therapy

                  29.      Court-ordered services

                  30.      Thermograms and thermography

                  31.      Biofeedback

                  32.      Radial keratotomy

                  33.      Respite Care

                  34.      Inpatient hospital services for mental health

                  35.      Inpatient and outpatient services for substance abuse

                  36.      Partial hospitalization

                                                                           IV-17

<PAGE>

                  37.      Skilled nursing facility services

                  38.      Family Planning Services

                  39.      Hospice Services

                  40.      Optometrist Services

                  41.      Optical Appliances

                  42.      Organ Transplant Services

                  43.      Podiatrist Services

                  44.      Prosthetic Appliances

                  45.      Outpatient Rehabilitation Services

                  46.      Maternity and related newborn care

4.1.8    SUPPLEMENTAL BENEFITS

         Any service, activity or product not covered under the State Plan may
         be provided by the contractor only through written approval by the
         Department and the cost of which shall be borne solely by the
         contractor.

4.1.9    CONTRACTOR AND DMAHS SERVICE EXCLUSIONS

         Neither the contractor nor DMAHS shall be responsible for the
         following:

         A.       All services not medically necessary, provided, approved or
                  arranged by a contractor's physician or other provider (within
                  his/her scope of practice) except emergency services.

         B.       Cosmetic surgery except when medically necessary and approved.

         C.       Experimental organ transplants.

         D.       Services provided primarily for the diagnosis and treatment of
                  infertility, including sterilization reversals, and related
                  office (medical or clinic), drugs, laboratory services,
                  radiological and diagnostic services and surgical procedures.

         E.       Respite Care

         F.       Rest cures, personal comfort and convenience items, services
                  and supplies not directly related to the care of the patient,
                  including but not limited to, guest meals and accommodations,
                  telephone charges, travel expenses other than those services
                  not in Article 4.1 of this contract, take home supplies and
                  similar cost. Costs incurred by an accompanying parent(s) for
                  an out-of-state medical intervention are covered under EPSDT
                  by the contractor.

         G.       Services involving the use of equipment in facilities, the
                  purchase, rental or construction of which has not been
                  approved by applicable laws of the State of New Jersey and
                  regulations issued pursuant thereto.

                                                                           IV-18

<PAGE>

                           c.       It is strongly encouraged that the
                                    contractor publish the formulary on its
                                    internet website.

                  7.       If the formulary includes generic equivalents, the
                           contractor shall provide for a brand name exception
                           process for prescribers to use when medically
                           necessary. For MCSA enrollees, the contractor should
                           implement a mandatory generic drug substitution
                           program consistent with medicaid program requirements
                           (not applicable to non-mcsa contractor).

                  8.       The contractor shall establish and maintain a
                           procedure, approved by DMAHS, for internal review and
                           resolution of complaints, such as timely access and
                           coverage issues, drug utilization review, and claim
                           management based on standards of drug utilization
                           review.

         C.       Pharmacy Lock-In Program. The contractor may implement for MCO
                  enrollees and must implement for MCSA enrollees (not
                  applicable to non-MCSA contractor) a pharmacy lock-in program
                  including policies, procedures and criteria for establishing
                  the need for the lock-in which must be prior approved by DMAHS
                  and must include the following components to the program:

                  1.       Enrollees shall be notified prior to the lock-in and
                           must be permitted to choose or change pharmacies for
                           good cause.

                  2.       A seventy-two (72)-hour emergency supply of
                           medication at pharmacies other than the designated
                           lock-in pharmacy shall be permitted to assure the
                           provision of necessary medication required in an
                           interim/urgent basis when the assigned pharmacy does
                           not immediately have the medication.

                  3.       Care management and education reinforcement of
                           appropriate medication/pharmacy use shall be
                           provided. A plan for an education program for
                           enrollees shall be developed and submitted for review
                           and approval.

                  4.       The continued need for lock-in shall be periodically
                           (at least every two years) evaluated by the
                           contractor for each enrollee in the program.

                  5.       Prescriptions from all participating prescribers
                           shall be honored and may not be required to be
                           written by the PCP only.

                  6.       The contractor shall fill medications prescribed by
                           mental health/substance abuse providers, subject to
                           the limitations described in Article 4.4C.

                  7.       The contractor shall submit quarterly reports on
                           Pharmacy Lock-in participants. See Section A.7.17 of
                           the Appendices (Table 15).

                                                                           IV-27

<PAGE>

5.2      AID CATEGORIES ELIGIBLE FOR CONTRACTOR ENROLLMENT

         A.       Except as specified in Article 5.3, all persons who are not
                  institutionalized, belong to one of the following eligibility
                  categories, and reside in any of the enrollment areas, as
                  identified in Article 5.1, are in mandatory aid categories and
                  shall be eligible for enrollment in the contractor's plan in
                  the manner prescribed by this contract.

                  1.       Aid to Families with Dependent Children
                           (AFDC)/Temporary Assistance for Needy Families
                           (TANF);

                  2.       AFDC/TANF-Related, New Jersey Care...Special Medicaid
                           Program for Pregnant Women and Children;

                  3.       SSI-Aged, Blind, Disabled, and Essential Spouses;

                  4.       New Jersey Care...Special Medicaid programs for Aged,
                           Blind, and Disabled;

                  5.       Division of Developmental Disabilities Clients
                           including the Division of Developmental Disabilities
                           Community Care Waiver;

                  6.       Medicaid only or SSI-related Aged, Blind, and
                           Disabled;

                  7.       Uninsured parents/caretakers and children who are
                           covered under NJ FamilyCare;

                  8.       Uninsured adults and couples without dependent
                           children under the age of 23 who are covered under NJ
                           FamilyCare (Not applicable to non-MCSA contractor).

                  9.       Restricted alien parents, excluding pregnant women
                           (Not applicable to non-MCSA contractor).

         B.       The contractor shall enroll the entire Medicaid case, i.e.,
                  all individuals included under the ten digit Medicaid
                  identification number.

         C.       DYFS. Individuals who are eligible through the Division of
                  Youth and Family Services may enroll voluntarily. All
                  individuals eligible through DYFS shall be considered a unique
                  Medicaid case and shall be issued an individual 12 digit
                  Medicaid identification number, and may be enrolled in his/her
                  own contractor.

         D.       The contractor shall be responsible for keeping its network of
                  providers informed of the enrollment status of each enrollee.

         E.       Dual eligibles (Medicaid-Medicare) may voluntarily enroll.

5.3      EXCLUSIONS AND EXEMPTIONS

         Persons who belong to one of the eligible populations (defined in 5.2A)
         shall not be subject to mandatory enrollment if they meet one or more
         criteria defined in this Article. Persons who fall into an "excluded"
         category (Article 5.3.1A) shall not be eligible to enroll in the
         contractor's plan. Persons falling into the categories under Article
         5.3.IB

                                                                           V - 2

<PAGE>

         I.       It is hereby understood and agreed by both parties that this
                  contract shall be effective and payments by DMAHS made to the
                  contractor subject to the availability of State and federal
                  funds. It is further agreed by both parties that this contract
                  can be renegotiated or terminated, without liability to the
                  State in order to comply with state and federal requirements
                  for the purpose of maximizing federal financial participation.

         J.       Upon termination of this contract, the contractor shall comply
                  with the closeout procedures in Article 7.13.

         K.       Rights and Remedies. The rights and remedies of the Department
                  provided in this Article shall not be exclusive and are in
                  addition to all other rights and remedies provided by law or
                  under this contract.

7.13     CLOSEOUT REQUIREMENTS

         A.       A closeout period shall begin one hundred-twenty (120) days
                  prior to the last day the contractor is responsible for
                  coverage of specific beneficiary groups or operating under
                  this contract. During the closeout period, the contractor
                  shall work cooperatively with, and supply program information
                  to, any subsequent contractor and DMAHS. Both the program
                  information and the working relationships between the two
                  contractors shall be defined by DMAHS.

         B.       The contractor shall be responsible for the provision of
                  necessary information and records, whether a part of the MCMIS
                  or compiled and/or stored elsewhere, to the new contractor
                  and/or DMAHS during the closeout period to ensure a smooth
                  transition of responsibility. The new contractor and/or DMAHS
                  shall define the information required during this period and
                  the time frames for submission. Information that shall be
                  required includes but is not limited to:

                  1.       Numbers and status of complaints and grievances in
                           process;

                  2.       Numbers and status of hospital authorizations in
                           process, listed by hospital;

                  3.       Daily hospital logs;

                  4.       Prior authorizations approved and disapproved;

                  5.       Program exceptions approved;

                  6.       Medical cost ratio data;

                  7.       Payment of all outstanding obligations for medical
                           care rendered to enrollees;

                                                                          VII-15

<PAGE>

         The contractor shall have the right to request an informal hearing
         regarding disputes under this contract by the Director, or the designee
         thereof. This shall not in any way limit the contractor's or State's
         right to any remedy pursuant to New Jersey law.

7.25     MEDICARE RISK CONTRACTOR

         To maximize coordination of care for dual eligibles while promoting the
         efficient use of public funds, the contractor:

         A.       Is recommended to be a Medicare+Choice contractor.

         B.       Shall serve all eligible populations.

7.26     TRACKING AND REPORTING

         As a condition of acceptance of a managed care contract, the contractor
         shall be held to the following reporting requirements:

         A.       The contractor shall develop, implement, and maintain a system
                  of records and reports which include those described below and
                  shall make available to DMAHS for inspection and audit any
                  reports, financial or otherwise, of the contractor and require
                  its providers or subcontractors to do the same relating to
                  their capacity to bear the risk of potential financial losses
                  in accordance with 42 C.F.R Section 434.38. Except where
                  otherwise specified, the contractor shall provide reports on
                  hard copy, computer diskette or via electronic media using a
                  format and commonly- available software as specified by DMAHS
                  for each report.

         B.       The contractor shall maintain a uniform accounting system that
                  adheres to generally accepted accounting principles for
                  charging and allocating to all funding resources the
                  contractor's costs incurred hereunder including, but not
                  limited to, the American Institute of Certified Public
                  Accountants (AICPA) Statement of Position 89-5 "Financial
                  Accounting and Reporting by Providers of Prepaid Health Care
                  Services".

         C.       The contractor shall submit financial reports including, among
                  others, rate cell grouping costs, in accordance with the
                  timeframes and formats contained in Section A of the
                  Appendices. The contractor shall submit separate financial
                  reports for MCSA enrollees in accordance with the rate cell
                  grouping for this population (not applicable to non-MCSA
                  contractor).

         D.       The contractor shall provide its primary care practitioners
                  with quarterly utilization data within forty-five (45) days of
                  the end of the program quarter comparing the average medical
                  care utilization data of their enrollees to the average
                  medical care utilization data of other managed care enrollees.
                  These data

                                                                          VII-37

<PAGE>

         H.       The contractor shall annually and at the time changes are made
                  report its staffing positions including the names of
                  supervisory personnel (Director level and above and the QM/UR
                  personnel), organizational chart, and any position vacancies
                  in these major areas.

         I.       DMAHS shall have the right to create additional reporting
                  requirements at any time as required by applicable federal or
                  State laws and regulations, as they exist or may hereafter be
                  amended and incorporated into this contract.

         J.       Reports that shall be submitted on an annual or semi-annual
                  basis, as specified in this contract, shall be due within
                  sixty (60) days of the close of the reporting period, unless
                  specified otherwise.

         K.       Mcsa Paid Claims Reconciliation. On a quarterly basis, the
                  contractor shall provide paid claims data, via an encounter
                  data file or separate paid claims file, that meet the HIPAA
                  format requirements for audit and reconciliation purposes. The
                  contractor shall provide documentation that demonstrates a
                  100% reconciliation of the amounts paid to the amounts billed
                  to the DMAHS. The paid claims data shall include at a minimum,
                  claim type, provider type, category of service, diagnosis code
                  (5 digits), procedure/revenue code, Internal Control Number
                  or Patient Account Number under HIPAA, provider ID, dates of
                  services, that will allow the DMAHS to price claims in
                  comparison to medicaid fee schedules for evaluation purposes
                  (This section not applicable to non-MCSA contractor).

7.27     FINANCIAL STATEMENTS

7.27.1   AUDITED FINANCIAL STATEMENTS (SAP BASIS)

         A.       Annual Audit. The contractor shall submit its audited annual
                  financial statements prepared in accordance with Statutory
                  Accounting Principles (SAP) certified by an independent public
                  accountant no later than June 1 of each year, for the
                  immediately preceding calendar year as well as for any company
                  that is a financial guarantor for the contractor in accordance
                  with N.J.S.A. 8:38-11.6.

         B.       Audit of Rate Cell Grouping Costs

                  The contractor shall submit, quarterly, reports found in
                  Appendix, Section A in accordance with the "HMO Financial
                  Guide for Reporting Medicaid/NJ Family Care Rate Cell Grouping
                  Costs" (Appendix, Section B7.3). These reports shall be
                  reviewed by an independent public accountant in accordance
                  with the standard "Agreed Upon Procedures" (Appendix, Section
                  B).

                  The contractor shall require its independent public accountant
                  to prepare a letter and report of findings which shall be
                  submitted to DMAHS by June 1 of each

                                                                          VII-39

<PAGE>

8.5.1    REGIONS

Capitation rates for DYFS, NJ FamilyCare Plans B, C, and D and the non
risk-adjusted rates for AIDS and clients of DDD are statewide. Rates for all
other premium groups are regional in each of the following regions:

         -        Region 1: Bergen, Hudson, Hunterdon, Morris, Passaic,
                  Somerset, Sussex, and Warren counties

         -        Region 2: Essex, Union, Middlesex, and Mercer counties

         -        Region 3: Atlantic, Burlington, Camden, Cape May, Cumberland,
                  Gloucester, Monmouth, Ocean, and Salem counties

         Contractors may contract for one or more regions but, except as
         provided in Article 2, may not contract for part of a region.

8.5.2    MAJOR PREMIUM GROUPS

         The following is a list of the major premium groups. The individual
         rate groups (e.g. children under 2 years, etc.) with their respective
         rates are presented in the rate tables in the appendix.

8.5.2.1  AFDC/TANF, NJC PREGNANT WOMEN, AND NJ FAMILYCARE PLAN A CHILDREN

         This grouping includes capitation rates for Aid to Families with
         Dependent Children (AFDC)/Temporary Assistance for Needy Families
         (TANF), New Jersey Care Pregnant Women and Children, and NJ FamilyCare
         Plan A children (includes individuals under 21 in PSC 380), but
         excludes individuals who have AIDS or are clients of DDD.

8.5.2.2  NJ FAMILYCARE PLANS B & C

         This grouping includes capitation rates for NJ FamilyCare Plans B and C
         enrollees, excluding individuals with AIDS and/or DDD clients.

8.5.2.3  NJ FAMILYCARE PLAN D CHILDREN

         This grouping includes capitation rates for NJ FamilyCare Plan D
         children, excluding individuals with AIDS.

8.5.2.4  NJ FAMILYCARE PLAN D PARENTS/CARETAKERS

         This grouping includes capitation rates for NJ FamilyCare Plan D
         parents/caretakers, excluding individuals with AIDS, and include only
         enrollees 19 years of age or older.

                                                                          VIII-6

<PAGE>

8.5.7    EPSDT INCENTIVE PAYMENT

         The contractor shall be paid separately, $10 for every documented
         encounter record for a contractor-approved EPSDT screening examination.
         The contractor shall be required to pass the $ 10 amount directly to
         the screening provider.

         The incentive payment shall be reimbursed for EPSDT encounter records
         submitted in accordance with 1) procedure codes specified by DMAHS, and
         2) EPSDT periodicity schedule.

8.5.8    ADMINISTRATIVE COSTS

         The capitation rates, effective July 1, 2003, recognize costs for
         anticipated contractor administrative expenditures due to Balanced
         Budget Act regulations.

8.5.9    NJ FAMILYCARE PLAN H ADULTS

         The contractor shall be paid an administrative fee for NJ FamilyCare
         Plan H adults without dependent children, and restricted alien parents
         excluding pregnant women, as defined in Article One (Not applicable to
         non-MCSA contractor).

8.6      HEALTH BASED PAYMENT SYSTEM (HBPS) FOR THE ABD POPULATION WITHOUT
         MEDICARE

         The DMAHS shall utilize a Health-Based Payment System (HBPS) for
         reimbursements for the ABD population without Medicare to recognize
         larger average health care costs and greater dispersion around the
         average than other DMAHS populations. The contractor shall be
         reimbursed not only on the basis of the demographic cells into which
         individuals fall, but also on the basis of individual health status.

         The Chronic Disability Payment System (CDPS) (University of California,
         San Diego) is the HBPS or the system of Risk Adjustment that shall be
         used in this contract. The methodology for CDPS specific to New Jersey
         is provided in the Actuarial Certification Letter for Risk Adjustment
         issued separately to the contractor. Two base capitation rates and a
         DDD mental health/substance abuse add-on are developed for this
         population. These are:

         -        ABD without Medicare, non-DDD

         -        ABD DDD without Medicare, physical health component

         -        ABD - DDD without Medicare, Mental Health/Substance Abuse
                  add-on-component

         The Risk adjustment process has four major components.

         -        Development of base rates for the risk adjusted populations.

                                                                          VIII-9

<PAGE>

                  payment that is proportionate to the part of the month during
                  which the contractor provides coverage. Payments are
                  calculated and made to the last day of a calendar month except
                  as noted in this Article.

         J.       Risk Assumption. The capitation rates shall not include any
                  amount for recoupment of any losses suffered by the contractor
                  for risks assumed under this contract or any prior contract
                  with the Department.

         K.       Hospitalizations. For any eligible person who applies for
                  participation in the contractor's plan, but who is
                  hospitalized prior to the time coverage under the plan becomes
                  effective, such coverage shall not commence until the date
                  after such person is discharged from the hospital and DMAHS
                  shall be liable for payment for the hospitalization, including
                  any charges for readmission within forty-eight (48) hours of
                  discharge for the same diagnosis. If an enrollee's
                  disenrollment or termination becomes effective during a
                  hospitalization, the contractor shall be liable for
                  hospitalization until the date such person is discharged from
                  the hospital, including any charges for readmission within
                  forty-eight (48) hours of discharge for the same diagnosis.
                  The contractor must notify DMAHS of these occurrences to
                  facilitate payment to appropriate providers.

         L.       Continuation of Benefits. The contractor shall continue
                  benefits for all enrollees for the duration of the contract
                  period for which capitation payments have been made, including
                  enrollees in an inpatient facility until discharge. The
                  contractor shall notify DMAHS of these occurrences.

         M.       Drug Carve-Out Report. The DMAHS will provide the contractor
                  with a monthly electronic file of paid drug claims data for
                  non-dually eligible, ABD enrollees.

8.8
         N.       MCSA Administrative Fee. The contractor shall receive a
                  monthly administrative fee, PMPM, for its MCSA enrollees, by
                  the fifteenth (15th) day of any month during which health care
                  services will be available to an enrollee (Not applicable to
                  non-MCSA contractor).

         O.       Reimbursement for MCSA Enrollee Paid Claims. The contractor
                  shall submit to DMAHS a financial summary report of claims
                  paid on behalf of MCSA enrollees on a weekly basis. The report
                  shall be summarized by category of service corresponding to
                  the MCSA benefits and payment dates, accompanied by an
                  electronic file of all individual claim numbers for which the
                  state is being billed (Not applicable to non-MCSA contractor).

         P.       MCSA Claims Payment Audits. The contractor shall monitor and
                  audit claims payments to providers to identify payment errors,
                  including duplicate payments, overpayments, underpayments, and
                  excessive payments. for such payment errors (excluding
                  underpayments), the contractor shall refund DMAHS the overpaid
                  amounts. The contractor shall report the dollar amount of
                  claims with payment errors on a monthly basis, which is
                  subject to

                                                                         VIII-18

<PAGE>

                  Verification by the State. The contractor is responsible for
                  collecting funds due to the State from providers, either
                  through cash payments or through offsets to payments due the
                  providers (Not applicable to non-MCSA contractor).

8.9      CONTRACTOR ADVANCED PAYMENTS AND PIPS TO PROVIDERS

         A.       The contractor shall make advance payments to its providers,
                  capitation, FFS, or other financial reimbursement arrangement,
                  based on a provider's historical billing or utilization of
                  services if the contractor's claims processing systems become
                  inoperational or experience any difficulty in making timely
                  payments. Under no circumstances shall the contractor default
                  on the claims payment timeliness provisions of this contract.
                  Advance payments shall also be made when compliance with
                  claims payment timeliness is less than ninety (90) percent for
                  two (2) quarters. Such advance payments will continue until
                  the contractor is in full compliance with timely payment
                  provisions for two (2) successive quarters.

         B.       Periodic Interim Payments (PIPs) to Hospitals. The contractor
                  shall provide periodic interim payments to participating,
                  PIP-qualifying hospitals.

                  1.       Designation of PIP-Qualifying Hospitals. Each
                           quarter, DMAHS shall determine which hospitals
                           qualify for monthly PIPs.

                  2.       When Contractor is Required to Make PIPs. The
                           contractor shall make PIPs to a participating
                           (network provider), qualifying hospital when the
                           average monthly payment from the contractor to the
                           hospital is at least $100,000 for the most recent
                           six-month period excluding outliers. An outlier is
                           defined as a single admission for which the payment
                           to the hospital exceeds $100,000. It should be noted
                           that outlier claims paid are included in the
                           establishment of the monthly PIPs and the
                           reconciliation of the PIPs.

                  3.       Methodologies to Establish Amount of PIPs.

                           a.       The contractor may work out a mutually
                                    agreeable arrangement with the participating
                                    PIP-qualifying hospitals for developing a
                                    methodology for determining the amount of
                                    the PIPs and reconciling the PIP advances to
                                    paid claims. If a mutually agreeable
                                    arrangement cannot be reached, the
                                    contractor shall make PIPs in accordance
                                    with the methodology described in 3.b.
                                    below.

                           b.       Beginning August 1, 2000, the contractor
                                    shall provide a participating,
                                    PIP-qualifying hospital with an initial
                                    60-day PIP (representing two 30-day cash
                                    advances) which shall be reconciled using a
                                    claims offset process, with the first 30-day
                                    PIP reconciled

                                                                         VIII-19

<PAGE>

                                 PLAN H COVERED
                            DURABLE MEDICAL EQUIPMENT

Alternating Pressure Pads
Bed Pans
Bladder Irrigation Supplies
Blood Glucose Monitors and Supplies
Canes
Commodes
NOTE: BATHROOM DEVICES PERMANENTLY ATTACHED ARE NOT COVERED
Crutches and Related Attachments
Fracture Frames
Gastrostomy Supplies
Hospital Beds (Manual, Semi-Electric, Full Electric) and Related Equipment
Ileostomy Supplies
Infusion Pumps
Intermittent Positive Pressure Breathing (IPPB) Treatments and Related Supplies
IV Poles
Jejunostomy Supplies
Lancets and Related Devices
Loop Heals/Loop Toe Devices
Lymphedema Pumps
Manual Wheelchairs and Related Equipment
NOTE: MOTORIZED WHEELCHAIRS ARE NOT COVERED
NOTE: TYPES OF COVERED WHEELCHAIRS INCLUDE FULL-RECLINING; HEMI; HIGH-STRENGTH
LIGHTWEIGHT; HIGH-STRENGTH LIGHTWEIGHT; HEAVY DUTY; AND SEMI-RECLINING.
Mattress Overlays
NOTE;LOW AIR LOSS AND AIR FLUIDIZED BED SYSTEMS NOT COVERED
Nasogastric Tubing
Nebulizers and Related Supplies
Needles
Ostomy Supplies
Over-Bed Tables
Oxygen and Related Equipment and Supplies
NOTE: LIQUID AND GAS SYSTEMS AND OXYGEN CONCENTRATORS ARE COVERED
NOTE: VENTILATION SYSTEMS ARE NOT COVERED
Pacemaker Monitors
Parenteral Nutrition
Patient Lifts
Pneumatic Appliances
Sitz Bath
Suction Machines and Related Supplies
Syringes
Tracheostomy Supplies
Traction/Trapeze Apparatus
Urinals
Urinary Pouches and Related Supplies
Urine Glucose Tests
Walkers and Related Attachments
Wheelchair Seating/Support Systems<PAGE>

                                                            EXHIBIT 10.16.1

                                AMENDMENT TO
                        CCPN AND HMO MEDICAID AGREEMENT

     THIS AMENDMENT TO CCPN AND HMO MEDICAID AGREEMENT (the "Amendment") is
entered into as of the 1st day of January, 2000 (the "Effective Date"), by and
between AMERICAID Texas, Inc., a Texas corporation ("HMO") and Cook Children's
Physician Network, a Texas non-profit corporation ("CCPN").

                                   RECITALS:

     WHEREAS, HMO and CCPN have entered into a CCPN and HMO Medicaid Agreement
on October 1, 1996 (the "Initial Agreement"), as amended pursuant to the
Modification Agreement (defined below) and the amendments identified on Schedule
1 attached hereto (as amended, the "Medicaid Services Agreement"); and

     WHEREAS, HMO and CCPN desire to amend the Medicaid Services Agreement on
the terms set forth below; and

     WHEREAS, Cook Children's Health Care System (f/k/a Cook Children's Heath
Care Network) and AMERIGROUP Corporation (f/k/a AMERICAID, Inc.) as parties to
that certain Agreement executed October 9, 1997 to be effective as of September
1, 1995 (the "Modification Agreement") are executing this Amendment solely to
acknowledge that certain of its terms modify the terms of the Modification
Agreement.

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

1.   Definitions. Capitalized terms not otherwise defined herein shall have
     the meaning given such terms under the Medicaid Services Agreement.

2.   Modifications to Compensation Terms.

     a)   The "Financial Arrangements" set forth in Attachment A of the
          Initial Agreement, as amended, are amended and restated in their
          entirety as set forth in Attachment A attached hereto; such attachment
          shall supersede Sections 5, 6 and 7 of the Modification Agreement.
          The new terms therein with respect to the administration and
          settlement of the pools shall be effective retroactively to September
          1, 1998 (notwithstanding the Effective Date herein for the other terms
          of this Amendment) so that they shall apply for purposes of the 98/99
          Year-End Settlement. The Exhibits to Attachment A of the Initial
          Agreement (e.g., Exhibits 4 and 5) shall continue to apply.

     b)   Attachments B and C to the Initial Agreement are hereby amended and
          restated by the rates set forth in revised Attachments B and C
          attached hereto, and Schedule A-IV.H (which had been implemented
          pursuant to the Second Amendment dated
<PAGE>
          March 1, 1998) is hereby amended and restated by the rates set forth
          in Attachment D hereto.

3.   Delegation of Additional Administrative Functions.

     a)   CCPN shall have the option to receive delegation of medical
          management, provider services and/or claims processing, adjudication
          and payment (the "Administrative Functions"), if each of the
          conditions in this Section 3 are satisfied. CCPN shall provide HMO
          with not less than ninety (90) days (the "Notice Period") prior
          written notice of exercise (the "Exercise Notice") and shall, with
          such Notice, provide HMO with such documentation and information as
          HMO may deem reasonably necessary to demonstrate that the conditions
          have been or will be satisfied. HMO shall promptly review whether all
          conditions are satisfied, it being the intent of the parties to
          implement the delegation not earlier than ninety (90) days nor later
          than one hundred fifty (150) days after the Exercise Notice is
          received (assuming all conditions are satisfied). The conditions are
          as follows:

          i)   CCPN has received delegation of the same Administrative
               Functions from all other contracted health maintenance or managed
               care organizations in connection with CCPN's provision of
               Medicaid services to such organizations' members under the STAR
               Program (or its successor program) and at least one of such
               delegated arrangements for a Medicaid product will be operational
               by the end of the Notice Period;

          ii)  CCPN meets all of HMO's standards for performing such services,
               including, without limitation, HCFA, TDI and TDH requirements,
               and the standards and requirements of HEDIS and NCQA. Upon
               request by CCPN, HMO agrees to provide any such standards related
               to the aforementioned administrative functions to CCPN. CCPN
               acknowledges that HMO shall have the ability to perform a site
               visit and audit prior to the delegation of such administrative
               functions to ensure compliance with HMO's standards.

          iii) CCPN and HMO agree to negotiate and enter into a mutually
               acceptable delegation agreement to ensure CCPN appropriately
               assists HMO in meeting all then applicable legal requirements
               (including, without limitation, any applicable requirements of
               HCFA, TDH, TDI or Texas Senate Bill 890 or its successor) and the
               standards and requirements of HEDIS and the NCQA, and continues
               to satisfy the conditions set forth herein. The agreement shall,
               among other things, (A) ensure appropriate accountabilities for
               performance, service delivery, and data reporting (CCPN shall,
               among other things, be required to timely report all data
               elements presently used by HMO in its claims processing and
               precertification functions so that there will be no disruption in
               HMO's ability to accurately project medical claims), (B) ensure
               CCPN's
<PAGE>
               participation in and compliance with federal, state and NCQA
               reviews, (C) establish performance standards and penalties, (D)
               include reciprocal indemnification provisions by which each party
               agrees to defend and hold the other harmless from claims,
               damages, penalties, sanctions, etc. (whether governmental,
               private party or otherwise) related to, among other things, the
               functions for which the indemnifying party is responsible under
               the agreement, whether performed by such party or sub-delegated,
               (E) prohibit sub-delegation without HMO's prior written consent,
               and (F) establish the circumstances under which delegation may be
               revoked;

          iv)  The parties shall have mutually agreed on (A) the amount HMO
               shall pay CCPN for CCPN's performance of the Administrative
               Functions, which amount will consider, among other things, HMO's
               costs to provide oversight of the delegation and HMO's actual
               average total direct costs for such services as a percentage of
               total premium and applied to the premium payable with respect to
               pediatric Members (as defined in Attachment A), and (B)
               adjustments required to the Pool allocation and settlement
               methodologies set forth on Attachment A in light of such modified
               payment terms; and

           v)  If claims processing and precertification is to be delegated,

               (A)  CCPN must successfully complete a thorough review by HMO
                    and/or its designee (such as external auditors) regarding
                    appropriate internal controls over the performance of such
                    services (based on HMO's then applicable review tool) prior
                    to implementation;

               (B)  The delegation agreement shall further provide that on a
                    periodic basis, but not less than quarterly for internal
                    review and annually for external review, CCPN (and its
                    designees, if any) will be audited to ensure that the
                    controls and procedures reviewed prior to implementation are
                    in place and are being used appropriately and that any
                    deficiencies will be promptly cured through a corrective
                    action plan; and

               (C)  The delegation agreement shall further require CCPN to meet
                    on an ongoing basis HMO's then applicable financial adequacy
                    and reporting requirements for delegated claims
                    relationships.

4.   Use of HMO-to-HMO Contract. To the extent permitted by law, at CCPN's
     option, the obligations of CCPN under the Medicaid Services Agreement shall
     be effected through Cook Children's Health Plan (through an HMO-to-HMO
     contract), which plan shall maintain sufficient risk reserves to satisfy
     all of CCPN's obligations hereunder.

5.   Modifications to Administrative Processes. Within thirty (30) days of
     execution of this
<PAGE>
     Amendment, CCPN and HMO agree to work collaboratively to reform in writing
     the current processes regarding claims submissions, claims adjudication,
     claims resubmissions, and accounts receivable. CCPN and HMO shall each
     assign a high level person to guide the reformation process with HMO's
     person also available on a bi-weekly basis to resolve all pending claims
     problems.

6.   Effect of Increases to Cook's Charge Master and Adjustments to
     Cost-to-Charge Ratio. The rates/charges upon which HMO is reimbursing CCMC
     are not subject to increase in connection with any increase in CCMC's
     charge master until October 1 each year, beginning October 1, 2000. CCPN
     shall (or shall cause CCMC to) provide HMO with written notice of the
     change. CCMC's current cost-to-charge ratio (percentage discount) used by
     the State shall be the basis for reimbursement prospectively and shall not
     change (notwithstanding the State's May, 2000 adjustments, if any) until
     October 1, 2000, at which time the cost-to-charge ratio shall be adjusted
     prospectively to the cost-to-charge ratio then in use by the State (i.e.,
     the ratio adopted in May 2000). Then, on June 1, 2001, and annually on June
     1 thereafter, the cost-to-charge ratio shall be adjusted (again to apply on
     a prospective basis only) to the cost-to-charge ratio that the State is
     then using. Because of system configuration requirements, any change
     required by the foregoing may be delayed by HMO for up to, but not more
     than, sixty (60) days.

7.   Clarifications with Respect to the Modification Agreement.

     a)   The text in the first sentence of Section 10 of the Modification
          Agreement beginning with "as well as" and ending with "AMERICAID" is
          hereby replaced with the following: "as well as any additional
          counties into which TDH permits AMERICAID to expand such Service
          Area."

     b)   It is understood and agreed that the automatic one year renewals
          following the initial term, as described in Section 13 of the
          Modification Agreement, shall not apply if either party gives 180 days
          notice of termination prior to the end of the term then in effect.

8.   Services Outside of Service Area. If CCPN desires to be a provider in
     HMO's Dallas STAR network, HMO shall include CCPN in its network on such
     terms as the parties' agree; provided, such participation shall be on
     Dallas contract terms and not part of the incentive arrangement implemented
     through the Risk Funds.

9.   Additional Regulatory Amendments. The Medicaid Services Agreement is hereby
     further amended by the terms set forth on Attachment E hereto which are
     incorporated for purposes of regulatory compliance.

10.  Miscellaneous. Each party represents and warrants that it has full
     corporate power and has taken all required corporate and other action
     necessary to permit it to execute and deliver this Amendment. Except as
     modified by the provisions of this Amendment, all of the terms of the
     Medicaid Services Agreement shall remain in full force and effect (the
     parties hereby acknowledge that Schedule 1 accurately identifies the
     applicability of the
<PAGE>
     terms of the prior amendments from and after the date hereof). This
     Amendment may be executed in any number of counterparts, by each party on a
     separate counterpart, each of which, when so executed and delivered, shall
     be deemed to be an original and all of which taken together shall
     constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first above written.

                                             AMERICAID TEXAS, INC.

                                            By: /s/James D. Donovan, Jr.
                                                -------------------------
                                                Name:  James D. Donovan, Jr.
                                                Title: CEO

                                            COOK CHILDREN'S PHYSICIAN NETWORK

                                            By: /s/Alan Kent Lassiter, MD
                                                ---------------------------
                                                Name:  Alan Kent Lassiter, MD
                                                Title: President and CEO

SEEN AND ACKNOWLEDGED:

COOK CHILDREN'S HEALTH CARE SYSTEM

By: /s/John A. Grigson
   --------------------
   Name: John A. Grigson
   Title: E.V.P./CEO

AMERIGROUP CORPORATION

By: /s/James D. Donovan, Jr.
    ------------------------
   Name: James D. Donovan, Jr.
   Title:
        ---------------------------------------
<PAGE>

                                  AMENDMENT TO
                        CCPN AND HMO MEDICAID AGREEMENT

     THIS AMENDMENT TO CCPN AND HMO MEDICAID AGREEMENT (the "Amendment") is
effective thirty (30) days from the date of complete execution (the "Effective
Date"), by and between AMERIGROUP Texas, Inc. (formerly, "AMERICAID Texas,
Inc."), a Texas corporation ("HMO") and Cook Children's Physician Network, a
Texas non-profit corporation ("CCPN"), and is effective as of such Effective
Date, except as otherwise expressly provided herein. Cook Children's Health Care
System joins in this Agreement for the purpose of the acknowledgement and
agreement set on the signature page below.

                                   RECITALS:

     A.    On October 1, 1996, HMO and CCPN entered into a CCPN and HMO
Medicaid Agreement (the "Initial Agreement"). The Initial Agreement was
subsequently amended pursuant to that certain Agreement, executed October 9,
1997, effective as of September 1, 1995 (the "Modification Agreement"), an
Amendment entered into as of January 1, 2000 (the "Global Amendment") and
certain other amendments identified in the Global Amendment. The Initial
Agreement, as amended by the Modification Agreement, with all such amendments,
including the Global Amendment, is hereinafter referred to as the "Medicaid
Services Agreement."

     B.    HMO and CCPN wish to amend the Medicaid Services Agreement to
add certain terms related to the provision of urgent care services and
ambulatory surgery services by CCPN under the Medicaid Services Agreement.

                                   AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:

     1.    Capitalized terms not otherwise defined herein shall have the
meaning given such terms under the Medicaid Services Agreement.

     2.    Effective thirty (30) days from the date of complete execution,
the attached "Attachment F - Compensation for Ambulatory Surgery Center Services
and Urgent Care Center Services" is hereby added to the Agreement, it being
acknowledged and agreed by the parties hereto that the compensation set forth on
such Attachment F shall apply solely to services provided at Cook Children's
Pediatric Surgery Center and Cook Children's Pediatric Urgent Care Center, both
located at 6316 Precinct Line Road, Hurst, Texas 76054. The compensation set
forth on Attachment F shall not apply to any other services provided pursuant to
the Medicaid Services Agreement at any other locations other than the location
expressly described in this paragraph. "Attachment F - Compensation for
Ambulatory Surgery Center Services and Urgent

                                       1

<PAGE>
Care Center Services Provided at 6316 Precinct Line Road, Hurst, Texas" is
hereby added to the Medicaid Services Agreement and incorporated therein by
reference.

     3.     Each party represents and warrants that it has full corporate power
and has taken all required corporate and other action necessary to permit it to
execute and deliver this Amendment. Except as modified by the provisions of this
Amendment, all of the terms of the Medicaid Services Agreement shall remain in
full force and effect. This Amendment may be executed in any number of
counterparts, by each party on a separate counterpart, each of which, when so
executed and delivered, shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
day and year first above written.

                                     AMERIGROUP Texas, Inc. (formerly,
                                     AMERICAID Texas, Inc.)

                                     By:   /s/Robert Westcott
                                           -------------------
                                     Name:  Robert F. Westcott, JD
                                     Title: Vice President
                                     Date:  February 18, 2003

                                     Cook Children's Physician Network

                                     By:   /s/Mark Laney, MD
                                           -------------------
                                     Name:  Mark Laney, MD, MS
                                     Title: President
                                     Date:  02/11/03

SEEN AND ACKNOWLEDGED:

Cook Children's Health Care System

By:   /s/Daniel L. Fink
     --------------------
Name:  Daniel L. Fink
Title: Senior Vice President Managed Care
Date:  02/11/03

                                       2
<PAGE>

                                  AMENDMENT TO
                         CCPN AND HMO MEDICAID AGREEMENT

     THIS AMENDMENT TO CCPN AND HMO MEDICAID AGREEMENT (the "Amendment") is
effective July 1, 2003, (the "Effective Date"), by and between AMERIGROUP Texas,
Inc., a Texas corporation ("HMO") and Cook Children's Physician Network, a Texas
non-profit corporation ("CCPN"). Cook Children's Health Care System joins in
this Agreement for the purpose of the acknowledgement and agreement set forth on
the signature page below.

                                    RECITALS:

     A. On October 1, 1996, HMO and CCPN entered into a CCPN and HMO Medicaid
Agreement (the "Initial Agreement"). The Initial Agreement was subsequently
amended pursuant to that certain Agreement, executed October 9, 1997, effective
as of September 1, 1995 (the "Modification Agreement"), an Amendment entered
into as of January 1, 2000 (the "Global Amendment") and certain other amendments
identified in the Global Amendment. The Initial Agreement, as amended by the
Modification Agreement, with all such amendments, including the Global
Amendment, is hereinafter referred to as the "Medicaid Services Agreement."

     B. HMO and CCPN wish to amend the Medicaid Services Agreement to add
Behavioral Health Care Services to be provided by CCPN under the Medicaid
Services Agreement.

     C. AMERIGROUP and CCPN wish to amend the Agreement as set forth herein.

                                   AGREEMENT:

     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows.

     1. The Agreement is hereby amended to add the following definition of
Behavioral Health Care Services:

        Behavioral Health Care Services are services a Member is entitled to
receive which AMERIGROUP is required to provide pursuant to the Texas state
Medicaid Program ("Medicaid") referenced in the Medicaid Services Agreement and
any successor programs thereto.

     2. The definition of "Covered Services" in the Medicaid Services Agreement
is hereby modified to add Behavioral Health Care Services as Covered Services.

     3. Attachment A-Behavioral Health attached hereto is hereby added to the
Medicaid Services Agreement.

                                       2
<PAGE>

     4. Except as expressly modified herein, nothing contained in this Amendment
shall, or shall be construed to, modify, alter or amend the Medicaid Services
Agreement. The parties hereto hereby affirm the Medicaid Services Agreement,
except as expressly modified herein.

     5. To the extent any provision contained in this Amendment conflicts with
the terms and conditions of the Medicaid Services Agreement, this Amendment
shall control.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed.

                                HMO:

                                AMERIGROUP Texas, Inc., a Texas corporation

                                 By: /s/ Robert Wescott
                                Robert F. Westcott, JD                 [Name]
                                Vice President                         [Title]
                                June 11, 2003                          [Date]

                                CCPN:

                                Cook Children's Physician Network

                                By: /s/ Mark Laney, MD
                                Mark Laney                             [Name]
                                President                              [Title]
                                6/10/03                                [Date]
                                801 7th Ave                            [Address]
                                Ft. Worth, TX  76104
                                ____________________________[Phone#]

SEEN AND ACKNOWLEDGED:

Cook Children's Health Care System

By:/s/ John A. Grigson
     Name: John A. Grigson
     Title: CFO
      Date: 6/10/03

                                       3
<PAGE>

                                  AMENDMENT TO
                         CCPN AND HMO MEDICAID AGREEMENT

     THIS AMENDMENT TO CCPN AND HMO MEDICAID AGREEMENT (the "Amendment") is
effective the first day of the month next following the date thirty (30) days
after complete execution (the "Effective Date"), by and between AMERIGROUP
Texas, Inc. (formerly, "AMERICAID Texas, Inc."), a Texas corporation ("HMO") and
Cook Children's Physician Network, a Texas non-profit corporation ("CCPN"). Cook
Children's Health Care System joins in this Agreement for the purpose of the
acknowledgement and agreement set on the signature page below.

                                   RECITALS:

     A. On October 1, 1996, HMO and CCPN entered into a CCPN and HMO Medicaid
Agreement (the "Initial Agreement"). The Initial Agreement was subsequently
amended pursuant to that certain Agreement, executed October 9, 1997, effective
as of September 1, 1995 (the "Modification Agreement"), an Amendment entered
into as of January 1, 2000 (the "Global Amendment") and certain other amendments
identified in the Global Amendment. The Initial Agreement, as amended by the
Modification Agreement, with all such amendments, including the Global
Amendment, is hereinafter referred to as the "Medicaid Services Agreement."

     B. HMO and CCPN desire to amend the Medicaid Services Agreement on the
terms set forth below to convert the reimbursement methodology under the
Medicaid Services Agreement for Primary Care Physicians and Primary Care
Providers, as such terms are defined in the Medicaid Services Agreement, on and
after the Effective Date from a capitation methodology to a fee-for-service
reimbursement methodology.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the premises and the mutual promises,
          covenants and agreements set forth herein, and for other good and
          valuable consideration, the receipt and sufficiency of which is hereby
          acknowledged, the parties agree as follows:

     1.  Capitalized terms not otherwise defined herein shall have the meaning
given such terms under the Medicaid Services Agreement.

     2.  Section IV.A. of Attachment A to the Medicaid Services Agreement is
hereby amended to add the following to the end of the section:

          Notwithstanding the foregoing, the parties hereto acknowledge and
          agree that effective as of the effective date of this Amendment, no
          Primary Care Physicians and Primary Care Providers employed by CCPN
          shall be paid under the capitation methodology set forth in Section
          I.A. of Attachment B to this Agreement, it being acknowledged and
          agreed that as of the effective date of this Amendment, all Primary
          Care Physicians and Primary Care Providers employed by CCPN shall be
          paid under the fee-for-service methodology set forth under Section
          I.B. of Attachment B to this Agreement.

                                       4
<PAGE>

          The parties further acknowledge and agree that, although certain
          Primary Care Physicians and Primary Care Providers who or which are
          party to a contract with CCPN for the provision of services hereunder
          (individually, a "Contracted Provider") shall continue to be paid
          under the capitation methodology set forth in Section I.A of
          Attachment B of this Agreement, following the effective date of this
          Amendment, CCPN shall use its best efforts commencing as of such date
          to execute and deliver an amendment to the agreement between CCPN and
          each such Contracted Provider (a "Contracted Provider Agreement")
          converting the reimbursement methodology thereunder from capitation to
          fee-for-service paid in accordance with Section I.B of Attachment B to
          this Agreement.

          Fee-for-service reimbursement under such amended Contracted Provider
          Agreements shall be effective as of the first (1st) day of the month
          following the date HMO receives notice from CCPN that a Contracted
          Provider and CCPN have executed and delivered an amendment to the
          Contracted Provider Agreement converting the reimbursement methodology
          thereunder from capitation to fee-for-service; provided such notice is
          received by HMO prior to the fifteenth (15th) day of the month. Any
          such notices received after the fifteenth (15th) day of the month
          shall be processed by HMO for an effective date as of the first (1st)
          day of the second month following HMO's receipt of such notice.

          AMERIGROUP shall comply with all applicable requirements under
          Amendment No. 9 to the 1999 Contract for Services between Health and
          Human Services Commission and AMERIGROUP related to provider pass
          through requirements.

     3.   The fifth sentence of Section IV.A. of Attachment A is hereby deleted
in its entirety and replaced as follows:

          Primary Care Physicians or Providers shall submit itemized statements
          on current HCFA 1500 claim forms with current HCPCS coding, current
          ICD9 coding and current CPT4 coding for all capitated services and
          non-capitated Covered Health Services provided by Primary Care
          Physicians or Providers to HMO at the address set forth below within
          ninety-five (95) days of the date the Covered Health Service was
          provided.

     4.   Section I.A of Attachment B to the Medicaid Services Agreement is
amended to add the following to the end of Section I.A:

          Notwithstanding the foregoing, the parties hereto acknowledge and
          agree that as of the effective date of this Amendment, no Primary Care
          Physicians and Primary Care Providers employed by CCPN shall be paid
          under the capitation methodology set forth in this Section I.A., it
          being acknowledged and agreed that as of the effective date of this
          Amendment, all Primary Care Physicians and Primary Care Providers
          employed by CCPN shall be paid under the fee-for-service methodology
          set forth under Section I.B. of this Attachment B.

                                       5
<PAGE>

          The parties further acknowledge and agree that, although certain
          Contracted Providers shall continue to be paid under the capitation
          methodology set forth in this Section I.A. following the effective
          date of this Amendment, CCPN shall use its best efforts commencing as
          of such date to execute and deliver an amendment to all Contracted
          Provider Agreements converting the reimbursement methodology
          thereunder from capitation to fee-for-service paid in accordance with
          Section I.B. of this Attachment B.

     5.   Section I.B of Attachment B to the Medicaid Services Agreement is
hereby deleted in its entirety and replaced as follows:

               B. Primary Care Fee-For-Service Payment - Primary Care Physicians
               -----------------------------------------------------------------
          or Primary Care Providers.
          --------------------------

               HMO shall compensate Primary Care Physicians/Primary Care
          Providers for Primary Care Services on a fee-for service basis for
          services provided to Members at the lesser of the Primary Care
          Provider's/Primary Care Physician's billed charges or the current
          AMERIGROUP fee schedule ("HMO's fee schedule") which is based on the
          Texas Medicaid Fee Schedule. A representative sample of the current
          HMO's fee schedule for Primary Care Services is attached as "Schedule
          1 to Attachment B". HMO shall provide written notice to CCPN at least
          thirty (30) days prior to any material changes to the HMO's fee
          schedule. Following receipt of such notice, CCPN shall have thirty
          (30) days to provide written acceptance or objections to such changes.
          If CCPN fails to provide the required written acceptance or objections
          to such changes in thirty (30) days, HMO shall be entitled to
          implement the material change. If CCPN timely objects, the parties
          shall negotiate in good faith regarding such changes and shall use
          best efforts to agree within sixty (60) days. In the event HMO and
          CCPN do not reach mutual agreement within the sixty (60) day period,
          then no fee schedule changes shall be implemented until the parties
          agree. The parties will jointly perform financial reviews of any fee
          schedule changes. HMO shall have a minimum of sixty (60) days notice
          to implement any fee schedule changes, or as may be reasonably
          required.

               HMO shall also provide timely written notice to CCPN of any
          changes to the HMO's fee schedule that may be required by the
          applicable Texas Medicaid agency; in that event CCPN shall not have
          the opportunity to object and must accept such fee schedule changes.

     6. Effective as of September 1, 2001, Compensation under Section II of
Attachment B of the Medicaid Services Agreement is increased from $21.00 per
visit to $34.00 per visit for the Reporting of Texas Health Steps screenings on
a HCFA-1500 based on the Texas Health Steps codes and periodicity schedule in
the TDN/NHIC manual.

     7. Section IV of Attachment B to the Agreement is hereby deleted in its
entirety and replaced as follows:

                                       6
<PAGE>

          IV. NO PRIMARY CARE CAPITATION OPTION. The parties hereto acknowledge
          and agree that all Primary Care Physicians and all Primary Care
          Providers shall be reimbursed on a fee-for-service basis pursuant to
          the terms of this Agreement, except as otherwise expressly provided
          herein, and that, notwithstanding any provision contained herein, or
          in any other agreement between the parties hereto, and no Primary Care
          Physicians or Primary Care Providers be reimbursed under a capitation
          methodology, except as expressly provided herein or as otherwise
          agreed by the parties in a writing signed by the parties hereto
          evidencing such agreement.

     8. Schedule 1 to Attachment B to the Medicaid Services Agreement is hereby
deleted in its entirety and replaced with Schedule 1 to Attachment B attached
hereto.

     9. The parties acknowledge and agree that the compensation for CPT Code
99213 set forth on Schedule 1 to Attachment B attached hereto was the then
current compensation for such services as of the effective date of this
Amendment. The parties further acknowledge and agree that the compensation set
forth on Schedule 1 to Attachment B attached hereto for the Texas Health Steps
Well Child Visits was the then current compensation for such services as of
January 18, 2002.

     10. Each party represents and warrants that it has full corporate power and
has taken all required corporate and other action necessary to permit it to
execute and deliver this Amendment. Except as modified by the provisions of this
Amendment, all of the terms of the Medicaid Services Agreement shall remain in
full force and effect. This Amendment may be executed in any number of
counterparts, by each party on a separate counterpart, each of which, when so
executed and delivered, shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.

                                       6
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their duly authorized officers or agents.

                                        AMERIGROUP Texas, Inc. (formerly,
                                        AMERICAID Texas, Inc.)

                                        By: /s/ Robert F. Westcott
                                           -----------------------
                                             Name: Robert F. Westcott, JD
                                             Title: Vice President
                                              Date: June 11, 2003

                                        Cook Children's Physician Network

                                        By:/s/ Mark Laney, MD
                                             Name: Mark Laney, MD, MS
                                             Title: President
                                              Date: 6/23/03

SEEN AND ACKNOWLEDGED:

Cook Children's Health Care System

By:/s/ John A. Grigson
     Name: John A. Grigson
     Title: EVP/CFO
     Date: 6/20/03

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