Document:

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                                                                  EXHIBIT 10.9

                                CHILD HEALTH PLUS
                            COMMUNITY INSURANCE PLAN
                       ELIGIBLE CHILDREN IN NEW YORK STATE

                                TABLE OF CONTENTS

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  I. Introduction......................................................................................               1

 II. Expanded Program Design...........................................................................               9

III. General Information for the Bidder................................................................              40

 IV. Application Format................................................................................              48

  V. Evaluation Criteria...............................................................................              53

 VI. Review Process....................................................................................              59
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APPENDICES:

     Appendix A - Income Guidelines
     Appendix B - Advisory Memoranda
     Appendix C - University of Rochester
                    Final Report to Legislature
     Appendix D - Quarterly Enrollment Report
     Appendix E - Benefit Package
     Appendix F - Procedures and Requirements for Filing
                    of Rates and Rate Filing Guidelines
     Appendix G - Reporting Requirements
     Appendix H - Model Application
     Appendix I - New York State Standard Clauses (Appendix A)
                   for all New York State Contracts
     Appendix J - Electronic Billing Process
     Appendix K - Budget Forms
     Appendix L - Bidder's Summary of Proposal
     Appendix M - Standard Contract/Bid Insert Form
                   Stock Item Specification Form

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I. INTRODUCTION

      A. PURPOSE

                  The New York State Department of Health (DOH) is issuing this
            Request for Proposal (RFP) to voluntarily select and contract with
            organizations to provide health insurance coverage, through a
            managed care product, to eligible New York State children under the
            Child Health Plus program. The New York Health Care Reform Act of
            1996 (HCRA of 1996) has expanded the eligibility of the current
            program to include children under the age 19 and added inpatient
            benefits.

                  All insurers are eligible to participate in the Child Health
            Plus Program. All New York State Medicaid managed care providers are
            strongly encouraged to respond to this RFP. It is the goal of the
            DOH that every child have a medical home, therefore managed care
            products need to be available to all eligible children. The benefits
            to insurers of creating a natural linkage between the Child Health
            Plus program and Medicaid managed care would include not only
            seamless coverage for members of that insurer but also increased
            enrollment for the plans.

                  Improving the health status of New York State's children is
            one of DOH's highest priorities. An important way to improve child
            health is by increasing access to primary and preventive care. New
            York State is taking steps to improve access to care by taking
            advantage of key opportunities: the reforming of the State's
            Medicaid Program to a managed care system; and reforming the State's
            hospital reimbursement methodology so that in addition to
            reimbursing hospitals directly for uncompensated care, the State is
            subsidizing health insurance for children of low income families
            which will emphasize preventive care.

                  New York is committed to improving the health of children. Low
            income children are at particular risk for illness and injury that
            affect their health status. In New York State, children of low -
            income families, including children on Medicaid, continue to be
            over-represented in infant mortality and low birthweight statistics.
            These children are more likely to receive care in emergency room
            settings for primary health care problems, lack a primary care
            provider, and become hospitalized for conditions (e.g. asthma) which
            are potentially preventable with high quality ambulatory care. Data
            show that these children are also more likely to be less than fully
            immunized, suffer

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            preventable infectious diseases, and be exposed to toxins such as
            lead.

                  The health care system in New York State is designed to be
            proactive, providing children with the health care that focuses on
            prevention so that they can lead healthier lives. Under the Child
            Health Plus Program, children will have a "medical home" with a
            primary care provider who will coordinate his or her health care as
            part of a "seamless system", including referrals to specialists,
            when appropriate.

                  In order to promote the objective of "seamless coverage" the
            DOH is currently working to develop a joint application process for
            Medicaid, Child Health Plus, and the Special Supplemental Food
            Program for Women, Infants, and Children (WIC). This joint
            application will also have an objective of simplifying
            administrative processes for both patient and providers.

                  Children who enroll in Medicaid or Child Health Plus may
            experience changes which make them ineligible for a program.
            "Seamless coverage" would allow children the ability to move between
            insurance programs without changing providers. The children would
            have access to the same provider network, regardless of the payer
            (Medicaid or Child Health Plus).

                  Other DOH projects which are currently underway which focus on
            a goal of improving children's health include, but are not limited
            to, the following:

            -     Electronic Birth Certificates

                  Currently underway in DOH is the implementation of a system of
                  electronic reporting of birth certificate information. This
                  system has a goal of simplifying while expediting
                  bi-directional transfer of information between DOH and health
                  care providers.

                  Currently, more than 90% of hospitals (excluding New York
                  City) report births directly to DOH. Nearly that percentage of
                  New York City hospitals report electronically to the New
                  York City Department of Health. The NYC DOH then forwards its
                  data, once it has been validated, to the State DOH.

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            -     Immunization Registries

                  The development of a prototype child immunization registry is
                  currently underway. This registry will build upon the
                  electronic birth certificate data base to allow providers to
                  have access to the immunization status of their pediatric
                  patients.

                  DOH currently supports six regional consortia engaged in
                  designing and promoting the electronic recording of
                  immunization status in their area. Over time, these regions
                  are expected to interconnect and begin to include the rest of
                  the State as well. New York City currently mandates provider
                  participation in an immunization registry.

            -     Lead Screening

                  The DOH Lead Poisoning Prevention Program has been successful
                  in integrating blood lead screening as part of primary health
                  care for children. More children are being appropriately
                  screened within physicians' offices.

                  In summary, in order to improve the health outcomes of New
            York State's children, there must also be a corresponding increase
            in access to health care for children of the working poor who are
            neither eligible for Medicaid nor covered by health insurance
            through their employers. The expansion of the Child Health
            program, along with other State initiatives both present and future,
            demonstrate the State's commitment to creating a seamless system for
            children to access health services.

      B.    BACKGROUND OF THE CHILD HEALTH PLUS PROGRAM

                  The current Child Health Plus program provides a subsidized,
            primary and preventive health insurance program for uninsured and
            underinsured eligible children residing in New York State that are
            under the age of 17 (after January 1, 1997, children under the age
            of 19); not eligible for Medicaid; and who lack equivalent health
            care coverage. Children in households with gross incomes equal to or
            less than 222 percent of gross federal poverty levels are eligible
            for a premium subsidy under Child Health Plus (please refer to the
            income guideline chart in Appendix A). Families above these income
            guidelines are able to

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      purchase Child Health Plus but do not receive a premium subsidy from New
      York State. Equivalent coverage is defined in the program's advisory
      memoranda which is enclosed as Appendix B.

      C.    LEGISLATIVE AUTHORITY

            1.    New York's Health Care Reform Act of 1996

                        Legislation enacted as part of the New York Health Care
                  Reform Act (HCRA) of 1996 continues the Child Health Plus
                  program through December 31, 1999 and expands the program as
                  follows:

                  -     from July 1, 1996 through December 31, 1996 provides
                        benefits for eligible children under the age of 17;

                  -     effective January 1, 1997, children under the age of 19
                        who meet other eligibility requirements are eligible to
                        participate in the program;

                  -     inpatient care will be added as a covered benefit in
                        1997; and

                  -     program funding has been significantly increased to
                        allow for greater participation of the eligible
                        population and the expanded benefit package.

            2.    LEGISLATIVE HISTORY - CHILD HEALTH PLUS

                        In 1990, Chapters 922 and 923 of the Laws of 1990
                  (Article 25 of the Public Health Law Section 2510 and 2511)
                  authorized the Commissioner of Health, in consultation with
                  the Superintendent of Insurance, to establish a statewide
                  program to provide subsidized outpatient health insurance for
                  children under age 13 in low income families. Funding for the
                  program was limited to $20 million per year. The Department
                  currently contracts with 15 insurers to provide statewide
                  coverage for the program. Eligible children began receiving
                  coverage through the Child Health Plus program in August,
                  1991. The legislation also authorized the Commissioner of
                  Health to contract with qualified organizations for purposes
                  of public education, outreach and recruitment of children. Two
                  marketing and outreach organizations were selected through a
                  RFP process.

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                  Chapter 731 of the Laws of 1993 continued the Child Health
            Plus program through December 31, 1995 and increased funding for the
            program to $120 million for the two year period. Under this
            legislation, contracts with existing insurers, and outreach and
            marketing contractors for Child Health Plus, were extended through
            1995. The legislation required that the Department implement
            measures' to perform an annual review of the participating insurer's
            enrollment and recertification procedures. In addition, the
            Department was required to conduct a comprehensive evaluation of the
            implementation and effectiveness of the Child Health Plus program. A
            RFP for the evaluation of the program was issued in May, 1994. The
            University of Rochester, Child Health Studies Group, was selected as
            the contractor. A summary of the final report which was submitted to
            the Governor and Legislature in 1996 is enclosed as Appendix C.

                  Subsequent program legislation was enacted in 1994 and 1995
            that expanded Child Health Plus to eligible children under age 16,
            continued contracts with existing insurers and required a RFP for
            continuing marketing and outreach activities be issued. The
            program's two existing marketing and outreach contractors were the
            sole bidders and were awarded contracts to continue this activity.

      D.    ALLOCATION AND FUNDING

                  Provisions established through HCRA of 1996 provide that the
            Child Health Plus program shall be financed through the Health Care
            Initiatives Pool.

                  Statewide allocations are available for the program in the
            following amounts:

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January 1, 1997 - December 31, 1997      $109M
January 1, 1998 - December 31, 1998      $150M
January 1, 1999 - December 31, 1999      $207M
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                  It is expected that the contract period will be May 1, 1997
            through December 31, 1999. Any extension of the contract period is
            dependent upon continuation of the Child Health Plus program by
            legislation and allocation of funds.

      E.    PROGRAM GOAL AND OBJECTIVES

                  The program goal for Child Health Plus is to provide access to
            comprehensive inpatient and outpatient health care services to low
            income children by removing financial barriers and providing a
            medical home through a managed care product.

                  Child Health Plus has the following objectives:

            -     to improve the health status of children participating in the
                  program by providing a "medical home";

            -     to provide primary, preventive, outpatient and inpatient
                  health insurance coverage to low income children by removing
                  financial barriers to purchasing such coverage through an
                  individual subsidy program;

            -     to increase children's access to primary comprehensive and
                  preventive health care services; and

            -     to reduce and more effectively target bad debt and charity
                  care expenditures in New York State.

      F.    ENROLLMENT TRENDS

                  The Child Health Plus Program is growing at a rapid rate and
            is receiving a great deal of attention as a large-scale statewide
            program which offers all children access to affordable health
            insurance coverage. It is anticipated that enrollment in the Child
            Health Plus program will continue to be strong and constant,
            increasing at a steady rate each year. Since March, 1996, enrollment
            in the program has been increasing at a steady rate with
            approximately 1,500 new enrollees per month. With the addition of
            older children, the Department expects this trend to increase.

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                                  [BAR CHART]

                             [PLOT POINTS TO COME]

            Effective January 1, 1997, the age eligibility will be expanded to
      include children age 16 through 18, thereby adding a new population to the
      current enrollment. During 1997, inpatient care will also be added as
      covered benefit.

            Figure 1 is a chart depicting enrollment in the program since 1992,
      and the projected enrollment of the age 0-14 and age 15-18 year categories
      through 1999. Figure 1 depicts that, as of June, 1996, over 106,000
      children were enrolled in Child Health Plus. The latest quarterly
      enrollment report with enrollment by age and income level is enclosed and
      appears as Appendix D.

            An evaluation of the Child Health Plus Program recently completed by
      the Rochester Child Health Studies Group, found that the Child Health Plus
      program has had beneficial effects on improving access to health care,
      utilization of primary care services, and on some measures of quality of
      care, to a large number of eligible children. It was also found that
      Hispanic and African American children, and children in the

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      lowest eligible incomes levels were slightly under-represented in the
      Child Health Plus population. It is very important in future enrollment
      efforts that these populations be effectively reached as part of an
      aggressive community outreach effort.

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II.   EXPANDED PROGRAM DESIGN

      A.    ELIGIBLE ORGANIZATIONS

                  Organizations eligible to submit proposals for participation
            in Child Health Plus are the following:

            -     a commercial insurance company licensed under New York State
                  Insurance Law; or

            -     a corporation or health maintenance organization licensed
                  under Article 43 of the Insurance Laws; or

            -     a health maintenance organization certified under Article 44
                  of the New York State Public Health Law; or

            -     a comprehensive health service plan operating under the
                  regulations of the Department of Health.

      B.    ELIGIBILITY CRITERIA

                  A child is eligible for a subsidy payment if the following
            criteria are met:

            -     the child is a resident of New York State;

            -     the child is not eligible for medical assistance (Medicaid);

            -     the child does not have equivalent health insurance coverage;

            -     the child resides in a household having a gross household
                  income at or below 222% of the non-farm gross federal income
                  official poverty level (as defined and annually revised by the
                  U.S. Office of Management and Budget); and

            -     the child is a less than 19 years of age.

                  The RFP has stated all references to the eligibility
            thresholds in terms of gross income levels, as enrollment in the
            Child Health Plus program will be determined based upon gross income
            levels. The 1996 monthly and annual net and gross income thresholds
            are presented in Appendix A.

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                  The approved organization must establish a means test (income)
            for assuring that all enrollees meet defined eligibility criteria.
            There will be no resource test (asset) required for program
            eligibility.

                  The insurer is responsible for obtaining and maintaining all
            documentation necessary to make an eligibility determination.
            Detailed eligibility criteria are contained in Appendix B. Some
            examples of appropriate documentation are as follows:

            -     Income

                  -     annual federal and State tax return statements;

                  -     paycheck stubs or other documentation of income;

                  -     written documentation of income by employer; and/or

                  -     attestation of Self-Declaration of Income (Department of
                        Health Form which can be found in Appendix B).

            -     Age

                  -     birth certificate of enrolled;

                  -     passport or Visa;

                  -     school record which documents a child's birthdate;

                  -     religious certificate (i.e., baptismal papers); and

                  -     signed affidavit stating witness of birth.

            -     Equivalent Insurance

                  -     documentation of other insurance coverage.

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            -     Residency

                  -     current school records, utility bills, or any mail
                        addressed to the individual which has been postmarked.

                  A 60 day presumptive period of eligibility is available to
            applicant children as a means of providing services under Child
            Health Plus when a child appears eligible for the program, but,
            pertinent documentation is lacking. The insurer performs an initial
            review of the child's age, family's gross income, residency, and
            health care coverage, and from the completed application determines
            whether the child appears eligible. If one or more pieces of the
            documentation to support these variables is not submitted with the
            application, the family is allowed up to 60 days to submit the
            additional material or the child is disenrolled from the program.
            Only one period of presumptive eligibility per child is allowed. DOH
            will reimburse the insurer for the subsidy of a presumptively
            enrolled child if the child is later found to be ineligible when the
            missing documentation is submitted.

                  The period of eligibility means that period commencing on the
            first day of the month in which the child is covered by the insurer
            and ending on the last day of the month in which the child's
            coverage ceases. All applications must be approved prior to the
            effective date of enrollment as there is no retroactive enrollment
            in Child Health Plus.

      C.    BENEFITS

                  Child Health Plus insurers will be required to provide a
            uniform benefit package as part of their managed care product.

                  Included in the current benefit package, which was mandated
            by prior legislation (Chapters 922 and 923 of the Laws of 1990) are:
            well-child care; immunizations; x-ray and laboratory tests;
            outpatient/ambulatory surgery; diagnosis and treatment of accident,

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            illness and injury; emergency care; prescription drugs; outpatient
            treatment for alcoholism and substance abuse; short-term
            therapeutic services such as chemotherapy, hemodialysis, radiation
            therapy, occupational therapy and physical therapy; diabetic
            supplies; diabetic education; and nutritional supplements.

                  The 1997 enhanced benefit package will include inpatient care
            (excluding inpatient mental health substance abuse or alcohol
            treatment) as a covered benefit as mandated by HCRA of 1996. The
            expanded benefit package will also include limited durable medical
            equipment (DME) and outpatient mental health visits (up to 20 per
            year as part of the 60 visit maximum for outpatient alcohol and
            substance abuse) and home visits when in lieu of inpatient
            hospitalizations.

                  A detailed description of the benefit package is included in
            Appendix E. Please note, benefits provided under Child Health Plus
            are secondary to any other plan of insurance or benefit program
            under which an eligible child may have coverage. The insurer must
            have any primary coverage pay any applicable portion of a child's
            medical cost in the first instance.

                  Each provider must follow the well-child care guidelines
            established by the American Academy of Pediatrics and the
            immunization recommendations as delineated by The New York State
            Recommended Childhood Vaccination Schedule which are enclosed as
            part of Appendix.

      D.    CO-PAYMENTS

                  There will be a $2 co-payment required for all physician
            visits, except those provided on an inpatient basis, for well child
            care, or as otherwise prohibited by insurance law. A $1 to $3
            co-payment also can be charged for prescriptions and nutritional
            supplements as defined in the benefit package. Insulin has no
            co-payment. A $35 co-payment for failure to notify an insurer within
            24 hours of emergency room use and/or inappropriate emergency room
            visits

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            may be charged. No other co-payments are allowed and there are no
            deductibles for State subsidized children.

      E.    PREMIUMS

                  Insurance premiums that are submitted with this proposal will
            be reviewed by the Commissioner of Health along with the New York
            State Insurance Department prior to approval. The premium
            requests submitted should be valid at least through December 31,
            1997. For premium adjustments that may be required January 1, 1998
            and beyond, the insurer will be required to submit an application to
            DOH and the State Insurance Department for approval at least ninety
            (90) days prior to the requested effective date of such coverage.

                  In developing the premium proposal, an insurer should reflect
            adjustments for children under age one and pregnant women who will
            be eligible for Medicaid coverage. Because of expanded Medicaid
            eligibility rules for children under age one and pregnant women, it
            is expected that very few, if any, children under age one and
            pregnant women who are otherwise eligible for a State subsidy (99%
            of current enrollees) would be covered through the Child Health Plus
            program.

                  Since legislation also requires that the Child Health Plus
            benefit package be available to children who do not qualify for a
            premium subsidy, insurers will need to make adjustments to the
            premium structure that reflect utilization and cost for this
            population. The Child Health Plus program experience indicates that
            less than 600 children, who do not receive a premium subsidy, art
            currently enrolled. This pattern has remained constant throughout
            the life of the program and is expected to continue.

                  The premium rate filing should follow the format as set forth
            in 11 NYCRR Section 52.40 and the rate filing guidelines for the
            Child Health Plus insurance plan which can be found as Appendix F.

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      F.    GEOGRAPHIC AND COVERAGE PARAMETERS

                 At minimum, the plan must meet the following parameters:

            -     The plan must include coverage for subsidized and
                  non-subsidized children;

            -     The plan must propose to provide coverage in at least one
                  county. (Bidders may propose and are strongly encouraged to
                  cover more than one county or the entire State but not partial
                  counties. The Department reserves the right to waive this
                  requirement for portions of a county based upon unique needs
                  of that county);

            -     DOH reserves the right to limit a bidder's requested service
                  area; and

            -     DOH reserves the right to limit at it's own discretion, the
                  amount of available funding to a given insurer taking into
                  account total approved insurer proposals and funding
                  available.

      G.    SCHOOL-BASED HEALTH CENTERS

                  A number of school districts throughout the State have
            established school-based health centers to provide medical and/or
            behavioral health services to their students.

                  For year one of the program, health plans are encouraged to
            contract with school-based health centers, if such centers are
            operating within their borough/county. Plans should seek to contract
            with every center in their borough/county that wishes to participate
            as a network provider.

                  As another example of the State's effort to create a "seamless
            system", starting in year two of the program, the State will require
            these school-based health centers and health plans to contract with
            each other. The State is developing a model contract for this
            purpose and will make it available to both parties in the near
            future. Plans and schools may use the model contract, which will
            include specific language regarding

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            prior authorization procedures, payment and reporting requirements.

      H.    PRESUMPTIVE ELIGIBILITY PROVIDERS

                  Since 1990, New York's Medicaid program has provided access to
            prenatal care for pregnant women by allowing certain qualified
            health care providers to perform presumptive eligibility
            determinations at the time of first contact with the woman. The
            qualified provider assists the woman in completing the appropriate
            application forms and submitting these forms to the local Department
            of Social Services (LDSS), which then determines the woman's
            eligibility for Medicaid. There are currently about 175 presumptive
            eligibility providers located in various areas of the State.

                  Health plans must develop linkages with these providers (if
            geographically available) to facilitate referral to prenatal care
            for pregnant women. Plans need not develop linkages with every
            presumptive eligibility provider in the borough/county, but must
            include a sufficient number. In order to assure statewide coverage
            by insurers, DOH reserves the right to accept proposals from
            insurers who do not meet the above stated criteria for linkages with
            presumptive eligibility providers, if that insurer explains in
            detail why they do not meet the criteria and why that does not
            jeopardize the goals of the Child Health Plus program.

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      I.    FAMILY CONTRIBUTION TO THE PREMIUM

                  It is the insurer's responsibility to collect the family's
            portion of the premium for partially subsidized children. The
            schedule of maximum liability, by family income level, is as
            follows:

                        Child Health Plus Sliding Scale
                Family Contribution Schedule for Basic Coverage

<TABLE>
<CAPTION>
  GROSS FAMILY
INCOME (% OF FPL)              REQUIRED FAMILY CONTRIBUTION
-----------------              ----------------------------
<S>                    <C>
Less than 120%                        No Contribution Required
  120-159%             $ 9/month per child up to a family maximum of $36/month
  160-222%             $13/month per child up to a family maximum of $52/month
   + 222%                                 Full premium
</TABLE>

      At least one month of a family's share of the premium for each applicant
must be paid at the time of application. The balance due will be billed on a
monthly basis one month before the period it covers to allow for a 30 day grace
period prior to the first day of the effective month of coverage. Any child for
whom the family share is not paid within the period will be disenrolled.

      As indicated in the above chart, families above 222% of the FPL will be
able to purchase Child Health Plus coverage for their children, but New York
State will not make any subsidy payment toward their premium costs. The cost of
premium for non-subsidized children must be the same as for subsidized children.
However, it is important to note that the non-subsidized number of enrollees in
the current program is a very small percentage of the total population of
enrollees (it represents less than 1/2 of 1%).

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      J.    OTHER PROGRAM ISSUES

            I.    Standards for Provider Participation and Enrollment

                  a.    Provider Network

                        (1)   General

                                    Health plans must establish and maintain
                              provider networks with sufficient numbers of
                              providers and in geographically accessible
                              locations for the populations they serve. Health
                              plan networks must contain all of the provider
                              types necessary to furnish the prepaid benefit
                              package, including: hospitals, physicians (primary
                              care and specialist), mental health and substance
                              abuse providers, allied health professionals,
                              pharmacies, DME providers, etc. Health plans shall
                              not include in their networks, for purposes of
                              serving Child Health Plus enrollees, any medical
                              provider who has been sanctioned by Medicare or
                              Medicaid if the provider has, as a result of the
                              sanctions, been prohibited from serving Medicaid
                              clients or receiving medical assistance payments.

                                    To assure statewide coverage by insurers,
                              the Department of Health shall reserve the right
                              to accept proposals from insurers whose provider
                              network may differ from the following
                              requirements. In this instance, however, the
                              bidder must explain in detail how their proposal
                              differs and the reasons for such difference as
                              well as be able to support that such difference
                              does not jeopardize the goals of the Child Health
                              Plus program.

                        (2)   Physicians

                                        All network physicians must meet at
                              least one of the following standards:

                              -     be Board-Certified or -Eligible in their
                                    area of specialty;

                              -     have completed an accredited residency
                                    program; and

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                              -     have admitting privileges at one or more
                                    health plan network hospitals.

                        (3)   Primary Care Providers

                              (a)   Responsibilities

                                          Health plans must allow each enrollee
                                    to select a primary care provider (PCP) and
                                    make an assignment if one is not chosen.
                                    Members must be offered a choice of at least
                                    three primary care providers. Staff or group
                                    practice or center-based models may require
                                    that enrollees first select a site (clinic
                                    or health center) and subsequently select a
                                    PCP from among those available at the site.

                                          Primary care providers will serve as
                                    each child's initial and most important
                                    point of interaction with the provider
                                    network. To qualify as a PCP, a provider
                                    must practice at least two days per week (16
                                    hours) at each of his/her "primary care"
                                    sites. For example, if a provider has three
                                    office locations and practices 16 hours per
                                    week at location #1, 16 hours per week at
                                    location #2, and 8 hours per week at
                                    location #3, he/she could be offered as a
                                    PCP at the first two sites, but not at the
                                    third.

                                          In addition to meeting office hour
                                    standards, PCPs also must:

                                    -     deliver medically necessary primary
                                          care services;

                                    -     make referrals for specialty care and
                                          other medically necessary services,
                                          whether or not they are included in
                                          the health plan's prepaid benefit
                                          package. However, the Child Health
                                          Plus program will not be responsible
                                          for payment of

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                                          these referrals if outside the covered
                                          benefit package;

                                    -     coordinate each child's overall course
                                          of care with out-of-network providers
                                          to the extent possible; and

                                    -     maintain a comprehensive medical
                                          record for the member.

                              (b)   Eligible Specialties

                                          Health plans generally must limit
                                    their PCPs to the following primary care
                                    specialties:

                                    -     Family Practice

                                    -     General Practice

                                    -     General Pediatrics

                                    -     General Internal Medicine

                                          Exceptions to these limits are
                                    described below.

                              (c)   OB/GYN Providers

                                          Health plans, at their option, may
                                    permit OB/GYN providers to serve as PCPs,
                                    subject to DOH qualifications. Plans must
                                    also permit direct access for female members
                                    to obstetrics and gynecology services
                                    pursuant to public Health Law Section 4406
                                    b(1).

                              (d)   Registered Physician's Assistants and Nurse
                                    Practitioners

                                          Health plans may use nurse
                                    practitioners and physician assistants as
                                    PCPs, subject to their scope of practice
                                    limitations

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                                    under New York State Law (as put forth
                                    in Article 139 of the Education Law and
                                    Sections 94.1 and 94.2 of Title 10 of New
                                    York Codes, Rules and Regulations -
                                    Health.).

                              (e)   Medical Residents

                                          Health plans may use PGY2, PGY3 and
                                    PGY4 physicians who are enrolled in the
                                    Designated Priority Programs (formerly known
                                    as "upweighted" primary programs) in primary
                                    care as part of their PCP delivery system
                                    subject to the following guidelines:

                                    -     each resident team shall be
                                          comprised of no more than four
                                          physicians in training and must be
                                          supervised by an attending physician
                                          (please refer to the next section for
                                          additional information on PCP teams);

                                    -     PGY2s practice at least 8 continuity
                                          of care hours per week at a primary
                                          site; PGY3s and PGY4s practice at lest
                                          12 continuity of care hours per week
                                          at a primary site;

                                    -     the hours that the attending
                                          physician spends in supervision cannot
                                          also be counted as patient care hours
                                          when determining capacity;

                                    -     the following resident to enrollee
                                          ratios for calculating capacity shall
                                          apply:

                                          -  PGY4 -- 1:1,500

                                          -  PGY3 -- 1:1,125

                                          -  PGY2 -- 1:750

                                          (FTE=40) hours). For example, a PGY2
                                          who is a licensed physician and is in
                                          a designated priority program in
                                          primary care that practices 10
                                          continuity of care hours per

                                       20
<PAGE>

                                          week at a primary site can be a PCP
                                          and would be allowed to impanel 188
                                          enrollees (i.e. 10/40 times 750).

                                    -     residents comprising a team must share
                                          the caseload in a manner which assures
                                          care coordination;

                                    -     residents must comply with all
                                          health plan requirements for prior
                                          authorization, utilization review, and
                                          quality assurance and medical
                                          management of plan members; and

                                    -     members must be granted
                                          access to the attending physician if
                                          they request an appointment with this
                                          individual.

                              (f)   Primary Care Provider Teams

                                          Health plans with clinic provider
                                    sites may designate teams of physician/nurse
                                    practitioners to serve as PCPs for members
                                    receiving primary care at those sites. Such
                                    teams may include no more than four
                                    practitioners (or four medical residents and
                                    an attending physician) and, when a member
                                    chooses or is assigned to a team, one of the
                                    practitioners must be designated as "lead
                                    provider" for that member. In the case of
                                    teams comprised of medical residents under
                                    the supervision of an attending physician,
                                    the attending physician must be designated
                                    as the lead physician.

                              (g)   Distance/Travel Time for Primary Care

                                          Health plans must offer every member
                                    the opportunity to select from at least
                                    three PCPs within the following
                                    distance/travel time standards (by car or
                                    public transportation):

                                       21
<PAGE>

<TABLE>
<S>                     <C>
Normal Conditions,      20 miles;
    Primary Roads:      30 minutes

     Mountainous /      15 miles
  Secondary Roads:

      Flat Areas /      25 miles
        Interstate
         Highways:

      Metropolitan      30 minutes by
            Areas:      public
                        transportation
</TABLE>

                                          Enrollees may, at their discretion,
                                    select plan participating PCPs located
                                    farther from their homes. If three PCPs are
                                    not located within such a distance, the plan
                                    must include the next closest PCPs
                                    available.

                              (h)   Primary Care Provider Status Change

                                          Health plans must notify their members
                                    of any of the following PCP changes within
                                    thirty (30) business days of the effective
                                    date of change:

                                    -     office address/telephone number
                                          change;

                                    -     office hours change; and

                                    -     separation from plan (termination
                                          from network).

                        (4)   Hospitals

                                    Health plans must establish hospital
                              networks capable of furnishing the full range of
                              tertiary services to members. Plans must ensure
                              that all members have access to at least one
                              general acute care hospital within forty-five (45)
                              minutes travel time (by car or public
                              transportation) from the member's residence,
                              unless none are located within such a distance. If
                              none are located within forty-five (45) minutes
                              travel time, the plan must include the next
                              closest site in its network.

                                       22
<PAGE>

                        (5)   Pharmacies

                                    Health plans must include network pharmacies
                              in sufficient numbers to meet the following
                              distance/travel time standards:

                              -     normal conditions/primary roads - 20
                                    miles/30 minutes

                              -     mountainous/secondary roads - 15 miles

                              -     flat areas/interstate highways - 25 miles

                              -     metropolitan areas - 30 minutes by public
                                    transportation

                                    Health plans also must contract with
                              twenty-four (24) hour pharmacies and must ensure
                              that all members have access to at least one such
                              pharmacy within thirty (30) minutes travel time
                              (by car or public transportation) from the
                              member's residence, unless none are located within
                              such a distance. If none are located within thirty
                              (30) minutes travel time, the plan must include
                              the next closest site in its network. For certain
                              conditions, such as PKU, and cystic fibrosis,
                              plans are further encouraged to make pharmacy
                              arrangements with specialty centers treating these
                              conditions, where such centers are able to
                              demonstrate quality and cost effectiveness.
                              Finally, plans are encouraged to make use of mail
                              order prescription deliveries, where clinically
                              appropriate and desired by the member.

                        (6)   Home Health Providers

                                    Health plans must contract with and use
                              certified home health agencies (CHHAs) for
                              provision of home health services to enrollees in
                              each county. CHHAs may in turn subcontract with
                              licensed home health care agencies, but plans must
                              restrict their contracting to the CHHAs
                              themselves.

                                       23
<PAGE>

                        (7)   Laboratory

                                    Health plans must restrict their laboratory
                              provider network to entities having either a CLIA
                              certificate of registration or a CLIA certificate
                              of waiver.

                        (8)   Notification Regarding Network Changes

                                    Health plans must notify the State in a
                              timely manner of any significant changes in
                              network composition that negatively affect member
                              access to services (for example, an inability to
                              adhere to geographic standards, or a failure to
                              meet appointment standards). Such changes may be
                              grounds for contract termination.

                        (9)   Service Accessibility

                              (a)   General

                                          The State considers service
                                    accessibility to be one of the key
                                    determinants of quality of care and overall
                                    member satisfaction. Accordingly, health
                                    plans will be expected to take all necessary
                                    measures to ensure compliance with the
                                    access standards issued below. The State
                                    will actively monitor health plan
                                    performance in this area and will take
                                    prompt corrective action if and where
                                    problems are identified.

                              (b)   Twenty-Four (24) Hour Coverage

                                          Health plans must provide coverage to
                                    members, either directly or through their
                                    PCPs, on a twenty-four (24) hours a day,
                                    seven (7) days a week basis. Health plans
                                    must also instruct their members on what to
                                    do to obtain services after business hours
                                    and on weekends.

                              (c)   Telephone Access

                                          Health plans may require their PCPs to
                                    have primary responsibility for serving as
                                    an after hours "on-call"

                                       24
<PAGE>

                                    telephone resource to members with medical
                                    problems. If the PCP performs this function,
                                    he/she cannot be permitted to "sign-out"
                                    (i.e., automatically refer calls) to an
                                    emergency room.

                                          Whether or not the plan assigns
                                    primary responsibility for after hours
                                    telephone access to PCP, it also must have a
                                    twenty-four hour toll free telephone number
                                    for members to call which is answered by a
                                    live voice (answering machines are not
                                    acceptable). This number need not be stafedf
                                    by the Member Services Department and need
                                    not be equipped to respond to non-medical
                                    inquiries.

                              (d)   Emergency Services

                                          Health plans are prohibited from
                                    requiring members to seek prior
                                    authorization for services in a medical or
                                    behavioral health emergency. Plans must
                                    inform their members that access to
                                    emergency services is not restricted that if
                                    the member experiences a medical or a
                                    behavioral health emergency, he/she may
                                    obtain services from a non-plan physician or
                                    other qualified provider, without penalty.
                                    However, health plans may require members to
                                    notify the plan or their PCPs within a
                                    specified time after receiving emergency
                                    care and may require members to obtain prior
                                    authorization for any follow-up care
                                    delivered pursuant to the emergency.

                              (e)   Days to Appointment

                                          Health plans must abide by the
                                    following appointment standards:

                                    -     urgent medical or behavioral problems
                                          within 24 hours;

                                    -     non-urgent "sick visits" within 48 to
                                          72 hours, as clinically indicated;

                                       25
<PAGE>

                                    -     routine, non-urgent or preventive care
                                          visits within four weeks; and

                                    -     in-plan, non-urgent mental health or
                                          substance abuse visits within two
                                          weeks.

                        (10)  Second Opinions for Surgical Procedures

                                    Health plans must allow members to obtain
                              second opinions within the plan's network of
                              providers for surgical procedures.

                        (11)  Member Services Function

                                    Health plans must operate a member services
                              function during regular business hours. At a
                              minimum, the Member Services Department should be
                              staffed at a ratio of at least one member service
                              representative for every 4,000 members. Member
                              services staff must be responsible for the
                              following:

                              -     explaining health plan rules for obtaining
                                    services and assisting members to make
                                    appointments;

                              -     assisting members to select or change PCPs;
                                    and

                              -     fielding and responding to member questions
                                    and complaints, and advising members on the
                                    availability of their right to file a
                                    complaint with the State DOH.

                                    Health plans with both Child Health Plus and
                              non-Child Health Plus enrollment are encouraged to
                              identify and train dedicated staff within the unit
                              to deal with requirements of the Child Health Plus
                              program.

                        (12)  Provider Services Function

                                    Health plans must operate a provider
                              services function during regular business hours.
                              At a minimum, provider services staff must be
                              responsible for the following:

                                       26
<PAGE>

                              -     assisting providers with prior authorization
                                    and referral protocols;

                              -     assisting providers with claims processing
                                    procedures; and

                              -     fielding and responding to provider
                                    questions and complaints.

            2.    Quality Improvement and Medical Management

                  a.    Internal Quality Improvement Program/Quality Assurance
                        Plan

                              Health plans must have internal quality assurance
                        programs and written quality improvement or assurance
                        plans (Quality Improvement Programs/Quality Assurance
                        Programs) for monitoring and improving the quality of
                        care furnished to members. Such plans must address all
                        of the following:

                        -     description of quality assurance committee
                              structure;

                        -     identification of departments/individuals
                              responsible for QAP implementation;

                        -     description of manner in which network providers
                              may participate in QAP;

                        -     credentialling/recredentialling procedures
                              (description below);

                        -     standards of care (description below);

                        -     standards of service accessibility;

                        -     medical records standards;

                        -     utilization review procedures (description below);

                        -     quality indicator measures and clinical studies
                              (description below);

                        -     quality assurance plan documentation methods; and

                        -     description of the manner in which quality
                              assurance/quality improvement activities are
                              integrated with other management functions.

                                       27
<PAGE>

                  b.    Credentialling/Recredentialling

                              Health plans must institute a credentialling
                        process for their providers that includes, at a minimum,
                        obtaining and verifying the following information:

                        -     evidence of valid current license and valid DEA
                              certificate, as applicable;

                        -     names of hospitals, HMOs, PHPs, and medical groups
                              which the provider has been associated;

                        -     reasons for discontinuance of such associations;

                        -     level of malpractice coverage;

                        -     pending professional misconduct proceedings or
                              malpractice actions and the substance of such
                              allegations;

                        -     substance of any findings from such proceedings;

                        -     sanctions imposed by Medicare or Medicaid;

                        -     names and relevant information of providers who
                              will serve as on-call designees for the provider
                              (applies to non-staff, group models only). Plans
                              must ensure that all on-call providers are in
                              compliance with plan credentialling standards,
                              including any non-participating providers serving
                              in this capacity;

                        -     attestation of provider as to validity of
                              information provided;

                        -     information from other HMOs or hospitals which
                              provider has been associated regarding
                              professional misconduct or medical malpractice,
                              and associated judgments/settlements, and any
                              reports of professional misconduct a by a hospital
                              pursuant to NYS Public Health Law Section 2803-E;

                        -     review of provider's physical site of practice;

                                       28
<PAGE>

                        -     review of provider's capacity to provide such
                              services, based on practice size and available
                              resources; and

                        -     National Practitioner Data Bank profile.

                              Health plans must also recredential their
                        providers at least once every two years. During such
                        recredentialling, plans should re-examine the items
                        covered during the initial credentialling, as well as:

                        -     complaints lodged against the provider by plan
                              members; and

                        -     result of chart audits and other quality
                              reviews.

            3.    Utilization Review Procedures

                        Health plans must develop and have in place utilization
                  review policies and procedures that include protocols for
                  prior approval and denial of services, hospital discharge
                  planning, physician profiling, and retrospective review of
                  both inpatient and ambulatory claims meeting pre-defined
                  criteria. Plans also must develop procedures for identifying
                  and correcting patterns of over- and under-utilization on the
                  part of their enrollees.

            4.    Medical Director's Office

                        Health plans must designate a medical director with
                  responsibility for the development, implementation, and review
                  of the internal quality assurance plan. The medical director's
                  position need not be full time but must include sufficient
                  hours to ensure that all medical director responsibilities are
                  carried out in an appropriate manner. Health plans also may
                  use assistant or associate medical directors to help perform
                  the functions of this office.

                        The medical director must be licensed to practice
                  medicine in the State of New York and must be board-certified
                  in his or her area of specialty. The specific responsibilities
                  of the medical director must include, but need not be limited
                  to the following:

                        -     overseeing the health plan's Quality Assurance
                              Committee;

                                       29
<PAGE>

                  -     overseeing the development and revision of clinical
                        standards and protocols;

                  -     overseeing the plan's prior authorization/referral
                        process for non-primary care services;

                  -     overseeing the plan's recruiting, credentialling and
                        recredentialling activities;

                  -     review potential quality of care problems and overseeing
                        development and implementation of corrective action
                        plans;

                  -     serve as a liaison between the plan and its providers,
                        and/or;

                  -     local public health representatives; and

                  -     available to the health plan's medical staff on a daily
                        basis for consultation on referrals, denials, and
                        complaints.

            5.    Electronic Billing

                        The selected organizations will be required to submit
                  monthly billing information electronically to the Department
                  of Health. An electronic mail account (E-Mail) must be
                  established with DOH in order to submit monthly billing files.
                  The files consist of individual records for each enrollee in
                  the program for that month. The individual record includes
                  such information as: the child's name, address, county, zip
                  code, date of birth, effective date of coverage, and premium
                  information. The required file lay-out and their definitions
                  are in Appendix G. Selected insurers will be provided with
                  instructions for establishing an E-Mail account with DOH.

                        In addition to the electronic files, the insurer must
                  submit an original signed voucher when claiming payment. If a
                  bidder cannot file electronically and meets the above
                  criteria, they will be eliminated from bidding. This is a
                  non-negotiable item. Monthly voucher bills shall be based on
                  the actual number of children eligible for a subsidy enrolled
                  in the program during the month for which payment is being
                  claimed. All adjustments shall include a listing by enrollee
                  of any change in enrollment occurring in that period.

                                       30
<PAGE>

                  All monthly voucher bills shall be submitted to the State no
                  later than the tenth business day of the month. The State
                  reserves the right to process vouchers received later than the
                  tenth business day of the month in a subsequent period. The
                  State shall notify the health care initiatives pool
                  administrator by the first day of the following month, or the
                  first business day following the first day of the following
                  month, if the first day falls on a weekend or holiday, to
                  reimburse the contractor for vouchers for which payment is
                  being claimed. However, vouchers shall not be submitted to the
                  State later than ninety (90) days after the ending date of the
                  period for which reimbursement is being claimed unless the
                  State has granted an extension for late submission of premium
                  billing and voucher.

            6.    Department of Health Advisory Memoranda

                        DOH issues, Advisory Memoranda clarifies policies that
                  are either legislated or are in response to questions or
                  issues raised by the insurers. Examples of past Memoranda
                  include: updating income guidelines, updating equivalent
                  coverage definition, explaining new legislated mandates, and
                  outlining new processes for verifying applicant income. When
                  issued, the insurers must comply with these Advisory
                  Memoranda. Copies of pertinent existing policy Advisory
                  Memoranda addressing policy issues are included in Appendix B.

            7.    Program Monitoring

                        To comply with legislation requiring the verification of
                  insurers' enrollment and recertification procedures, DOH
                  developed an on-site monitoring program. On-site monitoring
                  consists of at least one annual visit to each insurer to
                  review a random sample of individual enrollee's application
                  records. The insurers are notified in advance of the visit and
                  told which enrollment files are selected for the sample. A
                  report is generated to notify the insurer of any deficiencies
                  found or corrections needed. Periodic, focused desk reviews of
                  selected enrollment files are also performed.

                                       31
<PAGE>

            8.    Education

                        Some enrollees may not have experience participating in
                  a private, individual health insurance program. To aid these
                  enrollees, the enrollment process is to include an educational
                  component where new enrollees are oriented to the use of Child
                  Health Plus benefits. This educational component must inform
                  the enrollee how to select a provider, how to make an
                  appointment, what benefits are covered, how to obtain
                  emergency care, and how to obtain care when outside the
                  insurer's service area. Charges and payment procedures must
                  also be explained.

      K.    ENROLLMENT

            1.    Insurer Responsibility

                        Insurers will be responsible for enrolling children into
                  the Child Health Plus program. To do this, the insurer must:

                  -     market the Child Health Plus program to eligible
                        populations of children, in accordance with the
                        provisions established by DOH and explained under
                        sub-heading L of this Section;

                  -     distribute an application to the eligible population and
                        request the required documentation;

                  -     collect and evaluate applicant submitted documentation
                        of age, income, insurance status, and New York State
                        residency;

                  -     refer children who appear Medicaid eligible to the
                        Medicaid program;

                  -     submit names and addresses of household members of
                        applicants to DOH for comparison with tax records in
                        cases where the insurer has reasonable cause to believe
                        fraudulent income documentation has been submitted;

                  -     if the applicant is presumptively enrolled, request the
                        applicant to submit missing enrollment documentation
                        necessary to complete within 60 days. If the family
                        fails to provide documentation, the child's coverage is
                        terminated at the end of the 60 day; and

                                       32
<PAGE>

                  -     annual recertification of enrollee eligibility.

                        Specific program requirements and acceptable
                  documentation are given in Advisory Memoranda in Appendix B.

            2.    Transferring of Enrollees from Non-Continuing Insurers

                        Some current Child Health Plus insurers may not be
                  continuing in the program, or they may not be covering the
                  same service area. In these instances, children will need to
                  enroll with new insurers.

            3.    Recertification/Termination of Coverage

                        The Child Health Plus subsidy and coverage shall
                  terminate or not be renewed upon annual recertification for
                  the following reasons:

                  -     child reaches the age of 19;

                  -     family's gross income exceeds the eligibility criteria
                        (however the child may enroll as a non-subsidized
                        enrollee);

                  -     child becomes eligible for Medicaid;

                  -     child no longer resides in the service area of the
                        insurer; and/or

                  -     the child has equivalent coverage.

                        Children who "age out" of Child Health Plus are
                  disenrolled from the plan on the last day of the month in
                  which they reach 19 years. Conversion policies must be made
                  available to children who upon their 19th birthday are no
                  longer eligible for participation in Child Health Plus. If the
                  contractor is unable to offer a conversion policy from their
                  own organization then they must provide information on the
                  insurance options available with another organization to such
                  children. Such policies need not be identical to Child Health
                  Plus or be of the same premium cost. Recertification of income
                  eligibility, coverage under equivalent insurance, and New York
                  State residency must be performed on an annual basis by the
                  anniversary date of the child's enrollment. Children who are
                  found to be enrolled in Medicaid will be disenrolled from
                  Child Health Plus.

                                       33
<PAGE>

                        Children who do not submit required recertification and
                  appropriate documentation by the last day of the month prior
                  to the child's anniversary date, must be disenrolled from the
                  program.

                        Enrollees are required to notify insurers if their
                  circumstances change and they are no longer eligible for Child
                  Health Plus. These changes can include income changes where
                  they are no longer eligible for subsidy, equivalent coverage,
                  including Medicaid, or no longer residing in the service area
                  of the insurer.

                        The effective date for a child's enrollment shall be the
                  first day of the month. There will be no retroactive
                  enrollment of children. Disenrollment will be midnight on the
                  last day of a month.

            4.    Coordination with Medicaid Program

                        In order to encourage potentially Medicaid eligible
                  applicants to apply to Medicaid, Child Health Plus insurers
                  must refer applicants who appear to be Medicaid eligible to
                  their appropriate office for Medicaid eligibility
                  determination. Insurers will be required to screen all Child
                  Health Plus applicants for Medicaid eligibility. If other
                  information and/or documentation submitted by the family
                  suggests that the family may be eligible for medical
                  assistance, the insurer must refer the family to the Medicaid
                  program. The insurer is to provide each applicant referred to
                  the Medicaid program with a brochure (provided by the State)
                  describing the Medicaid program and application process.
                  Documentation of these referrals are required and reviewed at
                  the time of the site visit. It is anticipated that very few
                  cases referred to Medicaid, as a result of a screening, will
                  not be Medicaid eligible since the screening instrument used
                  is reliable and accurate. If children become eligible for
                  Medicaid while enrolled in Child Health Plus, they must be
                  disenrolled from the Child Health Plus program. The insurers
                  should be aware of the many Medicaid outstations where
                  families can apply for Medicaid. These "outstations" are found
                  in many hospitals and clinics and have facilitated the ease of
                  the application process.

                                       34
<PAGE>

                        To aid insurers in determining which Child Health Plus
                  applicants should be referred to Medicaid, DOH developed a
                  Medicaid referral form, which can be found in Appendix B.

                        The insurers will be responsible for referring the
                  family/child directly to the local DSS or outstation, who will
                  assist these families with applications to the Medicaid
                  program. Likewise, local DSS will refer families with eligible
                  children, who have been denied Medicaid or disenrolled from
                  Medicaid, to the Child Health Plus program.

                        Currently, Child Health Plus enrollees are compared to
                  the State's Medicaid enrollment files on a monthly basis to
                  determine dually enrolled children. Those children who are
                  enrolled in both programs are disenrolled from Child Health
                  Plus, provided they cannot supply proof they are not enrolled
                  in Medicaid. It is anticipated that this process will
                  continue.

                        The following chart identifies the income level for
                  Medicaid Coverage:

<TABLE>
<CAPTION>
INDIVIDUAL / AGE             NET FAMILY INCOME (FEDERAL POVERTY LEVEL %)
----------------             -------------------------------------------
<S>                          <C>
Pregnant women               <185% FPL
Children <1                  <185% FPL, without an asset test
Children <6                  <133% FPL, without an asset test
Children 6 - 12              <100% FPL, without an asset test
Children 13 - 19             At Medicaid income level, with an asset test
</TABLE>

            5.    Model Application

                        Each insurer will be allowed to use an application form
                  that is unique to their plan. However, the variables that are
                  identified in the Model Application (Appendix H) will need to
                  be collected. The final application is subject to approval by
                  the State Insurance Department.

                        Also, the Department is working to develop a joint
                  application process for Medicaid, Child Health Plus and
                  Special Supplemental Food Program

                                       35
<PAGE>

                  for Women, Infants and Children (WIC). This application will
                  be pilot tested and selected insurers will be expected to
                  participate in the demonstration project. When the joint
                  application is implemented statewide all insurers will be
                  required to use the application form. The application pilot
                  test project is projected to be September 1, 1997.
                  Implementation of the joint application is planned for January
                  1, 1998.

            6.    Subscriber Contract

                        Each insurer selected for participation in Child Health
                  Plus will be required to issue a subscriber contract to
                  program enrollees. The contract must be approved by the State
                  Insurance Department in conjunction with the Commissioner of
                  Health.

                        DOH has developed a model subscriber contract to assist
                  an insurer in designing its subscriber contract. The model
                  contract will be sent to all insurers who submit a Letter of
                  Intent to the Department, by December 23, 1996.

                  Insurers are not required to use the model. However, if an
            insurer does not use the model, care should be taken to ensure that
            the provisions adopted from the model accurately reflect that
            insurer's mode of operation.

                  It is not required that a draft subscriber contract be
            included in an insurers response to this RFP. The State Insurance
            Department and the DOH will contact each insurer selected for
            participation to detail how the insurer files the subscriber
            contract for approval.

      L.    COMMUNITY OUTREACH AND MARKETING

            1.    Previous Efforts

                        The Department has previously contracted with two
                  organizations to provide outreach and marketing for Child
                  Health Plus. Community outreach and marketing for the program
                  includes a telephone hotline to refer families to Child Health
                  Plus and/or Medicaid, printing and distributing of brochures
                  and posters, and conducting training sessions for interested
                  organizations. Additional activities include health fairs,
                  immunization drives, and the establishment of linkages with
                  schools and other community-based organizations.

                                       36
<PAGE>

                  a.    Growing Up Healthy Hotline

                              The Growing Up Healthy Hotline, a New York State
                        sponsored referral service, is an 800 telephone number
                        which refers callers to health and social programs.
                        Child Health Plus is one of the options available to
                        callers and many are referred to participating insurers
                        and/or to Medicaid. In 1995, the Growing Up Healthy
                        Hotline made over 2,500 referrals to Child Health Plus.

            2.    Requirements for the Future

                        The insurers are responsible for marketing the Child
                  Health Plus program in their service areas. To aid in the
                  outreach and marketing for the program, the Department of
                  Health will undertake a mass media marketing campaign and
                  contract with an organization to provide outreach and
                  marketing for the program.

                        Requirements for the future include the continuation of
                  what the marketing and outreach contractors established for
                  the program in the past (telephone hotlines to refer families
                  to Child Health Plus and/or Medicaid, distributing of
                  brochures and posters, and conducting training sessions for
                  interested organizations). Additional activities required
                  include health fairs, immunization drives, and the
                  establishment of linkages with schools and community-based
                  organizations.

                        Insurers must submit to the DOH a general plan of a
                  marketing program outline with their proposal along with a
                  complete description on how they expect to conduct community
                  outreach and marketing activities.

                        Insurers must develop a comprehensive plan of all
                  marketing and enrollment activities they will engage in during
                  the contract period. The plan must be submitted to the DOH
                  Child Health Plus contract manager for approval prior to
                  implementation. An informational brochure prepared by DOH will
                  be available for use by plans until plan-specific marketing
                  materials are approved and printed. Any subsequent change or
                  additions to an insurer's marketing plan must be submitted to
                  the DOH at least thirty (30) days prior to implementation and
                  must be approved by DOH prior to implementation of such plan
                  or change.

                                       37
<PAGE>

                        DOH will review and approve all marketing plans and
                  materials submitted by insurance plans.

                        Insurers may use radio, television, billboards,
                  newspapers, leaflets, brochures, yellow page advertisements,
                  Letters, posters and verbal presentations by marketing
                  representatives as well as health fairs and events to market
                  their product to eligible children.

                        All materials for radio, television, billboards, and
                  bus, subway and statewide/regional print advertisements must
                  be submitted to DOH for review and approval.

                        Insurers must use the DOH official Child Health Plus
                  logo on all marketing material, applications, and
                  correspondence.

                        Insurers may distribute marketing material in local
                  community centers and gathering places, markets, pharmacies,
                  hospitals, schools, health fairs and other areas where
                  potential beneficiaries are likely to gather. Door-to-door
                  distribution of material is not permitted.

                        Themes and materials for health fairs must be submitted
                  by the insurer to DOH for approval at least thirty (30) days
                  prior to the event.

                        Insurers may not offer incentives of any kind to Child
                  Health Plus recipients to join a health plan. Incentives are
                  defined as any type of inducement, either monetary or in-kind
                  which might reasonably be expected to result in the person
                  receiving it to join a plan. However, insurers may offer
                  nominal gifts of not more than five dollars ($5.00) in value
                  as part of a health fair or other promotional activity to
                  stimulate interest in the Child Health Plus program. These
                  nominal gifts must be given to everyone who requests them
                  regardless of whether or not they intend to enroll in the
                  plan.

                        All material to be used in a media campaign (television,
                  radio, billboards and subway and bus posters) directed at
                  encouraging enrollment in Child Health Plus in their plan must
                  be reviewed and approved by DOH at least 30 days prior to the
                  campaign.

                                       38
<PAGE>

                        The insurer may not offer financial or other kinds of
                  incentives to marketing representatives based on the number
                  enrolled in the plan.

                        The insurer may not discriminate against a potential
                  enrollee based on his/her current health status or anticipated
                  need for future health care. The insurer may not discriminate
                  on the basis of disability, or perceived disability of an
                  enrollee. Health assessment forms may not be used by plans
                  prior to enrollment. Once a plan has been chosen and a child
                  has been enrolled, a health assessment form may be used to
                  assess the person's health care needs.

                        The insurers have responsibility for the local marketing
                  and working with the Department and Community Outreach
                  Contractor.

                                       39
<PAGE>

      III.  GENERAL INFORMATION FOR THE BIDDER

            A.    ISSUING OFFICE

                        This Request for Child Health Plus Insurance Proposal is
                  issued by the Division of Health Care Financing, Office of
                  Health Systems Management, New York State Department of Health
                  which is responsible for the RFP's contents as well as for the
                  evaluation of all submitted proposals.

            B.    ROLE OF NEW YORK STATE AGENCIES IN IMPLEMENTING AND MONITORING
                  CHILD HEALTH PLUS PROGRAM

                  1.    New York State Department of Health (DOH)

                              The DOH will be responsible for overall
                        coordination of the program: making subsidy payments to
                        insurers to cover subsidy costs for children; monitoring
                        the use of subsidy payments; monitoring overall program
                        implementation and operation; and data collection,
                        policy analysis, and contracting with insurers. DOH also
                        will conduct on-site visits and desk audits to verify
                        enrollment policies and procedures, produce quarterly
                        enrollment reports based on insurers' submission of
                        monthly enrollment reports and produce a legislatively
                        mandated annual report. In addition, DOH is responsible
                        for coordinating activities between the insurers and
                        DSS, the marketing and outreach contractor(s),
                        subcontractors, and for providing technical assistance
                        to contractors.

                  2.    New York State Insurance Department (SID)

                              The following provisions of Child Health Plus are
                        subject to the approval of the Superintendent of
                        Insurance in conjunction with the Commissioner of
                        Health:

                        -     benefit packages and the cost of such benefit
                              packages and premiums;

                        -     applications and subscriber contracts;

                        -     financial feasibility of the proposed program; and

                        -     provisions for arranging for, or offering,
                              conversion coverage in event of termination of
                              coverage under this plan.

                                       40
<PAGE>

            C.    INFORMATION

                        All inquiries concerning this RFP should be addressed
                  to:

                        Suzanne Moore, Ph.D.
                        Director
                        Bureau of Health Economics
                        Child Health Plus Request for Proposal
                        New York State Department of Health
                        Corning Tower Building, Room 1110
                        Empire State Plaza
                        Albany, New York 12237-0722
                        (518) 486-7897

            D.    BIDDERS' CONFERENCE

                        A bidder's conference will be held on January 10, 1997,
                  12:30 to 3:30 p.m. in the Museum Theater, West Gallery,
                  Cultural Education Center, Empire State Plaza, Albany, New
                  York. Any bidder wishing to pose a question shall lodge such
                  an inquiry in writing to Dr. Moore no later than close of
                  business December 30, 1996. All such questions will be
                  considered official inquiries and documented together with
                  appropriate answers by publication in the official minutes of
                  the meeting.

            E.    SUBMISSION OF PROPOSAL

                        Bidders are to notify Dr. Moore in writing by close of
                  business December 23, 1996 if they intend to submit a
                  proposal. Failure to provide this notice will result in
                  disqualification from the bidding.

                        Proposals are to be prepared concisely. Interested
                  bidders should submit fifteen (15) copies of their plan to Dr.
                  Moore by close of business February 14, 1997.

                        Bidders are responsible for ensuring that their plans
                  are received on time. The content of each plan will be held in
                  confidence and no details of any plan will be shared with any
                  other bidder. There will be no public bid opening.

                                       41
<PAGE>

      F.    RELEVANT DATES

                  The following are dates in the State's health plan procurement
            schedule:

<TABLE>
<S>                               <C>
Notice Appears in Contract        December 9, 1996
Reporter

RFP is Issued                     December 9, 1996

Notice Appears in State           December 11, 1996
Register

Letter of Intent Due to           December 23, 1996
Department by Close of
Business

Due Date for the Submission       December 30, 1996
of Questions

Bidder's Conference               January 10, 1997

Due Date for Written              January 23, 1997
Response to Questions

Proposal Due to Department        February 14, 1997
by Close of Business (15
copies)

Panel Review of Proposals         February 17, 1997
                                  to March 19, 1997

Notification of Contract          March 24, 1997
Awards

Program Implementation            May 1, 1997
</TABLE>

      G.    LIABILITIES

                  The State of New York is not responsible for any cost incurred
            by bidders prior to issuance of a contract.

                  The Department of Health reserves the right to:

            -     reject any or all plans received in response to this RFP;

            -     select a bidder on a basis other than apparent lowest cost;

            -     consider modifications to any plans at any time prior to the
                  awarding to contracts if such action is in the best interest
                  of the State;

                                       42
<PAGE>

            -     waive or modify minor irregularities found in any plan
                  received after notification to, and with the concurrence of,
                  that bidder;

            -     utilize any and all ideas submitted in any plan received
                  unless these ideas are covered by legal patent, copyright or
                  proprietary rights;

            -     amend the specifications contained herein after their release.
                  In the event of such amendments, all competing parties will be
                  notified and any modified schedules will also be published;

            -     alter any schedules or dates specified in the RFP to
                  accommodate changes in existing conditions;

            -     limit the number of participating insurers in any region of
                  the State; and

            -     Department reserves the right to change and/or modify as it
                  deems necessary, all forms or schedules contained within this
                  RFP before final approval and implementation of the program by
                  the insurer.

      H.    BIDDER PRESENTATIONS

                  Due to the time frame for this RFP process, DOH does not
            anticipate that bidders submitting acceptable plans will be
            requested to provide oral presentations of their proposal.

      I.    SOLE SOURCE RESPONSIBILITY

                  The selected contractors assume responsibility for all
            services and benefits covered by this contract. Plans for
            subcontracts should be specified in the applicant's proposal. The
            contractor will be held accountable as to any decision or actions
            made by the subcontractor. A statement to this effect must be
            included in the proposal submitted. A final form of the subcontract
            must be approved by DOH. Applicants should specify in the plan how a
            satisfactory performance of subcontracts will be ensured.

      J.    DATA MAINTENANCE

                  All data relating to design, implementation and outcome of
            Child Health Plus must be reported to DOH and made available for a
            period of six years following the conclusion of the contract. Data
            used as basis for the reports are considered to be patient and
            provider specific and are held to all confidentiality controls
            pursuant to DOH review standards.

                                       43
<PAGE>

      K.    REPORTS

                  The insurers will be responsible for submitting reports to DOH
            regarding the progress of their enrollment. An insurer should have
            the capability to submit reports electronically to the Department,
            as that may be a future requirement. However, at this time, reports
            can be submitted on DOH developed forms via postal service mail.

                  These reports include: monthly enrollment reports (detailing
            new and ongoing enrollment and disenrollment), quarterly
            disenrollment reports, semi-annual and annual financial and
            utilization reports, annual progress reports (detailing marketing
            and enrollment outcomes), demographic characteristics of enrollees
            and utilization outcomes (Appendix G). Inability of a bidder to
            complete these forms within the required timeframe will mean
            disqualification from bidding.

      L.    QUALITY ASSURANCE/UTILIZATION REVIEW

                  The insurer will be responsible for ensuring that the services
            and providers under Child Health Plus meet the quality of care
            standards pursuant to Public Health Law and regulations. If a bidder
            is unable to meet the quality assurance standards as required by the
            program, as set forth in Section II, they will be disqualified from
            bidding.

                  Additional DOH sponsored quality assurance studies may be
            conducted during the contract period. The insurers will have a
            contractual responsibility to work with the Department or its agent
            to complete the quality assurance study within the specified
            timeframes. This will include supplying the medical records of
            enrolled children who are selected for the study sample and
            responding to inquiries from the contractor.

                  As set forth in Section II, the bidder must also specify the
            process to be used in verifying an enrollee's health utilization and
            be able to forward the data to DOH electronically. This process must
            include a method for encouraging that well-child care visits are
            scheduled and kept in conformance with the standards of the American
            Academy of Pediatrics (Appendix E). These efforts and follow-up
            efforts must be documented.

                                       44
<PAGE>

      M.    QUALITY IMPROVEMENT AND MEDICAL MANAGEMENT

                  Plans must specifically provide quality performance data which
            is consistent with the New York State Department of Health Quality
            Assurance Reporting Requirements (QARR) data specifications, on an
            annual basis for the Child Health Plus population. Some of the
            required QARR data elements which will be required to be collected
            appear in the table below:

                  Proposed Reporting Requirements for the Child Health Plus
            Population.

<TABLE>
<CAPTION>
Category                           Variable to Be Collected
--------                           ------------------------
<S>                     <C>
Membership              -    Member Months of Enrollment by age, sex and payer
                        -    Enrollment by County

Utilization             -    Frequency of Selected Conditions
                        -    Inpatient Care
                        -    Ambulatory Care
                        -    Maternity Care
                        -    Newborn Care
                        -    Disenrollment Rate

Quality                 -     Prenatal Care
                              Low Birth Weight, Entry in first
                              trimester, initial prenatal care visit,
                              number of prenatal care visits, stage of
                              pregnancy at time of enrollment
                        -     Well Child Care Visits in First Year of Life
                        -     Age 4, 5, and 6 year old well child visits
                        -     Adolescent Well Child Care Visits (age 12-18)
                        -     HIV Education (age 12-18)
                        -     Substance Abuse Counseling (age 12-18)
                        -     Immunizations
                        -     Mental Health Follow-Up

Access &                -     Utilization of primary care providers by
Member                        children
Satisfaction            -     Availability (waiting times for scheduled
                              appointments)
                        -     Uniform Member Satisfaction

General Plan            -     Quality and Service Improvement Studies
Management              -     Case Management
                        -     Utilization Management
                        -     Risk Management
                        -     Provider Compensation
                        -     New Member Orientation/Education
                        -     Language Services
                        -     Arrangements with public health, education
                              and social services
</TABLE>

                                       45

<PAGE>

      N.    NOTIFICATION OF PLAN ACCEPTANCE

                  The Office of Health Systems Management will notify the
            successful bidders through a Letter of Commitment. A standard State
            contract will be developed with the conditions and deliverables for
            the program. In the event that program changes are subsequently
            defined and agreed to during the period the contract is awarded and
            the implementation date, payment for costs consequent to these
            adjustments will be negotiated separately. The contract will
            incorporate this RFP and the bidder's final plan in addition to the
            Appendix A Standard Clauses for all New York State Contracts
            (Appendix I), the deliverables and the program budget.

                  If a bidder's plan is rejected, they will be notified by DOH.
            News or public announcements pertaining to this program will not be
            made without prior DOH approval, and then only in coordination with
            the Office of Health Systems Management.

      O.    CONTRACTUAL CONTENT

                  Following selection of the successful bidders, DOH and a
            bidder will negotiate a contact to include Standard State Clauses
            (Appendix A, found in Appendix I of this RFP), this RFP and the
            bidder's plan for the development and implementation of the Child
            Health Plus program. The contract will include, but not be limited
            to, the items listed below:

            -     terms and conditions of contract;

            -     State's obligations;

            -     contractor's liability;

            -     financial considerations;

            -     deliverables;

            -     subcontracting;

            -     delivery and implementation dates; and

            -     evaluation plans.

                  The forms in Appendix M must be completed and returned with
            your response to this RFP. The contract will incorporate these forms
            as completed by the successful bidders

                                       46
<PAGE>

      P.    NON-CONCLUSIVE BIDDING REQUIREMENT

                  In accordance with Section 139-d of the State Finance Law, if
            this contract was awarded based upon the submission of bids, the
            contractor warrants, under penalty of perjury, that its bid was
            arrived at independently and without collusion aimed at restricting
            competition. The contractor further warrants that, at the time
            Contractor submitted its bid, an authorized and responsible person
            executed and delivered to the State a non-conclusive bidding
            certification on Contractor's behalf.

      Q.    WORKERS' COMPENSATION LAW

                  Chapter 213 of the Laws of 1993 amended the Workers'
            Compensation Law by imposing two new contract requirements. Agencies
            cannot enter into contracts involving contractor employees unless
            proof duly subscribed by an insurance carrier is produced showing
            that workers' compensation and disability insurance benefits
            coverage has been secured for the employees in accordance with
            Sections 57.2 and 220.8(b) of the Workers' Compensation Law. Proof
            must be provided prior to signing a contract which will involve
            contractor employees. The forms which are satisfactory to the chair
            of the Workers' Compensation Board are C-105.2 (Application for
            Certificate on Workers Compensation Insurance) and DE0120.1
            (Employer's Application for Certificate of Compliance with
            Disability Benefits Law).

      R.    TRADEMARK

                  Each insurer is obligated to use the State designated logo for
            Child Health Plus in any activities. These activities include
            outreach and marketing, correspondence with the applicant or
            enrollee, on the application, and on the benefit card. In no event
            is the acronym, CHP, to be used in referring to the Child Health
            Plus program.

                                       47

<PAGE>

IV.   APPLICATION FORMAT

      A.    GENERAL REQUIREMENTS

                  A proposal to participate in the Child Health Plus program
            must be submitted as outlined below. Pages should be numbered
            consecutively starting with number 1 and continuing through the end
            of the plan. Do not use separate numbering for any part of the plan.
            The bidder should state how the enrollment, marketing and other
            operating plans may change during the length of the program.

                  In addition to your proposal, please submit a proposal summary
            using the outline which appears as Appendix L.

      B.    SPECIFIC REQUIREMENTS

                  Follow the sequence of the format, including separate sections
            and appendices for each area covered and use the letters and numbers
            specified in each section.

            1.    Letter of Intent

                        All bidders must submit a Letter of Intent by close of
                  business on December 23, 1996, indicating that a full proposal
                  will be submitted by the required date.

            2.    Letter of Transmittal

                        A Letter of Transmittal must accompany the proposal. The
                  letter must be signed by an official of the company or
                  organization authorized to bind the bidder to the requirements
                  of the RFP. The plan and all provisions of the offer price are
                  to remain in effect for one-hundred and twenty (120) days. The
                  plan is due by close of business February 14, 1997.

            3.    Proposal

                  a.    Background and Statement of Understanding

                              Briefly discuss the characteristics of the
                        population to be served by Child Health Plus and the
                        estimated enrollment in the proposed service area.

                                       48

<PAGE>

                  b.    Contractor Qualifications

                        -     full name and address of your organization and
                              list responsible officers.

                        -     name and position of the person entitled to
                              negotiate a contract with the Department.

                        -     name and position of the person who will have
                              ultimate responsibility and accountability for
                              this contract.

                        -     management team which will oversee the various
                              tasks of the project, and the level of access this
                              team has to your corporate management.

                        -     specific qualifications and experience of the
                              person(s) having ultimate responsibility and
                              accountability for this contract that would enable
                              this (these) person(s) to successfully develop and
                              implement the project design.

                        -     resources that will be committed to implementing
                              and operating this program.

                        -     submit, as Appendices I and II respectively,
                              copies of your organization's Articles of
                              Incorporation and By-Laws. Include a narrative
                              description of your organization including the
                              parent and all subsidiary companies.

                        -     describe the role of board members in governance
                              and policy making.

                        -     include as Appendix III, organization budgets and
                              audited financial statements which show sources of
                              funds for the last complete fiscal year of the
                              organization. A narrative should accompany the
                              financial statements, indicating the
                              organization's long term financial projections and
                              how cost and income from other programs are
                              separated. It should also show the results or
                              sources of upcoming fiscal changes.

                                       49

<PAGE>

      C.    PLAN AND PROJECT DESIGN

                  Provide a timeline of implementation of the program and a
            narrative description of your program. The proposal and narrative
            are to include strategies to respond to problems that may arise. The
            narrative description should:

            -     Identify the specific county(ies) that you propose to cover in
                  your program. Indicate whether the bid covers the entire
                  State. Include the number of individuals you expect to serve,
                  the capacity of your proposed program, and how you determined
                  the need that exists in your area. Submit a projection of the
                  number of enrollees by member months, and an estimated premium
                  revenue based on your projection.

            -     Identify the provider network (by type, number, and county)
                  include a directory of health care providers and their
                  geographic accessibility to enrollees. For primary care
                  providers, you must identify the additional number of Child
                  Health Plus enrollees that the provider is willing to accept.

            -     Describe the strategies for recruiting the target population
                  including uninsured members of the various minority
                  communities in your county(ies). Be specific in identifying
                  the minority communities and targeted recruitment strategies.

            -     Identify the enrollment and eligibility determination
                  procedures. This should include the identification and
                  documentation of enrollee eligibility including the
                  designation of other organizations which may perform such
                  functions under a subcontract. The enrollment process should
                  address how enrollees will be educated on the use of the
                  provider system and should include a flowchart of the process.

            -     Identify the billing process and procedures to be used. This
                  billing process description should include the insurer's
                  policy for disenrollment for non-payment of premiums. Also
                  identify your capability to meet the Department's electronic
                  premium payments (Appendix J).

            -     Detail the arrangements for the reimbursement of participating
                  providers.

                                       50

<PAGE>

            -     Prepare a budget which includes the family's share of the
                  premium and New York State's premium share. Include a short
                  narrative on your budget plans and a description of the
                  estimated expenses, personnel costs, marketing costs and other
                  administrative costs. The budget should specify the resources
                  necessary to implement the plan and be submitted on the Budget
                  Forms in Appendix K.

            -     Identify and specify the quality assurance, utilization review
                  and managed care mechanisms that will be used for Child Health
                  Plus enrollees.

            -     Discuss your plan and capability to fulfill data analysis and
                  reporting requirements including the submittal of the
                  specified data.

            -     Describe in detail the benefit package and its costs.

            -     Detail the provisions and/or arrangements for offering
                  conversion of benefits in the event of termination of coverage
                  under this plan, or for children who age out of the program.

            -     Demonstrate the financial feasibility of your organization's
                  proposed Child Health Plus program including the financial
                  requirements of the New York State Insurance Law and Public
                  Health Law.

            -     Specify the monthly and annual premium of the Child Health
                  Plus benefit package and the population on which the premium
                  is based. The premium components must include covered
                  services, assumed payment rates to providers, co-insurance and
                  estimated utilization patterns. This should include:

                  -     schedule of rates;

                  -     actuarial memorandum including but not limited to:

                        -     the formulas and assumptions used in calculating
                              gross premiums;

                        -     expected claim costs;

                        -     identification of morbidity tables, experience
                              studies or other data sources utilized;

                                       51

<PAGE>

                        -     percentage breakdown of the rates to show
                              expected claim costs, expenses, contributions to
                              statutory reserves, and surplus;

                        -     comparison with filed rates for similar benefits
                              and populations (if the bidder is a current Child
                              Health Plus insurer, comparison with current rates
                              should be included);

                        -     HMOs and insurers should comment on the
                              consistency or variance of actuarial and other
                              pricing assumptions from those underlying approved
                              community rates for individual products currently
                              offered with detailed explanation for variances;

                        -     expected number of covered lives; and

                        -     identify the specific counties that you propose to
                              cover in your program.

            -     Identify any services to be provided by subcontractors. These
                  subcontractors would include providers, pharmaceutical and
                  diagnostic laboratory networks.

            -     Discuss how Child Health Plus will interact with other
                  insurance products, including Medicaid.

                                       52

<PAGE>

V.    EVALUATION CRITERIA

            Proposals will be evaluated on a competitive basis using the
      criteria listed below. Each section of the proposal will be scored. The
      total score of all parts combined will be a maximum of 100 points. A
      ranking will then be assigned. Plans will be chosen in order to ensure an
      adequate statewide coverage.

      A.    UNDERSTANDING OF THE GOAL, OBJECTIVES AND INTENDED RESULTS OF CHILD
            HEALTH PLUS.............(15 POINTS)

                  The proposal demonstrates that the insurer understands the
            goal and objectives of Child Health Plus with anticipated results
            stated both quantitatively and qualitatively.

      B.    KNOWLEDGE/EXPERIENCE/CAPABILITY IN AREA.....(70 POINTS)

            1.    Knowledge and Experience (10 points)

                        The proposal describes the relevant experience
                  and competence of the project director(s) and other key staff
                  in the area. The project director(s) and key staff are
                  qualified and possess experience in this area and the variety
                  of skills required to successfully implement the Child Health
                  Plus program. The applicant provides evidence of understanding
                  and knowledge of prior and ongoing work in the area. Specific
                  information is also provided concerning how the personnel are
                  to be organized in the project, to whom they will report, and
                  how they will be used to accomplish specific objectives or
                  components of the project.

                        The present capacity to provide health care services for
                  the intended target population should be discussed, including
                  the capability to comply with New York State Insurance Law.
                  The proposal will be evaluated on the following three
                  criteria: network composition, fiscal, and general technical.

            2.    Network Composition (20 points)

                  a.    NYS Medicaid Managed Care Participants

                              If you are a participant in the New York State's
                        Medicaid Managed Care Initiative, then submit a copy of
                        your Certificate of Authority and state whether or not
                        there have been any additions, subtractions or other
                        significant

                                       53

<PAGE>

                        changes to the network which would alter your compliance
                        with Department standards. Please itemize all changes to
                        your network, if applicable. In addition, NYS Medicaid
                        Managed Care Participants are required to submit the
                        information as required under Section IV.

                  b.    Non-Medicaid Managed Care Participants

                              If not a participant of the State's Managed Care
                        Initiative, your network will be evaluated on a
                        competitively scored basis, according to the following
                        criteria:

                        (1)   General

                                 Health plans must establish and maintain
                             provider networks with sufficient numbers of
                             providers and in geographically accessible
                             locations for the populations they serve. Health
                             plan networks must contain all of the provider
                             types necessary to furnish the benefit package as a
                             managed care product, including: hospitals,
                             physicians (primary care and specialist), mental
                             health and substance abuse providers, allied health
                             professionals, pharmacies, laboratories, DME
                             providers, etc. Health plans should not include in
                             their networks, for purposes of service Child
                             Health Plus enrollees, any medical provider who has
                             been sanctioned by Medicare or Medicaid if the
                             provider has, as a result of the sanctions, been
                             prohibited from serving Medicaid clients or
                             receiving medical assistance payments.

                        (2)   Completeness

                                 The insurer's network will be evaluated on the
                             presence of all required specialties to adequately
                             meet the needs of Child Health Plus enrollees. In
                             addition, the entire benefit package as described
                             in Appendix E.

                                       54

<PAGE>

                        (3)   Accessibility

                                 The insurer's network will be evaluated on the
                             total number of providers and their office hours,
                             the presence of school-based health centers, and
                             wheelchair accessibility.

                        (4)   Training

                                 The insurer's network will be evaluated on the
                             "Board" status of the physicians within he network;
                             hospital admitting privileges; and residency
                             completion.

                        (5)   Mainstreaming

                                 The insurer's network will be evaluated on the
                             percent of the total network which will be open to
                             Child Health Plus enrollees under the age of 19.

                        (6)   Cultural Competency

                                 The network will be evaluated on whether or not
                             there is an inclusion of providers who speak
                             languages other than English.

            3.    Fiscal Evaluation Criteria (20 points)

                  a.    Premium Range

                              The premium rate proposal for the Child Health
                        Plus benefit package must be reasonable in relation to
                        the benefits provided and may not be excessive,
                        inadequate, or unfairly discriminatory.

                  b.    Budget

                              The resources that will be needed to conduct the
                        project must be specified, including personnel, time,
                        budget and facilities. The project's cost must be
                        reasonable in view of the anticipated results. Any
                        subcontracts with other organizations must be clearly
                        defined. All resources (personnel, travel, consultants,
                        equipment, etc.) are detailed and budgeted. The budget
                        forms in Appendix K must be completed with a short
                        narrative. The proposal should provide evidence of the
                        financial feasibility of the

                                       55

<PAGE>

                        impact of the proposed program on overall operations of
                        the bidder.

            4.    General Technical Evaluation Criteria (20 points)

                  a.    Marketing

                              Marketing of the Child Health Plus program to
                        targeted children and families is critical to the
                        success of the program. Successful enrollment is
                        dependent upon well-defined marketing plans.

                              In addition to the Child Health Plus Community
                        outreach and Marketing subcontractor which will be
                        responsible for the marketing of the program on a
                        statewide basis (which is being solicited through a
                        separate RFP process), the insurer is also responsible
                        for marketing the Child Health Plus program to the
                        targeted population in the regions in which the insurer
                        covers. The statewide campaign should be considered, by
                        the insurer, as a base upon which to guide the insurer's
                        critical local campaign. Proposals submitted should
                        reflect the targeted enrollment and marketing effort
                        that will be used to attract applicants. The insurer
                        should develop a plan to ensure a smooth referral system
                        for applicants.

                  b.    Benefit Package

                              The insurance benefit package should be described
                        in detail, along with the costs for each. The benefit
                        package must offer the benefits as outlined in Appendix
                        E.

                                       56

<PAGE>

                              Each provider must follow the well-child care
                        guidelines established by the American Academy of
                        Pediatrics and the immunization recommendations as
                        delineated by the The New York State Recommended
                        Childhood Vaccination Schedule which are enclosed as
                        part of Appendix E.

                              Detail the provisions and/or arranging for
                        offering conversion of benefits in the event of
                        termination of coverage under this plan.

                  c.    Reasonable Outreach Efforts

                              The insurer should submit in their proposal, the
                        outreach strategies that will be used to disseminate
                        information regarding Child Health Plus to the targeted
                        population and recruit and enroll from this population.
                        Specify methods that will be used to evaluate the
                        effectiveness of these strategies. These strategies must
                        follow the guidelines as established in Section II of
                        this RFP.

                  d.    Patient Education

                              The insurer should submit in their proposal, the
                        public education strategies that will be used for the
                        targeted population. Specify methods that will be used
                        to evaluate the effectiveness of these strategies.

                  e.    Quality Assurance/Utilization Review/Credentialling

                              The proposal should identify and specify the
                        quality assurance, utilization review, credentialling,
                        and managed care mechanism which will be used for Child
                        Health Plus enrollees.

                  f.    Reporting Requirements

                              The proposal should discuss the plan and
                        capability to fulfill data analysis and reporting
                        requirements including the submission of data outlined
                        in the Reports section of this RFP and enrolled data.

                                       57

<PAGE>

                  g.    Electronic Billing Capacity

                              The proposal must clearly detail how the insurer
                        is able to handle the electronic billing requirements of
                        the program.

                  h.    Provider and Member Services/Medical Director's Office

                              As detailed in Section II of this RFP, the
                        proposal should specify the provider and member services
                        function, and the medical director's function which will
                        be used for Child Health Plus enrollees.

                  i.    Other Requirements

                              The proposal submitted should specify how the
                        insurer will implement enrollment procedures, coordinate
                        referrals to presumptive eligibility providers and
                        develop contracts with school-based health centers.

      C.    Project Design and Time-
            Plan for Implementation...................(15 points)

                  The activities and resources required to ensure implementation
            and operation of the Child Health Plus program should be clearly
            defined. As previously described in detail, evaluation of the
            project design and time plan will be based on the following:

            -     geographical location of the program and estimated number of
                  enrollees;

            -     adequacy and quality of provider network;

            -     marketing strategies to be employed and enrollment and
                  eligibility determination procedures to be used, including a
                  flowchart of the process;

            -     payment methodologies for providers and their comparison to
                  similar benefit plans;

            -     utilization review, quality assurance and case management
                  mechanisms;

            -     ability to meet data analysis and reporting requirements;

            -     availability of conversion provisions;

                                       58

<PAGE>

            -     appropriateness of the timeframe for implementation of the
                  program; and

            -     understanding of how Child Health Plus will interact with the
                  Medicaid program.

                  The bidder must be prepared to enroll children for coverage
            and provide the health services in the plan by May 1, 1997. These
            timeframes should be as objective as possible.

                  Specific information must be provided concerning how personnel
            are to be organized in the project, to whom they will report, and
            how they will accomplish the specific tasks of the project. The
            staffing pattern clearly links responsibility and levels of effort
            to the project tasks. Curriculum Vitae of key personnel should be
            included.

VI.   REVIEW PROCESS

            An independent review of submitted plans will be conducted by a
      panel of not less than three people selected by DOH. The review will focus
      on the evaluation criteria specified above.

                                       59

<PAGE>

[X] APPENDIX X    Modification Agreement Form (to accompany modified appendices
                  for changes in term or consideration on an existing period or
                  for renewal periods)

IN WITNESS THEREOF, the parties hereto have executed or approved this AGREEMENT
on the dates below their signatures.

_____________________________________      _____________________________________
                                               Contract No. C___________________
CONTRACTOR                                   STATE AGENCY

_____________________________________      _____________________________________

_____________________________________      _____________________________________

By: _________________________________      By: _________________________________

    _________________________________          _________________________________
            Printed Name                                  Printed Name

Title: ______________________________      Title: ______________________________

Date:  ______________________________      Date:  ______________________________

                                         State Agency Certification: "In
                                         addition to the acceptance of this
                                         contract, I also certify that original
                                         copies of this signature page will be
                                         attached to all other exact copies of
                                         this contract."
_____________________________________    _______________________________________
          STATE OF NEW YORK         )
                                    )SS.:
               County of ___________)

On the _____ day of __________, 19___, before me personally appeared
____________ _________________, to me known, who being by me duly sworn, did
depose and say that he/she resides at __________________, that he/she is
the__________________ of the _____________________, the corporation described
herein which executed the foregoing instrument; and that he/she signed his/her
name thereto by order of the board of directors of said corporation.
(Notary) __________________________________

ATTORNEY GENERAL'S SIGNATURE               STATE COMPTROLLER'S SIGNATURE
_____________________________________      ____________________________________

Title: ______________________________      Title: _____________________________

Date:  ______________________________      Date:  _____________________________

<PAGE>

                                   APPENDIX A

                               INCOME GUIDELINES

<PAGE>

                                CHILD HEALTH PLUS
                       1996 FEDERAL POVERTY LEVELS (FPLs)
                                EFFECTIVE 4/1/96

<TABLE>
<CAPTION>
                                                 Net Income
                 -------------------------------------------------------------------------
                         100%                       133%                       185%
Family Size      Annual       Monthly       Annual       Monthly       Annual       Monthly
-----------      ------       -------       ------       -------       ------       -------
<S>              <C>          <C>           <C>          <C>           <C>          <C>
  1               7,740          645        10,294          858        14,319        1,193
  2              10,360          863        13,779        1,148        19,166        1,597
  3              12,980        1,082        17,263        1,439        24,013        2,001
  4              15,600        1,300        20,748        1,729        28,860        2,405
  5              18,220        1,518        24,233        2,019        33,707        2,809
  6              20,840        1,737        27,717        2,310        38,554        3,213
  7              23,460        1,955        31,202        2,600        43,401        3,617
  8              26,080        2,173        34,686        2,891        48,248        4,021
Extra Person      2,620          218         3,485          290         4,847          404
</TABLE>

Note: The above chart represents net poverty levels (FPLs).

      The chart below reflects gross poverty levels for use in determining Child
      Health Plus  eligibility (net x 1.2 = gross)

<TABLE>
<CAPTION>
                                                Gross Income
                 -------------------------------------------------------------------------
                         120%                       160%                       222%
Family Size      Annual       Monthly       Annual       Monthly       Annual       Monthly
-----------      ------       -------       ------       -------       ------       -------
<S>              <C>          <C>           <C>          <C>           <C>          <C>
  1               9,288          774        12,353        1,029        17,183        1,432
  2              12,432        1,036        16,535        1,378        22,999        1,917
  3              15,576        1,298        20,716        1,726        28,816        2,401
  4              18,720        1,560        24,898        2,075        34,632        2,886
  5              21,864        1,822        29,080        2,423        40,448        3,371
  6              25,008        2,084        33,260        2,772        46,265        3,855
  7              28,152        2,346        37,442        3,120        52,081        4,340
  8              31,296        2,608        41,623        3,469        57,898        4,825
Extra Person      3,144          262         4,182          349         5,816          485
</TABLE>

(3/96)
<PAGE>

                                   APPENDIX B

                               ADVISORY MEMORANDA
<PAGE>

                     NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                                  NUMBER  A-1

                                                                     DATE 2/1/92

SUBJECT:        I.  Emergency Room Copayment and Insurer Liability for
                    Inappropriate Use

               II.  Eligibility Documentation

              III.  Medicaid Eligibility

               IV.  Presumptive Eligibility - Minimum Days

                V.  Enrollment Fee

               VI.  Definition of Equivalent Coverage

              VII.  Enrollment Issues

             VIII.  Child Health Plus/Child Information Form

               IX.  Annual Recertification of Child Health Plus Eligibility
                    for Coverage

                X.  Conversion

     I.   EMERGENCY ROOM COPAYMENT AND INSURER LIABILITY FOR INAPPROPRIATE USE

          Considerable concerns were raised by insurers with the initial
          interpretation of the statute governing emergency room (ER)

                                              Page 1

<PAGE>

coverage. The law was virtually interpreted to stipulate that families were
liable for a $35 copayment if use of the ER was not reported to the insurer
within 24 hours, but appeared to not permit denial of the claim.

Based on legislative clarification, a copayment of $35 for ER service is
permissible when the beneficiary does not inform the insurer within 24 hours of
use of such service or when use of the ER was not for an emergency condition. In
the latter case, copayment should be waived if, given the options available, the
ER was the most appropriate site of service. If the insurer determines that the
use of ER was inappropriate, the insurer may deny the claim and the hospital may
directly bill the family for the total charge for the ER visit. Insurers are
responsible for monitoring the use of ER by enrollees and providing feedback
where there is a consistent misuse of the service. The Department will be
collecting information on ER usage including cases where payment is denied or a
copay imposed. The forms for collecting this data are currently under
development and will be issued to insurers upon completion.

It should be noted that it was not the intent of the Legislature that insurers
be required to cover emergency room services in a manner inconsistent with
private health insurance underwriting practices for such services. Several Child
Health Plus insurers have proposed to limit the coverage of emergency room
services in a HMO format, comparable to their ordinary HMO plans. This is
consistent with legislative intent.

                                     Page 2

<PAGE>

II.  ELIGIBILITY DOCUMENTATION

     Insurers have requested clarification regarding the types of documentation
     they must obtain from enrollees as proof of eligibility. Eligibility
     criteria are:

     -   the child is not enrolled in Medicaid;

     -   the child does not have equivalent health insurance coverage;

     -   the child is less than 13 years of age.

     Proof of citizenship or residency is not an eligibility requirement under
     Child Health Plus.

     Insurers are responsible for assuring that all enrollees meet the defined
     eligibility criteria and for retaining copies of proof of eligibility,
     which may be audited. As part of the application process, families must
     have proof of age, income, and if appropriate, other health insurance
     documentation. The following information is provided to insurers as a guide
     for meeting these requirements.

     A.   PROOF OF AGE

          Documentation of proof of age may include a copy of birth certificate,
          religious documents (baptismal papers), school records, and/or a
          signed affidavit stating witness of birth.

                                     Page 3
<PAGE>

B.   PROOF OF INCOME

     The means test for income shall include any one of the following: Annual
     Federal and State tax returns, paycheck stubs or other documentation of
     income, written documentation by employer, a WIC "Income Residency
     Documentation Form" or an affidavit of self-income declaration (see Section
     II.D and E). Income for the purposes of this part means gross income before
     deductions for income taxes, employees' social security taxes, insurance
     premiums, bonds, etc. Income includes the following:

     1.  Monetary compensation for services, including wages, salary,
         commissions or fees;

     2.  Net income from farm and non-farm employment;

     3.  Social Security;

     4.  Dividends or interest on savings or bonds, income from estates or
         trusts, or net rental income;

     5.  Public Assistance;

     6.  Unemployment compensation;

     7.  Government civilian employee or military retirement or pensions or
         veterans' payments;

                                     Page 4

<PAGE>

       8.  Private pensions or annuities;

       9.  Alimony or child support payments;

      10.  Regular contributions from persons not living in the household;

      11.  Net royalties; and

      12.  Other cash income. Other cash income would include but would not be
           limited to, cash amounts received or withdrawn from any source
           including savings, investments, trust accounts, and other resources
           which are readily available to the family.

      Copies of income documents should be retained with insurer records.
      However, it should be noted that proof of residency, citizenship, or
      documents relating denial of Medicaid eligibility are not required as
      proof of eligibility for the Child Health Plus Program.

C.    INCOME ELIGIBILITY DETERMINATION

      Several insurers have inquired as to whether they must use gross or net
      income in determining enrollee eligibility. The Department strongly
      recommends that the insurer use the family's gross income to determine
      eligibility for subsidy

                                     Page 5

<PAGE>

      payment. The determination of net income is a complex administrative
      process and would require the development of detailed screens and
      exemptions. However, the State will permit insurers to use net income as a
      criteria in assessing a child's application, if consideration of
      appropriate deductions would enable a child to be eligible based on net
      income.

      If a household has two sources of income and one is entitlement income
      such as Medicaid, the entitlement income need not be adjusted to make it
      equivalent to gross when calculating the total family income.

D.    DECLARATION OF INCOME WITHOUT DOCUMENTATION

      Insurers have found it difficult to obtain income eligibility
      documentation for some potential enrollees. Specifically, insurers have
      found it difficult to document income earned by families who are not
      documented U.S. citizens, who are homeless, who have recently moved to New
      York, or who are self-employed and are not maintaining records or filing
      1040-ES. In addition, insurers have encountered many children who have
      parents who work for employers who cannot or are unwilling to supply the
      appropriate documentation of wages. Applicants/participants who have
      income but cannot document it may make a self-declaration of income by
      completing an "Affidavit of Self-Income Declaration", (Appendix II, sample
      attached). Self-declaration should only be used in cases where

                                     Page 6
<PAGE>

     there is truly no way to document income requirements. Insurers can expect
     the Department to review the use of self-declaration.

E.   USE OF WIC APPLICATION AS PROOF OF INCOME

     The Department will allow insurers to accept a copy of the WIC program,
     "Income and Residency Documentation Form" as proof of income eligibility
     for Child Health Plus (see Appendix I). WIC representatives will refer
     income eligible children to Child Health Plus insurers. At the time of
     referral, WIC providers will furnish a copy of the WIC application to the
     approved WIC participant together with a copy of the Child Health Plus
     brochure describing the program and containing a list of insurers to
     contact for enrollment in the program. Child Health Plus insurers may use
     the approved WIC application as documentation for verification of income
     eligibility. Insurers should review the WIC program "Income and Residency
     Documentation Form" to verify whether it is in effect on the date which the
     family applies for Child Health Plus. Only those WIC program, "Income and
     Residency Documentation Forms" which have an effective date which is valid
     concurrent with the date of enrollment into the Child Health Plus will be
     acceptable as income documentation. Annual recertification of Child Health
     Plus eligibility for coverage will be administered in accordance with
     Section IX of this memorandum.

                                    Page 7

<PAGE>

     F.   EQUIVALENT COVERAGE

          As part of the eligibility process, insurers are required to document
          whether a potential enrollee has equivalent coverage. Such
          documentation may include a subscriber contract as proof of coverage.
          Many insurers have had difficulties in accessing this documentation,
          particularly in cases where the parent carrying the insurance for the
          child does not live in the same household. Insurers are responsible
          for assessing the validity of the subscriber contract and for
          determining whether a child has equivalent coverage. (Please refer to
          Section VI for further detail.) In such instances where a copy of the
          applicable insurance documentation is truly not accessible to satisfy
          this requirement, a signed affirmation stating that the child has no
          equivalent coverage is permissible.

III. MEDICAID ELIGIBILITY

     A.   SPEND-DOWN TO MEDICAID ELIGIBILITY LEVEL

          To ensure continuity of health care coverage, families enrolled in
          Child Health Plus who become Medicaid eligible may include the Child
          Health Plus premium as part of the family's expenses qualifying them
          as Medicaid eligible. When using the Child Health Plus premium cost in
          calculating Medicaid spend-down, families have the option of keeping
          the child enrolled in Child Health Plus while the family enrolls in
          Medicaid and may

                                     Page 8

<PAGE>

     continue using the Child Health Plus premium to meet the spend-down
     calculation requirement to remain Medicaid eligible.

B.   MEDICAID REFERRAL/COORDINATION

     Insurers have requested clarification regarding their responsibility for
     referring potential applicants to local Department of Social Services (DSS)
     offices for Medicaid.

     To ensure that appropriate referrals to the Medicaid program are made, all
     Child Health Plus applicants whose age, income and family size meet
     criteria that indicate a strong potential for Medicaid eligibility, must be
     referred by the Child Health Plus insurers for application to Medicaid.
     These include children who are less than one year of age and reside in a
     household whose gross income is less that 222% of the federal poverty
     levels, and children who are less than six years of age and reside in a
     household whose gross income is less than 160% of the federal poverty
     levels.

     In addition to referring those applicants to DSS, insurers must provide all
     applicants with a brochure prepared by the State describing the Medicaid
     program and application process. Application by the family to Medicaid is
     not mandatory but should be strongly encouraged. Children deemed eligible
     for Child Health Plus shall remain covered until families referred are
     actually enrolled in Medicaid. All children should be

                                    Page 9

<PAGE>

            accepted into Child Health Plus if all Child Health Plus eligibility
            criteria are met regardless of whether they appear Medicaid eligible
            or are not.

IV.   PRESUMPTIVE ELIGIBILITY - MINIMUM DAYS

      The presumptive eligibility process must be used by all contractors under
      the Child Health Plus program. Presumptive eligibility provides immediate
      coverage pending a full eligibility determination. If an applicant appears
      to meet all acceptable eligibility requirements, but does not have all
      appropriate documentation available at the time of enrollment, the insurer
      shall make the determination that the child is presumptively eligible for
      a maximum of 60 days after the initial date of enrollment. Only one period
      of presumptive eligibility per child is allowed. At the end of the
      presumptive eligibility period, all required documentation must have been
      provided to maintain the enrollee's coverage.

      If a child is determined to be ineligible, DOH will pay the subsidy for up
      to 60 days of presumptive eligibility. Upon request by the family, the
      enrollment fee must be refunded by the insurer if the  family provided
      all required documentation and the child did not use any services during
      the 60 days presumptive eligible period. Insurers may claim the cost of
      premium incurred during the 60 day presumptive eligibility period in their
      monthly premium voucher submission.

                                    Page 10
<PAGE>

V.    ENROLLMENT FEE

      According to statute, families whose gross income is between 160-222
      percent of the Federal poverty level pay $25 per child per year with an
      annual maximum family contribution of $100. Where applicable, insurers are
      responsible for collecting a minimum enrollment fee of $25 at the time of
      enrollment regardless of the number of children being enrolled. Insurers
      have the discretion of working out a payment plan for up to a 12-month
      period for any additional fee required but not paid during the time of
      enrollment. However, at the time of annual recertification, payment of any
      outstanding balance must be satisfied plus the $25 re-enrollment fee in
      order to continue in the program. The insurer has the option of imposing
      their own payment plan for those families ineligible for subsidy coverage.

      As noted in the, "Presumptive Eligibility," Section IV of this memorandum,
      the State will reimburse the insurer for enrollment fees refunded to
      applicants who were initially deemed presumptively eligible for Child
      Health Plus and were subsequently determined ineligible at some point
      during the 60 day presumptive eligibility period.

      The insurer cannot retain a portion of any enrollment fee being refunded
      to defer the administrative cost related to the enrollment process. The
      State will reimburse the insurer the cost of the premium for the period in
      which the child was considered

                                    Page 11
<PAGE>

      presumptively eligible and this will cover the costs associated with the
      enrollment processing.Any refunded enrollment fees must be reimbursed by
      insurers directly to families.

VI.   DEFINITION OF EQUIVALENT COVERAGE

      Many insurers continue to have questions relating to the definition of
      equivalent coverage. The following guidelines should be followed in
      determining equivalent coverage.

      -     Coverage for primary health care services provided in a physician's
            office or other outpatient sites which is consistent with the Child
            Health Plus benefit package is considered equivalent coverage.
            Insurance plans which do not include prescription drugs or do not
            provide preventive care services, but meet the above definition will
            be deemed to offer 'equivalent coverage'.

Applicants who have the coverage specified above, but whose insurance requires a
copayment and/or deductible will also be considered to have equivalent coverage.
This will apply where copayments and/or payments are consistent with industry
standards. These are:

      -     Major medical policies underwritten by Article 43 Corporations and
            major commercial carriers with a copayment of 20 percent or less per
            visit/service.

                                    Page 12
<PAGE>

      -     copayments for office and physicians visits are $10.00 or less.

      -     Deductibles are equal to or less that $250 per person per year.

Coverage above the cost of the above industry standards, will not be considered
"Equivalent Coverage," and the applicant will be eligible for coverage under
Child Health Plus. "Limited benefit policies" which pay a fixed dollar amount
per episode of care (regardless of the cost of the medical care) are not
considered equivalent health insurance for determining eligibility for
enrollment in the Child Health Plus program.

VII.  ENROLLMENT ISSUES

      Many insurers have encountered situations where children are not living
      with a parent or legal guardian. In order to eliminate barriers for
      enrollment of those children not residing with their parents, DOH is
      requesting that insurers permit enrollment of eligible children by
      "responsible adults" other than a parent or legal guardian. In these
      instances, insurers may request "responsible adults" to furnish written
      permission (from the parent or legal guardian) which authorizes the
      rendering of health care services. However, this is not a mandatory
      requirement for enrollment.

                                    Page 13
<PAGE>

VIII. CHILD HEALTH PLUS/CHILD INFORMATION FORM

      The purpose of the "Child Health Plus/Child Information Form" is to
      capture information from applicants on previous health status,
      utilization patterns, and demographic data. All insurers are required to
      distribute the "Child Health Insurance/Child Information Form" at the time
      of the enrollment application encounter. The completion of the form by
      applicants is not a mandatory part of the application or a prerequisite
      for enrollment. However, the form must be distributed to all applicants,
      and to the extent it is completed by the applicant, collected by the
      insurer at the time of application or to be forwarded directly to the
      Department by the applicant at a later time. The forms should be batched
      and returned to the Department in accordance with instructions provided to
      insurers. Insurers should strongly encourage all applicants to complete
      this form.

IX.   ANNUAL RECERTIFICATION OF CHILD HEALTH PLUS ELIGIBILITY FOR COVERAGE

      In accordance with statute, recertification on an annual basis is required
      for continued enrollment in the program. Insurers have requested
      guidelines regarding the timing which should be used for recertification
      of eligibility for coverage under Child Health Plus. Insurers may
      recertify all enrollees on the same day, e.g. first of the year or
      recertify each child on the anniversary date of his/her enrollment.

                                    Page 14
<PAGE>

X.    CONVERSION

      Legislation requires insurers to provide conversion when enrollees age out
      of the program and also when the program terminates under statute on
      December 31, 1993, unless extended.

      The benefits offered under the conversion policies need not be equivalent
      to the coverage provided under Child Health Plus. The insurers may offer
      conversion through their existing policies. The Departments of Health and
      Insurance are continuing to investigate options for Child Health Plus
      insurers who need conversion coverage.

      Enrollees who relocate to another part of the State should be referred by
      their current Child Health Plus insurer to the Child Health Plus insurer
      in the new area. Insurers are not responsible for providing conversion
      when an enrollee moves out of the State.

                                    Page 15
<PAGE>

                                                                     Appendix II
                               in effect 12/31/93
                               ------------------
                                  [ILLEGIBLE]

                                                    "DRAFT" 1/16/92

                                CHILD HEALTH PLUS

                      AFFIDAVIT OF SELF INCOME DECLARATION

NAME: ________________________________________  PHONE: _________________________

ADDRESS: _______________________________________________________________________

                                  FAMILY INCOME

       Annual          $________________             Monthly $__________________
       BiWeekly        $________________             Weekly  $__________________
       Other (specify) $________________

      ALL APPLICANTS MUST READ AND SIGN THE FOLLOWING IN ORDER TO BE CONSIDERED
      FOR ELIGIBILITY UNDER SELF-DECLARATION OR INCOME FOR THE CHILD HEALTH PLUS
      PROGRAM:

            I HEREBY CERTIFY that I have no means for documenting the above cash
            income and that all of the above information's true and correct. I
            understand that this information is being given in connection with
            the receipt of Child Health Plus services. I understand that program
            officials may verify information on this form. I understand that
            deliberate misrepresentation may subject me to repayment of benefits
            received and prosecution under applicable State statutes.

            _______________________________________      ___________________
                         SIGNATURE                              DATE

LOCAL AGENCY USE ONLY:

APPROVED: ______________________________    DISAPPROVED: _______________________
                     DATE                                        DATE

CHILD HEALTH INSURANCE REPRESENTATIVE:

        ______________________________________          ________________________
                     SIGNATURE                                   DATE

<PAGE>

                                  [ILLEGIBLE]

[ILLEGIBLE] STATE DEPARTMENT OF HEALTH                         CHILD HEALTH PLUS
[ILLEGIBLE] community Health Insurance           ATTESTATION OF SELF-DECLARATION
and Finance Systems                                                    OF INCOME

INSTRUCTIONS Complete this form ONLY if you have no other proof of family
             income. Return the completed form to the insurer where you sent
             your Child Health Plus application.

Name(s)of Children Applying for Child Health Plus

1 _____________________________________  4 _____________________________________
2 _____________________________________  5 _____________________________________
3 _____________________________________  6 _____________________________________

Name of adult making application
_______________________________________    _____________________________________
             street                                    Apt. or PO Box

Address
________________________________________________________________________________
city                                       state                 zip
________________________________________________________________________________

Relationship                               Telephone Number
to children                                (including area code)  (           )
_______________________________________    _____________________________________

FAMILY INCOME

Include all income from all members
living in the household. Enter the amount
of money received by the payment source
and the time period in which it is/was
received.                                    Year income received

<TABLE>
<CAPTION>
SOURCE OF INCOME                YEARLY          MONTHLY         EVERY TWO WEEKS         WEEKLY
----------------                ------          -------         ---------------         ------
<S>                            <C>            <C>              <C>                     <C>
Program(s) (Example: Cash
assistance, SSI,
unemployment, disability)

[ILLEGIBLE]                    $_______       $_________       $________________       $______

[ILLEGIBLE]                     _______        _________        ________________        ______

[ILLEGIBLE] names)             ________       __________       _________________       _______

Wages/Salary                   ________       __________       _________________       _______

Tips/Gratuities                ________       __________       _________________       _______

Commissions                    ________       __________       _________________       _______

Income from self-employment    ________       __________       _________________       _______

Contributions/gifts from
relatives or friends           ________       __________       _________________       _______

Support payments               ________       __________       _________________       _______

Income from rental property    ________       __________       _________________       _______

Interest/dividends             ________       __________       _________________       _______

Social Security                ________       __________       _________________       _______

Pension (public or private)    ________       __________       _________________       _______

Anything else for which money
is received without providing
goods or services              ________       __________       _________________       _______

TOTAL                          ________       __________       _________________       _______
</TABLE>

ALL APPLICANTS MUST READ AND SIGN THE FOLLOWING STATEMENT IN ORDER TO BE
CONSIDERED FOR ELIGIBILITY UNDER SELF-DECLARATION OF INCOME FOR THE CHILD HEALTH
PLUS PROGRAM:

I hereby certify that I have no means of proving or documenting the above cash
income and that all of the above information is true and correct. I understand
that this information is being given in connection with application to the Child
Health Plus program. I understand that program officials (Insurer or State) may
verify information on this form. I understand that deliberate misrepresentation
may subject me to repayment of any benefits received under the Child Health
Plus program and for prosecution under applicable State statutes.

         ____________________________________________      ______/______/_______
         Signature of Adult Making Application             Date Signed

<TABLE>
<S>                            <C>                         <C>
INSURER USE ONLY                                           Child  Health Plus Insurer Represenative:
                               Approved ____/____/_____
                                                                        Date: _____/_____/______
Total
Annual Income _______________  Disapproved____/____/_____  Insurer: ____________________________
</TABLE>

<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                NUMBER A-2
                                                   DATE   April 1992

SUBJECT:    I.    NEW YORK STATE IMMUNIZATION GUIDELINES FOR HEALTH CARE
                  PROVIDERS

                  The New York State Immunization Guidelines for Health Care
                  Providers (Appendix I) have been revised. As you know, the
                  Child Health Plus benefit package specifies that the schedule
                  of immunizations for Child Health Plus enrollees follow the
                  immunization guidelines issued by the Department of Health.
                  The enclosed guidelines have been distributed by the Office of
                  Public Health to approximately 12,000 practicing physicians
                  including pediatricians, family physicians and other primary
                  care specialists. Thus, physicians within the Child Health
                  Plus provider network will also have received these materials.
                  Please direct any questions on the immunization schedules to
                  the Bureau of Immunization at (518) 473-4437.

            II.   1992 FEDERAL POVERTY LEVELS

                  The enclosed 1992 Federal Poverty Levels (Appendix II) should
                  be used effective immediately to determine Child Health Plus
                  eligibility. Although these guidelines are provided at the net
                  and gross levels, as noted in the first Advisory Memorandum,
                  Child Health Plus insurers are to determine eligibility from
                  gross income levels.

            III.  DEPARTMENT OF SOCIAL SERVICES LOCAL COMMISSIONERS' MEMORANDUM

                  The Department of Social Services issued a Local Commissioners
                  Memorandum on Child Health Plus on February 24, 1992
                  explaining certain points about Child Health Plus and its
                  relationship with Medicaid. A copy is enclosed. Questions
                  pertaining to the NYSDSS memorandum should be directed to your
                  Child Health Plus program liaison.

<PAGE>

                                CHILD HEALTH PLUS

                         1 / 92 Federal Poverty Levels

<TABLE>
<CAPTION>
                       100%                    133%                        135%
                 Annual   Monthly      Annual       Monthly       Annual         Monthly
<S>             <C>        <C>        <C>          <C>          <C>             <C>
1               $ 6,810    $  568     $  9,057     $     755     $  12,599      [ILLEGIBLE]
2                 9,190       766     $ 12,223    [ILLEGIBLE]   [ILLEGIBLE]     [ILLEGIBLE]
3                11,570       964     $ 15,388         1,282     $  21,405      [ILLEGIBLE]
4                13,950     1,163     $ 18,554         1,546     $  25,808         2,151
5                16,330     1,361     $ 21,719         1,810     $  30,211         2,518
6                18,710     1,559     $ 24,884         2,074     $  34,614         2,884
7                21,090     1,758     $ 28,050         2,337     $  39,017         3,251
8                23,470     1,956     $ 31,215         2,601     $  43,420         3,618
Extra Person:
                  2,380       198     $  3,165           264     $   4,403           367
</TABLE>

Note: If the above chart represents net poverty levels then the chart below
reflects gross poverty levels (net x 1.2=gross).

<TABLE>
<CAPTION>
                       120%                     160%                       222%
                 Annual   Monthly       Annual         Monthly    Annual          Monthly
<S>             <C>       <C>         <C>             <C>        <C>            <C>
1               $ 8,172    $  681     $  10,869       $    906   $  15,118      $     1,260
2                11,028       919        14,667          1,222      20,402            1,700
3                13,884     1,157     [ILLEGIBLE]        1,539      25,685            2,140
4                16,740     1,395     [ILLEGIBLE]        1,855      32,969            2,581
5                19.596     1,633     [ILLEGIBLE]        2,172      36,253            3,021
6                22,452     1,871        29,861          2,488   [ILLEGIBLE]          3,461
7                25,308     2,109        33,660          2,805      46,320            3,902
8                28,164     2,347        37,458          3,122      52,103            4,342
Extra Person:
                  2,856       238         3,798            317       5,284      [ILLEGIBLE]
</TABLE>

<PAGE>

                         LOCAL COMMISSIONERS MEMORANDUM

                        DSS-4037 [ILLEGIBLE] (Rev. 9/89)

                                                  Transmittal No: 92 LCM-38

                                                  Date: February 24, 1992

                                                  Division: Medical Assistance

      TO: Local District Commissioners

      SUBJECT: CHILD HEALTH PLUS (CHP) Insurance Program

      ATTACHMENTS: Suggested letter to CHP providers: Attachment 1 (on-line)
                   CHILD HEALTH PLUS Poster: Attachment 2 (not available on-
                   line)

The Department has received questions relating to the Child Health Plus (CHP)
program. Many CHP questions were answered in Informational Letter 91 INF-71.
This letter will respond to additional questions from the local districts.

      Question 1: Administrative Directive 91 ADM-18 notes that the CHP subsidy
      must stop when the Medical Assistance (MA) case includes a CHP recipient.
      In Section IV.A., the letter reads as follows:

            The social services district must contact the [ILLEGIBLE] [CHP]
            contract agency to inform it that MA eligibility has been
            established.

      Within this context, how must the district contact the plan?

      Response 1: The district should write a letter to the plan so that the
      plan has official notification of MA eligibility for that child before the
      plan takes action to drop CHP coverage. This written notification should
      detail the child's period of MA eligibility. Generally, a plan will not
      accept a phone call by the district as being sufficient, and will require
      a letter. In turn, the CHP insurer will disenroll the child from CHP.
      Attachment 1 is a suggested letter to CHP providers.

<PAGE>

Date February 24, 1992

TRANS. No. 92 LCM-38                                                  Page No. 2

      Question 2: Administrative Directive 91 ADM-18, Section [ILLEGIBLE]
      [ILLEGIBLE] local social services districts to provide notice of CHP
      [ILLEGIBLE] [ILLEGIBLE] denial/closing action affects a child under 13
      years of age. The suggested letter was Attachment III to that
      Administrative [ILLEGIBLE]. Is there a statewide hotline number that could
      be added to the suggested letter?

      Response 2: Yes. The Public Policy and Education Fund of New York has a
      contract with the New York State Department of Health for CHP outreach.
      Their statewide hotline number, which should be added to the letter from
      local social services districts, follows:

                                 1-800-698-4KIDS

      The CHILD HEALTH PLUS poster, Attachment 2, was developed by the Public
      Policy and Education Fund. Staff from the Fund will contact local social
      services districts to discuss the interface of CHP with the MA program and
      to supply outreach material.

      It should be noted that a separate contractor has been selected for CHP
      outreach in New York City. The Medical and Health Research Association of
      New York City will contact the New York City Human Resources
      Administration for CHP outreach.

      Question 3: The New York State Department of Health pays a monthly subsidy
      to the CHP insurance carrier. The annual subsidies were detailed in 91
      LCM-136. Additionally, certain clients are required to pay a $25 fee per
      child per year, up to a total of $100 per household per year. How should
      these payments/bills be handled for spenddown?

      Response 3: The monthly subsidy amount paid to the insurance carrier
      by the New York State Department of Health (NYSDOH) can be used to reduce
      the monthly spenddown.

      For any CHP fee billed to the MA household, as with other health
      insurance premiums incurred by the individual or family, treat as a
      deduction from countable income. Therefore, the client's share of premium
      costs, as well as the subsidy, can be used to reduce the monthly
      spenddown.

      NOTE: Please remember that persons receiving MA are not eligible for CHP.
      Since the household can choose who may apply for MA, please remember that
      applicants/recipients can include or exclude persons from the MA
      household. Therefore, if a CHP recipient is not included in the MA
      application, the CHP coverage remains uninterrupted. The amount of the
      NYSDOH subsidy and any household premiums would reduce the monthly
      spenddown for the rest of the family. See Administrative Directive 91
      ADM-18 for details.

<PAGE>

Date February 24, 1992

Trans. No. 92 LCM-38                                                  Page No. 3

      Question 4: A 5 person household applied for MA and was [ILLEGIBLE]
      accepted as a spenddown case. The monthly spenddown [ILLEGIBLE]
      [ILLEGIBLE] household has not met the spenddown requirement in any
      [ILLEGIBLE] [ILLEGIBLE] Therefore, the Common Benefit Identification Card
      will not be valid, since coverage has not been authorized through
      [ILLEGIBLE]. The [ILLEGIBLE] appears income-eligible for CHP. Can the
      children in the household under age 13 apply for and get CHP?

      Response 4: Yes. This household should apply for CHP. The children are
      neither eligible for nor in receipt of MA at this time. Therefore, the
      household can apply for and receive CHP for appropriate children if
      otherwise eligible. Remember that the CHP subsidy and any premium payments
      are used to reduce the excess income of other family members.

      Question 5: Is the phone number for GHI correct as given in 91 LCM-136?

      Response 5: No. The correct phone number for GHI is 212-960-6655.

                                       ***

If there are questions on spenddown, please call Mr. Joseph Kudner on 1-800-
342-3715, extension 3-5509. For questions on CHP, call Mr. John Harwick on
extension 3-5878.

                                               _________________________________
                                               Jo-Ann A. Costantino
                                               Deputy Commissioner
                                               Division of Medical Assistance

<PAGE>

                                  ATTACHMENT 1

            Suggested letter to CHP when child is on Medicaid and CHP

      Dear ______________________:

                                        NAME OF CHILD:
                                        ADDRESS:

                                        SOCIAL SEC.#:

                                        PHONE:

                                        DATES OF ELIGIBILITY
                                        FOR MEDICAL ASSISTANCE:
                                          (from-to}

      We have been advised that the above-named child is currently receiving
Child Health Plus from your organization. In accord with Chapters 922 and 923 of
the Laws of 1990, we are informing you that this child is enrolled in the
Medical Assistance program for the time period noted above. Please call (staff
name) on (phone number) if there are any questions.

                                        Sincerely,

<PAGE>

                       NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                     NUMBER  A-11

                                                        DATE  February 1994

SUBJECT: Child Health Plus - Supplemental Form Data Analysis

            A self-administered, optional reporting tool was developed by the
      Department to collect data to learn some descriptive information about the
      population of Child Health Plus applicants. The report was used to collect
      data from applicants from the inception of the program through January,
      1993. The attached report is an analyses of the collected data.

            A few notes contained in the report deserve highlighting:

            -     The majority of the Child Health Plus population are eligible
                  due to loss of insurance from loss of employment, or Medicaid
                  eligibility;

            -     Most report themselves as in good health;

            -     The average income of applicants is approximately $16,000,
                  and;

            -     The population represents a fairly even distribution by age.
                  The great majority of Child Health Plus members are white and
                  english speaking.

      Attachment

<PAGE>

                                CHILD HEALTH PLUS

                         SUPPLEMENTAL FORM DATA ANALYSIS

                      PLAN INCEPTION THROUGH JANUARY, 1993

                       New York State Department of Health

                      Bureau of Community Health Insurance

                               and Finance Systems

                                 November, 1993

<PAGE>

OVERVIEW

      The Supplemental Form was an optional data collection tool developed by
the Department to collect data in a uniform manner from Child Health Plus
applicants on demographic, marketing, prior utilization, access, and health
status elements. All but one insurer submitted forms. The form went into use at
the inception of the program and was collected until April, 1993. At that time
the insurers were instructed to stop including the form with the enrollment
packet, but to mail in any forms which they received from previous applicants.
To date, approximately 30,000 forms have been received and entered. The data in
the following tables and graphs is based upon 26,000 forms collected from plan
inception through January, 1993.

      While some plans submitted one form per family, others submitted a form
for each child applicant. The results include applicants to Child Health Plus,
not just those who were accepted. Therefore, the number of forms received does
not equal the number of children enrolled. In a few instances, more forms were
received than the insurer enrolled. Other insurers submitted forms for just
those that were accepted into the program. In addition, the data is
self-reported and may not reflect actual use. Not all respondents answered every
question on the form. The results were tallied by completed question and not
completed form. The graphs only include those applicants who answered the
questions.

      When more than one answer was given in questions five and six regarding
locus of care, the lowest level of care was entered. For question four, how
coverage was lost, if left/lost job was checked with other items, the question
was coded for left/lost job. For question seven, some people checked "has no
problem" and wrote in: don't need an appointment for the emergency room.If more
than one language was checked for question eight and one was English, the
question was coded for English. Also, if more than one race/ethnicity was
checked for question nine, the question was coded, as other. In many instances
the items to be checked by the insurer in the FOR OFFICE ONLY section were left
blank.

SUMMARY OF FINDINGS

      -     Most of the applicants learned of Child Health Plus through a
            friend/relative.

      -     Two-thirds to 90 percent of applicants did not have health insurance
            and most lost their coverage because parent lost/left their job.

      -     Most of the applicants had a source of care for an injury or illness
            (physician office, clinic, health center).

<PAGE>

      -     Three-fourths of the applicants reported no problem getting access
            to care.

      -     Close to 90 percent of the applicants spoke English, with Spanish
            and Chinese being spoken in New York City in two plans.

      -     Almost three-fourths of the applicants report being
            white/non-hispanic

      -     Less than 10 percent of applicants were under the age of 1 year with
            the remainder fairly evenly split between the age categories of
            1 - 5 and 6 - 12.

      -     The male and female applicants were evenly split.

      -     Approximately 30 percent of the applicants report having an ER visit
            in the 12 months prior to application with the average number of
            visits 1.8 of those report having visits.

      -     Less than five percent of applicants reported having an overnight
            hospital admission in the 12 months prior to application; however
            those who did report admissions averaged 1.5 admissions.

      -     Over 85 percent of applicants reported having visits to a clinic,
            doctor or health center in the 12 months prior to application. Of
            those who reported visits, the average number was 3.8 visits.

      -     The majority of applicants reported their health status as good or
            better. Less than one-half of one percent reported their health
            status as poor.

      -     The average income for applicants reporting income is $16,189 per
            family.

      -     The average number of adults per family is about 2, the average
            number of children less than 13 per family is about 2, the average
            number of children older than 13 is about 1.5 with the overall
            average family size about 4.

<PAGE>

NEW YORK STATE DEPARTMENT OF HEALTH
Bureau of Health Economics                  CHILD HEALTH PLUS: CHILD INFORMATION

                           Name of health plan/insurer to which you are applying
                           _____________________________________________________

[CHILD HEALTH PLUS LOGO]

                           Write in the month, day and year you filled out the
                           application form for Child Health Plus (example,
                           January 14, 1991).
                           _____________________________________________________

INSTRUCTIONS

Child Health Plus is a new program sponsored by this health plan and subsidized
by New York Slate. The New York State Department of Health is asking the
following questions to find out about the health needs of children who apply for
Child Health Plus and to serve better the needs of children who enroll. Please
answer these questions as completely as you can. YOUR ANSWERS WILL NOT AFFECT
YOUR CHILD(REN)'S ENROLLMENT IN CHILD HEALTH PLUS. DO NOT PUT YOUR NAME ON THIS
FORM. If you have any questions about this form please call (518) 474-5050. Give
the completed form back to the health plan/insurer to which you are applying.
Please print your answers in ink.

<TABLE>
<S>   <C>
1.    Enter the child(ren)'s zip code (home address) [          ]

2.    Place an X in front of all the ways that you found out about Child Health
      Plus.

      [ ] Material received in the mail     [ ] Television                         [ ] Radio
      [ ] Community organization            [ ] Through the child(ren)'s school    [ ] Newspaper
      [ ] Friend/relative                   [ ] Social services/Medicaid           [ ] Health care provider (doctor, nurse, clinic)
      [ ] Other (specify)________________________________________

3.    What kind of health insurance does/do the child(ren) have now?

      [ ] No insurance                      [ ] Other insurance (specify)
      [ ] Medicaid                              ______________________________________________________________________

4.    If the child(ren) were covered by health insurance in the past, how did
      they lose that coverage?

      [ ] Parent left/lost his/her job      [ ] Insurance was cancelled            [ ] Other (specify)
      [ ] Could not afford premium          [ ] Lost Medicaid eligibility              _______________________________

5.    Where does(do) the child(ren) usually go for routine preventive care
      (physicals, immunizations)?

      [ ] Emergency room                    [ ] Clinic                             [ ] Do not receive care
      [ ] Doctor's office                   [ ] Health center                      [ ] Other (specify)
                                                                                       _______________________________

6.    Where does(do) the child(ren) usually go when they need care for an injury
      or illness?

      [ ] Emergency room                    [ ] Clinic                             [ ] Do not receive care
      [ ] Doctor's office                   [ ] Health center                      [ ] Other (specify)
                                                                                       _______________________________

7.    The last time the child(ren) needed to get health care (illness, injury,
      physical), the following was true: Place an X in the box in front of the
      best answer.

      [ ] Had no problem getting an appointment         [ ] Was not able to get an appointment
      [ ] Had to wait too long to get an appointment    [ ] Did not try to get an appointment

8.    Place an X in the box in front of the language the child(ren) speaks most
      [ILLEGIBLE] [ILLEGIBLE] at home.

      [ ] English                [ ] French              [ ] Chinese               [ ] Hebrew
      [ ] Spanish                [ ] Italian             [ ] Korean                [ ] Other (specify)
                                                         [ ] Japanese                  _______________________________
</TABLE>

DOH-3403(10/91)

                                    p 1 of 2
<PAGE>

                           NUMBER OF RECORDS PER PLAN
                      CHILD HEALTH PLUS SUPPLEMENTAL FORMS
                             Through January, 1993

                                  [PIE CHART]

      PERCENT OF
  JANUARY ENROLLMENT
        BY PLAN

<TABLE>
<S>                <C>
TBHP                .84
HCP                 7.8
CPHSP               2.4
HIP                10.2
GHI                 3.3
EBCBS              31.2
BS NENY             2.5
BCBS CNY            8.8
BCBS UW             8.5
BCBS WNY            7.1
BCBSA               8.2
WPHSP               3.6
CHP                 5.7
</TABLE>

<PAGE>

                    SOURCES OF REFERRAL TO CHILD HEALTH PLUS
               AS REPORTED ON THE SUPPLEMENTAL FORM FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                    SOURCES OF REFERRAL TO CHILD HEALTH PLUS
                  AS REPORTED ON THE SUPPLEMENTAL FORM BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

              HEALTH INSURANCE COVERAGE HELD AT TIME OF APPLICATION
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                   [PIE CHART]

                             [PLOT POINTS TO COME]

             HEALTH INSURANCE COVERAGE HELD AT TIME OF APPLICATION
              AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                 REASONS CHILDREN LOST HEALTH INSURANCE COVERAGE
           AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                 REASON CHILDREN LOST HEALTH INSURANCE COVERAGE
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

            SOURCES OF ROUTINE PREVENTIVE CARE PRIOR TO APPLICATION
           AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

            SOURCES OF ROUTINE PREVENTIVE CARE PRIOR TO APPLICATION
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]
<PAGE>

           SOURCES OF CARE FOR INJURY OR ILLNESS PRIOR TO APPLICATION
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

           SOURCES OF CARE FOR INJURY OR ILLNESS PRIOR TO APPLICATION
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                   ACCESS TO HEALTH CARE PRIOR TO APPLICATION
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                   ACCESS TO HEALTH CARE PRIOR TO APPLICATION
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                             Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                   LANGUAGE SPOKEN MOST FREQUENTLY IN THE HOME
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                   LANGUAGE SPOKEN MOST FREQUENTLY IN THE HOME
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                                 RACE/ETHNICITY
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                                 RACE/ETHNICITY
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                      AGE AT LAST BIRTHDAY BY AGE CATEGORY
            AS REPORTED BY CHILD HEALTH PLUS APPLICANTS FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                      AGE AT LAST BIRTHDAY BY AGE CATEGORY
               AS REPORTED BY CHILD HEALTH PLUS APPLICANTS BY PLAN
                             Through, January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

                       SEX OF CHILD HEALTH PLUS APPLICANTS
                 As Reported Through January, 1993 For All Plans

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

                       SEX OF CHILD HEALTH PLUS APPLICANTS
                    As Reported Through January, 1993 By Plan

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

Overall average number of visits per child of those reporting visits-1.8

Overall percent of children reporting emergency room visits-29.02%

                NUMBER OF EMERGENCY ROOM VISITS IN THE 12 MONTHS
                     PRIOR TO CHILD HEALTH PLUS APPLICATION
                  AS REPORTED ON THE SUPPLEMENTAL FORM BY PLAN
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

-     Percentage of Children Reporting Emergency Room Visits

-     Average Number of Visits of Those Reporting Visits

<PAGE>

Overall average number of hospital admissions per child of those reporting
admissions-1.5

Overall percent of children reporting hospital admissions-4.14%

                 OVERNIGHT HOSPITAL ADMISSIONS IN THE 12 MONTHS
                     PRIOR TO CHILD HEALTH PLUS APPLICATION
                  AS REPORTED ON THE SUPPLEMENTAL FORM BY PLAN
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

-     Percent of Children Reporting Over night Admissions

-     Average Number of Admissions for Those Reporting Admissions

<PAGE>

Overall average number of visits per child of those reporting visits-3.8

Overall percent of children reporting visits-85.7%

                   VISITS TO A CLINIC, DOCTOR OR HEALTH CENTER
             IN THE 12 MONTHS PRIOR TO CHILD HEALTH PLUS APPLICATION
                                     BY PLAN
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

-     Percentage of Children Reporting Visits to Clinic, Doctor or Health Center

-     Average Number of Visits of Those Reporting Visits

<PAGE>

              GENERAL HEALTH STATUS OF CHILD HEALTH PLUS APPLICANTS
               AS REPORTED ON THE SUPPLEMENTAL FORM FOR ALL PLANS
                              Through January, 1993

                                  [PIE CHART]

                             [PLOT POINTS TO COME]

              GENERAL HEALTH STATUS OF CHILD HEALTH PLUS APPLICANTS
                  AS REPORTED ON THE SUPPLEMENTAL FORM BY PLAN
                              Through January, 1993

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

<PAGE>

Overall average income of those reporting income-$16,189

                 AVERAGE FAMILY INCOME OF THOSE REPORTING INCOME
                   AS REPORTED BY CHILD HEALTH PLUS APPLICANTS
                              Through January, 1993

                                  [LINE GRAPH]

                             [PLOT POINTS TO COME]

<PAGE>

Overall average number of adults per family-1.8

Overall average number of children greater than 13 per family-1.4

Overall average number of children less than 13 per family-2.1

Overall average number of total family members 4.1

                  AVERAGE FAMILY SIZE BY AGE CATEGORY BY PLAN
                  AS REPORTED BY CHILD HEALTH PLUS APPLICANTS
                             Through January, 1993

                                  [LINE GRAPH]

                             [PLOT POINTS TO COME]

<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                     NUMBER A-12
                                                        DATE   5/1/94

SUBJECT: Definition of Equivalent Coverage

                  AMENDED POLICY - EFFECTIVE 7/1/94

            Effective 7/1/94, the following policy will supersede that contained
      in "Child Health Plus Advisory Memorandum #A-1, dated February 7, 1992,
      Item VI., pages 12 and 13, with respect to the Definition of Equivalent
      Coverage:"

      "VI. Definition of Equivalent Coverage

            When determining whether a child should be deemed as having
      "equivalent coverage," the following guidelines should be followed
      effective 7/1/94. This policy will be used to determine eligibility for
      new and all existing enrollees who recertify for coverage after 7/1/94:

            -Coverage for primary and preventive health care services including
      diagnostic and treatment of illness and injury provided in a physician's
      office or other outpatient site(s) which is consistent with the Child
      Health Plus benefit package is considered equivalent coverage, regardless
      of whether or not there is a co-payment for such coverage. If however, a
      policy has a deductible of greater than $750.00, per person per year, they
      will be eligible for enrollment in Child Health Plus.

            Insurance plans which do not include prescription drugs or do not
      provide benefits consistent with the Child Health Plus Benefit package as
      approved by the New York State Insurance Department, but meet the above
      definition, will be deemed to offer "equivalent coverage".

            "Limited Benefits Policies" which pay a fixed dollar per episode of
      care (regardless of the cost of the medical care provided) are not
      considered equivalent health insurance for determining eligibility for
      enrollment in the Child Health Plus program.

<PAGE>

NEW YORK STATE DEPARTMENT OF HEALTH                           CHILD HEALTH  PLUS
CHILD HEALTH PLUS                                             MEDICAID  REFERRAL

Complete this form to help get your children into the best program available for
them. Print all answers clearly in ink. Return this form with your Child Health
Plus application. Answer all questions as completely as you can.

I. IDENTIFICATION OF APPLICANTS

a. Name of person completing form ______________________________________________

   Street address ______________________________________________________________

   City _________________________   State ___________________  Zip _____________

   Telephone number     Home (_______) _________  Work (__________)_____________

   Relationship to child for whom making application _______________   Birthdate

b. Name of Child applicant(s)  1. _____________________________  _______________

                               2. _____________________________  _______________

                               3. _____________________________  _______________
_
                               4. _____________________________  _______________

                               5. _____________________________  _______________

                               6. _____________________________  _______________

   Child(ren)'s street address _________________________________________________

   City _________________________ State _______________________ Zip ____________

   Telephone number   Home (______) ____________________

c. Name of child's parent/legal guardian _______________________________________
   (if different from person completing form)

   Street address ______________________________________________________________

   City _______________________   State ______________________  Zip ____________

   Telephone number   Home (_______)________________  Work (_______)____________

II. MEDICAID AND HEALTH INSURANCE

  a. Does applicant(s) currently have Medicaid coverage?  Yes [ ]  No [ ]

  b. If Yes, when will Medicaid coverage stop? _________________________________

  c. Has applicant ever received or applied for Medicaid or
     assistance?   Yes [ ]  No  [ ]

  d. If child is covered by other health insurance, how much is paid for
     premiums per month? _______________________________________________________

<PAGE>

III. INCOME

a.    List all the income received by family members living in your household.

      Be sure to include all sources of gross income (before taxes) such as
      wages, dividends and interest, AFDC, SSI, annuities, pension, disability,
      child support, alimony, cash gifts, and other unearned income.

<TABLE>
<CAPTION>
                                                                                                        f. Do you have child
b. Name of person(s)                                 d. How often is money                                   care costs?
working or receiving        c. Who provides the        received? (Weekly,                                 How much? (weekly,
money. (Attach extra          money? (Employer,         every two weeks,                                   every two weeks,
sheet if necessary)          program or person)             monthly)            e. What amount?                monthly)
--------------------        -------------------      ---------------------      ---------------         --------------------
<S>                         <C>                      <C>                        <C>                     <C>
1. Father                   ___________________      _____________________      _______________         ____________________

2. Mother                   ___________________      _____________________      _______________         ____________________

3.                          ___________________      _____________________      _______________         ____________________

4.                          ___________________      _____________________      _______________         ____________________

5.                          ___________________      _____________________      _______________         ____________________

g. Total (1+2+3+4+5)           =============             ==============
                            ___________________      _____________________      _______________         ____________________
</TABLE>

IV. HOUSEHOLD DESCRIPTION

a. Family Size

   1. Mother ____________

   2. Father ____________

   3. Number of children under 21 in home ___________

   4. Total _________

V. CERTIFICATION

  I certify that all information is correct to the best of my knowledge.

  Signature of person who completed the form __________________________________

  Relationship to applicant(s)_________________   Date____/____/_________

DOH-3743(8/93)

                                   p. 2 of 2

<PAGE>

                               FOR OFFICE USE ONLY

VI. DEDUCTIONS (MONTHLY)

a.  Household's monthly gross income _____________________________
    Total (from III. column e, line g) (convert to monthly equivalent, if
    needed.)

    1. $90 from earned income only _______________________________
       (per working parent)

    2. Child Care expenses from employment (if applicable)______________________
       ($175.00 maximum per child age 2 or oven $200.00 maximum per child under
       age 2) (from III. column f, line g) (convert to monthly equivalent if
       needed)

    3. $50 from child support only _________________________
       (per household)

    4. Health insurance premiums paid ______________________
       (from II. d.)

b. Total Deductions (1+2+3+4) ______________________________

c. Net Monthly Income (a-b) ________________________________

VII. MONTHLY INCOME LEVELS (EFFECTIVE 7/1/93)

<TABLE>
<CAPTION>
                                                                                                           Add for each
Family Size          1        2         3          4          5          6         7          8         additional person
-----------        ----      ----      ----       ----       ----       ----      ----       ----       -----------------
<S>                <C>       <C>       <C>        <C>        <C>        <C>       <C>        <C>        <C>
100% FPL
Children born
after 9-30-83,
but younger
than age 19         580       785       990       1195       1400       1605      1810       2015                 205

133% FPL
Children under
age 6               772      1045      1317       1590       1863       2135      2408       2681                 272

185% FPL
Children under
age 1              1074      1453      1833       2212       2591       2970      3350       3729                 379
</TABLE>

VIII. REFERRAL

      Referral (Check one      1. Yes [ ]  No [ ]  Referral Date __/____/_______
               for each child  2. Yes [ ]  No [ ]
               applicant)      3. Yes [ ]  No [ ]  Review's initials ___________
                               4. Yes [ ]  No [ ]
                               5. Yes [ ]  No [ ]
                               6. Yes [ ]  No [ ]

DOH-3743(8/93)
<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                             NUMBER A-14
                                                                DATE 5/16/94

SUBJECT:    I.  Requirement to maintain list of 13 and 14 year old individuals
                who have aged out of the Child Health Plus program.

            II. Medicaid referrals.

      I.    Due to pending legislation concerning the increase in age
            eligibility (13 and 14 year olds) for enrollment in the Child Health
            Plus program, it is important that an accurate record of children
            currently aging out of the program be kept.

            The following procedure should be used as a means of tracking all
            Child Health Plus enrollees who age out of the program retroactively
            from January 1, 1994.

            For those plans which do not already have a system to track aged out
            individuals, a database should be maintained with (at a minimum) the
            following information:

            Policy #
            Name
            Address
            City
            State
            Zip Code
            Phone #
            Effective date (the enrollee aged out of the program)
            Date of Birth
            Social Security Number
            Name of Responsible Adult (Address and Phone Number if not same as
            above)

      II.   Effective immediately: If your plan is not already doing so, please
            begin a process to refer potentially Medicaid eligible Child Health
            Plus enrollees, who are going to age out of the Child Health
            program, to Medicaid. To help you determine potentially eligible
            children, enclosed is a copy of the Child Health Plus Medicaid
            Referral form. Medicaid brochures may be obtained by calling John
            Harwick of DSS at (518) 432-2505. The Medicaid brochure is available
            in English and Spanish. Please request Medicaid brochure number 16
            for the English language version. For the Spanish language version,
            please request Medicaid brochure form number 1615S.

<PAGE>

NEW YORK STATE DEPARTMENT OF HEALTH                            CHILD HEALTH PLUS
CHILD HEALTH PLUS                                              MEDICAID REFERRAL

Complete this form to help get your children into the best program available
for them. Print all answers clearly in ink. Return this form with your Child
Health Plus application. Answer all questions as completely as you can.

I. IDENTIFICATION OF APPLICANTS

a.  Name of person completing form _____________________________________________

    Street address _____________________________________________________________

    City ____________________  State _________________  Zip ____________________

    Telephone number   Home (______)_____________  Work (______)________________

    Relationship to child for whom making application ________________ Birthdate

b.  Name of Child applicant(s) 1. _____________________   ______________________
                               2. _____________________   ______________________
                               3. _____________________   ______________________
                               4. _____________________   ______________________
                               5. _____________________   ______________________
                               6. _____________________   ______________________

   Child(ren)'s street address _________________________________________________

   City ____________________  State __________________  Zip ____________________

   Telephone number  Home (_______)__________________

c. Name of child's parent/legal guardian _______________________________________
   (If different from person completing form)

   Street address ______________________________________________________________

   City __________________________  State _________________  Zip _______________

   Telephone number   Home (______)______________  Work (_______)_______________

II. MEDICAID AND HEALTH INSURANCE

    a. Does applicant(s) currently have Medicaid coverage?  Yes [ ]  No [ ]

    b. If Yes, when will Medicaid coverage stop?________________________________

    c. Has applicant ever received or applied for Medicaid or assistance?
       Yes  [ ]  No [ ]

    d. If child is covered by other health insurance, how much is paid for
       premiums per month?______________________________________________________

DOH-3743(8/93)

                                    p 1 of 2
<PAGE>

III. INCOME

a.    List all the income received by family members living in your household.

      Be sure to include all sources of gross income (before taxes) such as
      wages, dividends and interest, AFDC, SSI, annuities, pension, disability,
      child support, alimony, cash gifts, and other unearned income.

<TABLE>
<CAPTION>
                                                                                                  f. Do you have child
b. Name of person(s)                               d. How often is money                               care costs?
working or receiving        c. Who provides the      received? (Weekly,                             How much? (weekly,
money. (Attach extra         money? (Employer,        every two weeks,                               every two weeks,
sheet if necessary)         program or person)             monthly)             e. What amount?           monthly)
-------------------         ------------------             --------             ---------------           --------
<S>                         <C>                    <C>                          <C>               <C>
1. Father                   ___________________    _____________________        _______________   ____________________

2. Mother                   ___________________    _____________________        _______________   ____________________

3.                          ___________________    _____________________        _______________   ____________________

4.                          ___________________    _____________________        _______________   ____________________

5.                          ___________________    _____________________        _______________   ____________________

g. Total (1+2+3+4+5)           ============            =============
                            ___________________    _____________________        _______________   ____________________
</TABLE>

IV. HOUSEHOLD DESCRIPTION

a. Family Size

   1. Mother _________

   2. Father _________

   3. Number of children under 21 in home ________________

   4. Total _____________

V. CERTIFICATION

   I certify that all information is correct to the best of my knowledge.

   Signature of person who completed the form _________________________________

   Relationship to applicant(s)_____________________  Date ____/_____/_________

DOH-3743(8/93)

                                   p. 2 of 2
<PAGE>

                               FOR OFFICE USE ONLY

VI. DEDUCTIONS (MONTHLY)

a.  Household's monthly gross income ________________________
    Total (from III. column e, line g) (convert to monthly equivalent, if
    needed.)

    1. $90 from earned income only _____________________________________________
       (per working parent)

    2. Child Care expenses from employment (if applicable) _____________________
       ($175.00 maximum per child age 2 or over $200.00 maximum per child under
       age 2) (from III. column f, line g) (convert to monthly equivalent if
       needed)

    3. $50 from child support only _____________________________________________
       (per household)

    4. Health insurance premiums paid __________________________________________
       (from II. d.)

b. Total Deductions (1+2+3+4) __________________________________________________

c. Net Monthly Income (a-b) ____________________________________________________

VII. MONTHLY INCOME LEVELS (EFFECTIVE 7/1/93)

<TABLE>
<CAPTION>
                                                                                                            Add for each
Family Size           1        2         3          4           5         6         7          8          additional person
-----------          ---     -----      ----       ----       -----      ----      ----       ----        -----------------
<S>                           <C>       <C>        <C>         <C>       <C>       <C>        <C>         <C>
100% FPL
Children born
after 9-30-83,
but younger
than age 19          580       785       990       1195        1400      1605      1810       2015                205

133% FPL
Children under
age 6                772      1045      1317       1590        1863      2135      2408       2681                272

185% FPL
Children under
age 1               1074      1453      1833       2212        2591      2970      3350       3729                379
</TABLE>

VIII. REFERRAL

      Referral (Check one      1.  Yes [ ]  No [ ]  Referral date___/____/______
               for each child  2.  Yes [ ]  No [ ]
               applicant)      3.  Yes [ ]  No [ ]  Review's initials __________
                               4.  Yes [ ]  No [ ]
                               5.  Yes [ ]  No [ ]
                               6.  Yes [ ]  No [ ]

DOH-3743(8/93)
<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

                              HEALTH PLAN FOR KIDS

  ADVISORY MEMORANDUM                                          NUMBER A-15
                                                               DATE June, 1994

  SUBJECT: Procedure for Child Health Plus Enrollees Enrolled With More Than One
           Insurer

As you are aware, "dual enrollment" (ie: Child Health Plus enrollees with more
than one insurer) has been an ongoing coordination and billing issue. In
response, the following procedure has been developed to streamline current
policy related to dual enrollment. This policy should be used by all Child
Health Plus insurers, and shall become effective immediately.

NYS DOH determines dual enrollment by a Child Health Plus enrollee by comparing
monthly billing files between each of the Plans.

The effective dates are compared to determine the first insurer enrolled. In
case of the same effective date, the first billing file received will be
considered first enrolled.

Once the first enrolled plan is determined, the second plan(s) will be notified
by DOH. Notification will be mailed within 5 business days of receipt of all
plans billing files for the month, directing all second plan(s) to disenroll the
child effective the first of the month following notification. The second
enrolled plan(s) should not bill DOH and will not receive payment from DOH for
the child's premium after that time.

The second plan(s) will notify the child's responsible adult that the child is
being disenrolled, the reason for disenrollment, and the effective date of
disenrollment.

In cases where the responsible adult wants to enroll the child with the second
plan instead of remaining with the first plan the child must be disenrolled from
the second plan until the following occurs:

      -     Responsible adult must notify first plan of decision to disenroll
            child from that plan with a future effective date. Family should
            indicate that the purpose for disenrollment is in order to enroll in
            a different plan.

      -     The first plan must send written confirmation of disenrollment with
            effective date of termination of coverage to the responsible adult.

      -     The responsible adult must submit a copy of the written [ILLEGIBLE]
            of a disenrollment to the second plan before the child can be
            re-enrolled in the second plan.

<PAGE>

      -     The second plan can enroll the child upon receipt of confirmation of
            disenrollment. The new effective date must not be prior to the
            disenrollment date of the first plan and should be the first of the
            month following date of disenrollment from the first plan to avoid
            any lapse in coverage.

      -     The second plan must submit a copy of the confirmation of
            disenrollment to the Department of Health/Child Health Plus Program
            upon re-enrolling the child. This documentation must be received by
            the Department prior to billing for premiums for the child.

If the child's name appears on subsequent billing files from the second plan
before the department receives from the second plan, the copy of confirmation of
disenrollment from the first plan, the monthly premium amount will automatically
be posted as a negative adjustment to the second insurer's billing file by the
Department.

If there is disagreement between insurers as to which insurer is first, NYS
DOH's determination is final.

<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                        NUMBER  A-16
                                                           DATE January 25, 1995

SUBJECT:  Changes in  Policies  and/or Procedures Required by Chapter 731 of the
          Laws of 1993, and Chapters 170 and 731 of the Laws of 1994.

      I. Eligibility

     II. Change in Status

    III. Reporting

     IV. Request for Income Verification by the Department of Taxation and
         Finance

      V. Eligibility Verficiations

     VI. Pattern and Practice of Enrolling Ineligible Children

Attachments

      1. Changes Needed to Current Application Forms

      2. Report on Reasons for Denied Applicants and Disenrollments

<PAGE>

I.   ELIGIBILITY

      A. Age - For the period of January 1, 1994 through December 31, 1995, in
order to be eligible for participation in the Child Health Plus program, the
child must be born on or after June 1, 1980 and must be under fifteen years of
age. Documentation supporting age must be maintained by the insurer.

      B. Residency - Proof of residency is now a required element for
determining eligibility. Proof of residency shall be demonstrated by adequate
proof of a New York State street address. Adequate proof shall include but not
be limited to school records, utility bills or any mail addressed to the
individual which is postmarked. Documentation must be maintained by the insurer.

      C. Equivalent Health Insurance - The responsible adult must attest to the
source and nature of any health care coverage the child is receiving. The
application must contain a section inquiring about any additional health
insurance. The application must contain a question (e.g. Does the child have any
other health insurance or Medicaid?) which must be answered yes or no. If this
question in answered yes, the insurer must maintain documentation of other
insurance.

      D. Income Documentation - The most recently filed income tax return should
be submitted if available. Income statements from employers or paycheck stubs
may be used for income documentation if a tax return is not available. If the
family indicates income has changed since a tax return was filed or if
additional income is currently available to the child which is not documented on
an income tax return, additional income information must be submitted in order
to supplement the income tax return. The most recent form of income
documentation available which accurately represents the current financial status
of the family, should be used in order to determine eligibility. The
self-declaration of income form may only be used if no other means of income
documentation is available. Income documentation must be maintained by the
insurer.

      E. Social Security Number - State law requires the collection of social
security account numbers for each parent and legally responsible adult who is a
member of the household and whose income is available to and being received by
or on behalf of the child. In accordance with legislation, social security
numbers must be reported on the application to the insurer if available.

                                     Page 2
<PAGE>

      F. Medicaid Eligibility - In order to be eligible for participation in the
Child Health Plus program, the child must not be enrolled in Medicaid. If an
insurer discovers that a child enrolled in Child Health Plus is also enrolled in
Medicaid, the insurer must immediately disenroll that child from Child Health
Plus. This practice is known as the "transfer" of children who are eligible or
who become eligible for Medicaid. The existing Medicaid referral policy remains
in effect and documentation of such must be maintained by the insurer.

      G. Income Eligibility - Consistent with previous Department policy, income
eligibility determinations should continue to be based upon gross household
income that is available to the child. Please note that, as stated above, social
security numbers and income tax returns may only be collected from parents and
legally responsible adults who are members of the household and whose income is
available to the child. Therefore, this information is not required to be
collected on individuals who have no legal or parental relationship with the
child. However, their income may continue to be used when determining
eligibility and the insurer must maintain income documentation. For example, if
a mother and her children are living with a boyfriend who helps financially
support the children but has no legal or parental relationship with the them,
his income may be counted in determining eligibility. However, his social
security number may not be collected by the insurer.

11.    CHANGE IN STATUS

      A. The responsible adult is obligated to report to the insurer any change
in status, such as residency, income, or other insurance, that may make the
child ineligible for participation in the program, within 60 days of such
change. It is the insurer's responsibility to review this information in order
to redetermine eligibility and to notify the family and the Commissioner or his
representative if the child is no longer eligible for subsidy, within 30 days of
receipt of this information. Documentation must be maintained by the insurer.

                                     Page 3
<PAGE>

III. REPORTING

      A. Effective July 1, 1994, the insurer must report to the Department, on a
quarterly basis, the number of applicants and enrollees determined ineligible
for participation in the Child Health Plus program and the reasons for such
determination. This should include applicants initially determined ineligible,
those disenrolled at the close of the presumptive eligibility period, those
that are not recertified due to the fact that they are determined ineligible and
any other disenrollment which occurs at any point during the year. This report
must be received by the Department within 30 days after the close of the
quarter. The attached form should be used to report this information.

      B. Effective July 1, 1994, enrollment data includes thirteen and fourteen
year olds who were born on or after June 1, 1980. A new category was added on
the monthly enrollment report for these children.

IV.   REQUEST FOR INCOME VERIFICATION BY THE DEPARTMENT OF TAXATION AND FINANCE

      This process is currently under development with the Department of
Taxation and Finance. Pending resolution of several outstanding issues
concerning what information may be collected for purposes of verifying income, a
policy will be instituted via an advisory memorandum.

V.    ELIGIBILITY VERIFICATIONS

      The Department will review, on an annual basis, eligibility verification
and recertification procedures by each insurer to insure appropriate enrollment
of children. This may include an annual review of a statistically valid sample
of cases from each insurer through site visits and/or desk audits to determine
adherence to enrollment policies and procedures, the verification would first
check that, based on the age, family size, residence status, insurance status,
and income reported on the application, the child was actually eligible for
subsidized enrollment. For applications with appropriate income levels, evidence
of Medicaid referral would be checked. In addition, the presence of required
documentation in support of the application would be checked.

                                     Page 4
<PAGE>

VI. PATTERN AND PRACTICE OF ENROLLING INELIGIBLE CHILDREN

      If, when conducting a review of the insurer's eligibility process and
documentation, the Department discovers that some application records do not
have complete documentation attached or on their face appear invalid the
Department will identify such children for further review of eligibility by the
insurer.

      If the number of children with incomplete applications or documentation
who are subsequently determined to be ineligible is significant, this may
constitute a pattern and practice of enrolling or recertifying children who are
ineligible. If this is determined, the insurer shall be required to repay, to
the Bad Debt and Charity Care Pool, all subsidy payments made on behalf of these
ineligible children. The insurer also may be subject to removal from the program
once all eligible children can be orderly transitioned to other insurers, if it
is established that a pattern and practice of enrolling or recertifying children
who are ineligible exists.

      Improper enrollment based on a good faith reliance on documentation which
appears accurate on its face shall not constitute a pattern or practice of
enrolling or recertifying children who are ineligible and shall not subject the
insurer to repayment of premiums or removal from the program.

                                     Page 5
<PAGE>

      ATTACHMENT I

                                CHILD HEALTH PLUS
                   CHANGES NEEDED TO CURRENT APPLICATION FORMS

1.    ADDITION OF ATTESTATION/ACKNOWLEDGEMENT STATEMENT:

      As required by New York State, I attest to the following statements:

-     I certify that all statements contained in this application are true and
      accurate.

-     I hereby certify that I have provided complete and accurate information on
      the source and nature of all health care coverage the child is receiving.

-     I understand that if the child becomes enrolled in Child Health Plus, it
      is my responsibility to notify (insurer name), of any change which may
      make the child ineligible for subsidized coverage in the Child Health Plus
      program, including changes in income, residency or insurance coverage,
      within 60 days.

-     I understand that I may be liable for any premiums paid on behalf of the
      child which are a result of my willful misstatement of information on this
      application or failure to report any subsequent changes in information
      within 60 days of such change.

-     I further understand that my income may be subject to verification by the
      Department of Taxation and Finance if (insurer name) has reasonable cause
      to believe that the income information provided is false.

____________________________                                       ________
Parent or Guardian Signature                                         Date

2.    ADDITION OF QUESTIONS REGARDING OTHER INSURANCE:

      The application must contain the question, "Does the child have any other
health insurance or Medicaid?" which is answered yes or no. If yes, a section
must be completed identifying the source of insurance, policy number and
coverage amounts. A copy of the policy or adequate documentation of benefits
such as a summary of benefits, a statement/letter from the other insurance
company indicating the benefits and deductible or a statement/letter from the
employer indicating the benefits and deductible must also be submitted and,
retained as documentation.

<PAGE>

3.    ADDITION OF QUESTIONS RELATING TO INCOME TAX RETURNS:

      -     Question asking if the previous year's tax return was filed.

      -     Question asking if previous year's tax return is available.

      -     Question asking if the responsible party's financial status has
            changed subsequent to filling the tax return.

      -     if the responsible adult indicates that a tax return was filed and
            is available, a copy must be attached to the application.

4.    REQUEST FOR SOCIAL SECURITY NUMBERS

      State law requires that social security numbers of each parent and legally
responsible adult who is a member of the household and whose income is available
to and being received by or on behalf of the child must be reported on the
application to the insurer if available. The application must contain a question
asking if a social security number for each parent or responsible adult is
available. If the responsible adult indicates that a social security number is
available, the number must be provided on the application.
<PAGE>

                               CHILD HEALTH PLUS
                       ADDITIONAL REQUIRED DOCUMENTATION

1) PROOF OF RESIDENCY - i.e. school records, utility bill or any mail addressed
to the individual which has been postmarked.

2) INCOME - Prior year's tax return for each parent and legally responsible
adult whose income is available to and being received by or on behalf of the
child, regardless of current income status.

Note that, as described in the policy memorandum, if income level has changed
since last year's income, documentation supporting the current income will be
needed in addition to the prior year tax return.

<PAGE>

                                  ATTACHMENT 2

                                CHILD HEALTH PLUS
                     REPORT ON REASONS FOR DENIED APPLICANTS
                               AND DISENROLLMENTS

Instructions: Insurer must report the number of applicants and enrollees
determined ineligible for participation in the Child Health Plus Program and the
reasons for the determination. This should include applicants initially
determined ineligible, those not enrolled at recertification due to the fact
that they are determined ineligible, those disenrolled at the close of the
presumptive eligibility period and disenrollment which occurs at any other
point during the year. This report must be received by the Department on a
quarterly basis within 30 days after the close of the quarter. The reports
should be sent to:

            Bureau of Community Health Insurance and Finance Systems
            Child Health Plus Program
            New York State Department of Health
            Corning Tower Building, Room 1168
            Empire State Plaza
            Albany, New York 12237-0721

INSURER: _________________________________ QUARTER: ____________________________

I.    New Applicants

      A.    Ineligible due to:

            Age _____________
            Income _____________
            Equivalent insurance ____________________
            Residency ______________

      B.    Failure to pay $25 enrollment fee (if applicable) __________________

      C.    Miscellaneous/Other ___________________

<PAGE>

II.   After Presumptive Eligibility Period

      A.    Lack of sufficient documentation _________________

      B.    Failure to pay $25 enrollment fee (if applicable) __________________

      C.    Miscellaneous/Other ______________

III.  At Recertification

      A.    Ineligible due to :

            Age _______________
            Income _________________
            Equivalent Insurance___________________________
            Residency _____________________

      B.    Lack of sufficient documentation ____________________

      C.    Failure to pay $25 enrollment fee (if applicable) _________________

      D.    Family voluntarily chose not to re-enroll __________________________

      E.    Miscellaneous/Other __________________________

IV.   Disenrollment at any Other Point During the Year

      A.    Insurer notified of any change in status of responsible party:

            Income _____________
            Residency _____________
            Equivalent insurance ______________________

      B.    Family voluntarily chose to disenroll ___________________________

      C.    Miscellaneous/Other___________________________

<PAGE>

                                   APPENDIX C

                             UNIVERSITY OF ROCHESTER

                           FINAL REPORT TO LEGISLATURE

<PAGE>

                      NEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                           NUMBER    A-11
                                                              DATE February 1994

SUBJECT: Child Health Plus - Supplemental Form Data Analysis

            A self-administered, optional reporting tool was developed by the
      Department to collect data to learn some descriptive information about the
      population of Child Health plus applicants. The report was used to collect
      data from applicants from the inception of the program through January,
      1993. The attached report is an analyses of the collected data.

            A few notes contained in the report deserve highlighting:

            -     The majority of the Child Health Plus population are eligible
                  due to loss of insurance from loss of employment, or Medicaid
                  eligibility;

            -     Most report themselves as in good health;

            -     The average income of applicants is approximately $16,000,
                  and;

            -     The population represents a fairly even distribution by age.
                  The great majority of Child Health Plus members are white and
                  english speaking.

      Attachment

<PAGE>

                                CHILD HEALTH PLUS

                         SUPPLEMENTAL FORM DATA ANALYSIS

                      PLAN INCEPTION THROUGH JANUARY, 1993

                       New York State Department of Health
                      Bureau of Community Health Insurance
                               and Finance Systems
                                 November, 1993

<PAGE>

                      MEW YORK STATE - DEPARTMENT OF HEALTH

                            [CHILD HEALTH PLUS LOGO]

ADVISORY MEMORANDUM                                           NUMBER    A-11
                                                              DATE February 1994

SUBJECT: Child Health Plus - Supplemental Form Data Analysis

            A self-administered, optional reporting tool was developed by the
      Department to collect data to learn some descriptive information about the
      population of Child Health Plus applicants. The report was used to collect
      data from applicants from the inception of the program through January,
      1993. The attached report is an analyses of the collected data.

            A few notes contained in the report deserve highlighting:

            -     The majority of the Child Health Plus population are eligible
                  due to loss of insurance from loss of employment, or Medicaid
                  eligibility;

            -     Most report themselves as in good health;

            -     The average income of applicants is approximately $16,000,
                  and;

            -     The population represents a fairly even distribution by age.
                  The great majority of Child Health Plus members are white and
                  english speaking.

Attachment

<PAGE>

                                CHILD HEALTH PLUS

                        SUPPLEMENTAL FORM DATA ANALYSIS

                      PLAN INCEPTION THROUGH JANUARY, 1993

                       New York State Department of Health
                      Bureau of Community Health Insurance
                               and Finance Systems
                                 November, 1993

<PAGE>

OVERVIEW

      The Supplemental Form was an optional data collection tool developed by
the Department to collect data in a uniform manner from Child Health Plus
applicants on demographic, marketing, prior utilization, access, and health
status elements. All but one insurer submitted forms. The form went into use at
the inception of the program and was collected until April, 1993. At that time
the insurers were instructed to stop including the form with the enrollment
packet, but to mail in any forms which they received from previous applicants.
To date, approximately 30,000 forms have been received and entered. The data in
the following tables and graphs is based upon 26,000 forms collected from plan
inception through January, 1993.

      While some plans submitted one form per family, others submitted a form
for each child applicant. The results include applicants to Child Health Plus,
not just those who were accepted. Therefore, the number of forms received does
not equal the number of children enrolled. In a few instances, more forms were
received than the insurer enrolled. Other insurers submitted forms for just
those that were accepted into the program. In addition, the data is
self-reported and may not reflect actual use. Not all respondents answered every
question on the form. The results were tallied by completed question and not
completed form. The graphs only include those applicants who answered the
questions.

      When more than one answer was given in questions five and six regarding
locus of care, the lowest level of care was entered. For question four, how
coverage was lost, if left/lost job was checked with other items, the question
was coded for left/lost job. For question seven, some people checked "has no
problem" and wrote in: don't need an appointment for the emergency room. If more
than one language was checked for question eight and one was English, the
question was coded for English. Also, if more than one race/ethnicity was
checked for question nine, the question was coded as other. In many instances
the items to be checked by the insurer in the FOR OFFICE ONLY section were left
blank.

SUMMARY OF FINDINGS

      -     Most of the applicants learned of Child Health Plus through a
            friend/relative.

      -     Two-thirds to 90 percent of applicants did not have health insurance
            and most lost their coverage because parent lost/left their job.

      -     Most of the applicants had a source of care for an injury or illness
            (physician office, clinic, health center).

<PAGE>

      -     Three-fourths of the applicants reported no problem getting access
            to care.

      -     Close to 90 percent of the applicants spoke English, with Spanish
            and Chinese being spoken in New York City in two plans.

      -     Almost three-fourths of the applicants report being
            white/non-hispanic.

      -     Less than 10 percent of applicants were under the age of 1 year with
            the remainder fairly evenly split between the age categories of 1-5
            and 6-12.

      -     The male and female applicants were evenly split.

      -     Approximately 30 percent of the applicants report having an ER visit
            in the 12 months prior to application with the average number of
            visits 1.8 of those report having visits.

      -     Less than five percent of applicants reported having an overnight
            hospital admission in the 12 months prior to application; however
            those who did report admissions averaged 1.5 admissions.

      -     Over 85 percent of applicants reported having visits to a clinic,
            doctor or health center in the 12 months prior to application. of
            those who reported visits, the average number was [ILLEGIBLE]
            visits.

      -     The majority of applicants reported their health status as good or
            better. Less than one-half of one percent reported their health
            status as poor.

      -     The average income for applicants reporting income is $16,189 per
            family.

      -     The average number of adults per family is about 2, the average
            number of children less than 13 per family is about 2, the average
            number of children older than 13 is about 1.5 with the overall
            average family size about 4.

<PAGE>

                         EVALUATION OF CHILD HEALTH PLUS
                                       IN
                                 NEW YORK STATE
                                     SUMMARY

                                       by

                    THE ROCHESTER CHILD HEALTH STUDIES GROUP

                           Peter G. Szilagyi, MD, MPH
                               Jack Zwanziger,PhD
                             Lance E. Rodewald, MD
                                Jane L. Holl, MD
                              Dana B. Mukamel, PhD
                                Sarah Trafton, JD
                                  Laura Pollard
                                Andrew Dick, PhD
                                Lynne Jarrell, MS
                            Richard F. Raubertas, PhD

                                   April 1996

                                 Departments of:
                                   Pediatrics
                        Community and Preventive Medicine
                               Emergency Medicine

                             UNIVERSITY OF ROCHESTER

<PAGE>

CONTENTS

<TABLE>
<CAPTION>
NUMBER                                                                             PAGE
<S>                                                                                <C>
I        Background                                                                  1

II       Evaluation Methods                                                          1

III      Findings
4

         A. Profile of Children in Child Health Plus

4
         B. Access to Health Care                                                    6
         C. Utilization of Health care                                               6
         D. Quality of Health Care                                                   9
         E. Expenditures and the Uncompensated Care Pool
9
         F. Evaluation of Marketing and Outreach                                    11
         G. Evaluation of Insurer performance in Determination of Eligibility
             for Child Health Plus                                                  11

IV       Recommendations                                                            12
         A. Recommendations for programmatic Changes                                14
         B. Issues for Future Study                                                 16
</TABLE>

<PAGE>

LIST OF TABLES

<TABLE>
<CAPTION>
                                                                                 PAGE
TABLE                              TITLE OF TABLE                               NUMBER
<S>                                                                             <C>
1     Legislative Objectives for Evaluation of Child Health Plus                   2

2     Methods for Data Collection                                                  3

3     Insurance Coverage for Children in New York State (1993) - By Region         5

4     Number of Children Enrolled in Child Health Plus, Eligible for child
      Health Plus, and Potential Child Health Plus-Eligible Children               5

5     Effects of Child Health Plus on Utilization of Primary Care Services:
      Analysis of Medical Charts for Preschool Children (0-5 yr.)                  7

6     Effects of Child Health Plus on Utilization of Primary Care and Specialty
      Services: Analysis of Parent Interviews                                      8

7     Effect of Child Health Plus on Hospitalizations                              9
</TABLE>

<PAGE>

LIST OF FIGURES

FIGURE                          TITLE OF FIGURE

1     Percent of Children by Race and Ethnicity

2     Percent of Children by Poverty Level

3     Percent of Children With Health Insurance Prior to Child Health Plus by
      Insurance Type

4     Percent of Children Who Have Specific Type of Primary Care Home During
      Child Health Plus and Number of Minutes to Provider

5     Percent of Children Who Changed Primary Care Providers After Enrolling in
      Child Health Plus

6     Number of Visits per Member per Year During Child Health Plus By Region

7     Percent of Children Who Saw a Specialist, Year Before and Year During
      Child Health Plus

8     Number of Hospitalization Reported, Year Before and Year During Child
      Health Plus

9     Percent of Children Who Were Up-to-Date on Immunizations, Before and
      During Child Health Plus

10    Change in Child's Health Care Due to Child Health Plus (Children with
      Chronic Conditions)

11    Change in Child's Health Status Due to Child Health Plus (Children with
      Chronic Conditions)

12    Child Health Plus Expenditures per Member per Year by Region

13    Child Health Plus Expenditures per Member Year by Visit Type and Plan Type
      (Upstate Regions Only)

<PAGE>

                         EVALUATION OF CHILD HEALTH PLUS

                                    SUMMARY

I.    BACKGROUND

      A large number of children in New York State are uninsured or
underinsured. Between 1989 and 1993, the rate of uninsured children in New York
increased from 8.7 percent to 10.7 percent, and in the United States to 13.5
percent. In New York State and in the United States, children who are uninsured
are from working poor families. Hispanic and African-American children are more
likely to be uninsured than Caucasian children. Prior studies have found that
uninsured children suffer from inadequate access to health care, and in some
cases have poorer health outcomes.

      Child Health Plus was first included in Chapters 922 and 923 of the Laws
of 1990 as a statewide program designed to: provide primary and preventive
health insurance coverage to low income children, increase eligible children's
access to primary and preventive health care services, improve the health status
of enrolled children, and reduce and more efficiently target outpatient bad debt
and charity care expenditures in New York State. The Child Health Plus benefit
package covers most ambulatory care, including preventive care, ambulatory
surgery, emergency care, prescription drugs, some other outpatient services, but
does not include hospitalizations. Fifteen insurance plans participate in Child
Health Plus (four indemnity plans and eleven managed care plans). Two marketing
organizations have contracts to promote the program, one in New York City and
another for the rest of the state.

      Financing of Child Health Plus comes from the Statewide Bad Debt and
Charity Care pool established under the New York Prospective Hospital
Reimbursement Methodology, as well as from premium contributions from families
($25 per child per year up to a $100 maximum per family per year). Only families
of the partially subsidized children whose family income is between 160 percent
and 222 percent of the federal poverty level must contribute the $25 to the
premium. Children are eligible for Child Health Plus if they (1) were born on or
after June 1, 1980 and are under the age of fifteen, (2) reside in New York
State in a household having a gross income at or below 222 percent of the
federal poverty level, (3) are not eligible for Medicaid, and (4) do not have
equivalent coverage. Families with gross incomes that exceed 222 percent of the
federal poverty level can purchase Child Health Plus for the cost of the full
premium (ranging from $498 to $798 per year). The program has grown rapidly,
from a first-year enrollment of 2,000 children in January, 1992, to a current
enrollment of 103,407 in September, 1995.

      As a means of determining whether the program's goals have been met,
legislation required a comprehensive evaluation. Chapter 731, Laws of 1993, as
amended by Chapter 170, Laws of 1994, authorized the Commissioner to solicit
proposals to evaluate the program, and outlined specific evaluation objectives.

II.   EVALUATION METHODS

      The Rochester Child Health Studies Group was selected in August, 1994 to
conduct the evaluation of Child Health Plus. The evaluation occurred over a
15-month time period. Table 1 shows the legislative objective: for the
evaluation:

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       1
<PAGE>

                                     TABLE 1
          LEGISLATIVE OBJECTIVE FOR THE EVALUATION OF CHILD HEALTH PLUS
                                  TO EVALUATE:

1.    The overall effect of Child Health Plus on access to, utilization and
      quality of primary and preventive health care services, including, but not
      limited to, patterns of service utilization, geographic availability of
      service providers, possible reductions in uncompensated care as a result
      of the program, and enrollee satisfaction with program administration,
      services and quality;

2.    The impact of the child health insurance program on the health status of
      program participants, including the comparative impact on families that
      have a child enrolled in the program and other children that are not
      eligible and do not have coverage;

3.    The effect of the child health insurance program on emergency room (ED)
      utilization, including the effectiveness of preventing inappropriate
      utilization;

4.    The geographic accessibility of the child health insurance program,
      including the availability and accessibility of service providers, premium
      levels and premium increases;

5.    The effect of community-based and statewide outreach education efforts;

6.    The results of a statistically valid sampling of cases verifying
      certification and recertification of eligibility for subsidy payments
      under this title including but not limited to data on failure by approved
      organizations to adequately verify enrollee eligibility;

7.    Any recommendations for programmatic changes to improve the child health
      insurance program based on program evaluation and enrollee satisfaction
      data;

8.    A cost and patient outcome comparison of indemnity plans and managed care
      plans offered under this program.

      The evaluation focused on children who had enrolled in Child Health Plus
between July 1, 1992 and June 30, 1993, and who were enrolled for a minimum of
nine continuous months. This allowed us to evaluate a recent [ILLEGIBLE] of
children on Child Health Plus who also had sufficient experience with Child
Health Plus to permit accurate determinations of any effect of the program on
health care and outcomes.

      We employed several methods and data sources to answer the eight
legislative questions. These methods are shown in the Table 2:

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       2

<PAGE>

                                    TABLE 2
                          METHODS FOR DATA COLLECTION

<TABLE>
<S>                                         <C>
Parent Interviews                           To determine characteristics of the population, sources of
(N=2,507 children)                          health care both before Child Health Plus and during enrollment
(N=2,126 Total Unique families)             in Child Health Plus, experience with Child Health Plus
(N=1291 Preschool children)                 and with medical care, and the impact of Child Health
(N=358 Children with Asthma)                Plus on enrolled children's health care and health status.
(N=152 Children with Attention              [Objectives 1-5,7,8]
Deficit Disorder)

Supplemental Interview                      To obtain additional information about parent experiences
(N-121 Children)                            with and opinions about insurance, and their willingness to
                                            pay for Child Health Plus. [Objectives 1-2]

Medical Chan Reviews                        To  measure, for the 1-year period before enrollment in
(N=633 Preschool children)                  Child Health Plus and the 1-year period during enrollment
(N=159 Children with Asthma)                in Child Health Plus: (1) utilization of primary,
(N=49 Children with Attention               subspecialty, and emergency care, (2) quality of care,
Deficit Disorder)                           and  (3) costs of care. Chart reviews were performed for
                                            young children (birth to 6 years of age), and for
                                            patients with asthma and attention deficit disorder
                                            (ADD). The latter two conditions were chosen because
                                            asthma is the most common chronic medical condition of
                                            childhood and ADD is one of the most common chronic
                                            developmental conditions. [Objectives 1-5,7,8]

Health Care Provider Survey                 To evaluate marketing of Child Health Plus to providers,
(N= 117 Providers)                          the impact of Child Health Plus on primary care practices,
                                            and the changes in utilization of services  by Child Health
                                            Plus patients. [Objectives 1,2,4,5]

Individual-level Claims Analysis            To Measure utilization and costs of care. [Objectives
(N=1478 Children)                           1-5,7,8]

Marketing and Outreach                      To evaluate the effectiveness of marketing and
Evaluation                                  community-based and statewide outreach efforts, both
                                            downstate and upstate.   [Objective 5]

Insurance Plan Chart Reviews                To measure documented compliance with requirements
(N=2,250 Children; 4226 Episodes of         for eligibility certification for each of the 15
enrollment)                                 insurance plans.   [Objective 6]

Analysis of Existing Datasets               Analysis of: (1) the Current Population Survey to estimate
                                            the number of Children eligible for Child Health Plus, (2)
                                            the Child Heath Plus billing file for patient selection,
                                            (3) SPARCS dataset for estimating costs of admissions,and
                                            (4) the National Health Interview Survey for population
                                            comparisons. [Objectives 1-6, 8]

Case Study                                  Interviews with key informants from insurance plans, New York
                                            State DOH, and community organizations, and parents, to assess
                                            their experience with Child Health Plus and the implementation
                                            of Child Health Plus. [Objectives 1-8]
</TABLE>

      In order to assess regional differences, the Child Health Plus population
was divided into 4 regions: (1) New York City, (2) New York City Suburbs, (3)
Upstate Urban region, and (4) Upstate Rural region. A stratified sampling
technique was used to sample sufficient patients from each region. Patients were
selected irrespective of whether they were in an indemnity or managed care
insurance plan type. To perform a comprehensive evaluation of the effect of
Child Health Plus on the measures listed above it was necessary to obtain
detailed information for time periods both before and after enrollment in Child
Health Plus; otherwise it would have been difficult to estimate whether Child
Health Plus had any effect at all.

      The study methodology allowed us to evaluate key questions for the entire
Child Health Plus population in New York State; by region for each of the four
regions; by plan type

ROCHESTER CHILD HEALTH STUDIES GROUP.                   EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       3
<PAGE>

(indemnity or managed care); for each of three groups of children: preschool
children (ages 0-5 yrs), children with asthma (the most common chronic medical
disease of childhood), and children with attention deficit disorder (one of the
most common chronic developmental conditions); and by level of insurance
Coverage prior to Child Health Plus (either insured or uninsured). Plan type was
evaluated for the two upstate regions because almost all children in the two
downstate regions belonged to managed care plans. Weighting techniques were used
to estimate state-wide proportions and averages for key outcome measures.

      Children who had been enrolled in Child Health Plus for less than 9 months
were not included in this evaluation for several reasons. First, an effect of
Child Health Plus is unlikely for children who were enrolled for only a few
months. Second, the twelve percent of children who were enrolled for only one or
two months probably represent presumptive enrollees who did not remain in the
program beyond the presumptive period. Following initial application, families
are given two months to supply supporting documentation for eligibility; this
period of presumptive eligibility thus includes some children who were not
enrolled in Child Health Plus beyond the two month period. Twenty-three percent
of children were enrolled for 3-8 months; the findings from this evaluation may
not be applicable to these children.

      Informed consent was obtained from parents for all children included in
the study. Parents who spoke only Spanish or Chinese (3 main dialects) were
included since interviewers were available for these languages. There were a
small number of parents whom we were unable to interview because of language
difficulties.

      Because of a lower rate of successful contact of parents in New York City,
a separate substudy was performed in New York City to determine whether the
children included in the main study were representative of the New York City
Child Health Plus population. We subcontracted with an outreach organization in
Manhattan (Alianza Dominicana) who attempted to contact 100 randomly selected
children who were part of the sample that we had not been able to contact;
methods for contact in the substudy included visits to homes and nearby health
centers. Alianza was able to contact 31 children (31%). There were no major
differences between key characteristics of the Alianza sample and
characteristics of the remainder of the New York City sample. Thus, it appears
that the New York City sample is representative of children enrolled in Child
Health Plus in New York City.

      Medical chart reviews were performed either on-site throughout New York
State, or by review of 1,335 photocopied charts obtained with parent and
provider permission. Claims and encounter data were obtained from 13 plans for
children for whom informed consent had been obtained. A uniform dataset was
developed by aggregating individual claims to the visit level. Information about
provider type and location was included. Average visits and costs per member per
month were calculated. Multivariate analysis was performed to determine if there
were differences between indemnity and managed care plans, controlling for
patient characteristics.

III.  FINDINGS

A. PROFILE OF CHILDREN IN CHILD HEALTH PLUS

      Although enrollment in Child Health Plus has increased dramatically, many
eligible children are not enrolled (see Tables 3 and 4). Using analysis of the
Current Population Survey (CPS) and our parent interview, we found that in 1993,
37 percent of children throughout New

ROCHESTER CHILD HEALTH STUDIES GROUP.                   EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       4
<PAGE>

York State who were eligible for Child Health Plus were enrolled (see Table
4). Enrollment in Child Health Plus varied by region, with lower percentages in
New York City (29 percent of eligibles) than the rest of New York State (50
percent of eligibles). Increasing the Child Health Plus age limit to 17 years
would increase the eligible population by about 50 percent (based on 1993 CPS
data). Hispanic children and African-American children, and children in the
lowest eligible income levels were slightly under-represented in the Child
Health Plus population.

                                     TABLE 3
     INSURANCE COVERAGE FOR CHILDREN IN NEW YORK STATE (1993) -- BY REGION

<TABLE>
<CAPTION>
                   PRIVATE &                     CHILD HEALTH
                    CHAMPUS          MEDICAID         PLUS            UNINSURED           TOTAL
                    -------         ----------        ----            ---------           -----
<S>                <C>              <C>          <C>                  <C>              <C>
STATE TOTAL        2,047,373        903,092         71,031             274,388         3,002,902
REGION 1             606,819        519,501         29,883             133,273         1,170,818
REGION 2             515,288         72,055         14,070              59,006           623,025
REGION 3             729,237        230,065         19,833              60,507           948,319
REGION 4             196,029         81,471          7,245              21,602           260,740
</TABLE>

Child Health Plus data are based on Child Health Plus enrollment files from
March of the following year, (e.g., 1993 Child Health Plus enrollment is based
on March 1994 enrollment file.) All Child Health Plus data are based on
information from Child Health Plus enrollment files.

*Region 1 is New York City; Region 2 is the suburban area around New York City;
Region 3 includes upstate urban counties (SMSA areas); and Region 4 includes
upstate rural counties (non-SMSA areas).

                                     TABLE 4
         NUMBER OF CHILDREN ENROLLED IN CHPLUS, ELIGIBLE FOR CHPLUS, AND
                       POTENTIAL CHPLUS-ELIGIBLE CHILDREN

<TABLE>
<CAPTION>
                                                      PERCENT OF CHILD
                    CHILD HEALTH    CHILD HEALTH        HEALTH PLUS-
                        PLUS-      PLUS-ELIGIBLE     ELIGIBLE ENROLLED      ADDITIONAL       ADDITIONAL
                      ENROLLED       POPULATION       IN CHILD HEALTH        CHILDREN         CHILDREN
 REGION              POPULATION    0 TO 12 YEARS           PLUS           13 TO 15 YEARS   16 TO 18 YEARS
 ------             ------------   -------------           ----           --------------   --------------
<S>                 <C>            <C>               <C>                  <C>              <C>
NEW YORK CITY          29,883         104,146               29%                42,032           29,292
OTHER 3 REGIONS        41,148          88,186               50%                20,339           27,048
                       ------         -------               --                 ------           ------
ALL NYS                71,031         192,332               37%                62,371           56,340
</TABLE>

      As shown in Figure 1, the majority of children on Child Health Plus are
Caucasian, with a greater proportion of African-American, Hispanic, and Asian
children found in New York City than in other regions. Families on Child Health
Plus are working poor: 91 percent have a working parent, mostly employed in
non-professional, non-managerial occupations. Figure 2 shows income levels: 78
percent had family gross incomes below 160 percent of the federal poverty level.
Eighty-six percent of children had a parent who completed 12th grade. More than
half of children were uninsured before enrollment in Child Health Plus (Figure
3), and nearly two-thirds had no prior insurance coverage for preventive care.
Half of children had lost their prior insurance because of loss of
employment-related insurance benefits or because insurance was too costly. Four
percent of parents stated their child received Medicaid concurrently with Child
Health Plus, and six percent purchased concurrent inpatient coverage.

      Parents expressed a desire for three types of increased benefits: dental
care (50 percent of parents), inpatient coverage (28%), and increasing the age
limit (13%). Ten percent had

ROCHESTER CHILD HEALTH STUDIES GROUP.                   EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       5
<PAGE>

services denied and 15 percent had payments denied; denials were slightly more
common in indemnity plans than in managed care plans (some reported "denials"
were for services not covered by Child Health Plus). Based on 121 parents
interviewed for the Supplemental Interview, most parents preferred Child Health
Plus to Medicaid, and most expressed a willingness to pay a $3 copayment for
doctor visits, a annual premium of up to $240, and an annual deductible of up to
$ 100.

B.    ACCESS TO HEALTH CARE.

      Access to the Child Health Plus program was similar across regions, and
was relatively easy according to parents (though complex according to insurers).
Enrollment in Child Health Plus slightly improved access to sources of both
preventive care and sick care, with greatest improvements in New York City
(where base line levels were lowest). After enrollment in Child Health Plus, 99
percent of children had a regular source for preventive care and for sick care.
Child Health Plus resulted in an increase of 6 percent in the proportion of
children who had a preventive "home" (11 percent in New York City), and an
increase of 3 percent in the proportion of children who had a sick "home " (6
percent in New York City).

      Enrollment in Child Health Plus increased the proportion of children
seeing private doctors from 59 percent to 65 percent, and increased the
proportion of children using health centers from 13 percent to 25 percent (see
Figure 4). Children in New York City, and children in managed care plans were
more likely to use health centers. Parents reported a relatively short travel
time to reach their child's primary care provider (Figure 4).

      Child Health Plus resulted in some discontinuity of health care for many
patients, primarily because many of their prior primary care physicians were
not Child Health Plus providers. As Figure 5 shows, 51 percent of patients
switched primary care physicians upon enrollment in Child Health Plus. A major
reason for the switch was that providers were not participating in the networks
of the Child Health Plus insurers.

      The vast majority of parents found that during Child Health Plus access to
primary care services was easy: more than 85 percent of parents reported that it
was easy to reach their doctor by telephone, make an appointment, get to the
office, and get prescriptions. Access to emergency and specialty care during
Child Health Plus was also rated extremely easy by more than 80 percent of
parents. Levels of access were slightly higher in the two upstate regions than
in the downstate regions, (for getting to the office, and ease of use of the
emergency department), and slightly higher for children in indemnity plans than
children in managed care plans (for reaching their doctor by phone, and getting
referrals). However, the overall levels of access were extremely high in all
regions and for both plan types.

C.    UTILIZATION OF HEALTH CARE

      Parents of 91 percent of children stated that their child utilized a
primary care provider for a service during the year after enrollment in Child
Health Plus; these high levels were confirmed by both medical chart reviews and
claims analyses. Child Health Plus enrollees averaged 5.2 visits to a health
care provider, 80 percent to primary care providers, 9.6 percent to specialists,
5.1 percent for ambulatory surgery, 2 percent for emergency department (ED), and
2 percent for independent radiology and laboratory services. Visit rates were
highest in the upstate urban region (5.9 visits per member per year) and lowest
in the New York City suburb region (4.6 visits per member per year). The rate of
emergency department (ED) visits was much

ROCHESTER CHILD HEALTH STUDIES GROUP.                   EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       6
<PAGE>

higher in the two upstate regions than in the two downstate regions. Overall,
utilization was very similar between indemnity and managed care plans, except
that specialty care was slightly lower under managed care plans (0.7 visits per
member year) than indemnity plans (1.1 visits per member year).

      Based on medical chart reviews, We found that preschool children had high
rates of primary care visits during Child Health Plus. Seventy percent made at
least one primary care visit during the year on Child Health Plus and 90 percent
made at least one visit of any type to their primary care provider. Figure 6
shows the number of visits per member per year during Child Health Plus for
preschool children (ages 0-5 years) according to region. On average, preschool
children made 1.3 preventive visits, 3.7 acute visits, 1.3 follow-up visits,
0.38 chronic illness visits, and 6.7 total primary care visits per year, this is
a high number of primary care visits. Children in the upstate rural region had
the lowest number of visits, while children in the New York City suburban region
had the highest number of visits.

      Child Health Plus resulted in substantial increases in almost all types of
primary care visits, as shown in Tables 5 and 6. Controlling for age, family
size, region, plan type, and prior insurance, the effect of Child Health Plus
(Table 5) was to add 0.38 preventive care visits per year, 1.9 acute care
visits, 0.45 follow-up visits, 0.25 chronic care visits, and 3.0 total primary
care visits. Child Health Plus resulted in significant reductions in use of
health department clinics for immunizations, by 88 percent. Child Health Pius
increased the likelihood of preschool children using their primary care
providers for preventive and for sick care (Table 6). The effect of Child Health
Plus was greatest in New York City, where baseline utilization (for patients
before Child Health Plus) was the lowest. For acute care visits and total
primary care visits only, the effect of Child Health Plus was slightly greater
for managed care plans than for indemnity plans.

                                     TABLE 5
      EFFECTS OF CHILD HEALTH PLUS ON UTILIZATION OF PRIMARY CARE SERVICES
          ANALYSIS OF MEDICAL CHARTS FOR PRESCHOOL CHILDREN (0-5 YR.)

<TABLE>
<CAPTION>
                                                 CHANGE IN VISITS
                                                   DUE TO CHILD
           VISIT TYPE                               HEALTH PLUS       P VALUE
           ----------                               -----------       -------
<S>                                              <C>                  <C>
# PREVENTIVE VISITS PER YEAR                         + 0.38            <.001*
# ACUTE VISITS PER YEAR                               + 1.9            <.001*
# FOLLOW-UP VISITS PER YEAR                          + 0.45            <.001*
# CHRONIC CARE VISITS PER YEAR                       + 0.25            <.001*
# NURSING VISITS IN OFFICE PER YEAR                 + 0.046              .07
# TOTAL PRIMARY CARE VISITS PER YEAR                  + 3.0            <.001*
HAD A HEALTH DEPARTMENT IMMUNIZATION                   -8.8%           <.001*
DURING THE YEAR (YES OR NO)
</TABLE>

* REPRESENTS STATISTICALLY SIGNIFICANT DIFFERENCES

ROCHESTER CHILD HEALTH STUDIES GROUP.                   EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       7
<PAGE>

                                     TABLE 6

   EFFECTS OF CHILD HEALTH PLUS ON UTILIZATION OF PRIMARY CARE AND SPECIALTY
                                    SERVICES
 ANALYSIS OF PARENT INTERVIEWS FOR ALL CHILDREN ON CHILD HEALTH PLUS (0-12 YR.)

<TABLE>
<CAPTION>
                                       CHANGE IN PERCENT OR
                                         NUMBER OF VISITS
                                              DUE TO
         VISIT TYPE                      CHILD HEALTH PLUS     P VALUE
         ----------                      -----------------     -------
<S>                                    <C>                     <C>
HAD A PREVENTIVE CARE HOME                    + 5.9%           < .001*
USED PREVENTIVE CARE HOME                     + 2.7%              .04
HAD SICK CARE HOME                            + 3.3%           < .001*
USED SICK CARE HOME                           + 3.0%           < .001*
</TABLE>

* REPRESENTS STATISTICALLY SIGNIFICANT DIFFERENCES

      According to parent interviews, specialty care increased markedly due to
Child Health Plus, from a rate of 13 percent use of specialists during the year
before Child Health Plus enrollment to 29 percent during the year on Child
Health Plus (see Figure 7). Claims analysis confirmed high rates of specialty
utilization. There were no significant differences across regions or between
plan types in the effect of Child Health Plus on utilization of specialty care.

      There were somewhat conflicting findings about the effect of Child Health
Plus on Emergency Department (ED) utilization depending on the source of
information (interviews or medical chart reviews). Parents reported an increase
in ED utilization (by 0.11 ED visits per child per year, controlling for other
variables; p< .001). However, the medical records showed no such increase (no
significant effect of Child Health Plus on ED visits). In addition, claims data
contained only about one-third the number of ED visits noted by parents. On the
whole, we believe the best source of information for ED utilization is medical
charts rather than parent interviews. Thus, we conclude that there was no
significant effect of Child Health Plus on ED utilization. There was also no
evidence that Child Health Plus decreased ED utilization. While ED utilization
was not changed by Child Health Plus, children made an average of 1.1 to 2.3
more illness visits to their primary care provider because of Child Health Plus.
This increase in illness visits probably represents previously unmet demand for
illness care. That increase in illness care was borne almost entirely by primary
care providers during Child Health Plus.

      Figure 8 shows the number of hospitalizations reported by parents
during the year before and the year during Child Health Plus. For all regions of
the state, the average number of hospitalizations per year was 0.072 before
Child Health Plus, and 0.042 during Child Health Plus. Based on information from
parent interviews, Child Health Plus reduced hospitalization rates by 4 percent,
and reduced the probability of being hospitalized by up to 2 percent
(controlling for age, family size, region, plan type, and prior insurance--see
Table 7). However, these results may have some inaccuracies; for example,
hospitalizations were not included on claims files to allow for verification.
More comprehensive studies are needed (with large sample sizes) to adequately
evaluate the effect of Child Health Plus on hospitalizations.

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       8
<PAGE>

                                    Table 7

                EFFECT OF CHILD HEALTH PLUS ON HOSPITALIZATIONS

<TABLE>
<CAPTION>
VISIT TYPE FROM PARENT INTERVIEWS      EFFECT OF CHILD
FOR ALL CHILDREN (0-12 YR)               HEALTH PLUS      P VALUE
--------------------------               -----------      -------
<S>                                    <C>                <C>
# HOSPITALIZATIONS                        -0.04           < .001*
PROBABILITY OF HOSPITALIZATION             -2.0%            .002
</TABLE>

* REPRESENTS STATISTICALLY SIGNIFICANT DIFFERENCES

D.    QUALITY OF HEALTH CARE

      Based on measures of access, which are often used in quality assessments,
Child Health Plus resulted in clinically and statistically meaningful
improvements in access to preventive services. Immunization rates for Child
Health Plus enrollees were similar to rates for most poor populations. However,
as shown in Figure 9, Child Health Plus did not result in improved immunization
rates based on medical chart reviews of all sources of care.

      One-third of parents stated that Child Health Plus improved their child's
quality of care, and almost no parent stated that Child Health Plus resulted in
poorer quality of care. Similarly, one-third of parents perceived that Child
Health Plus improved their child's health status, and almost no parent perceived
a worsening of health status due to Child Health Plus. More than 90 percent of
parents in all regions and plan types were satisfied with the Child Health Plus
program, with their insurer, and with their primary care doctor.

      Primary care providers gave relatively poor ratings for the promotion of
Child Health Plus to their patients and to providers. However, providers gave
high ratings for the impact of Child Health Plus on improving preventive visits
by their patients who had enrolled in the program.

      For children with either of the two chronic conditions (asthma and
attention deficit disorder), more than one-third of parents perceived that both
their child's quality of care and their child's health status had both improved
because of Child Health Plus, and almost none perceived worsening because of
Child Health Plus (see Figures 10 and 11). Most parents stated that their
children with chronic illnesses had easy access to their primary care providers,
to specialists, and to the emergency department if needed. The number of visits
to both primary care providers and specialists increased markedly after
enrollment in Child Health Plus for these patients. Overall, results from
interviews and chart reviews suggested improved quality of care for the three
vulnerable subgroups: preschool children, children with asthma and children with
attention deficit disorder.

E.    EXPENDITURES AND THE UNCOMPENSATED CARE POOL

      Approximately half of Child Health Plus expenditures were for primary
health care services. As shown in Figure 12, there were substantial differences
in average expenditures (for medical care) per member year across regions:
statewide average expenditures were estimated at $477.36 per member year.
Expenditures were highest in the upstate urban region ($615.72) and lowest in
the New York City Suburb region ($407.04).

      Expenditures per member year were higher for managed care plans ($633.62
per member per year) compared with indemnity plans ($492.85 per member per
year), as seen in Figure 13. However, these differences were due to differences
in population characteristics. After

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       9
<PAGE>

controlling for enrollee characteristics we found no differences in expenditures
between indemnity and managed care plans. Child characteristics that were
significant in the cost equation and were controlled for in the comparison of
managed care and indemnity plans were: age, length of enrollment in Child Health
Plus, race, household income, being underinsured prior to Child Health Plus, and
utilization of the Emergency department, hospitalization, and specialist
services prior to Child Health Plus (all of these variables were obtained by
interview).

      Using the interview, we estimated the effect that Child Health Plus had on
the probability of a hospitalization. We found that for the respondents to our
survey, representing the population eligible for the study (enrollment in Child
Health Plus between July 1, 1992 and June 30, 1993, that lasted at least nine
months), the probability of admission was decreased by 2.0 percentage points,
with no significant differences in the size of this effect for the four regions
of our study. Applying this change in the probability of an admission to the
entire Child Health Plus population for the calendar year 1993, we estimate that
the Child Health Plus program reduced the number of admissions for uninsured
children by 1.054 admissions. We assumed that the avoided admissions have the
same average cost as those that occurred. Using 1993 SPARCS data, we aggregated
the number of admissions for uninsured children under 13 years of age and their
corresponding charges, resulting in an average charge per admission of $5,588.
We multiplied the number of admissions avoided through the Child Health Plus
program by this average charge per admission to find the total charges avoided.
Then, applying a statewide average cost to charge ratio for 1993, we estimated
the total costs that hospitals avoided in 1993 as a result of the program. Using
this approach, we found that Child Health Plus had a total effect on inpatient
costs of approximately $4,000.000.

      We also used claims data to calculate the average payment per member per
month for outpatient hospital services in each region, and multiplied this
number by the number of member months in each region. We estimate that Child
Health Plus paid $3,900,000 for outpatient services in 1993.

      To estimate what the effect on hospital finances would have been in the
absence of Child Health Plus, we estimated two opposing effects resulting from
its presence: (1) shift of the non-ED outpatient utilization away from hospital
clinics toward physician offices (obtained from the interview), and (2) increase
in overall utilization (calculated from chart reviews). Combining these two
factors, we find that outpatient usage would have been higher in the absence of
Child Health Plus. By applying a statewide average outpatient revenue to cost
ratio to the difference between the forgone revenue (in the absence of Child
Health Plus) and the payments by Child Health Plus for non-ED outpatient
services, we estimate that hospital outpatient costs would have been higher by
$1,100,000.

      The combined effect of increased outpatient revenue and reduced outpatient
costs due to Child Health Plus is approximately $5,000,000, although the cost
savings are likely to be somewhat inflated as discussed in Chapter 8 of the
complete report. Child Health Plus had a substantial effect on hospital
finances, both by reducing admissions and by decreasing the net financial need
of hospital outpatient services. While the impact of Child Health Plus on the
uncompensated care pool is likely to be substantial, the program is far from
self-financing--the costs of the additional ambulatory services; are greater
than the above savings.

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       10
<PAGE>

F.    EVALUATION OF MARKETING AND OUTREACH

      It was not possible to directly measure the effectiveness of the marketing
contractors because the linkage between Child Health Plus enrollment and
marketing activity is weak. A perception of both marketing contractors and
insurers is that Child Health Plus enrollment consistently approached program
limits. (Enrollment was frozen statewide once, in the Summer of 1992. Insurers
were able to appeal for increases in allocation of slots on an individual basis,
preventing a repeat of the enrollment "freeze.") The concern expressed by
marketing contractors and insurers alike was that demand would exceed program
resources. Child Health Plus was not designed to accomodate all eligible
children in the State, thus outreach efforts were adjusted according to
contractor and insurer knowledge of enrollment levels and space available. An
additional limitation that was reported by marketing contractors and insurers
was the limit on administrative expenditures at 10 percent for insurers. Some
plans reported that the staff available to process incoming applications was
only one half-time individual. If the number of applications exceeded the staff
resources available to process applications, the result was a longer waiting
period for potential applicants' coverage to be approved and instituted. The
extent to which marketing contributed to heightend demand for Child Health Plus
is not clear. Most parents heard about Child Health Plus from a friend, school,
or their doctor, and very few heard about Child Health Plus from a marketing
activity (such as TV, mailing or community meeting.).

      Although the marketing contractors submitted new workplans to the state
effective with each contract extension, it was the marketing contractors'
perception that they lacked sufficient flexibility to revise marketing
strategies as the program developed and as they gained experience with marketing
Child Health Plus. Clearly it would be consistent with the social marketing
paradigm to encourage this flexibility to develop new strategies. Thus, contract
renewal terms and eveluation of marketing contractors, performance of activities
in the future should allow for revision of marketing strategies both over the
length of the marketing contract as well as with contract extensions.

      Both marketing contractors engaged in major activities, including
targeting schools, health centers, producing large volumes of mailings, and
organizing many meetings and presentations, which more than 16,000 people
attended. Their contracts did not require contractors to demonstrate success in
increased enrollment to these activities. Health care providers gave poor
ratings to the overall promotion of Child Health Plus to their patients and to
the physician community. Children from minority populations and from the lowest
eligible income categories (160-222% of federal poverty level) were
under-represented in Child Health Plus, suggesting the need for more aggressive
marketing and outreach to these populations.

G.    EVALUATION OF INSURER PERFORMANCE IN DETERMINATION OF ELIGIBILITY FOR
      CHILD HEALTH PLUS

      We randomly selected 150 children from each of the fifteen Child Health
Plus insurers and requested enrollment records from insurers. Children were
eligible if they were enrolled for a minimum of three months, with an initial
enrollment date between July 1, 1993 and June 30, 1994. All documents in the
enrollment records were reviewed, either on-site at insurer offices or using
photocopies of records. Documentation for 3,557 episodes of enrollment (both
original enrollment and recertification) was received for the 2,250 randomly
selected children. Insurer documentation was reviewed for completeness (presence
of appropriate documents) across six elements as required for Child Health Plus
eligibility: date of birth, residence in New York State

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       11
<PAGE>

(which was not required to be documented until July, 1994), income and family
size documentation (to calculate percent of federal poverty level), insurance
verification, concurrent insurance (to determine if equivalent to Child Health
Plus), and Medicaid referral if appropriate. We also determined accuracy of
information on the Child Health Plus application form, compared with source of
documents supplied by insurers.

      Chapter 10 of the complete report shows results for each insurer. The
criteria for verification of Date of Birth state that documentation must be
provided upon initial enrollment, but need not be provided again at the time of
recertification. Thus, the results for Date of Birth were computed by child,
using the denominator 150 (number of children sampled from each insurance
plan). Date of Birth was documented for 1,953 (87%) of the 2,250 randomly
selected children. The remainder of outcomes were calculated by episode of
enrollment (the difference is that each child may have multiple episodes of
enrollment due to recertification). For the 2,250 children sampled, 3,557
episodes were documented. Residence (again, not required to be documented until
July, 1994) matched for 61 percent of episodes, and federal poverty level for 73
percent of episodes; there were wide variations across plans. When documentation
was present, the information was almost always recorded accurately on the Child
Health Plus application form. Concurrent insurance was identified in only 4
percent of cases, similar to results from our interview. For 81 percent of cases
having concurrent insurance, there was not enough information supplied to
determine the type of concurrent insurance.

      Medicaid referrals were documented in 19 percent of episodes. (Not all
children who apply for Child Health Plus appear to the insurer to be eligible
for Medicaid, thus referrals are not expected in 100% of cases.) Documentation
of referrals to Medicaid may not reflect the actual numbers of referrals that
are made; according to the NYSDOH, most plans make more referrals than are
documented. While the precise percentage of this sample that was Medicaid
eligible is unknown, we did cross-check the accuracy of insurers' calculation of
federal poverty level by calculating the percent of federal poverty level for
each family based on income documentation supplied; in 95 percent of documented
episodes, our calculation of percent of federal poverty level matched the
calculation by the insurer. Thus, insurers were quite accurate in recording
percent of federal poverty level when supporting documentation was present.

      Insurers stated that the application process was complicated for families,
and that documentation of eligibility was often problematic because of patient
problems with lack of appropriate documents. Most parents, however, reported
that the application process was easy. Multiple documents and income worksheets
were utilized. The Child Health Plus application form has undergone revisions
over the past several years.

IV.   RECOMMENDATIONS

      This evaluation found that Child Health Plus was successful in meeting its
objectives. It has provided insurance to a large number of poor children from
primarily working families, most of whom were previously uninsured or
underinsured, or who would otherwise not be able to afford private insurance.
Child Health Plus resulted in increased access to primary care and specialty
care. It resulted in increased utilization of primary care, substantially
increased utilization of specialty care, no substantial change in emergency
department care, and a probable reduction in hospitalizations. Child Health Plus
improved the quality of care based on several dimensions such as preventive care
visit rates and use of appropriate services by children with chronic conditions,
but had no significant impact on other dimensions such as immunization

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       12
<PAGE>

rates. The majority of parents reported that Child Health Plus improved their
child's health care, and a significant number reported that Child Health Plus
improved the health status of their child. Finally, parents reported a high
level of satisfaction with the program and with the ease of use of most aspects
of the program.

      The evaluation also found that in 1993, 37 percent of children eligible
for Child Health Plus were enrolled in the program (29 percent of eligibles from
New York City and 50 percent from the other regions). Children from families
having the lowest income levels and minority children were under-represented in
Child Health Plus. Since Child Health Plus was found to have beneficial effects
on improving access to health care, utilization of primary care services, and on
some measures of quality of care a large number of eligible children could
benefit from enrollment in the program.

      The evaluation illuminated potential areas for improvement in the
operations of Child Health Plus. Physicians identified a need for better
promotion of Child Health Plus to their patients and improved education of
parents about the program and its requirements. Parents noted a strong desire
for an increased benefit package in three areas: dental coverage, inpatient
coverage, and expansion of age limits. In fact, the lack of coverage for
inpatient services potentially compromises physicians' ability to provide
optimal care. Many parents reported that their child switched primary care
physicians after enrolling in Child Health Plus, which resulted in discontinuity
of care. The primary reason for changing providers, as reported by parents, was
that the prior physician did not accept Child Health Plus (55%), (i.e. prior
physicians were not participating in the networks of Child Health Plus
insurers). Results of the assessment of insurer documentation of eligibility
varied widely across plans; increased accountability may equalize performance.
Insurers were concerned about the frequency and scope of reporting required by
the Department of Health and about the complexity of the application process;
most parents, on the other hand, did not indicate problems with the application
process. Several aspects of Child Health Plus marketing worked well, however,
others could be improved including determination of marketing effectiveness and
more focused strategies targeting minority and poor populations. Marketing
contractors as well as insurers noted constraints of program requirements that
limited their abilities to adapt to changes in the Child Health Plus program.

      The Child Health Plus program is a rapidly expanding program, with
enrollment increasing every year. While it was a relatively small program
several years ago, it is now a large-scale statewide program. Child Health Plus
has a dual role, providing both short-term "stopgap" insurance for some
families, and long-term coverage for many families. Given the overall success of
Child Health Plus, its rapid growth, its relatively successful model of
public-private partnership, and the likelihood of long-standing need for the
program, we believe it may be appropriate to redesign the Child Health Plus
program now in terms of its desired population size, benefit package and
structure, operations, and types and numbers of insurers. In keeping with the
public-private nature of the Child Health Plus program, New York State should
begin to handle the Child Health Plus program in a manner similar to that of
large purchasers of health benefits: monitoring access, utilization, quality and
costs, and restructuring the program to meet both the changing needs of clients
and our improved understanding of the impact of the program.

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       13
<PAGE>

            With the above findings and interpretations, we make recommendations
1 to 4:

A. RECOMMENDATIONS FOR PROGRAMMATIC CHANGES

1.    NEW YORK STATE SHOULD ATTEMPT TO ENROLL A HIGHER PROPORTION OF ELIGIBLE
      CHILDREN INTO CHILD HEALTH PLUS.

            -     TARGETED EFFORTS SHOULD BE IMPLEMENTED IN NEW YORK CITY, WHERE
                  THE PROPORTION OF ELIGIBLE CHILDREN ACTUALLY ENROLLED IN CHILD
                  HEALTH PLUS IS LOWER THAN THE REST OF THE STATE.

            -     PARTICULAR EMPHASIS SHOULD BE PLACED ON ENROLLING CHILDREN
                  FROM MINORITY FAMILIES AND FROM THE LOWEST INCOME CATEGORIES
                  WITHIN CHILD HEALTH PLUS ELIGIBILITY.

2.    NEW YORK STATE SHOULD IMPROVE THE PROMOTION OF CHILD HEALTH PLUS.

            -     KEY SITES ARE PHYSICIAN'S OFFICES (MOST CHILDREN IDENTIFIED A
                  SOURCE OF CARE PRIOR TO CHILD HEALTH PLUS), SCHOOL, AND
                  COMMUNITY SETTINGS.

            -     MARKETING CONTRACTORS SHOULD DEVELOP BETTER STRATEGIES TO
                  REACH MINORITIES AND OTHER SPECIAL POPULATIONS.

            -     MARKETING CONTRACTORS SHOULD FUNCTION AS EDUCATORS, WITH THE
                  GOAL OF INCREASING THE KNOWLEDGE OF POTENTIAL APPLICANTS ABOUT
                  THE VALUE OF HEALTH INSURANCE AND PREVENTIVE HEALTH CARE, THE
                  VALUE AND USE OF HEALTH INSURANCE, AND THE APPLICATION PROCESS
                  (INCLUDING DOCUMENTATION OF ELIGIBILITY).

            -     CONTRACT RENEWAL TERMS AND EVALUATION OF MARKETING
                  CONTRACTORS' PERFORMANCE OF ACTIVITIES IN THE FUTURE SHOULD
                  ALLOW FOR REVISION OF MARKETING STRATEGIES BOTH OVER THE
                  LENGTH OF THE MARKETING CONTRACT AS WELL AS WITH CONTRACT
                  EXTENSIONS.

            -     MARKETING OBJECTIVES SHOULD BE CLEARLY DEFINED, AND INCLUDE
                  CLEARLY DEFINED AND CONSISTENT MECHANISMS FOR EVALUATING THE
                  EFFECTIVENESS OF THE MARKETING STRATEGIES (LINKING ACTIVITIES
                  TO CHILD HEALTH PLUS ENROLLMENT).

            -     MARKETING CONTRACTORS SHOULD UTILIZE A COMMON REPORTING
                  STRUCTURE.

3.    NEW YORK STATE SHOULD EXPAND THE SCOPE OF CHILD HEALTH PLUS BENEFITS (IN
      THE FOLLOWING ORDER OF PRIORITIES):

            -     AGE LIMITS SHOULD BE INCREASED.

            -     INPATIENT CARE SHOULD BE ADDED TO THE BASIC BENEFIT PACKAGE.

            -     DENTAL COVERAGE SHOULD BE ADDED TO THE BASIC BENEFIT PACKAGE.

4.    NEW YORK STATE SHOULD CONSIDER RESTRUCTURING THE CHILD HEALTH PLUS PROGRAM
      TO FACILITATE:

            -     ENTRY OF NEW INSURERS AND PROVIDERS;

            -     BETTER DOCUMENTATION OF ELIGIBILITY, INCLUDING ACCOUNTABILITY
                  FOR BETTER PERFORMANCE;

            -     EXPANSION OF THE BASIC BENEFIT PACKAGE (AS LISTED IN #3
                  ABOVE); AND

            -     ENHANCEMENT OF MARKETING EFFORTS.

      As the purchaser of insurance, the State of New York must ensure that
Child Health Plus insurance plans are maintaining acceptable standards of access
and quality of care while controlling costs. Much as large employers are in the
process of developing reporting requirements that will allow them to evaluate
the insurance plans used by their employees, New York State must develop such
measures that are designed for the Child Health Plus population and for its
program objectives. Most of these measures are likely to be the same as ones

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       14
<PAGE>

currently included in health insurance plan "Report Cards"; others may have to
be program-specific. These reports will have to be provided periodically,
enabling the state to monitor plan performance. In turn, Child Health Plus
enrollees will be able to use these reports in their selection of plans.

5.    NEW YORK STATE SHOULD ESTABLISH CONSISTENT AND EFFECTIVE MECHANISMS FOR
      ROUTINE MONITORING OF CHILD HEALTH PLUS, OR REEXAMINE CURRENT MECHANISMS
      FOR USEFULNESS IN PROVIDING MEANINGFUL INFORMATION ABOUT THE FOLLOWING
      COMPONENTS:

            -     ACCESS TO CARE;

            -     SPECIFIC MEASURES OF QUALITY OF HEALTH CARE; AND

            -     UTILIZATION AND COSTS OF CARE

            MECHANISMS TO FACILITATE MONITORING INCLUDE:

            -     ON ENROLLMENT, PARENTS SHOULD BE ASKED TO PROVIDE CONSENT FOR
                  ONGOING CONFIDENTIAL REVIEWS OF MEDICAL RECORDS AND INSURANCE
                  CLAIMS BY THE STATE, WITH THE ASSURANCE THAT INDIVIDUAL-LEVEL
                  INFORMATION WILL NOT BE REPORTED OR RELEASED. THIS WOULD
                  PROVIDE AN AUDIT CAPABILITY FOR NEW YORK STATE.

            -     INSURERS SHOULD BE REQUIRED TO REPORT TO THE STATE THE SAME
                  WAY THEY REPORT TO ANY OTHER PAYER. THE STATE MAY CHOOSE TO
                  MANDATE A UNIFORM STRUCTURE FOR SUCH REPORTING.

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       15
<PAGE>

B.    ISSUES FOR FUTURE STUDY

      The current evaluation was not able to assess every aspect of the Child
Health Plus program. A number of key questions or issues were raised regarding
the health care of children on Child Health Plus. These issues include:

1.    DIFFERENCES BETWEEN VARIOUS TYPES OF MANAGED CARE ORGANIZATIONS SHOULD BE
      EXAMINED. The category "managed care" (with no further distinction) may be
      too broad, since there are many variations in service delivery systems and
      financial structures within managed care.

2.    REASONS FOR THE LARGE PROPORTION OF PATIENTS WHO SWITCHED PROVIDERS AT
      ENROLLMENT IN CHILD HEALTH PLUS SHOULD BE INVESTIGATED FURTHER. Switching
      is a marker for discontinuity of care which potentially compromises
      quality of care, and it should be minimized. Avenues for expanding options
      for enrollees have been recommended above.

3.    THE STATE SHOULD INVESTIGATE ALTERNATIVES FOR RESTRUCTURING CHILD HEALTH
      PLUS TO ENSURE THAT EXPANSION TO NEW INSURERS IS ADEQUATE, RESULTING IN
      CHOICE OF SEVERAL CHILD HEALTH PLUS INSURERS WITHIN EACH GEOGRAPHIC AREA.

4.    FURTHER STUDY SHOULD FOCUS ON BARRIERS TO ENROLLMENT AND CARE FOR MINORITY
      AND OTHER SUBPOPULATIONS, PARTICULARLY IN NEW YORK CITY. Such barriers may
      attenuate the benefits of any insurance coverage, including Child Health
      Plus. Strategies to overcome such barriers should be developed and
      implemented.

5.    STUDIES SHOULD EVALUATE THE APPROPRIATENESS OF CARE RECEIVED BY CHILD
      HEALTH PLUS BENEFICIARIES, INCLUDING EMERGENCY DEPARTMENT USE, SPECIALTY
      CARE, PRESCRIPTION DRUG USE, AND HOSPITALIZATIONS.

6.    STUDIES SHOULD EVALUATE THE ABILITY AND WILLINGNESS OF PARENTS TO
      CONTRIBUTE TO THE COST OF CARE VIA COPAYMENTS, MONTHLY PREMIUMS, OR ANNUAL
      DEDUCTIBLES. While some inferences are available from the current study,
      this evaluation was not designed to answer these questions and larger
      sample sizes are needed to address the issue of cost-sharing.

ROCHESTER CHILD HEALTH STUDIES GROUP                    EVALUATION OF CHILD PLUS
                                                                    FINAL REPORT

                                       16
<PAGE>

                                    Figure 1

                             PERCENT OF CHILDREN BY
                               RACE AND ETHNICITY

                  PARENT INTERVIEWS -- ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 2

                     PERCENT OF CHILDREN BY POVERTY LEVELS

                PARENT INTERVIEWS --  ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 3

                 PERCENT OF CHILDREN WITH HEALTH INSURANCE PRIOR
                  TO CHILD HEALTH PLUS BY PRIOR INSURANCE TYPE

                  PARENT INTERVIEWS -- ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 4

                      PERCENT OF CHILDREN WHO HAVE SPECIFIC
                     TYPE OF PRIMARY CARE HOME DURING CHILD
                  HEALTH PLUS AND NUMBER OF MINUTES TO PROVIDER

                   PARENT INTERVIEW -- ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 5

                  PERCENT OF CHILDREN WHO CHANGED PRIMARY CARE
                 PROVIDERS AFTER ENROLLING IN CHILD HEALTH PLUS

                   PARENT INTERVIEW -- ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 6

                      NUMBER OF VISITS PER MEMBER PER YEAR
                            DURING CHPLUS BY REGION

              MEDICAL CHART REVIEW -- PRESCHOOL CHILDREN (0-5 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 7

                    PERCENT OF CHILDREN WHO SAW A SPECIALIST
                       YEAR BEFORE AND YEAR DURING CHPLUS
                   PARENT INTERVIEW -- ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 8

                       NUMBER OF HOSPITALIZATIONS REPORTED
                       YEAR BEFORE AND YEAR DURING CHPLUS
                    PARENT INTERVIEW --  ALL CHILDREN (0-12 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 9

                        PERCENT OF CHILDREN UP-TO-DATE ON
                            IMMUNIZATIONS BY REGION
              MEDICAL CHART REVIEW -- PRESCHOOL CHILDREN (0-5 YRS)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT
<PAGE>

                                    Figure 10

                       PARENT REPORT OF CHANGE IN CHILD'S
                                   HEALTH CARE
                        CHILDREN WITH CHRONIC CONDITIONS

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT
<PAGE>

                                    Figure 11

                       PARENT REPORT OF CHANGE IN CHILD'S
                                  HEALTH STATUS
                        CHILDREN WITH CHRONIC CONDITIONS

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 12

                       CHILD HEALTH PLUS EXPENDITURES PER
                           MEMBER PER YEAR BY REGION
                           CLAIMS ANALYSIS -- ALL AGES

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                    Figure 13

                       CHILD HEALTH PLUS EXPENDITURES PER
                     MEMBER YEAR BY VISIT TYPE AND PLAN TYPE
                             (UPSTATE REGIONS ONLY)

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

ROCHESTER CHILD HEALTH STUDIES GROUP             EVALUATION OF CHILD HEALTH PLUS
                                                                    FINAL REPORT

<PAGE>

                                   APPENDIX D

                          QUARTERLY ENROLLMENT REPORT

<PAGE>

                            NEW YORK STATE UNINSURED
                                    PROJECT
                                QUARTERLY REPORT

                                CHILD HEALTH PLUS
                             REGIONAL PILOT PROJECTS
                              SECOND QUARTER, 1996

                                     [LOGO]

                          N.Y.S. DEPARTMENT OF HEALTH
                        DIVISION OF HEALTH CARE FINANCING
                           BUREAU OF HEALTH ECONOMICS

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH

                               CHILD HEALTH PLUS

PROGRAM INFORMATION/USING THE DATA

Child Health Plus is a statewide program funded by an annual assessment from the
Statewide Bad Debt and Charity Care Pool. Direct subsidies are paid to fifteen
participating insurers to provide outpatient health insurance coverage to
children meeting certain eligibility criteria related to the child's age, family
income and health insurance status. Children born on or after June 1, 1980 and
under the age of 15 are eligible to enroll. Recent legislation now allows
children who had enrolled prior to their 15th birthday to remain in Child Health
Plus until age 16.

The Child Health Plus Quarterly Report contains summary data of the insurers'
enrollment progress and subscriber demographic information. The report is
derived from monthly enrollment data submitted by each insurer and aggregated on
a quarterly basis for the report period. The enrollment data presented on page 3
reflects only those children for whom a subsidy payment was made. The data
provided on pages 4 and 5 includes subsidized and non-Subsidized
enrollees.

       INSURER                             SERVICE AREA

   NEW YORK CITY METROPOLITAN AREA

       Westchester PHSP                    Westchester, Rockland

       The Bronx Health Plan, Inc.         Bronx, Manhattan

       Group Health Insurance, Inc.        Bronx, selected zip codes in
                                           Manhattan

       Health Insurance Plan of            Queens, Suffolk, Nassau
       Greater New York

       Health Plus                         Brooklyn, Richmond

       Centercare (Manhattan PHSP)         Manhattan

       Empire Blue Cross/Blue Shield       New York City, Long Island, Columbia,
                                           Delaware, Dutchess, Orange, Putnam,
                                           Rockland, Sullivan, Ulster and
                                           Westchester counties

       Blue Shield of Northeast NY         Dutchess, Orange, Putnam,
                                           Sullivan, and Ulster counties

                                       1
<PAGE>

UPSTATE

   Community Health Plan              Albany, Clinton, Columbia, Delaware,
                                      Dutchess, Essex, Greene, Orange, Otsego,
                                      Putnam, Rensselaer, Saratoga Schenectady,
                                      Schoharie, Ulster, Warren and Washington
                                      counties

   Community Health Plan/             Madison, Cayuga, Tioga,
   Health Services Medical            Tompkins, Oswego, Herkimer,
   Corp. (HSMC)                       Cortland, Oneida, Broome
                                      and Onondaga counties

   Community Health Plan/             Erie, Niagara,
   Health Care Plan (HCP)             Cattaraugus and Wyoming

   Empire Blue Cross/Blue Shield      Albany, Essex, Fulton, Greene,
                                      Montgomery, Rensselaer, Saratoga,
                                      Schenectady, Schoharie, Warren and
                                      Washington counties

   Blue Shield of Northeast NY        Albany, Clinton, Columbia, Essex,
                                      Fulton, Greene, Montgomery,
                                      Rensselaer,    Saratoga, Schenectady,
                                      Schoharie, Warren and Washington
                                      counties

   Blue Cross/Blue Shield             Chenango, Clinton,
   Utica-Watertown, Inc.              Delaware, Essex, Franklin, Fulton,
                                      Hamilton, Herkimer, Jefferson, Lewis,
                                      Madison (east), Montgomery, Oneida,
                                      Oswego, Otsego and St. Lawrence counties

   Blue Cross/Blue Shield             Broome, Cayuga,
   of Central NY, Inc.                Chemung, Cortland, Madison (west),
                                      Onondaga, Schuyler, Steuben, Tioga and
                                      Tompkins counties

   Blue Cross/Blue Shield of          Livingston, Monroe,
   Rochester                          Ontario, Seneca, Wayne and Yates counties

   Blue Cross/Blue Shield of          Allegany, Cattaraugus,
   Western NY, Inc.                   Chautaugua, Erie, Genesee, Niagara,
                                      Orleans and Wyoming counties

                                       2
<PAGE>

                          CHILD HEALTH PLUS ENROLLMENT
                                   JUNE, 1996

                                  [BAR CHART]

                             [PLOT POINTS TO COME]

      ALL PLANS SUBSIDIZED ENROLLMENT 105,518 ADDITIONAL 603 NON-SUBSIDIZED
      CHILDREN ALSO IN PROGRAM FOR A TOTAL ENROLLMENT OF 106.121

                                       3
<PAGE>

                          CHILD HEALTH PLUS ENROLLMENT
                               BY SUBSIDY AND AGE
                              SECOND QUARTER, 1996

[ENROLLMENT BY SUBSIDY LEVEL PIE CHART]           [ENROLLMENT BY AGE PIE CHART]

        [PLOT POINTS TO COME]                          [PLOT POINTS TO COME]

                            TOTAL ENROLLEES: 106,121

                                       4
<PAGE>

                          CHILD HEALTH PLUS ENROLLMENT
                            JANUARY 1994 - JUNE 1996

                                  [LINE GRAPH]

                             [PLOT POINTS TO COME]

                                       5
<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH

                            REGIONAL PILOT PROJECTS

PROGRAM INFORMATION/USING THE DATA

      The Regional Pilot Projects were developed to test, on a limited regional
basis, health care coverage models for possible application on a statewide
basis. The program is funded by an annual distribution from the Statewide Bad
Debt and Charity Care Pool.

      There are two types of regional pilot programs: an individual subsidy
program and an employer incentive program. The first assists individuals and
families in purchasing health coverage through a direct subsidy. The second
assists employers in purchasing health care coverage for their employees.
Currently, there are four insurers participating in five Regional Pilot
Projects: three are individual subsidy programs and two are employer based.

      The Regional Pilot Project Quarterly Report contains summary data on the
insurers' enrollment progress and descriptions of the employer groups
participating in the Employer Incentive Programs. The report is derived from
monthly enrollment data submitted by each insurer and aggregated on a quarterly
basis for the report period. Enrollment reflects subsidized subscribers and
their dependents receiving coverage through the Regional Pilot Projects.

      INSURER                              SERVICE AREA

      Community Health Plan                Capital District, Hudson Valley and
                                           Cooperstown Region

      Health Insurance Plan of             Brooklyn
      Greater New York

      The Bronx Health Plan, Inc.          Bronx

      Empire Blue Cross/Blue Shield

              Downstate                    Selected zip codes in the upper west
                                           side of Manhattan

              Upstate                      Essex, Hamilton, Saratoga, Warren and
                                           Washington counties

                                       6
<PAGE>

                             REGIONAL PILOT PROJECT
                             SUBSIDIZED ENROLLMENT
                               THROUGH JUNE, 1996

        [REGIONAL PILOT PROJECT SUBSIDIZED ENROLLMENT BY PLAN BAR CHART]

                             [PLOT POINTS TO COME]

            [REGIONAL PILOT PROJECT SUBSIDIZED ENROLLMENT BAR CHART]

                             [PLOT POINTS TO COME]

                                       7
<PAGE>

                             REGIONAL PILOT PROJECT
                               MONTHLY ENROLLMENT
                         JUNE, 1992 THROUGH JUNE, 1996

                                  [LINE GRAPH]

                             [PLOT POINTS TO COME]

                        ALL PLANS TOTAL ENROLLMENT 8,178

                                       8
<PAGE>

                     REGIONAL PILOT PROJECT EMPLOYER BASED
                      PERCENTAGE OF ENROLLED FIRMS BY TYPE
                          THROUGH SECOND QUARTER, 1996

[COMMUNITY HEALTH PLAN PIE CHART]              [HEALTH INSURANCE PLAN PIE CHART]

       [PLOT POINT TO COME]                            [PLOT POINT TO COME]

                                       9
<PAGE>

                      REGIONAL PILOT PROJECT EMPLOYER BASED
                   PERCENTAGE OF FIRMS BY NUMBER OF EMPLOYEES
                          THROUGH SECOND QUARTER, 1996

[COMMUNITY HEALTH PLAN PIE CHART]         [HEALTH INSURANCE PLAN PIE CHART]

      [PLOT POINTS TO COME]                      [PLOT POINTS TO COME]

                                       10
<PAGE>

                                   APPENDIX E

                                 BENEFIT PACKAGE

<PAGE>

                       CHILD HEALTH PLUS BENEFITS PACKAGE
                (NO PRO-EXISTING CONDITION LIMITATIONS PERMITTED)
                                     PAGE 1

<TABLE>
<CAPTION>
  GENERAL COVERAGE           SCOPE OF COVERAGE                   LEVEL OF COVERAGE          COPAYMENTS/DEDUCTIBLES
-------------------   --------------------------------  ----------------------------------  ----------------------
<S>                   <C>                               <C>                                 <C>
Pediatric             Well child care visits in         Includes all services related to            No copayment or
Health Promotion      accordance with visitation        visits. Includes immunizations,                deductibles.
visits.               schedule established by           well child care, health education,
                      American Academy of               tuberculin testing (mantoux),
                      Pediatrics, and the New York      hearing testing, dental and
                      State Department of Health        developmental screening, clinical
                      recommended immunization          laboratory and radiological tests,
                      schedule.                         eye screening, and lead screening.

Inpatient Hospital    As a registered bed patient       No benefits will be provided for any        No copayment or
Medical or Surgical   for treatment of an Illness,      out-of-hospital days, or if                    deductibles
Care                  injury or condition which         inpatient care was not necessary;
                      cannot be treated on an           no benefits are provided after
                      outpatient basis. The hospital    discharge; benefits are paid in
                      must be a short-term, acute       full for accommodations in a
                      care facility and New York        semi-private room. Includes 365
                      State licensed.                   days per year coverage for
                                                        inpatient hospital services and
                                                        services provided by physicians and
                                                        other professional personnel for
                                                        covered inpatient services: bed and
                                                        board, including special diet and
                                                        nutritional therapy; general,
                                                        special and critical care nursing
                                                        service, but not private duty nursing
                                                        services, facilities, services,
                                                        supplies and equipment related to
                                                        surgical operations, recovery
                                                        facilities, anesthesia, and
                                                        facilities for intensive or special
                                                        care (but not services of the
                                                        surgeons or anesthesiologists unless
                                                        they are employees of the hospital
                                                        and their services are included in
                                                        the hospital bill); oxygen and other
                                                        inhalation therapeutic services and
                                                        supplies; drugs and medications that
                                                        are not experimental; sera,
                                                        biologicals, vaccines, intravenous
                                                        preparations, dressings, casts, and
                                                        materials for diagnostic studies;
                                                        blood products, except when
                                                        participation in a volunteer blood
                                                        replacement program is available to
                                                        the insured or covered person, and
                                                        services and equipment related to
                                                        their administration; facilities,
                                                        services, supplies and equipment
                                                        related to physical medicine and
                                                        occupational therapy and
                                                        rehabilitation; facilities, services,
                                                        supplies and equipment related to
                                                        diagnostic studies and the monitoring
                                                        of physiologic functions, including
                                                        but not limited to laboratory,
                                                        pathology, cardiographic, endoscopic,
                                                        radiologic and
                                                        electro-encephalographic studies and
                                                        examinations; facilities, services,
                                                        supplies and equipment related to
                                                        radiation and nuclear therapy;
                                                        facilities, services, supplies and
                                                        equipment related to emergency
                                                        medical care; chemotherapy; any
                                                        additional medical, surgical, or
                                                        related services, supplies and
                                                        equipment that are customarily
                                                        furnished by the hospital.
</TABLE>

<PAGE>

                       CHILD HEALTH PLUS BENEFITS PACKAGE
               (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                                     PAGE 2

<TABLE>
<CAPTION>
   GENERAL COVERAGE            SCOPE OF COVERAGE                    LEVEL OF COVERAGE                  COPAYMENTS/DEDUCTIBLES
---------------------  ----------------------------------  -----------------------------------  ------------------------------------
<S>                    <C>                                 <C>                                  <C>
Professional Services  Provides services on ambulatory     No limitations. Includes wound       $2 copayment for physician office
for Diagnosis and      basis by a covered provider for     dressing and casts to immobilize     visits except for well-child care.
Treatment of Illness   medically necessary diagnosis and   fractures for the immediate
and Injury             treatment of sickness and injury    treatment of the medical condition.
                       and other conditions. Includes all  Injections and medications provided
                       services related to visits.         at the time of the office visit or
                       Professional services are provided  therapy will be covered. Includes
                       on outpatient basis and inpatient   audiometric testing where deemed
                       basis.                              medically necessary.

Outpatient Surgery     Procedures performed within the     The utilization review process must  No copayments or deductibles
                       provider's office will be covered   ensure that the ambulatory surgery
                       as well as "ambulatory surgery      is appropriately provided.
                       procedures" which may be performed
                       in a hospital-based ambulatory
                       surgery service or a freestanding
                       ambulatory surgery center.

Durable Medical        All DME must be medically necessary DME limited to wheelchairs, canes,   No copayments or deductibles
Equipment              and ordered by a plan physician.    crutches, walkers and commodes.

Diagnostic and          Prescribed ambulatory clinical     No limitations.                      No copayment or deductibles
Laboratory              laboratory tests and diagnostic
Tests.                  x-rays.
</TABLE>

<PAGE>
                       CHILD HEALTH PLUS BENEFITS PACKAGE
                (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                                     PAGE 3

<TABLE>
<CAPTION>
  GENERAL COVERAGE              SCOPE OF COVERAGE                   LEVEL OF COVERAGE                     COPAYMENTS/DEDUCTIBLES
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                         <C>                                                <C>
Therapeutic Services.      Ambulatory radiation        No limitations. These therapies must be            No copayment or
                           therapy, chemotherapy.      medically necessary and under the supervision      deductibles.
                           Injections and medications  or referral of a licensed physician. Short term
                           provided at time of         physical and occupational therapies will be
                           therapy (i.e.,              covered when ordered by a physician. No procedure
                           chemotherapy) will          or services considered experimental will be
                           also be covered.            reimbursed.

                           Hemodialysis                Determination of the need for services and
                                                       whether home based or facility based treatment
                                                       is appropriate.

Pre-surgical testing       All tests, (laboratory,     Benefits are available if a physician orders the   No copayments or
                           x-ray, etc) necessary       tests; proper diagnosis and treatment require the  deductibles
                           prior to inpatient or       tests; and the surgery takes  place within 7 days
                           outpatient surgery.         after the testing. If surgery is can celled
                                                       because of pre-surgical test findings or as a
                                                       result of a Second Opinion on Surgery, the cost
                                                       of the tests will be covered.

Outpatient visits for      Services must be provided   Provides at least 60 outpatient visits per year.   No copayment or
mental health and for the  by certified and/or         A minimum of 20 of the 60 visits may be used for   deductibles.
diagnosis and treatment    licensed professionals.     family therapy visits related to the alcohol
of alcoholism and                                      abuse. A maximum of 20 of the 60 visits may be
substance abuse.                                       for mental health.

Prescription Drugs.        Prescription medications    Prescriptions must be medically necessary. May be  $1.00 - $3.00 per
                           must be authorized by a     limited to generic medications where medically     prescription.
                           professional licensed to    acceptable. Includes family planning or
                           write prescriptions.        contraceptive medications or devices. All
                                                       medications used for preventive and therapeutic
                                                       purposes will be covered. Vitamin coverage need
                                                       not be mandated except when necessary to treat a
                                                       diagnosed Illness or condition.
</TABLE>
<PAGE>

                       CHILD HEALTH PLUS BENEFITS PACKAGE
                (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                                   [ILLEGIBLE]4

<TABLE>
<CAPTION>
  GENERAL COVERAGE              SCOPE OF COVERAGE                    LEVEL OF COVERAGE           COPAYMENTS/DEDUCTIBLES
---------------------  -----------------------------------  -----------------------------------  ----------------------
<S>                    <C>                                  <C>                                  <C>
Home Health            The care and treatment of a covered  Home care shall be provided by a            No copayment or
Care Services          person who is under the care of a    certified home health agency                   deductibles.
                       physician but only if                possessing a valid certificate of
                       hospitalization or confinement in a  approval issued pursuant to article
                       skilled nursing facility would       thirty-six of the public health
                       otherwise have been required if      law. Home care shall consist of one
                       home care was not provided and the   or more of the following: part-time
                       plan covering the home health        or intermittent home nursing care
                       service is established and approved  by or under the supervision of a
                       in writing by such physician.        registered professional nurse
                                                            (R.N.), part-time or intermittent
                                                            home health aide services which
                                                            consist primarily of caring for the
                                                            patient, physical, occupational or
                                                            speech therapy if provided by the
                                                            home health agency and medical
                                                            supplies, drugs and medications
                                                            prescribed by a physician, and
                                                            laboratory services by or on behalf
                                                            of a certified home health agency
                                                            to the extent such items would have
                                                            been covered or provided under the
                                                            contract if the covered person had
                                                            been hospitalized or confined in a
                                                            skilled nursing facility. The
                                                            contract must provide at least
                                                            forty such visits in any
                                                            calendar year.
</TABLE>

<PAGE>

                       CHILD HEALTH PLUS BENEFITS PACKAGE
                (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                                     PAGE 5

<TABLE>
<CAPTION>
  GENERAL COVERAGE             SCOPE OF COVERAGE            LEVEL OF COVERAGE         COPAYMENTS/DEDUCTIBLES
---------------------  -----------------------------------  -----------------   -----------------------------------
<S>                    <C>                                  <C>                 <C>
Emergency              For services to treat an emergency   No limitations.     A $35.00 copayment may be imposed
Medical                condition in hospital facilities.                        if the emergency room visit was
Services.              For the purpose of this provision,                       made for a condition or illness not
                       "emergency condition" means a                            meeting the guidelines described in
                       medical or behavioral condition,                         the scope of coverage. This
                       the onset of which is sudden, that                       copayment may be waived if given
                       manifests itself by symptoms of                          the medical options available, the
                       sufficient severity, including                           emergency room was the most
                       severe pain, that a prudent                              appropriate site of service. A
                       layperson, possessing an average                         copayment of $35.00 is permissible
                       knowledge of medicine and health,                        when the beneficiary does not
                       could reasonably expect the                              inform the insurer within 24 hours
                       absence of immediate medical                             of use of such a service.
                       attention to result in (A)
                       placing the health of the person
                       afflicted with such condition in
                       serious jeopardy, or in the case
                       of a behavioral condition placing
                       the health of such person or
                       others in serious jeopardy, or
                       (B) serious impairment to such
                       person's bodily functions: (C)
                       serious dysfunction of any bodily
                       organ or part of such person; or
                       (D) serious disfigurement of such
                       person.
</TABLE>

<PAGE>

                       CHILD HEALTH PLUS BENEFITS PACKAGE
                (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                                     PAGE 6

<TABLE>
<CAPTION>
GENERAL COVERAGE            SCOPE OF COVERAGE                                LEVEL OF COVERAGE              COPAYMENTS/DEDUCTIBLES
----------------            -----------------                                -----------------              ----------------------
<S>               <C>                                               <C>                                     <C>
Maternity Care    Inpatient hospital coverage for at least 48       No limitations; (however subsidized     $2 copayment for
                  hours after childbirth for any delivery other     children requiring maternity care       physician office visits.
                  than a C-Section and in at least 96 hours         services will be referred to Medicaid). All other services carry
                  following a C-Section. Also coverage of parent                                            no copayment or
                  education, assistance and training in breast or                                           deductible.
                  bottle feeding and any necessary maternal and
                  newborn clinical assessments. The mother shall
                  have the option to be discharged earlier than
                  the 48/96 hours, provided that at least one
                  home care visit is covered post-discharge.
                  Prenatal, labor and delivery care Is covered.

Dental Care       Treatment in connection with accidental injury    As stated                               No copayments or
                  to sound natural teeth within 12 months of the                                            deductibles
                  accident.

Diabetic          Insulin, Blood glucose monitors, blood            As prescribed by a physician or other   No copayments or
Supplies and      glucose monitors for legally blind, data          licensed health care provider legally   deductibles
equipment         management systems, test strips for               authorized to prescribe under title
                  monitors and visual reading, urine test           eight of the education law.
                  strips, insulin, injection aids,
                  cartridges for legally blind syringes,
                  insulin pumps and appurtenances thereto,
                  insulin infusion devices, oral agents.
</TABLE>

<PAGE>

                CHILD HEALTH PLUS BENEFITS PACKAGE
        (NO PRE-EXISTING CONDITION LIMITATIONS PERMITTED)
                              PAGE 7
<TABLE>
<CAPTION>
GENERAL COVERAGE            SCOPE OF COVERAGE                            LEVEL OF COVERAGE                  COPAYMENTS/DEDUCTIBLES
----------------            -----------------                            -----------------                  ----------------------
<S>                     <C>                                     <C>                                         <C>
Diabetic Education and  Diabetes self-management education      Limited to visits medically necessary       No copayments or
Home Visits             (including diet); reeducation or        where a physician diagnoses a significant   deductibles.
                        refresher. Home visits for diabetic     change in the patient's symptoms or
                        monitoring and/or education.            conditions which necessitate changes in a
                                                                patient's self-management or where
                                                                reeducation is necessary. May be provided
                                                                by a physician or other licensed health
                                                                care provider legally authorized to
                                                                prescribe under title eight of the
                                                                education law, or their staff, as part of
                                                                an office visit for diabetes diagnosis or
                                                                treatment, or by a certified diabetes
                                                                nurse educator, certified nutritionist,
                                                                certified dietitian or registered
                                                                dietitian upon the referral of a
                                                                physician or other licensed health care
                                                                provider legally authorized to prescribe
                                                                under title eight of the education law
                                                                and may be limited to group settings
                                                                wherever practicable.
</TABLE>

<PAGE>

                               CHILD HEALTH PLUS
                                  [ILLEGIBLE]

The following services will not be covered:

-     Experimental medical or surgical procedures.

-     Experimental drugs.

-     Inpatient Mental Health, Substance or Alcohol Abuse Services.

-     Drugs which can be bought without prescription, except as defined.

-     Private duty nursing.

-     Hospice services.

-     Home health care, except as defined.

-     Care in connection with the detection and correction by manual or
      mechanical means of structural imbalance, distortion or subluxation in the
      human body for the purpose of removing nerve interference and the effects
      thereof, where such interference is the result of or related to
      distortion, misalignment or subluxation of or in the vertebral column.

-     Services in a skilled nursing facility or rehabilitation facility.

-     Cosmetic, plastic, or reconstructive surgery, except as defined.

-     In vitro fertilization, artificial insemination or other means of
      conception and infertility services.

-     Services covered by another payment source.

-     Speech and hearing services, other than audiometric testing when deemed
      medically necessary.

-     Durable Medical Equipment and Medical Supplies, except as defined.

-     Non-Emergency Transportation.

-     Dental care, except as defined.

-     Personal or comfort items.

-     Vision examinations performed by an optometrist for the purpose of
      determining the need for corrective lenses, and If needed, to provide a
      prescription other than ophthalmologic visits for diagnostic purposes.

-     Eyeglasses and hearing aids.

<PAGE>

NEW YORK RECOMMENDED CHILDHOOD VACCINATION SCHEDULE
(ENDORSED BY NYS AND NYC DEPARTMENTS OF HEALTH)
Immunizations should be received at the earliest recommended age

              A check [X] means your child is due for an immunization

<TABLE>
<CAPTION>
                                     1          2      4       6          12           15        4-6       11-12
        AGE                BIRTH   MONTH     MONTHS  MONTHS  MONTHS     MONTHS       MONTHS     YEARS      YEARS
        ---                -----   -----     ------  ------  ------     ------       ------     -----      -----
<S>                      <C>      <C>        <C>     <C>   <C>          <C>       <C>           <C>      <C>
      VACCINE

     Hepatitis B(1)        [X]      [X]                       [X]
                         (Birth-2 (1-4 mo)                 (6-18 mo)                                         [X](1)
                           mo)

  Diphtheria and tetanus                      [X]    [X]      [X]                    [X]         [X]         [X]
toxoids and (acellular)                                                           (12-18 mo)             (11-16 yr.Td)
   pertussis vaccine(3)

Haemophilus influenzae
      type b(4)                               [X]    [X]      [X](4)                 [X](4)
                                                                                  (12-15 mo)

       Polio(5)                               [X]    [X]      [X]
                                                           (6-18 mo)                             [X]

Measles-mumps-rubella                                                   [X]
                                                                     (12-15 mo)(4)               [X]

    Varicella-zoster                                                    [X]                                  [X](7)
                                                                     (12-18 mo)
</TABLE>

Footnote explanations are printed on the reverse side.

( ) Indicates range of recommended ages for vaccination.

CHILDHOOD DISEASES ARE PREVENTABLE

-     The major childhood diseases are dangerous and can be crippling or even
      deadly. THEY CAN BE PREVENTED WITH A COMPLETE SERIES OF IMMUNIZATIONS
      GIVEN AT THE EARLIEST RECOMMENDED AGE.

-     Bring your child's official immunization record card to every visit with
      a health care provider or WIC center. WIC STAFF WILL EXPECT CHILDREN TO BE
      IMMUNIZED AT THE EARLIEST RECOMMENDED AGE.

-     Start at birth and continue to follow this schedule.

-     Your child may be eligible for low cost vaccines through the Vaccines for
      Children Program.

-     Contact your health care provider or the local health department (see list
      on reverse side) for assistance in locating providers in your community
      who immunize. Or.in New York City, call 1-800-325-CHILD (English);
      1-800-945-NINO (Spanish); elsewhere in New York State 1-800-522-5006

<PAGE>

1.    Infants born to HBsAg-negative mothers should receive 2.5 (mu)g of
      Recombivax HB(R) (Merck) or 10 (mu)g of Engerix B(R) (Smith/Kline
      Beecham). The second dose should be administered at least one month after
      the first dose. Infants born to HBsAg-positive mothers should receive 0.5
      ml hepatitis B immune globulin (HBIG) within 12 hours of birth, and either
      5 (mu)g of Recombivax HB (R) or 10 (mu)g of Engerix-B(R) at a separate
      site. The second dose is recommended at age one to two months and the
      third dose at six months. Infants born to mothers whose HBsAg status is
      unknown should receive either 5 (mu)g of Recombivax HB(R) or 10 (mu)g of
      Engerix-B(R) within 12 hours of birth. The second dose of vaccine is
      recommended at age one month and the third dose at age six months.

2.    Adolescents who have not received three doses of hepatitis B vaccine
      should initiate or complete the series at age 11-12 years. The second dose
      should be administered at least one month after the first dose, and the
      third dose should be administered at least four months after the first
      dose and at least two months after the second dose.

3.    The fourth dose of diphtheria and tetanus toxoids and pertussis vaccine
      (DTP) may be administered at age 12 months, if at least six months have
      elapsed since the third dose of DTP. Tripedix (R) (Connaught) diphtheria
      and tetanus and acellular pertussis vaccine (DTaP) is licensed for the
      first four doses for children aged two months, four months,six months, and
      15-20 months. ACEL-IMUNE (R) (Lederle) dephtheria and tetanus and
      acellular pertussis vaccine (DTaP) is only licensed for the fourth and
      fifth vaccine dose (s) for children aged > or = 15 months. Tetanus and
      diphtheria toxoids, adsorbed, for adult use (Td) is recommended at age
      11-12 years if at least five years have elapsed since the last dose of
      DTP, DTaP or diphtheria and tetanus toxoids, adsorbed, for pediatric use
      (DT).

4.    Three Haemophilus influenzoe type b (Hib) conjugate vaccines are licensed
      for infant use. If pedvax HIB (R) (Merck) Haemophilus b conjugate vaccine
      (PRP.OMP) is administered at ages two and four months, a dose at six
      months is not required. After completing the primary series, any Hib
      conjugate vaccine may be used as a booster.

5.    Oral poliovirus vaccine (OPV) is recommended for routine infant
      vaccination. Inactivated poliovirus vaccine (IPV) is recommended for
      persons with a congenital or acquired Immune deficiency disease or an
      altered immune status as a result of disease or immunosuppressive therapy,
      as well as their household contacts, and is an acceptable alternative for
      other persons. The primary three-dose series for IPV should be given with
      a minimum interval of four weeks between the first and second doses and
      six months between the second and third doses.

6.    12 months in NYC. 12.15 months in the rest of the state.

7.    Unvaccinated children who lack a reliable history of chickenpox should be
      vaccinated at age 11-12 years.

Use of trade names and commercial sources is for identification only and does
not imply endorsement by the New York State or New York City Health Departments.
Influenza vaccine is recommended for children in high-risk groups between the
ages of six months and 18 years of age. High risk would include children who
have long-term heart or lung problems, kidney disease, cystic fibrosis or a
chronic metabolic disease such as diabetes, anemia or asthma.

Pneumococcal vaccine is recommended for children who are two years of age or
older in high-risk groups. High risk would include individuals who have abnormal
or removed spleens, sickle cell disease, nephrotic syndrome, cerebral spinal
fluid leaks or who have disease or take drugs that lower their body's resistance
to infection.

Source: Advisory Committee on Immunization Practices, American Academy of
Pediatrics and American Academy of Family Physicians.

  COUNTY HEALTH DEPARTMENTS

<TABLE>
<S>          <C>             <C>        <C>             <C>         <C>             <C>         <C>
Albany       (518) 447-4612  Franklin   (518) 483-6767  Onondaga    (315) 435-3236  Steuben     (607) 776-9631
Allegany     (716) 268-9256  Fulton     (518) 762-0720  Ontario     (716) 396-4343  Suffolk     (516) 853-3055
Broome       (607) 778-2804  Genesee    (716) 344-8506  Orange      (914) 291-2330  Sullivan    (914) 292-0100
Cattaraugus  (716) 373-8050  Greene     (518) 943-6591  Orleans     (716) 589-3269  Tioga       (607) 687-8600
Cayuga       (315) 253-1404  Hamilton   (518) 648-6141  Oswego      (315) 349-3547  Tompkins    (607) 274-6616
Chautauqua   (716) 753-4491  Herkimer   (315) 866-7122  Otsego      (607) 547-4230  Ulster      (914) 340-3070
Chemung      (607) 737-2028  Jefferson  (315) 782-9289  Putnam      (914) 278-6086  Warren      (518) 761-6415
Chenango     (607) 337-1660  Lewis      (315) 376 5449  Rensselaer  (518) 270-2655  Washington  (518) 746-2400
Clinton      (518) 565 4848  Livingston (716) 243-7290  Rockland    (914) 364-2662  Wayne       (315) 946-5749
Columbia     (518) 828 3358  Madison    (315) 363-5490  St.Lawrence (315) 265-3730  Westchester (914) 593-5062
Cortland     (607) 753-5203  Monroe     (716) 274-6151  Saratoga    (518) 584-7460  Wyoming     (716) 786-8890
Delaware     (607) 746-3166  Montgomery (518) 853-3531  Schenectady (518) 346-2187  Yates       (315) 536-5160
Dutchess     (914) 486-3419  Nassau     (516) 571-1680  Schoharie   (518) 295-8474
Erie         (716) 858-6450  Niagara    (716) 694-5454
</TABLE>

<PAGE>

              RECOMMENDATIONS FOR PREVENTIVE PEDIATRIC HEALTH CARE

                  COMMITTEE ON PRACTICE AND AMBULATORY MEDICINE

Each child and family is unique; therefore, these Recommendations for
Preventive Pedlatric Health Care are designed for the care of children who are
receiving competent parenting, have no manifestations of any important health
problems, and are growing and developing in satisfactory fashion. Additional
visits may become necessary it circumstances suggest variations from normal.

These guidelines represent a consensus by the Committee on Practice and
Ambulatory Medicine in consultation with national committees and sections of the
American Academy of Pediatrics. The Committee emphasizes the great importance
of continuity of care in comprehensive health supervision and the need to avoid
fragmentation of care.

A prenatal visit is recommended for parents who are at high risk, for first time
parents, and for those who request a conference. The prenatal visit should
include anticipatory guidance and pertinent medical history. Every infant should
have a newborn evaluation after birth.

<TABLE>
<CAPTION>
                                             INFANCY(3)                      EARLY CHILDHOOD(3)          MIDDLE CHILDHOOD(3)
<S>                   <C>        <C>     <C>     <C>  <C>  <C>  <C> <C>    <C>  <C>  <C>  <C>   <C>    <C>    <C>    <C>   <C>
AGE(4)                NEWBORN(1) 2.4d(2) By 1mo  2mo  4mo  6mo  9mo 12mo   15mo 18mo 24mo  3y   4y     5y     6y     8y    10y

HISTORY
Initial/Interval         -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -

MEASUREMENTS
Height and Weight        -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -
Head Circumference       -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -
Blood Pressure

SENSORY SCREENING
Vision                   S          S      S      S    S     S   S   S      S    S    S   O(5)   O      O     S       S     O
Hearing(6)              S/O         S      S      S    S     S   S   S      S    S    S   O      O      O     S       S     O

DEVELOPMENTAL/           -          -      -      -    -     -   -   -      -    -    -     -    -      -     -       -     -
BEHAVIORAL
ASSESSMENT(7)

PHYSICAL
EXAMINATION(8)           -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -

PROCEDURES -
GENERAL(9)

Hereonary/Metabolic
Screening(10)
Immunization(11)         -                 -      -    -    -               -                           -
Lead Screening(12)                                               -                    -
Hematocnt or
Hemoglobin                                                       -                    -
Unnalysis

PROCEDURES-PATIENTS                                                                                     -
AT RISK
Tuberculin Test(15)                                                  -      -    -    -     -    -      -     -       -     -
Cholesterol Screening
(16)                                                                 -      -    -    -     -    -      -     -       -     -
STD Screening(17)
Pelvic Exam(18)

ANTICIPATORY
GUIDANCE(19)             -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -
Injury Prevention
(20)                     -          -      -      -    -    -    -   -      -    -    -     -    -      -     -       -     -

INITIAL DENTAL
REFERRAL(21)                                                                                -

<CAPTION>
                                                   ADOLESCENCE(3)
<S>                   <C>  <C>    <C>     <C>    <C>    <C>    <C>    <C>     <C>     <C>    <C>
AGE(4)                11y  12y    13y     14y    15y    16y    17y    18y     19y     20y    21y

HISTORY
Initial/Interval       -    -      -       -      -      -      -      -       -       -      -

MEASUREMENTS
Height and Weight      -    -      -       -      -      -      -      -       -       -      -
Head Circumference
Blood Pressure         -    -      -       -      -      -      -      -       -       -      -

SENSORY SCREENINGs
Vision                 S    O      S       S      O      S     S       O       S       S      S
Hearing(6)             S    O      S       S      O      S     S       O       S       S      S

DEVELOPMENTAL/
BEHAVIORAL
ASSESSMENT(7)          -    -      -       -      -      -      -      -       -       -      -

PHYSICAL
EXAMINATION(8)         -    -      -       -      -      -      -      -       -       -      -

PROCEDURES -
GENERAL(9)

Hereonary/Metabolic
Screening(10)
Immunization(11)       -
Lead Screening(12)
Hematocnt or
Hemoglobin                                        -
Unnalysis                                         -

PROCEDURES-PATIENTS
AT RISK
Tuberculin Test(15)    -    -      -       -      -      -      -      -       -       -      -
Cholesterol Screening
(16)                   -    -      -       -      -      -      -      -       -       -      -
STD Screening(17)      -    -      -       -      -      -      -      -       -       -      -
Pelvic Exam(18)        -    -      -       -      -      -      -      -       -       -      -

ANTICIPATORY
GUIDANCE(19)           -    -      -       -      -      -      -      -       -       -      -
Injury Prevention
(20)                   -    -      -       -      -      -      -      -       -       -      -

INITIAL DENTAL
REFERRAL(21)
</TABLE>

1     Breastleading encouraged and instruction and support offered.

2     For newborns discharged in less than 48 hours after delivery.

3     Development,psychosocial and chronic disease issues for children and
      adolescents may require frequent counseling and treatment visits separate
      from preventive care visits.

4     If a child comes under care lot the last time at any point on the schedule
      or if any items are not accompunished at the suggested age. The schedule
      should be brought up to date at the earliest possible time.

5     If the patient is uncooperative rescreen within six months.

6     Some experts recommand objective appraisal of hearing in the newborn
      period. The joint committee on infant Hearing has identified patients at
      significant risk for hearing loss. All children meating these criteria
      should be objectively screened. See the Joint Committee on infant Hearing
      1994 Position Statement.

7     By history and appropriate physical examination if suspicious by specific
      objective development testing.

8     At each visit, a complete physical examination is essential with infant
      totally unclothed older child undressed and suitably draped.

9     These may be modified depending upon entry point into schedule and
      individual need.

10    Metabolic screening lag thyroid hemoglonopathes PKU galaclosemias should
      be done according to state law.

11    Schedule(s) per the Committee on Infectious Diseases published
      periodically in Pediatics. Every visit should be an opportunity to update
      and complete a child's immunications.

12    Blood lead screen per AAP statement Lead Poisoning From Screening to
      Primary Prevention [1993].

13    All menstrating adolescents should be screened.

14    Conduct dispatch unnalysis for lauhcoyetes for male and female
      adolescents.

15    TB testing per AAP statement "Screening for Tuberculosis an infants and
      Children" (1994). Testing should be done upon recognition of high risk
      factors of results are negative but high risk situation continues. Testing
      should be repeated on an annual basis.

16    Cholesterol screening for high risk patients per AAP "Statement on
      Cholesterol" (1992) of family history cannot be ascertained and other risk
      factors are present, screening should be at the discretion of the
      physician.

17    All sexually active patients should be screened for sexually transmitted
      diseases (STDs)

18    All sexually active females should have a palvic examination . A palvic
      examination and routine pap smear should be offered as part of preventive
      health maintenance between the ages of 18 and 21 years.

19    Appropriate discussion and counseling should be an integral part of each
      visit for care.

20    From birth to age 12 refer to AAP's injury prevention program (TIPPs) as
      described in " A Guide to Safety Counselling in Office Practice"(1994).

21    Earlier initial dental evaluations may be appropriate for some children.
      Subsequent examinations as prescribed by dentist.

Key: - - to be performed

       - to be performed for patients at risk

     S - subjective by history

       - objective by a standard testing method

   -- >  - the range during which a service may be provided, with the dot
           indicating the preferred age.
   < --

NB :  Special chemical, Immunologic and endocrine testing is usually carried
      out upon specific indications. Testing other than newborn (eg. inborn
      errors of metabolism, sichie disease, etc.) is discrationary with the
      physician.

The recommendations in this publication do not indicate and exclusive course of
treatment or serve as a standard of medical care. Variations,taking into account
individual circumstances, may be appropriate.

-     1995 American Academy of Padistrics.

<PAGE>

                                   APPENDIX F

                        PROCEDURES AND REQUIREMENTS FOR

                        FILING OF RATES AND RATE FILING

                                   GUIDELINES

<PAGE>

Section 52.33                                                 TITLE 11 INSURANCE

Section 52.33 Letter of submission.

      A letter of submission in duplicate (single copy for individual forms
intended for delivery by domestic insurers exclusively outside New York) shall
be included in the filing, signed by a representative of the company authorized
to submit forms for filing or approval, containing the following:

  (a) the identifying form number of each form submitted;

  (b) if the form is a policy, the kind of accident and health by reference to
the statutory and regulatory authority therefore; and the kind of policy as
defined in section 52.5, 52.6, 52.7, 52.8, 52.9, 52.10 or 52.11 of this Part;

  (c) a statement whether the form is new or supersedes an approved or filed
form or forms:

  (d) if the form supersedes an approved or filed form, the form number and date
of approval or filing of the superseded form and any material differences from
the superseded form. If approval of the superseded form is still pending, the
form number, control number assigned by the department and the submission date;

  (e) if the form had previously been submitted for preliminary review, a
reference to the previous submission and a statement setting out either:

      (1)   that the form agree precisely with the previous submission; or

      (2)   the differences from the form submitted for preliminary review;

  (f) if the form is submitted in accordance with subdivision (c) of section
52.32 of this Part, identification of the prefiled group coverage;

  (g) if the form is other than a policy, give the form number and approval date
of the policy or policies with which it will be used; however, if the form is
for general use, the department may accept a description of the type of policy
with which it may be used in lieu of the form number and approval date;

  (h) if the form is a policy, the form numbers and dates of approval of any
applications previously approved to be used with the policy unless the
application is required to be attached to the policy upon submission;

  (i) if the policy is designed to be used with insert page forms, a statement
of the insert page forms which must always be included in the policy and a list
of all optional pages, together with an explanation of their use;

  (j) if the form of a domestic insurer is intended for delivery exclusively
outside New York:

            (1) a statement explaining differences in provisions and premiums,
  if any, from substantially comparable forms submitted or approved for delivery
  in New York or a statement that the form is not readily comparable to any form
  submitted or approved for delivery in New York; and

            (2) the name of each state or jurisdiction in which the form is to
  be delivered. Prompt notice shall be given to the department by a domestic
  insurer whenever a form issued for delivery exclusively outside New York is
  disapproved or approval is withdrawn by any state or jurisdiction.

                                 HISTORICAL NOTE
           Sec. filed Nov. 17.1972; repealed, new filed April 2, 1982
                               eff. Jan. 1, 1983.

Section 52.40 PROCEDURES AND REQUIREMENTS FOR FILING OF RATES.

      The following provisions shall apply with respect to rates:

      (a) GENERAL. (1) Supporting material for all rate filings shall be
      separately set forth in an actuarial memorandum or covering letter
      accompanying the rates being filed.

            (2) All policies, forms manuals, schedules and other material
      submitted shall be in duplicate.

            (3) Rate changes, additions and deletions shall be made by
      substituting, deleting or adding numbered pages to the rate manual or
      schedule of rates.

316  Insurance                  (Reissued 7/95)                          1-1-95

<PAGE>

CHAPTER III POLICY CERTIFICATE PROVISIONS                          Section 52.40

            (4) If a rate filing precedes the filing of a form, reference should
      be made to the rate control number when the form is submitted. Subsequent
      correspondence should refer to both control numbers.

      (b) Prohibited rating practices. (1) No rates for any policy shall be
      predicated on a level premium age-at-issue basis except:

                 (i) with respect to conversion policies issued in accordance
            with sections 162 and 164 of the Insurance Law ; or

                 (ii) when the policy form is guaranteed renewable, is
            noncancellable or provides that nonrenewal is subject to the consent
            of the superintendent. Such consent may be given only with respect
            to an entire class of insured upon request in writing and
            determination by the superintendent that such nonrenewal is in the
            best interests of the public.

            (2) No rates for any policy shall be predicated upon a reduced
      initial premium which is less than the pro rate portion of the applicable
      annual premium.

      (c) Required rate filings for individual insurance including franchise,
blanket insurance, and community-rated contacts of article IX-C corporations.
The following rules shall apply with respect to rates for individual insurance
including franchise, blanket insurance, and community-rated contracts of
article IX-C corporations:

            (1) A rate filing shall accompany every policy, and rider or
      endorsement affecting benefits, submitted to the department for approval.
      Any subsequent change in rates applicable to any such policy, rider or
      endorsement originally delivered or issued for delivery in New York shall
      also be submitted to the department. If a rider or endorsement affects
      benefits but does not result in a change of rates, a statement of such
      fact shall constitute the rate filing.

            (2) Every insurer shall file and maintain two current New York rate
      manuals in convenient form. The active rate manual shall include rates for
      policy forms currently available and being actively marketed, the inactive
      rate manual shall include the currently applicable rates on policy forms
      no longer available or being actively marketed where such rates have been
      approved or filed subsequent to the effective date of this Part. Each
      manual shall include the following:

                  (i) name of the insurer on each page:

                  (ii) index in alpha-numeric form number order;

                  (iii) identification by form number of each policy, rider or
            endorsement to which the rates apply, and a list of riders and
            endorsements which can be attached;

                  (iv) the schedule of rates, including, if any, policy fees,
            rate changes at renewal, variations based upon age, sex, occupation
            or other classification, separate charges for optional or
            miscellaneous benefits, and if rates are graded by age, a statement
            of whether the rates are level based on age-at-issue or attained age
            at time of renewal;

                  (v) an outline of the essential benefits, coverage's,
            limitations, exclusions, renewal conditions, limit of the related
            policy forms, and the expected benefit ratio, defined in section
            52.54(b) of this Part, which will be used under section 52.44 of
            this Part in the monitoring of actual loss ratios.

                  (vi) an outline of the general rules pertaining to
            underwriting limitations with respect to age, amounts and
            classifications of eligible risks and, in the case of a rider or
            endorsement, a complete list of the policy forms with which it will
            be used;

                  (vii) an outline of the general underwriting rules and methods
            of marketing the policy form, including, with respect to article
            IX-C corporations, a rule providing that no community-rated contract
            may be issued to a group whose experience under a group insurance
            policy with any insurer, including such article IX-C corporation
            indicates a rate in excess of the then current community rate;
            however, this rule does, not apply to a group which does not have a
            sufficient number of employees or members to qualify, under the
            article IX-C corporation's underwriting rules, for experience
            rating;

                  (viii) an occupational classification section or separate
            manual; and

1-1-95                          (Reissued 7/95)                  317   Insurance

<PAGE>

Section 52.40                                                TITLE 11  INSURANCE

                  (ix) the additional premium for impaired risks on a specified
            impairment or class basis; applicable rate schedules may be stated
            in dollar amounts or percentages of the standard premium; if classes
            are used, the maximum classification for each impairment shall be
            set forth.

            (3) Every article IX-C corporation shall file and maintain current
      the schedule of allowances used in connection with its contract forms.

      (d) Rate filings for individual insurance, including franchise and blanket
insurance written by commercial carriers, and rate filings for community-rated
contracts of article 43 corporations and health maintenance organizations. All
rate filings subject to this subdivision shall include the following:

            (1) With respect to rates accompanying the filing of new policy
      forms, to the extent appropriate:

                  (i) the specific formulas and assumptions used in calculating
            gross premiums;

                  (ii) the expected claim costs;

                  (iii) identification of morbidity and mortality tables or
            experience studies used, sufficient explanation for evaluation of
            their validity, including copies of such tables if they are not
            currently published;

                  (iv) the published data of other insurers;

                  (v) with respect to article IX-C corporations, percentage
            breakdown of the rates to show expected claims costs expenses,
            contributions to statutory reserves and surplus;

                  (vi) the range of commission rates and other fees payable to
            agents, brokers, salesmen or other persons except regularly salaried
            employees, stated separately for new and renewal business;

                  (vii) identification of specific rate manual pages being
            submitted or already on file applicable to each form and any pages
            being replaced or withdrawn;

                  (viii) identification of any occupational classification
            manual being submitted or already on file applicable to each form;

                  (ix) the expected future loss ratio, the loss ratio which will
            be monitored under section 52.44 of this Part, and the related
            minimum under section 52.45 of this Part. The expected future loss
            ratio may recognize expected future dividends beyond the second
            policy year as benefits, provided modifications are made in the
            applicable minimum loss ratio, as described in section 52.45(e) of
            his Part. Such dividends may be recognized as an offset to expected
            premiums without such modifications to the applicable minimums.
            Dividends expected to be paid within the first two policy years may
            be recognized if the company agrees not to change the dividend scale
            until two years from first issue:

                  (x) the expected less ratio by policy duration, where policy
            years three and later may be combined;

                  (xi) demonstration of compliance with the gross premium
            differential limitations as described in section 51.41 of this Part;
            and

                  (xii) methods and assumptions to be used in approximating
            earned premiums by duration for section 52.43(a)(1)(iii) of this
            Part, if exact methods will not be used.

            (2) With respect to rate revisions or additions to previously
      approved rate filings of commercial carriers to the extent appropriate:

                  (i) complete experience since inception, both yearly and in
            total, including the most recent calendar year if the submission is
            as of May 1st or later. Include written and earned premiums,
            dividends incurred, paid and incurred claims, each reserve, and
            earned/incurred loss ratios;

                  (ii) complete experience, as above, but with premiums adjusted
            to a single rate schedule, identifying the schedule, whether
            experience is nationwide or New York State only, and the reserve
            bases for each year:

 318   Insurance                   (Reissued 7/95)                       1-1-95

<PAGE>

CHAPTER III POLICY, CERTIFICATE PROVISIONS                         SECTION 52.40

                  (iii) if applicable to policies issued prior to July 1, 1959,
            the method of compliance with chapters 945 and 946, Laws of 1958
            (Metcalf laws);

                  (iv) derivation of the proposed revision in detail. This
            should include demonstration using interest assumptions from the
            applicable expected future loss ratio calculations, that:

                        (a) the expected future loss ratio, using the experience
                  in subparagraph (ii) of this paragraph, projected through the
                  period when rates will be effective, is at least as large as
                  the larger benefit or loss ratio used in disclosure statements
                  for the form and that it meets the requirement of section
                  52.45 of this part. If expected dividends are included in the
                  calculation as benefits, then the demonstration must be that
                  the projected expected future loss ratio be a least as large
                  as the disclosed loss ratio when modified by section 52.45(e)
                  of this part;

                        (b) the expected lifetime loss ratio is at least as
                  large as the disclosed loss ratio. This demonstration may use
                  future dividends as in (a) and past dividends as benefits. If
                  no policy was issued subsequent to the effective date of the
                  ninth amendment to this regulation, no modification in
                  accordance with section 52.45(e) is necessary. Otherwise, such
                  modifications are necessary;

                        (c) for policies issued prior to January 1, 1983, the
                  minimum anticipated loss ratio applicable to the policy at
                  time of issue is to be used in place of the disclosed loss
                  ratio referred to in clauses (a) and (b) of this subparagraph;

                  (v) description, in detail, of policy benefits;

                  (vi) complete history of previous rate revisions;

                  (vii) first and last years of policy issue and date of
            original form approval;

                  (viii) expected future loss ratio, expected lifetime loss
            ratio, and expected loss ratios by duration, as of the date of
            filing and as originally filed and the basis of each. If no such
            loss ratios have been filed, the anticipated loss ratio as
            originally filed;

                  (ix) a statement that the rates approved by the superintendent
            will be applied to all policies originally delivered or issued for
            delivery in New York, regardless of place of current residence;

                  (x) the accumulated value of each item in subparagraph (i) of
            this paragraph, except for reserves, such accumulation being made
            from the midpoint of each calendar year to December 31st of the most
            recent year for which data is submitted. Such accumulation shall
            employ the interest assumptions used in the applicable expected
            future loss ratio calculation, and shall be used in the
            demonstration required by subparagraph (iv) of this paragraph;

                  (xi) when a requested rate revision has been accepted for
            approval, revised rate manual pages reflecting the revision. If the
            revision is expressed as a percentage of existing rates, and the
            rates are part of the inactive rate manual, the insurer may file a
            single "multiplier" manual page duly referenced in the table of
            contents, which reflects the approved percentage revision to be
            applied to the manual pages which follow in lieu of a complete set
            of revised rate manual pages.

            (3) With respect to applications for revisions of previously
      approved rates of article 43 corporations and health maintenance
      organizations:

                  (i) information with respect to claim or utilization
            frequencies, claim costs and expenses shown for all contracts and
            riders, or for each coverage separately if more than one coverage is
            provided by a contract or rider, for a period of at least two years
            prior to the calendar year in which the new rates are effective,
            even though rates for some contracts, riders or coverages are not
            being changed;

                  (ii) the information required in subparagraph (i) of this
            paragraph projected for a period not more than two years beyond the
            effective date of the new rates;

                  (iii) a summary of projected changes in claim or utilization
            frequency, average claim costs and expenses;

1-1-95                           (Reissued 7/95)          319          Insurance

<PAGE>

 SECTION 52.40                                                TITLE 11 INSURANCE

                  (iv) the current financial condition of the corporation and
            the financial condition projected to the effective date of the new
            rates and to the end of the period during which the new rates will
            be in effect;

                  (v) the projected operating results for the period during
            which the new rates will be in effect, showing premiums, claims and
            expenses;

                  (vi) such additional information as may be needed in order to
            assist the superintendent in determining whether the application
            shall become effective as filed, shall become effective as modified,
            or shall be disapproved;

                  (vii) as respects rate adjustment applications where such
            adjustment is only requested to reflect anticipated payments to or
            from the demographic or specified medical condition pooling funds,
            such applications shall contain such information as may be needed in
            order to assist the superintendent in determining the amount of the
            adjustment which is necessary in order to recognize such payments.
            Such information shall be in lieu of the material requested in
            subparagraphs (i), (ii), (iii) and (vi) of this paragraph; and

                  (viii) a jurat subscribed to by the corporation's president or
            chief executive officer, treasurer or chief financial officer, and
            chief actuary or, if the corporation has no chief actuary, the
            person responsible for preparing this rate application. All
            testimony of the corporation's directors, employees, agents or
            representatives made at any public hearing ordered by the
            superintendent with respect to the terms of this application shall
            be subscribed to under oath. The form of this jurat shall be as
            follows: (Note: Modify jurat if any of these persons are not in the
            employment of the insurer or HMO.)

            (insert name)  , president (or chief executive officer) .(insert
            name) , treasurer or chief financial officer)   ,(insert name)
            chief actuary (or person responsible for preparing this
            application), of the (name of insurer or HMO) being duly sworn, each
            deposes and says that they are the above described employees of the
            said insurer or HMO and hereby affirm that the information in this
            premium rate application including all schedules and exhibits
            thereto has been prepared in accordance with the applicable
            provisions of Parts 52,360 and 361 of Title 11 of the Official
            Compilation of Codes, Rules and Regulations of the State of New York
            (Regulations 62, 145 and 146) and the most recent instructions of
            the New York State Insurance Department and to the best of their
            knowledge and belief is accurate and complete.

            __________________      __________________        __________________
                President                Treasurer               Chief Actuary

            Subscribed and sworn to before

            me this           day of

      (e) Required rate filings for group insurance including master group
contracts of article IX-C corporations. The following rules shall apply with
respect to rates for group insurance including master group contracts of article
IX-C corporations:

            (1) A rate filing shall accompany every policy, and rider or
      endorsement affecting benefits submitted to the department for approval
      unless schedules of rates or formulas applicable to such forms have been
      previously filed, in which case the rates shall be identified by reference
      to specific page number([ILLEGIBLE]) of the manual, formulas or schedules
      on file. If the filing contains rate manual pages, the requirements
      contained in paragraph (2) of this subdivision for group rate manual
      submissions must be satisfied.

            (2) Group rate manual submissions.

                  (i) Every insurer shall file and maintain current a schedule
            of manual rates or formulas which, to the extent applicable, shall
            include the following:

                        (a) the name of insurer on each page;

320     Insurance                  (Reissued 7/95)                        1-1-95

<PAGE>

CHAPTER III POLICY, CERTIFICATE PROVISIONS                         SECTION 52.40

                        (b) table of contents;

                        (c) an outline of the essential benefits, coverages,
                  limitations and exclusions to [ILLEGIBLE]. the rate applies;

                        (d) a schedule of the premium rates, rules and
                  classification of risks including any loading for age, sex and
                  industry;

                        (e) a definition of single risk for purpose of size
                  discounts;

                        (f) a definition and schedule of premium discounts for
                  self-administration or self-accounting;

                        (g) the manner of computation and instruction for
                  interpolating and extrapolating rates; and

                        (h) a schedule of commissions and fees.

                  (ii) The submission of rate manual pages should include the
            following information separate from the rate manual pages:

                        (a) specific reference to sections, pages and edition
                  dates of rates submitted, deleted or revised; and

                        (b) justification of rates being submitted or revised,
                  including reference to relevant information used in the
                  development of such justification and a demonstration that the
                  applicable minimum loss ratio of section 52.45 of this Part
                  will be met.

            (3) Filings of forms on a one-case basis shall include the following
      information:

                  (i) insurer's name;

                  (ii) name and location of policyholder;

                  (iii) form number if a policy or, if a rider, the policy form
            number to which the rider is attached;

                  (iv) an outline of the essential benefits, coverages,
            limitations and exclusions to which the rate applies;

                  (v) if rates are derived from or contained in the group rate
            manual, the specific page number(s) where the applicable rates are
            found and the actual rates being used;

                  (vi) if rates for the form are neither derived from nor
            contained in the group rate manual, the actual rate being used, the
            nature and extent of any deviation from the manual rate and
            justification for such deviation; and

                  (vii) a statement of consistency with filed rates.

            (4) Every article IX-C corporation shall file and maintain current
      the schedule of allowances used in connection with its contract forms.

      (f) Experience-rated group insurance of insurers other than article 43
corporations. The following rules shall apply to the readjustment of the rate of
premium for those policies rated in accordance with subsections (g), (h) and (j)
of section 4235 of the Insurance Law.

            (1) Policies may be experience-rated in accordance with a written
      plan or formula approved by the board of directors of the insurer or
      designee thereof, provided that:

                  (i) any such plan or formula shall not unfairly discriminate
            between groups with similar risk characteristics (other than claim
            experience, health status or duration since issue) with respect to
            credibility factors, stop-loss limits or other rate fluctuation
            controls;

                  (ii) the subparagraph of section 4235(c)(1) under which
            coverage is written or the current availability of a particular plan
            of insurance underwritten by the insurer for any such group are not
            acceptable risk classification factors under any such plan or
            formula, however, age, sex, occupation, location, industry, family
            composition and other factors affecting utilization and expense are
            acceptable risk classification factors; and

                  (iii) any such plan or formula shall not permit the selective
            nonrenewal of a group or insured person thereunder solely because of
            claim experience or health status.

1-1-95                        (Reissued 7/95)               321        Insurance

<PAGE>

SECTION 52.40                                                 TITLE 11 INSURANCE

            (2) Except as provided in paragraph (3) of this subdivision,
      policies insuring less than 50 persons at the inception of the
      experience-rating period, excluding dependents, may be experience-rated
      in accordance with a plan or formula accepted for filing by the
      superintendent, provided that:

                  (i) any such plan or formula shall not result in a renewal
            rate for any group which is more than 50 percent higher than the
            rate determined under the insurer's rate manual for new business
            filed pursuant to subdivision (e) of this section for a group with
            similar risk characteristics, notwithstanding claim experience,
            health status or duration since issue. Where a policy form is no
            longer available or actively marketed, the percentage change in the
            maximum rate for each rating period shall not exceed the percentage
            change in the new business rate for the same rating period for the
            policy form with benefits most nearly comparable to the benefits
            under the policy form which is no longer available or actively
            marketed;

                  (ii) any such plan or formula shall not result in a rate
            change for any group on renewal which exceeds the sum of:

                        (a) the percentage change in the new business rate for
                  such similar group from the first day of the prior period to
                  the first day of the new period, adjusted to reflect changes
                  in coverage or the group's risk characteristics,
                  notwithstanding claim experience, health status, or duration
                  since issue; and

                        (b) 15 percent adjusted pro rata for rating periods less
                  than one year. Where a policy form is no longer available or
                  actively marketed, the maximum rate change on renewal shall
                  not exceed the maximum renewal rate change as described in the
                  previous sentence for the current actively marketed policy
                  form with benefits most nearly comparable to the benefits
                  under the policy form which is no longer available or actively
                  marketed;

                  (iii) any such plan or formula shall not permit the use of a
            group's claims experience, health status or duration since issue in
            readjusting the rate of premium until the number of employee or
            member life/years of experience equals or exceeds 50 and shall
            adjust a group's incurred claims to remove unexpected,
            nonrecurring, catastrophic claims; and

                  (iv) any such plan or formula shall describe the risk
            classification factors, underwriting rules and participation
            requirements as well as transition rules applicable to existing
            groups with significant composition changes or to the negotiated
            takeover of one or more classes of policies of another insurer.

            (3) The rate of premium for policies insuring less than 50 persons
      at the inception of the rating period, excluding dependents, shall not be
      readjusted based upon claim experience, health status or duration of
      coverage since issue where:

                  (i) each person covered must satisfy the insurer's evidence of
            insurability requirements when initially eligible for coverage under
            the policy; or

                  (ii) the group or persons representing such group are not
            provided with reasonable written disclosure as part of the
            solicitation and sales materials, of the extent to which a group's
            claims experience, health status or duration since issue will be
            used by the insurer to establish or adjust the rate of premium for
            such group.

            (4) Experience of a preceding insurer or insurers may be relied on
      to the extent such experience is available according to a plan or formula
      filed with the department to produce higher or lower rates than those
      otherwise applicable in the first policy year.

            (5) Any provision contained in the policy with respect to
      retrospective rate adjustment or retention by the insurer shall be based
      on specific factors used in retrospective rating formulas or plans filed
      with the department.

            (6) For purposes of this subdivision, the terms group and policy
      shall also refer to employers which establish or participate in groups
      described in subparagraph (B), (D) or (H) of section 4235(c)(1) of the
      Insurance Law and to the insurance written thereunder which insures the
      employees of such employers.

322         Insurance              (Reissued 7/95)                        1-1-95

<PAGE>

CHAPTER III POLICY CERTIFICATE PROVISIONS                          SECTION 52.40

            (7) The superintendent may accept for filing a plan or formula, or
      an amendment thereof which does not comply with one or more of the rules
      contained in this subdivision satisfactory demonstration that such
      noncompliance is reasonably related to the [ILLEGIBLE[ condition of the
      insurer and will not result in rates which are unreasonable, inequitable
      or untair under the circumstances.

      (g) Experience-rated group insurance of article IX-C corporations. The
following rules shall apply to the adjustment of the rate of premium based on
the experience of any contract of master group insurance as provided for under
section 253(6)(a) of the Insurance Law:

            (1) Contracts of master group insurance may be experience-rated only
      in accordance with a formula or plan previously furnished to the
      department. Such formula or plan shall include a retention designed to
      provide for a contribution to surplus.

            (2) Any such plan or formula of experience rating may include
      provision for a rate stabilization reserve provided that the terms under
      which the rate stabilization reserve is created are included in the master
      group contract or separate written agreement previously approved by the
      department and which upon termination of the group contract impose an
      obligation on the plan in respect to the application of the funds
      represented by such reserve.

            (3) Experience of a preceding insurer or insurers may be relied on
      to the extent available according to a plan or formula filed with the
      department to produce higher or lower rates than those otherwise
      applicable in the first policy year.

      (h) Special rules for rates applicable to benefits under the disability
benefits law. The following rules shall be applicable with respect to policies
providing statutory benefits pursuant to article IX of the Workers' Compensation
Law:

            (1) Rate schedules for groups of 50 or more insured persons shall be
      based on a premium for each $10 of weekly benefit or a percentage of
      weekly payroll. Such weekly payroll shall be limited to two times the
      maximum weekly disability benefits law benefit per employee.

            (2) For groups of less than 50 insured persons, a simplified rate
      structure such as monthly per capita rates may be used.

      (i) Special rules for franchise insurance rates. The following rules shall
apply to rates for franchise insurance:

            (1) Rates shall not unfairly discriminate between cases of the same
      class. Rates may recognize age, sex, occupation, location, industry,
      marital status, family composition and other factors affecting
      utilization.

            (2) With respect to employee-employer franchise, rates shall be
      self-supporting and reasonably related to the mortality and morbidity
      assumptions used by the insurer for group insurance, execpt where it is
      demonstrated to the satisfaction of the superintendent that some other
      basis is appropriate.

            (3) With respect to association or union franchise:

                  (i) Rates shall be self-supporting and shall be reasonably
            related to the mortality and morbidity assumptions used by the
            insurer for individual insurance, except where it is demonstrated to
            the satisfaction of the superintendent that some other basis is
            appropriate. Rates may differ from those used for comparable
            individual accident and health insurance if it is shown to the
            satisfaction of the superintendent that any difference results from
            demonstrable savings in marketing, underwriting, policy issue and
            administrative expenses. If no comparable plan of individual
            insurance is filed or approved for the insurer, rates used by the
            insurer for comparable group insurance shall be deemed to be
            self-supporting if it is shown to the satisfaction of the
            superintendent that marketing, underwriting, policy issue,
            administrative, mortality and morbidity costs will not exceed those
            for such group insurance.

                  (ii) Franchise cases may be experience-rated on the basis of
            an equitable plan or formula approved by the superintendent
            applicable to all franchise cases of the same class.

      (j) Group commissions, compensations, fees and allowances. Schedules of
rates of commissions, compensation, fees and allowances required to be filed
under section 221(7) of the

1-1-95                         (Reissued 7/95)                323      Insurance

<PAGE>

SECTION 52.40                                                 TITLE 11 INSURANCE

Insurance Law shall be filed as part of the group rate manual and shall contain
at least the following information:

            (1) the basis upon which such schedules apply (e.g., a percentage of
      the annual premium, a dollar amount per certificate, or a dollar amount
      per $100 of weekly indemnity);

            (2) if applicable to premiums, the premiums to which they apply
      (e.g.. monthly, annual, first year or renewal);

            (3) any variations in the application of such schedules based on
      policy years, alternative scales, grading, type of coverage, category of
      agent, territories or any other variable including a clear explanation of
      the variable;

            (4) if based on administrative services, the nature of the services
      and the allowances therefor; and

            (5) the applicability of any revisions and identification of pages
      being added, deleted or substituted.

      (k) Special rules for the submission of rates and supporting documentation
applicable to individual and group Medicare supplement policies. The following
rules shall be applicable in addition to the other requirements of this section.

            (1) All filings of rates and rating schedules shall demonstrate that
      expected claims in relation to premiums comply with the requirements of
      section 52.45(i) of this Part when combined with actual experience to
      date. Filings of rate revisions shall identify the number of persons
      insured under the New York issued policies or certificates for which
      revision is requested and shall also demonstrate that the anticipated loss
      ratio over the entire future period for which the revised rates are
      computed to provide coverage can be expected to meet the appropriate loss
      ratio standards.

            (2) An issuer of Medicare supplement policies and certificates
      issued before or after May 1, 1992 in this State shall file annually with
      the submission required in paragraph (3) of this subdivision its rates,
      rating schedule and supporting documentation including ratios of incurred
      losses to earned premiums by policy duration for approval by the
      superintendent in accordance with the filing requirements and procedures
      prescribed by the superintendent. The supporting documentation shall also
      demonstrate in accordance with actuarial standards of practice using
      reasonable assumptions that the appropriate loss ratio standards can be
      expected to be met over the entire period for which rates are computed.
      Such demonstration shall exclude active life reserves. An expected
      third-year loss ratio which is greater than or equal to the applicable
      percentage shall be demonstrated for policies and certificates in force
      less than three years.

            (3) As soon as practicable, but prior to the effective date of
      enhancements in Medicare benefits, every issuer of Medicare supplement
      policies or certificates in this State shall file with the superintendent,
      in accordance with the applicable filing procedures of this State:

                  (i) appropriate premium adjustments necessary to produce loss
            ratios as anticipated for the current premium for the applicable
            policies or certificates. Such supporting documents as necessary to
            justify the adjustment shall accompany the filing; and

                  (ii) an issuer shall make such premium adjustments as
            necessary to produce an expected loss ratio under such policy or
            certificate as will conform with minimum loss ratio standards for
            Medicare supplement policies and which are expected to result in a
            loss ratio at least as great as that originally anticipated in the
            rates used to produce current premiums by the issuer for such
            Medicare supplement policies or certificates.

            (4) Except for nonprofit health service, hospital service or medical
      expense indemnity corporations, no premium adjustment which would modify
      the loss ratio experience under the policy other than the adjustments
      described in paragraph (3) of this subdivision shall be made with respect
      to the policy at any time other than upon its renewal date or anniversary
      date, as may be approved by the superintendent.

            (5) In addition to any other requirement of the Insurance Law, the
      superintendent shall order that a public hearing be held with respect to
      the terms of a filing or application by or on behalf of an issuer for an
      increase in premiums for Medicare supplement insurance policies or

324      Insurance                  (Reissued 7/95)                       1-1-95

<PAGE>

CHAPTER III POLICY. CERTIFICATE PROVISIONS                         SECTION 52.42

      certificates when such rate filing or application is for an increase of
      more than 15 percent in a 12-month period or such increase will be made on
      a policy or certificate form covering 10,[ILLEGIBLE] or more insureds in
      New York State. Public notice of such hearing shall be furnished
      [ILLEGIBLE] manner consistent with the requirements of section 4308(c)(2)
      of the Insurance Law.

                                 HISTORICAL NOTE

                  Sec. filed April 6, 1973; repealed, new filed April 2, 1982;
            amds. filed: June 26, 1984 as emergency measure, expired 60 days
            after filing; Sept. 14, 1984; Jan. 29, 1991; March 12, 1992; Aug.
            16, 1993 as emergency measure; Oct 19, 1993 eff. Nov. 3, 1993.
            Amended (d).

SECTION 52.41 GROSS PREMIUM DIFFERENTIALS BASED ON SEX.

      (a) The following requirements are established to limit maximum gross
premium differentials between males and females for all accident and health
policies or coverages where the insurance premium is paid by the insured:

            (1) Net or gross premium assumptions may differentiate between the
      sexes only for factors based on differences in morbidity or mortality
      between males and females.

            (2) Lapse and average size assumptions may not differ between males
      and females unless the insurer demonstrates to the satisfaction of the
      superintendent that the difference has a relationship to the morbidity or
      mortality assumptions such that the resulting rates are not unfairly
      discriminatory.

      (b) Net premium differentials shall be determined on one or more of the
following bases:

            (1) a statistical analysis of the company's own experience, if
      credible;

            (2) published credible experience, such as the morbidity studies of
      the Society of Actuaries and the studies made by the New York Insurance
      Department;

            (3) any other valid data; or

            (4) any combination of paragraph (1), (2) or (3) of this
      subdivision.

      (c) Gross premium differentials between sexes in the same premium cell may
reflect only the net premium differentials and those expenses which are directly
related to the amount of premiums or claims (e.g., premium taxes, commissions,
some claims administration expense). All other loadings for expenses shall be in
the same amounts in dollars for both sexes. A company may utilize a simplified
loading system if it can demonstrate that such system does not produce gross
premium differentials which are generally greater than those generated by the
method prescribed in this section, nor appreciably greater for any cell in the
premium scale.

      (d) Unisex rates are approvable for individual accident and health
insurance if all rates for such individual insurance coverages offered by the
company are charged on a unisex basis, unless the insurer demonstrates to the
satisfaction of the superintendent that use of unisex rates for only some
coverages is not unfairly discriminatory. This limitation does not apply to
group, blanket or franchise insurance.

                                 HISTORICAL NOTE

 Sec. filed April 27, 1977; repealed, new filed April 2, 1982 eff. Jan, 1, 1983.

SECTION  52.42 HEALTH MAINTENANCE ORGANIZATION (HMO) CONTRACT FORMS AND PREMIUM
RATES.

      (a) Requirement for prior approval of forms and rates. (1) Contracts,
      certificates, applications, riders and endorsements used by an HMO to
      provide benefits and their proposed rates must be filed with and approved
      by the superintendent in accordance with section 4308 of the Insurance
      Law.

            (2) Reasonable differentials between group and direct payment rates
      may be established to reflect differences in marketing costs as well as
      different administrative costs in collecting payments from direct pay
      contract holders.

            (3) The premium adjustments of all community rated contracts are
      subject to the provisions of section 4308 of the Insurance Law.

1-1-95                           Reissued 7/95)                325     Insurance
<PAGE>

                                                                      APPENDIX F

                        CHILD HEALTH PLUS INSURANCE PLAN
                             RATE FILING GUIDELINES

      The rate filing shall consist of the following:

1.    An outline of the essential benefits, coverage, limitations and
      exclusions.

2.    Premium rate sheets.

3.    Actuarial memorandum that will include the following:

      a.    The specific formulas, methods, and assumptions used in calculating
            premium rates including information on utilization frequencies,
            average charges, gross PMPM cost, co-payment PMPM, and net PMPM
            cost. Identify the sources of the claim cost data used and any
            modifications made thereto.

      b.    Please identify any special assumptions you have made with respect
            to:

            i. children under one year of age; and

            ii. children ages 15 to 19.

      c.    Comparison of the proposed rates with the currently approved rates,
            as applicable, for similar benefits and populations. Relate the
            basic assumptions in item a. above to those of the currently
            approved rates and support any variations in assumptions with
            actuarial justifications.

      d.    Experience, if any, on an existing Child Health Plus plan.

      e.    Expected incurred loss ratio.

      f.    Expense components of the premium (administrative expenses,
            contribution to statutory reserves and surplus, etc.)

      g.    Certification by your actuary (or appropriate financial officer)
            stating that the rate filing is in compliance with the applicable
            laws and regulations of the State of New York and that the proposed
            rates are reasonable in relation to the benefits provided.

4.    Identify the specific counties that you propose to cover with this plan.

5.    All rate filing material shall be in duplicate and each page of the rate
      filing shall display the name of the corporation and subscriber contract
      number.

6.    Please provide a telephone number and facsimile number of your actuary or
      other person(s) best able to respond to questions concerning your filing.

      Attached are examples of an acceptable rate filing and premium rate
      sheets.

<PAGE>

PREMIUM RATE DEVELOPMENT FOR CHILD         PLAN NAME: __________________________
HEALTH PLUS INSURANCE PLAN

BASE PERIOD - ACTUAL EXPERIENCE            MEMBER MONTHS: ______________________

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                SERVICE                    ACTUAL       AVERAGE    PMPM         CO-PAYMENT     CO-PAY      NET
                                          FREQUENCY     CHARGE                                 PMPM        PMPM
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
<S>                                       <C>           <C>        <C>          <C>            <C>         <C>
 Hospital Services
-----------------------------------------------------------------------------------------------------------------------

         Inpatient Utilization
         (Admissions)
-----------------------------------------------------------------------------------------------------------------------
         Emergency Room
-----------------------------------------------------------------------------------------------------------------------
         Hospital Outpatient
-----------------------------------------------------------------------------------------------------------------------
            Radiotherapy/Chemotherapy
-----------------------------------------------------------------------------------------------------------------------
            Outpatient Surgery
-----------------------------------------------------------------------------------------------------------------------
         Ambulance
-----------------------------------------------------------------------------------------------------------------------
 Physician
-----------------------------------------------------------------------------------------------------------------------
         Ambulatory Office Visits
-----------------------------------------------------------------------------------------------------------------------
           PCP
-----------------------------------------------------------------------------------------------------------------------
           Admission Fee
-----------------------------------------------------------------------------------------------------------------------
           Specialty
-----------------------------------------------------------------------------------------------------------------------
         Inpatient Hospital Visits
-----------------------------------------------------------------------------------------------------------------------
         Emergency Room Visits
-----------------------------------------------------------------------------------------------------------------------
         Miscellaneous Office Visits
-----------------------------------------------------------------------------------------------------------------------
         Surgery
-----------------------------------------------------------------------------------------------------------------------
           Inpatient
-----------------------------------------------------------------------------------------------------------------------
           Outpatient
-----------------------------------------------------------------------------------------------------------------------
         X-Ray
-----------------------------------------------------------------------------------------------------------------------
         Anesthesia
-----------------------------------------------------------------------------------------------------------------------
         Eye Refraction
-----------------------------------------------------------------------------------------------------------------------
         Outpt Alcohol & Subs Abuse
-----------------------------------------------------------------------------------------------------------------------
         Mental Health
-----------------------------------------------------------------------------------------------------------------------
         Obstetrics - Delivery
-----------------------------------------------------------------------------------------------------------------------
         Obstetrics - Non-Deliveries
-----------------------------------------------------------------------------------------------------------------------
         DME
-----------------------------------------------------------------------------------------------------------------------
Diagnostic & Laboratory Tests
-----------------------------------------------------------------------------------------------------------------------
Other Medical
-----------------------------------------------------------------------------------------------------------------------
Prescription Drug
-----------------------------------------------------------------------------------------------------------------------
Total Cost
-----------------------------------------------------------------------------------------------------------------------
Expenses
         Administrative Expenses
         2% Statutory Contribution
-----------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                 SAMPLE FILING

<PAGE>

I.    OUTLINE OF BENEFITS

      XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
      XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
      XX

      PREMIUM RATE SHEET(S)
      ABC Corporation
      Child Health Plus Insurance Plan
      Form Number XYZ

III.  ACTUARIAL MEMORANDUM

      A.    Derivation of rates

            1.    Description of rating approach
                  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
                  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

            2.    Sources of frequency and average charges
                  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
                  XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

            3.    Premium rate development (See attached premium rate sheets)

      B.    Comparison with currently approved rates for similar benefits,
            justification of differentials in basis assumptions, etc.
            XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXCXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
            XXXXXXXXXXXXXXXXXXCXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
            XX

      C.    Expected Incurred Loss Ratio = 90%

      D.    Expense Components of Premium
            Administrative Expenses                              X%
            Contribution to Statutory Reserves and Surplus       Y%
                                                                --
                                       TOTAL                    10%

      E.    Actuarial Certification

            I certify that this rate filing is in compliance with the applicable
            laws and regulations of the State of New York and that the proposed
            rates are reasonable in relation to the benefits provided.

            ______________________________
            (Actuary's Signature)                  (Date)

            ______________________________
            (Print/Type Name)

            ______________________________
            (Print/Type Title)

IV.   COUNTIES COVERED

      This plan will cover the following counties:
                       County A
                       County B
                       County C

<PAGE>

PREMIUM RATE DEVELOPMENT FOR CHILD HEALTH    PLAN NAME:_________________________
PLUS INSURANCE PLAN RATE PERIOD            MEMBER MONTHS:_______________________

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                    FREQUENCY         AVERAGE               STANDARD           CO-PAY           NET
                SERVICE                             PROJECTED         CHARGE     PMPM      CO-PAYMENT           PMPM           PMPM
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>        <C>       <C>                 <C>             <C>
Hospital Services                                                                              $0
------------------------------------------------------------------------------------------------------------------------------------
         Inpatient Utilization (Admissions)                                                    $0
------------------------------------------------------------------------------------------------------------------------------------
         Emergency Room                                                                        $0
------------------------------------------------------------------------------------------------------------------------------------
         Hospital Outpatient                                                                   $0
------------------------------------------------------------------------------------------------------------------------------------
            Radiotherapy/Chemotherapy                                                          $0
------------------------------------------------------------------------------------------------------------------------------------
            Outpatient Surgery                                                                 $0
------------------------------------------------------------------------------------------------------------------------------------
         Ambulance                                                                             $0
------------------------------------------------------------------------------------------------------------------------------------
Physician
------------------------------------------------------------------------------------------------------------------------------------
         Ambulatory Office Visits
------------------------------------------------------------------------------------------------------------------------------------
            PCP                                                                                $2
------------------------------------------------------------------------------------------------------------------------------------
            Admission Fee                                                                      $0
------------------------------------------------------------------------------------------------------------------------------------
            Specialty                                                                          $2
------------------------------------------------------------------------------------------------------------------------------------
         Inpatient Hospital Visits                                                             $0
------------------------------------------------------------------------------------------------------------------------------------
         Emergency Room Visits                                                                 $0
------------------------------------------------------------------------------------------------------------------------------------
         Miscellaneous Office Visits                                                           $2
------------------------------------------------------------------------------------------------------------------------------------
         Surgery
------------------------------------------------------------------------------------------------------------------------------------
            Inpatient                                                                          $0
------------------------------------------------------------------------------------------------------------------------------------
            Outpatient                                                                         $0
------------------------------------------------------------------------------------------------------------------------------------
         X-Ray                                                                                 $0
------------------------------------------------------------------------------------------------------------------------------------
         Anesthesia                                                                            $0
------------------------------------------------------------------------------------------------------------------------------------
         Eye Refraction                                                                        $0
------------------------------------------------------------------------------------------------------------------------------------
         Outpt Alcohol & Subs Abuse                                                            $0
------------------------------------------------------------------------------------------------------------------------------------
         Mental Health                                                                         $0
------------------------------------------------------------------------------------------------------------------------------------
         Obstetrics - Delivery                                                                 $0
------------------------------------------------------------------------------------------------------------------------------------
         Obstetrics - Non-Deliveries                                                           $2
------------------------------------------------------------------------------------------------------------------------------------
         DME                                                                                   $0
------------------------------------------------------------------------------------------------------------------------------------
Diagnostic & Laboratory Tests                                                                  $0
------------------------------------------------------------------------------------------------------------------------------------
Other Medical                                                                                  $0
------------------------------------------------------------------------------------------------------------------------------------
Prescription Drug                                                                              $3
------------------------------------------------------------------------------------------------------------------------------------
Total Cost                                                                                     $0
------------------------------------------------------------------------------------------------------------------------------------
Expenses

         Administrative Expenses
         2% Statutory Contribution
------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

PREMIUM RATE DEVELOPMENT FOR CHILD HEALTH      PLAN NAME:_______________________
PLUS INSURANCE PLAN                            MEMBER MONTHS:___________________
PREMIUM RATE SUMMARY

<TABLE>
<CAPTION>
                                                    BASE YEAR - ACTUAL         RATE YEAR      VARIANCE
                  SERVICE                               (PMPM)                  (PMPM)         (PMPM)
---------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                        <C>            <C>
Hospital Services
---------------------------------------------------------------------------------------------------------------
         Inpatient Utilization (Admissions)
---------------------------------------------------------------------------------------------------------------
         Emergency Room
---------------------------------------------------------------------------------------------------------------
         Hospital Outpatient
---------------------------------------------------------------------------------------------------------------
            Radiotherapy/Chemotherapy
---------------------------------------------------------------------------------------------------------------
            Outpatient Surgery
---------------------------------------------------------------------------------------------------------------
         Ambulance
---------------------------------------------------------------------------------------------------------------
Physician
---------------------------------------------------------------------------------------------------------------
         Ambulatory Office Visits
---------------------------------------------------------------------------------------------------------------
            PCP
---------------------------------------------------------------------------------------------------------------
            Admission Fee
---------------------------------------------------------------------------------------------------------------
            Specialty
---------------------------------------------------------------------------------------------------------------
         Inpatient Hospital Visits
---------------------------------------------------------------------------------------------------------------
         Emergency Room Visits
---------------------------------------------------------------------------------------------------------------
         Miscellaneous Office Visits
---------------------------------------------------------------------------------------------------------------
         Surgery
---------------------------------------------------------------------------------------------------------------
            Inpatient
---------------------------------------------------------------------------------------------------------------
            Outpatient
---------------------------------------------------------------------------------------------------------------
         X-Ray
---------------------------------------------------------------------------------------------------------------
         Anesthesia
---------------------------------------------------------------------------------------------------------------
         Eye Refraction
---------------------------------------------------------------------------------------------------------------
         Outpt Alcohol & Subs Abuse
---------------------------------------------------------------------------------------------------------------
         Mental Health
---------------------------------------------------------------------------------------------------------------
         Obstetrics - Delivery
---------------------------------------------------------------------------------------------------------------
         Obstetrics - Non-Deliveries
---------------------------------------------------------------------------------------------------------------
         DME
---------------------------------------------------------------------------------------------------------------
Diagnostic & Laboratory Tests
---------------------------------------------------------------------------------------------------------------
Other Medical
---------------------------------------------------------------------------------------------------------------
Prescription Drug
---------------------------------------------------------------------------------------------------------------
Total Cost
---------------------------------------------------------------------------------------------------------------
Expenses
         Administrative Expenses
         2% Statutory Contribution
---------------------------------------------------------------------------------------------------------------
TOTAL PREMIUM PMPM
---------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                   APPENDIX G

                                REPORTING FORMAT

<PAGE>

                                CHILD HEALTH PLUS
                     REPORT ON REASONS FOR DENIED APPLICANTS
                               AND DISENROLLMENTS

Instructions: Insurer must report the number of applicants and enrollees
determined ineligible for participation in the Child Health Plus Program and the
reasons for the determination. This should include applicants initially
determined ineligible, those not enrolled at recertification due to the fact
that they are determined ineligible, those disenrolled at the close of the
presumptive eligibility period and disenrollment which occurs at any other point
during the year. This report must be received by the Department on a quarterly
basis within 30 days after the close of the quarter. The reports should be sent
to:

                           Bureau of Health Economics
                            Child Health Plus Program
                       New York State Department of Health
                        Corning Tower Building, Room 1110
                               Empire State Plaza
                          Albany, New York 12237-0722

INSURER: ___________________________________ QUARTER: ______________

I.    New Applicants

      A.    Ineligible due to:

            Age _____
            Income __________
            Equivalent insurance _____________
            Residency _____________

      B.    Failure to pay the family Share of Premium (if applicable)
            _______

      C.    Miscellaneous/Other _______________________________

II.   After Presumptive Eligibility Period

      A.    Lack of sufficient documentation _________

      B.    Failure to pay the family Share of Premium (if applicable)
            ___________

      C.    Miscellaneous/Other____________

<PAGE>
`III. At Recertification

      A.    Ineligible due to:

            Age ______________
            Income ___________________
            Equivalent insurance _____________________________________
            Residency __________________________

      B.    Lack of sufficient documentation____________________________________

      B.    Failure to pay the family Share of Premium (if applicable) _________

      C.    Miscellaneous/Other ________________________________________

      D.    Family voluntarily chose not to re-enroll___________________________

      E.    Miscellaneous/Other _____________________________________________

IV. Disenrollment at any Other point During the Year

      A.    Insurer notified of any change in status of responsible party:

            Income _________________________
            Residency _______________________________
            Equivalent insurance ______________________________________

      B.    Family voluntarily chose to disenroll ______________________________

      C.    Miscellaneous/Other ________________________________________________

<PAGE>

                               CHILD HEALTH PLUS
                            MONTHLY ENROLLMENT REPORT

General Instructions

1.    The Child Health Plus Monthly Enrollment Report is intended to provide a
      snap shot of enrollment and disenrollment activity AS OF THE FIRST (1ST)
      DAY OF THE MONTH IDENTIFIED AS THE "REPORT PERIOD" in the heading of the
      report form. For example, for the Report Period December 1, 1996, the data
      reported for the current period will reflect enrollment and disenrollment
      as of December 1, 1996. This should equal the number of enrollees for whom
      a premium was billed this month plus any non-subsidized enrollees.

2.    The Report Period and Name of Insurer must be recorded on this report
      form. The contact person and phone number of that person should also be
      completed on the bottom of this report.

3.    The report is to be completed each month and is DUE IN THIS OFFICE NO
      LATER THAN THE 10TH BUSINESS DAY OF THE REPORT PERIOD MONTH. The completed
      form is to be returned to:

            CHILD HEALTH PLUS MONTHLY ENROLLMENT REPORT
            BUREAU OF HEALTH ECONOMICS
            NEW YORK STATE DEPARTMENT OF HEALTH
            CORNING TOWER, ROOM 1110
            EMPIRE STATE PLAZA
            ALBANY, NY 12237-0722

4.    If you have questions about the report form or these instructions, please
      call Ms. Rosemary DeSanta of the above referenced bureau at (518)
      473-7883.

The form requests enrollment/disenrollment information broken down by age
category (under 1 yr., 1-5 yrs., 6-12 yrs. and 13-16 yrs.) and income level
(<120% FPL, 120%-160% FPL, >160%-222% and +222%) as follows:

1.    NET ENROLLMENT FROM THE PREVIOUS MONTH (COLUMN A): Specify the number of
      children who were actively enrolled effective the first (1st) day of the
      calendar month immediately preceding the Report Period Month. In the
      example above where December is the Report Period Month, the insurer
      would record enrollment effective as of November 1, 1996.

2.    ADJUSTMENTS (COLUMN B) Please use this Column for transfer's between
      groups, either because of an age change or subsidy level change. Also add
      or deduct those children who were not included in previous reports or who
      were included more than once.

<PAGE>

3.    COLUMN C IS AN ADJUSTED ENROLLMENT FIGURE. It represents a Net Adjusted
      Enrollment figure which will include those children who were added and
      deducts those who should not be included.

4.    NEW ENROLLEES WITH COVERAGE EFFECTIVE FOR THIS REPORT PERIOD (COLUMN D):
      Specify the number of children whose enrollment became effective on the
      first (1st) day of the month identified as the Report Period Month --
      i.e., their applications were processed to completion during the calendar
      month immediately preceding the Report Period Month, they were found to be
      eligible for enrollment in Child Health Plus (including those
      presumptively eligible) and their enrollment became effective on the first
      day of the month identified as the Report Period.

5.    NUMBER DISENROLLED FOR THIS REPORT PERIOD (COLUMN E) : Specify the number
      of children whose disenrollment from Child Health Plus was processed to
      completion during the calendar month immediately preceding the Report
      Period Month. Hence, these children are no longer enrolled in Child Health
      Plus effective on the first (1st) day of the month identified as the
      Report Period.

6.    NET ENROLLMENT WITH COVERAGE EFFECTIVE FOR THIS REPORT PERIOD (COLUMN F):
      Specify the net number of children actively enrolled in Child Health Plus
      as of the first (1st) day of the month identified as the Report
      Period. This column equals the net enrollment from the previous month
      (Column A) add or subtract the numbers as necessary as adjustments to
      previous month's reports (Column B) which results in an adjusted
      enrollment number (Column C). To this, add the new enrollees with
      coverage effective for this report period (Column D) minus the number
      disenrolled for this report period (Column E) which will result in the net
      enrollment with coverage effective the first of the report period (Column
      F).

Reconciliation:

The reconciliation to premium billing section at the bottom of this page MUST be
completed. The total enrollment for the current month (which is indicated in
Column F, Row 5) less the number enrolled for the current month which are not
subsidized (which is indicated on 4.C. subtotal) should equal the number of
enrollees for whom a premium was billed for the current month. This number must
reconcile with the monthly billing information submitted for premium payment.
ANY DIFFERENCE MUST BE EXPLAINED IN DETAIL. Additional sheets may be attached to
this page for providing necessary explanations.

10/10/96

<PAGE>

                  CHILD HEALTH PLUS MONTHLY ENROLLMENT REPORT
                   REPORT PERIOD: MONTH _________ YEAR 19_____
NAME OF INSURER ______________________________________________

<TABLE>
<CAPTION>
                                          A
                                         NET             B               C               D                               F
                                     ENROLLMENT     ADJUSTMENTS      ADJUSTED       NEW ENROLLEE         E          NET ENROLL
                                        FROM        TO PREVIOUS     ENROLLMENT       W/COVERAGE       NUMBER         W/COVERAGE
                                     PREV. MONTH      MONTH'S        PREVIOUS        EFFECTIVE      DISENROLLED     EFFECT. THIS
                                   (Same as Col.F     REPORT           MONTH        THIS REPORT     THIS REPORT     RPT. PERIOD
                                    prev. month)     (+ or -)     (Col.A +/- B=C)      PERIOD         PERIOD       (Col.C+D-E=F)
                                   --------------   -----------   ---------------   ------------    -----------    -------------
<S>                                <C>              <C>           <C>               <C>             <C>            <C>
1. INCOME < 120% FPL AGE:

   a. 0 < 1 yr.

   b. 1 - 5 yrs.

   c. 6 - 12 yrs.

   d. 13 - 16 yrs.

      Subtotal

2. INCOME 120% - 160% FPL AGE:

   a. 0 < 1 yr.

   b. 1 - 5 yrs.

   c. 6 - 12 yrs.

   d. 13 - 16 yrs.

      Subtotal

3. INCOME 160% - 222% FPL AGE:

   a.  0 < 1 yr.

       1 - 5 yrs.

   c.  6 - 12 yrs.

   d.  13 - 16 yrs.

       Subtotal

4. TOTAL INCOME <= 222% FPL:

5. INCOME + 222% FPL AGE:

   a.  0 < 1 yr.

   b.  1 - 5 yrs.

   c.  6 - 12 yrs.

   d.  13 - 16 yrs.

       Subtotal

6.       TOTAL
</TABLE>

   RECONCILIATION TO PREMIUM BILLING

*Please explain any differences between current monthly billing and the number
of subsidized enrollees. (Attatch an additional sheet if necessary.)

                                         Contact Person: _______________________

                                         Telephone #: ( ) ______________________

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH

                           BUREAU OF HEALTH ECONOMICS

                                CHILD HEALTH PLUS

                                ANNUAL STATEMENT

                                       OF

                     CALENDAR YEAR ENDING DECEMBER 31, 19___

      This document should be completed and submitted on an annual basis
directly to the New York State Department of Health. This report is due within
ninety days of the close of the calendar year. Any questions or inquiries
regarding this document should be directed to the Bureau of Health Economics at
(518) 473-7883.

                  A copy of this report should be submitted to:

                       New York State Department of Health
                           Bureau of Health Economics
                  The Nelson A. Rockefeller Empire State Plaza
                       Corning Tower Building - Room 1110
                           Albany, New York 12237-0722

  Attach a management narrative to this report which describes any significant
problems or occurrences during the covered time period. Include a brief summary
 of the work completed during the report period relative to marketing, outreach
and program implementation. Note changes in any major elements of the plan, such
 as service area, service delivery systems, enrollment, financial arrangements,
                           management structure, etc.

              Due Date: 90 days after the end of the calendar year.

(10/96)

<PAGE>

                                STATE OF NEW YORK
                              DEPARTMENT OF HEALTH
                                CHILD HEALTH PLUS
                                  ANNUAL REPORT

Name of Insurer:________________________________________________________________
Start Date:_____________________________________________________________________
Contract Period: From_____________________To____________________________________
Report Period:  From______________________To____________________________________

Mailing Address: (Organization Name, Street, City, State, Zip Code)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Contact Person:_________________________________________________________________
Title:__________________________________________________________________________
Telephone Number;(___)__________________________________________________________

Chief Executive Officer or Executive Director
Name:___________________________________________________________________________
Title:__________________________________________________________________________
Telephone Number:(__)___________________________________________________________

Certification Statement:

certify that all information and statements made in this annual report are true,
complete and current the best of my knowledge.

_____________________________                                     ______________
Signature, Executive Director                                     Date

(10/96)

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       OFFICE OF HEALTH SYSTEMS MANAGEMENT
                        DIVISION OF HEALTH CARE FINANCING
                       ANNUAL CHILD HEALTH PLUS STATEMENT

INTRODUCTION

Plans and insurers participating in Child Health Plus are required to file this
report with the Department of Health no later than 90 days after the close of
the calendar year, December 31. The report includes a statement of revenues and
expenses, and enrollment and utilization reporting by age and income categories
for the children enrolled by the plan. Copies of the report should be submitted
to the New York State Department of Health, Bureau of Health Economics, as shown
on the face page.

GENERAL

1.    There are several categories that are not applicable to Child Health Plus
      activities and therefore should not be completed, e.g. inpatient expenses
      and utilization. Such categories are shaded as an aid in completing this
      report.

2.    Include enrollment, disenrollment and utilization activity for children 17
      years of age in the 15 less than 17 years category. Generally, this should
      include these children who have turned 17 and are covered until the end of
      the month in which they turned 17 since they were 16 on the first day of
      the month being covered.

3.    Unanswered questions and blank lines or schedules will not be accepted as
      meaning anything. If no answers or entries are to be made, write "None",
      "Not Applicable (N/A)", or "-0-" in the space provided.

4.    Any item which cannot be readily classified under one of the printed items
      should be entered as special item and adequately described.

5.    If additional supporting statements or schedules are added in connection
      with answering interrogatories or providing information on the financial
      statement, the additions should be properly keyed to the item being
      answered Example- "Other Revenue, line 7") and indicate the reporting date
      and the name of the Plan.

6.    If this report does not contain the information asked for in the blanks or
      is not prepared in accordance with these instructions, it will not be
      accepted.

(10/96)
<PAGE>

         INSTRUCTIONS FOR COMPLETING ANNUAL CHILD HEALTH PLUS STATEMENT

TABLE ONE:

Child Health Plus Enrollment Summary By Age and Income Classes

Complete this form for each of the age and income class distinctions for which
you had members enrolled. Explain any variances in excess of 10% of projected
enrollment.

TABLE TWO:

Disenrollment From Plan

This table aggregates the disenrollments from the plan by number of children
disenrolled and reason for disenrollment. All other reasons for disenrollment
which are not specified on the table and have been classified as "Other" should
be explained in the appropriate space provided.

TABLE THREE:

Statement of Revenue and Expenses

Report full accrued revenues and expenses, as defined below, in the format
indicated for the period. Full expenses, whether or not the plan ultimately
bears financial responsibility, should be shown. For example, the full emergency
room expenses are shown in the "ER" line. Offsets to these expenses such as
C.O.B. and the Insurance Recoveries are shown as revenue. Similarly, full
physician services expenses are shown with a year end adjustment for withholds
or other offsets returned to the plan as a contra category.

1.    MEMBER MONTHS - A member month is equivalent to one person for whom the
      plan has recognized capitation-based premium revenue for one month.

REVENUE

2a.   NYS Premium - Revenue received from NYS which is recognized on a prepaid
      basis for Child Health Plus enrollees for provision of a specified range
      of health services over a defined period of time, normally one month. if
      advance payments are made to the plan for more than one reporting period,
      only that portion of the payment applicable to the reporting period should
      be shown.

2b.   Subscriber Premium - Revenue received from program subscribers recognized
      on a prepaid basis for enrollees for provision of a specified range of
      health services over a defined period of time, normally one month. Include
      premium revenue received from both subsidized and non-subsidized
      enrollees.

(10/96)

<PAGE>

2c.   Employer Premium - Revenue received from employers participating in the
      small business regional pilot projects recognized on a prepaid basis for
      enrollees for provision of a specified range of health services over a
      defined period of time, normally one month. Include premium revenue
      received from subsidized and non-subsidized enrollees.

2d.   Total Premium - This amount equates to total premium revenue received for
      the report period (Rows 2A, 2B and 2C).

3.    Copayments and Deductibles - Revenue recognized by the insurer/plan for
      provision of health services by plan providers that require a partial
      contribution by program enrollees.

4.    Interest - Interest earned from all sources, including the Federal loan in
      escrow and reserve accounts.

5.    C.O.B. and Subrogation - Income from Coordination of Benefits and
      Subrogation.

6.    Reinsurance Recoveries - Income from the settlement of stop-loss
      (reinsurance) claims.

7.    Other Revenue - Revenue from sources not covered in the previous revenue
      accounts, such as recovery of bad debts or gain on sales of capital
      assets, etc.

8.    Total Revenue - Total of the above revenue accounts. (Sum of lines 2d thru
      7)

EXPENSES

Medical and Hospital: - Expenses for covered health service delivery including
the following components.

9.    Inpatient (N/A) - Inpatient hospital costs of routine and ancillary
      services for plan members while confined to an acute care hospital. Does
      not include out of area hospitalization.

      Routine hospital service includes regular room and board (including
      intensive care units, coronary care units, and other special inpatient
      hospital units), dietary and nursing services, medical surgical supplies,
      medical social services, and the use of certain equipment and facilities
      for which the provider does not customarily make a separate charge.
      Ancillary services may also include laboratory, radiology, drugs, delivery
      room and physical therapy services. Ancillary services may also include
      other special items and services for which charges are customarily made in
      addition to a routine service charge.

      Charges for non-plan physician services provided in a hospital are
      included in this line item only if included as an undefined portion of
      charges by a hospital to the plan. (If separately itemized or billed,
      physician charges should be included in physician referral services).

(10/96)
<PAGE>

10.   Primary Care Physician - Expenses for primary care physician services
      and/or clinic service provided under contractual arrangement to the plan
      including the following:

-     Salaries, including fringe benefits, paid to physician for delivery of
      medical services;

-     Capitated payments paid by the insurer/plan to physicians or clinic for
      delivery of medical services to plan subscribers;

-     Fees paid by the insurer/plan to physicians on a fee-for-service basis for
      delivery of medical services to plan subscribers.

11.   Physician Referral Services - Expenses for specialist physicians.

12a.  Other Professional Services: - Compensation, including fringe benefits,
      paid by the plan to non-physician providers engaged in the delivery of
      medical services and to personnel engaged in activities in direct support
      of the provision of medical services. This includes psychologists,
      podiatrists, extenders, nurses, nurse practitioners, nurse midwives,
      clinical personnel such as ambulance drivers, technicians,
      paraprofessionals, janitors, quality assurance analysts, administrative
      supervisors, secretaries to medical personnel, and medical record clerks.

12b.  Special Therapy - Expenses for all therapeutic services provided,
      including but not limited to, physician therapy, occupational therapy,
      chemotherapy, radiation therapy and hemodialysis.

13.   Emergency Room - Expenses for emergency room costs incurred by plan
      members for which [ILLEGIBLE] insurer/plan is responsible on a
      fee-for-service basis.

14.   Out-Of-Area, Other: - Expenses for other non-contracted health delivery
      services and out-of-area service costs for emergency physician and
      hospital.

15.   Drug and Alcohol Treatment - Expenses for all outpatient treatment and
      diagnosis of alcohol and substance abuse, including expenses for a maximum
      of 20 family visits.

16.   Dental (N/A) - Expenses for all dental services provided.

17.   Pharmacy - Expenses for prescription and non-prescription pharmacy
      services provided.

18.   Family Planning - Expenses for all family planning services provided by
      the plan.

19.   Home Health Care Services (N/A) - Expenses for home health services
      provided including therapeutic and preventive nursing services, home
      health aide services, and rehabilitation therapies.

20.   Transportation (N/A) - Expense for all emergency and non-emergency medical
      transportation.

(10/96)

<PAGE>

21.   Diagnostic Tests, Laboratory an X-Rays -"The cost of all diagnostic tests,
      laboratory and X-Rays for which the plan is separately billed.

22.   Vision Care Including Eyeglasses (N/A) - The cost of testing the vision
      and prescribing glasses to correct eye defects. This category includes the
      cost of eyeglasses but excludes physician costs related to the treatment
      of disease or injury to the eye.

23.   Other Medical - Costs directly associated  with the delivery of medical
      services under plan arrangement which are not appropriately assignable to
      the medical expense categories defined above; e.g., costs of medical
      supplies, medical administration expense (except compensation),
      malpractice insurance, etc.

24.   Reinsurance Expense - Expenses for Reinsurance or "Stop-loss" insurance
      made to a contracted re-insurer.

25.   Incentive Pool Adjustment - A contra category for adjusting the full
      medical expenses reported. For example, physician withholds retained by
      the plan should be included here. Adjustments should be made on annual
      reports only.

26.   Total Medical and Hospital - Total of all medical and hospital expenses.

ADMINISTRATION - Costs associated with the overall management and operation of
the plan including following components:

27.   Compensation - All expenses for administrative services including
      compensation and fringe benefits for personnel time devoted to or in
      direct support of administration. Include expenses for management
      contracts. Do not include marketing expenses here.

28.   Interest Expenses - Interest paid during period applicable to this
      program.

29.   Occupancy, Depreciation and Amortization - Expenses associated with
      administrative services including:

      -     The costs of occupancy to the plan entity that are directly
            associated with plan administration. Included in occupancy are an
            allocation of facility fire and theft insurance, utilities,
            maintenance, lease, etc. Do not include marketing expenses in this
            category;

      -     The amount of depreciation and amortization expenses that is
            directly associated with the provision of administrative services.
            Depreciation expense is the incremental consumption of the value of
            a fixed asset during the asset's useful life. Amortization expense
            is the allocation of the cost of certain assets over their estimated
            service lives; e.g., leasehold improvements.

(10/96)
<PAGE>

30.   Marketing - Expenses directly related to marketing activities including
      advertising, printing, marketing representative compensation and fringe
      benefits, commissions, broker fees, trav occupancy, and other expenses
      allocated to the marketing activity.

31.   Other - Costs which are not appropriately assigned to the health plan
      administration categories defined above. Included are costs to update
      subscriber records, servicing of subscriber inquiries and complaints,
      claims adjudication and payment, legal, audit, data processing,
      accounting, insurance, bad debts, all taxes except federal income taxes,
      etc. Do not include marketing expenses.

32.   Total Administration - Total of the above categories.

33.   Total Expenses - Total of Medical and Hospital and Administration
      Expenses.

34.   Income (Loss) - Excess or deficiency of total revenues over total
      expenses.

35.   Extraordinary item - A nonrecurring gain or loss that meets the following
      criteria:

-     The event must be unusual; that is, it should be highly abnormal and
      unrelated to, or only incidentally related to, the ordinary activities of
      the entity;

-     The event must occur infrequently; that is, it should be of a type that
      would not reasonably be expected to recur in the foreseeable future.

The following gains and losses are specifically not extraordinary:

-     Write-down or write-off of accounts receivable, inventory, or intangible
      assets;

-     Gains or losses from changes in the value of foreign currency;

-     Gains or losses from the disposal of fixed assets;

-     Effects of a strike;

-     Adjustments of accruals on long-term contracts.

36.   Provision for Taxes - State and federal taxes for period (for-profit
      organizations only).

37.   Net Income (Loss) - Excess or deficiency of total revenues over total
      expenses less state and federal taxes for the period.

(10/96)
<PAGE>

TABLE FOUR:

Administrative Expenses - Costs associated with the overall management and
operation of the plan. Included are the administrative services of professional
staff as well as cost associated with maintaining the physical plant of the
plan.

Full-Time Equivalent (F.T.E.) - A numerical expression of the time for which
full time and part time staff are compensated. Full time equals the definition
of a work week set by the plan, but must be between 35 and 40 hours per week.
Please report the number of FTE's in column A for the applicable personnel
categories.

Salary - The monetary value paid to an employee for the provision of services.
In column B, please report total salary expenses either paid or accrued for the
applicable personnel categories during the report period.

Non-Salary - Costs associated with expenditures incurred which are not related
to direct personnel services (ie, purchased and contract services, supplies, and
general costs). In column C, please report all non-salary related administrative
expenses.

The sum of columns B and C should equal column D. The total administrative
expense shown at the bottom of column D should equal the total shown on line 32
of Table Three, Statement of Revenues and Expenses.

(Illegible) expenses which are not specified on this table and have been
classified as "Other" should be explained in the appropriate space provided.

TABLE FIVE:

AMBULATORY CARE AND ANCILLARY UTILIZATION - TOTAL VISITS, PROCEDURES ETC.

Actual Utilization

Please report the number of actual visits/procedures for ambulatory care and
ancillary services received by program enrollees during the report period by the
categories listed for the applicable age groups. In addition, for each category
listed, enter the sum total utilization rate per member per year for the report
period. Per member per year utilization is defined as follows:

Rate per Member Per Year = (total visits/member months) *12.

Accrued Utilization

Below the entry for Rate Per Member Per Year-Actual, enter the total number of
accrued visits, procedures, etc., including the plan's estimate of incurred but
not reported utilization, for each of the service categories listed. The
utilization Rate per Member Per Year-Accrued should also be entered.

(10/96)

<PAGE>

TABLE SIX:

CLAIMS ANALYSIS

Section A: Claims Incurred

Claims incurred shall include medical expenses for services provided in the
report period which are either paid or unpaid and are reflected in lines 9, 10,
11, and 13 of the Statement of Revenue and Expenses in Table Three.

The sum of the amounts reported in columns B, C, and D should equal the amounts
reported in column A.

Enter in column B all payments actually made during the year for inpatient care,
primary physician services, physician referral services and emergency room
services provided in the report period.

Enter in column C the amount of claims which have been reported but not paid
during the report period.

Enter in column D the amount of claims that the plan estimates have been
incurred during the report period but not reported by providers.

Section B: Claims Unpaid

Enter in column A the amount of reported unpaid claims incurred during prior
years for each of the categories of service indicated.

Enter in column B the amount of reported unpaid claims incurred during the
current year for each of the categories of service indicated.

Enter in column C the amount of incurred but not reported claims during prior
years for the categories of service indicated.

Enter in column D the amount of incurred but not reported claims during the
current year for the categories of service indicated.

The cum of columns A, B, C, and D should equal column E.

(10/96)
<PAGE>

TABLE SEVEN:

EMERGENCY ROOM VISITS

Please report the number of paid and denied emergency room claims by age group,
emergency status and reasons for denial.

TABLE EIGHT:

USER RATES OF SERVICE

Please report the number of users and non-users of medical services by age
group.

(10/96)
<PAGE>

                                CHILD HEALTH PLUS
                                    TABLE ONE
                    ENROLLMENT SUMMARY BY AGE/INCOME CLASSES

<TABLE>
<CAPTION>
                                                                                                                  F
                                  A                                                                           Projected        G
                               Number of             B             C               D              E         Member Months  Variance
                             Enrollees at     New Enrollees  Disenrollments  Net Enrollees      Total         For Report     From
                           End of Prior Year      During Report Period       At End of Year  Member Months     Period     Projected*
                           -----------------  -----------------------------  --------------  -------------  ------------- ----------
<S>                        <C>                <C>            <C>             <C>             <C>            <C>           <C>
INCOME < 120% FPL
AGE
a. 0 < 1 yr.
b. 1 < 6 yrs.
c. 6 < 13 yrs.
d. 13 < 15 yrs.
e. 15 < 17 yrs.

INCOME 120% - 160%, FPL
AGE:
a. 0 < 1 yr.
b. 1 < 6 yrs.
c. 6 < 13 yrs.
d. 13 < 15 yrs.
e. 15 < 17 yrs.

INCOME + 222% FPL.
AGE:
a. 0 < 1 yr.
b. 1 < 6 yrs.
c. 6 < 13 yrs.
d. 13 < 15 yrs.
e. 15 < 17 yrs.

TOTAL
</TABLE>

Explain total variances in excess of 10% of projection:

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                    TABLE TWO
                             DISENROLLMENT FROM PLAN

<TABLE>
<CAPTION>
REASON FOR DISENROLLMENT                                 NUMBER OF CHILDREN DISENROLLED
------------------------                                 ------------------------------
<S>                                                      <C>
Obtained Equivalent Coverage
Also Enrolled in Medicaid
Moved From Service Area
Age 13 Years or Older
Presumptively Enrolled-Found Ineligible*
Other**
TOTAL
</TABLE>

<TABLE>
<CAPTION>
* DETAIL OF PRESUMPTIVELY ENROLLED WHO WERE
FOUND INELIGIBLE                                         NUMBER OF INELIGIBLE BY CATEGORY:
----------------                                         ---------------------------------
<S>                                                      <C>
Age
Income
Equivalent Coverage
Medicaid Eligible
Other
</TABLE>

**Explanation of Other:

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                   TABLE THREE
                    ANNUAL STATEMENT OF REVENUES AND EXPENSES

ALL UNFAVORABLE VARIANCES IN EXCESS OF .50 PMPM MUST BE EXPLAINED ON A SEPARATE
PAGE

<TABLE>
<CAPTION>
                                                                                                           E            F
                                                A             B            C               D             ACTUAL      VARIANCE
                                              BUDGET        ACTUAL      VARIANCE       BUDGET PMPM       PMPM         PMPM
                                              ------        ------      --------       -----------      ------      --------
<S>                                           <C>           <C>         <C>            <C>              <C>         <C>
1.  Member Months

REVENUE:
2a. NYS Premium
 b. Subscriber Premium
 c. Employer Premium
 d. Total Premium Revenues
3.  Copay & Deductible
4.  Interest
5.  C.O.B. & Subrogation
6.  Reinsurance Recoveries
7.  Other Revenue
8.  TOTAL REVENUE

EXPENSES
   Medical and Hospital:
9.  Inpatient
10. Primary Care Physician
11. Physician Specialty Services
12a.Other Professional Services
  b.Special Therapies
13. Emergency Room
14. Out-of-Area, Other
15. Drug & Alcohol Treatment
16. Dental
17. Pharmacy/Prescription Drugs
18. Family Planning
19. Home Health Care
20. Transportation
21. Diagnostic Test, Lab & X-Ray
22. Vision Care Inc. Eyeglasses
23. Other Medical
24. Reinsurance Expenses
25. Incentive Pool Adjustment
26. Total Medical & Hospital
</TABLE>

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                   TABLE THREE
                                   (CONTINUED)

ALL UNFAVORABLE VARIANCES IN EXCESS OF .50 PMPM MUST BE EXPLAINED ON A SEPARATE
PACE

<TABLE>
<CAPTION>
                                                                                                          E              F
                                                A             B           C                 D           ACTUAL        VARIANCE
                                              BUDGET        ACTUAL     VARIANCE        BUDGET PMPM       PMPM           PMPM
                                              ------        ------     --------        -----------      ------        --------
<S>                                           <C>           <C>        <C>             <C>              <C>           <C>
    ADMINISTRATION
27. Compensation
28. Interest Expense
29. Occupancy, Deprecation & Amortization
30. Marketing
31. Other
32. TOTAL ADMINISTRATION
33. TOTAL EXPENSES
34. INCOME (LOSS)
35. Extraordinary Item
36. Provision for taxes
37. NET INCOME (LOSS)
</TABLE>

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                   TABLE FOUR
                             ADMINISTRATIVE EXPENSES

<TABLE>
<CAPTION>
                                                     A              B               C                    D
                                                    FTE's         SALARY        NON-SALARY        TOTAL EXPENSES
                                                    -----         ------        ----------        --------------
<S>                                                 <C>           <C>           <C>               <C>
Depreciation & Amortization
Occupancy
Lease/Rental Expense
Office Equipment/Supplies
Interest
Finance
Marketing
Legal
MIS
Management/Administration
* Other
Total Administrative Expense
</TABLE>

* Please provide detail on administrative expenses included in this category:

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

-------------------------------------------------------------------------------

Note: Total Administrative Expense should equal Column B line 32 of Table 3.

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                   TABLE FIVE
    AMBULATORY CARE AND ANCILLARY UTILIZATION - TOTAL VISITS, PROCEDURES ETC.

A. AMBULATORY CARE

<TABLE>
<CAPTION>
                                                     C                    E
                                                 Physician     D     Mental Health,                           H           I
                         A              B        Referral   Special  Drug & Alcohol        F         G     Family    Ambulatory
Age Group          Emergency Room  Primary Care  Services   Therapy     Therapy       Vision Care  Dental  Planning   Surgery
---------          --------------  ------------  ---------  -------  --------------   -----------  ------  --------  ----------
<S>                <C>             <C>           <C>        <C>      <C>              <C>          <C>     <C>       <C>
 0 < 1yr.
 1 < 6 yrs.
 6 < 13 yrs.
 13 < 15 yrs.
 15 < 17 yrs.

TOTALS - ACTUAL

Rate Per Member
Per Year - ACTUAL

TOTALS - ACCRUED*

Rate Per Member
Per Year - ACCRUED*
</TABLE>

B. OTHER SERVICES

<TABLE>
<CAPTION>
                            A
                       Diagnostic
                          Tests,                      C                   D                                    F             G
                        Labs and       B       Medical Supplies        Medical              E                Other      Total Number
Age Group                X-rays     Pharmacy       and Equip.      Transportation    Home Health Care    Professional  Immunizations
---------              ----------   --------   ----------------    --------------    ----------------    ------------  -------------
<S>                    <C>          <C>        <C>                 <C>               <C>                 <C>           <C>
 0 < 1 yr.
 1 <  6 yrs.
 6 <  13 yrs.
 13 < 15 yrs.
 15 < 17 yrs.

TOTALS - ACTUAL

Rate Per Member
Per Year - ACTUAL

TOTALS - ACCRUED*

Rate Per Member
Per Year - ACCRUED*
</TABLE>

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                    TABLE SIX
                                 CLAIMS ANALYSIS

A. CLAIMS INCURRED

<TABLE>
<CAPTION>
                                                                                                                 (D)
             Category of Service                                                             (C)           Claims Incurred
         Revenue & Expense Statement                       (A)             (B)         Claims Reported          But Not
                (Table Three)                         Total Expense    Claims Paid      But Not Paid       Reported (IBNR)
---------------------------------------------         -------------    -----------     ---------------     ---------------
<S>                                                   <C>              <C>             <C>                 <C>
1. lnpatient....line 9
2. Primary Care...line 10
3. Physician Specialty Services .... line 11
4. Emergency Room....line 13
5. All Other Medical
6. TOTAL
</TABLE>

B. CLAIMS UNPAID

<TABLE>
<CAPTION>
                                                                                       (C)              (D)
                                          (A)                  (B)                  Incurred But Not Reported              (E)
                                   Reported Claims That Are Unpaid                               ON CLAIMS INCURRED   TOTAL UNPAID
                                  On Claims Incurred   On Claims Incurred    On Claims Incurred     DURING CURRENT       CLAIMS
      Category of Service         During Prior Years   During Current Year   During Prior Years         YEAR         (A + B + C + D)
-------------------------------   ------------------   -------------------   ------------------  ------------------  ---------------
<S>                               <C>                  <C>                   <C>                 <C>                 <C>
1. Inpatient
2. Primary Care
3. Physician Specialty Services
4. Emergency Room
5. All Other Medical
6. TOTAL
</TABLE>

<PAGE>

Plan Name: ______________                           Year Ending: _______________

                                CHILD HEALTH PLUS
                                   TABLE SEVEN

EMERGENCY ROOM VISITS

<TABLE>
<CAPTION>
                                                    NUMBER OF PAID CLAIMS
                                  -------------------------------------------------------
                                  APPROPRIATE ER    INAPPROPRIATE ER                           TOTAL NUMBER OF DENIED
  Category of Service                 USAGE              USAGE          TOTAL PAID CLAIMS             CLAIMS
-----------------------           --------------    ----------------    -----------------      ----------------------
<S>                               <C>               <C>                 <C>                    <C>
0 < 1 YR.
1 < 6 YRS.
6 < 13 YRS.
13 < 15 YRS.
15 < 17 YRS.
TOTAL
</TABLE>

                                  TABLE EIGHT

USER RATES OF SERVICE

<TABLE>
<CAPTION>
                                             USERS                                               NON-USERS
                          -----------------------------------------------      ------------------------------------------
                          NUMBER MEMBERS WHO USED MEDICAL SERVICES DURING      NUMBER MEMBERS WHO DID NOT USE ANY MEDICAL
Category of Service                         PERIOD                                        SERVICES DURING PERIOD               TOTAL
-------------------       -----------------------------------------------      ------------------------------------------      -----
<S>                       <C>                                                  <C>                                             <C>
0 < 1 YR.
1 < 6 YRS.
6 < 13 YRS.
13 < 15 YRS.
15 < 17 YRS.
TOTAL
</TABLE>

<PAGE>

                                   APPENDIX H

                                MODEL APPLICATION

<PAGE>

                                CHILD HEALTH PLUS
                                Model Application

CHILD HEALTH PLUS IS A NEW YORK STATE SUBSIDIZED HEALTH INSURANCE PROGRAM FOR
CHILDREN WHO:

      Live in New York State;
      Under the age of 19;
      Not eligible for Medicaid; and
      Do not have equivalent health care coverage.

TO APPLY FOR CHILD HEALTH PLUS, A PARENT OR RESPONSIBLE ADULT MUST:

      Complete and sign an application for each child and supply proof of:

      THE CHILD'S AGE: birth certificate, hospital record, passport, Visa,
      school record, or religious record;

      RESIDENCE IN NEW YORK STATE: recent (within 3 months) utility bill, rent
      receipt, or tax bill. You must supply proof of physical address not of a
      mailing address i.e. a post office box number.

      INCOME TAX RETURN: If questions l0a and b were answered yes, a signed copy
      of the previous year's tax return must be submitted.

      HOUSEHOLD INCOME: If household income has changed since the tax return was
      filed, then additionally one of the following should be submitted for each
      parent and responsible adult who is a member of the household who has
      income: a W-2, at least three paycheck stubs, an unemployment stub, copy
      of social security check or letter from social security or a letter from
      employer written on company letterhead. A self-statement of income will be
      accepted only in cases where there is no other means of documenting
      income.

      You must also show proof of other income: if you receive child support or
      alimony, you must submit a copy of the court order or statement from the
      person paying the support or alimony or a copy of a support or alimony
      check; if you are self-employed, a copy of your quarterly tax return; if
      in the military, a copy of your pay statement or a leave and earnings
      statement; if you receive veteran's benefits, you must submit a copy of
      your benefit check or correspondence with the Veteran's Administration; if
      you receive worker's compensation, you must submit a copy of your award
      letter or a check stub; and if you receive income from rent, you must
      submit a copy of a current check or statement from your tenant.

      OTHER INSURANCE: If the child has any other health care coverage, supply
      one of the following: copy of policy,
<PAGE>

      summary of benefits, statement/letter from the other insurance company
      indicating the benefits and the deductibles, or a statement/letter from
      your employer indicating the benefits and the deductible.

PREMIUM COSTS:

      There is no family contribution when households' gross annual, combined
      incomes are below 120% of the gross non-farm federal poverty level. These
      income levels are updated annually. A copy of the current federal poverty
      level guidelines is attached. For families whose gross annual income is
      120% or above, the family contribution is as follows:

            Between 120 and 159% of the gross, non-farm federal poverty level,
            $9 per child per month up to a maximum of $36 per family per month.

            Between 160 and 222% of the gross, non-farm federal poverty level,
            $13 per child per month up to a maximum of $52 per family per month.

            If the household's gross annual income is over 222% of the non-farm
            federal poverty level, the family must pay the entire premium
            amount.

      At least one months family share of the premium for each applicant must be
      paid at the time of application. The balance due will be billed on a
      monthly basis one month prior to the period it covers.

PRIMARY CARE PHYSICIAN:

      You must choose a primary care physician (PCP) from the Primary Care
      Physician Directory included with this application.

RECERTIFICATION:

      You must recertify your child every year before their anniversary date by
      submitting an application and the required documentation. We will send you
      the forms to be completed and the information needed prior to that date.
      If you do not recertify by submitting an application and necessary
      documentation prior to the child's anniversary date, your child will be
      disenrolled from Child Health Plus at midnight on the last day of the
      month prior to their anniversary date. If you do not receive a
      recertification application 45 days before your child's recertification
      date, it is your responsibility to contact us to obtain the required
      forms.

<PAGE>

DEPARTMENTS OF SOCIAL SERVICES AND TAXATION AND FINANCE VERIFICATION:

      The New York State Department of Health reserves the right to confer with
      the Department of Social Services to determine the Medicaid eligibility
      status of the child applying for Child Health Plus and with the Department
      of Taxation and Finance to verify household income.

If a subsidized enrollee becomes pregnant while enrolled in Child Health Plus,
it is your responsibility to apply for Medicaid within 30 days of discovering
the pregnancy as this change in circumstance would result in the pregnant
individual being eligible for Medicaid under the Prenatal Care Assistance
Program (PCAP).

By completing this application you will be applying for the Child Health Plus
program. The information entered on pages 1 and 2 of this form will be used for
the purposes of determining eligibility for this program.

YOU WILL BE NOTIFIED WHEN YOUR CHILD'S COVERAGE BECOMES EFFECTIVE. UNTIL YOU
RECEIVE IDENTIFICATION CARDS FOR THE CHILD, THERE IS NO CHILD HEALTH PLUS
COVERAGE. If you have questions or need help in completing this application,
call xxx-xxx-xxxx.

<PAGE>

1.    Name of Person Completing This Application:
      Last:______________First:__________________Middle Initial:________________
      Address:__________________________________________________________________
      State:__________Zip Code:______________Home Phone Number (  )_____________
      Relationship to Child:  / /Self  / /Parent
                 / /Legal Guardian  / /Other (specify)__________________________

2.    Child's Home Address:_____________________________________________________
      State:__________Zip Code:____________Home Phone Number: (  )______________
      Work Number of Father:_____________________Mother_________________________
      Emergency Contact: Name_____________________________Phone No._____________

3.    Billing Address (if different):___________________________________________
      State:_______________________Zip Code:____________________

4.    Does the child have any other health insurance coverage?
      / /Yes  / /No If yes, complete the following:

<TABLE>
<CAPTION>
         Child's Social    Name of    Type of
          Security No.    Insurance   Coverage:
              or         Company or  Impatient,
Child's  Identification    Health    Outpatient  Deductible
 Name         No.          Plan        or Both   per Person
-------  --------------  ----------  ----------  ----------
<S>      <C>             <C>         <C>         <C>
_______  ______________  __________  __________  __________
</TABLE>

5.    Is the child enrolled in Medicaid?  /  / Yes   /  / No

6.    Is anyone in the family receiving Public Assistance or SSI? / / Yes / / No
      If yes explain ___________________________________________________________
                     ___________________________________________________________

7.    Is the child currently enrolled in Child Health Plus?  / / Yes / / No

      If yes______________________________Eff. date of Termination______________
                   Name of Insurer

8.    Are there any other children in the household enrolled in Child Health
      Plus?  / /Yes    / /No  If yes, complete the following:

<PAGE>

<TABLE>
<CAPTION>
                    Child's          Name of Child
Child's Name  Identification No.  Health Plus Insurer
------------  ------------------  -------------------
<S>           <C>                 <C>
____________  __________________  ___________________
____________  __________________  ___________________
____________  __________________  ___________________
____________  __________________  ___________________
</TABLE>

9.    How many people are in your household?
      Parents_______________Children under 19__________Over 19__________________
      Other Adults________________Total Household Members_______________________

10.   a. Was the previous year's tax return filed? / /Yes  / /No
      b. Is the previous year's tax return available? / /Yes / /No
      c. Has the household income changed since the tax return was filed?
      / /Yes  / /No If yes, explain_____________________________________________

11.   Complete the following chart for the child's household:

<TABLE>
<CAPTION>
                                  Social    Applying
Family/     Name:                 Security    for
House-      Last,    Date         Number,    Child
 hold      First,     of            if       Health   Annual
Member   Middle Int  Birth  Sex  available   Plus?    Income
-------  ----------  -----  ---  ---------  --------  ------
<S>      <C>         <C>    <C>  <C>        <C>       <C>
Father

Mother

Head of
House

Child 1

Child 2

Child 3

Child 4

Other
Adult 1

Other
Adult 2

Total
Income
</TABLE>

12.   Is any other income available to the child? / / Yes / /No
      If yes: Amount: __________________________ Source_________________________

13.   Total Annual Household Income ____________________________________________

14.   Primary Care Physician Name_______________________________________________

<PAGE>

DECLARATION:

As required by New York State, I attest to the following statements:

I certify that:

      All statements contained in this application are true and accurate. I have
      provided complete and accurate information on the source and nature of all
      health care coverage the child is receiving.

I understand that:

      If the child becomes enrolled in Child Health Plus, it is my
      responsibility to notify (insurer name), of any change which may make the
      child ineligible for subsidized coverage in the Child Health Plus program,
      including changes in income, residency or insurance coverage, within 60
      days.

      I may be liable for any premiums paid on behalf of the child which are a
      result of my willful misstatement of information on this application or
      failure to report any subsequent changes in information within 60 days of
      such change.

      The income of each parent and legally responsible adult in the
      child(ren)'s household may be subject to verification by the Department of
      Taxation and Finance if (insurer name) has reasonable cause to believe
      that the income information provided is false.

      "Any person who knowingly and with intent to defraud any insurance company
      or other person files an application for insurance or statement of claim
      containing any materially false information, or conceals for the purpose
      of misleading, information concerning any fact material thereto, commits a
      fraudulent insurance act, which is a crime, and shall also be subject to a
      civil penalty not to exceed five thousand dollars and the stated value of
      the claim for each such violation."

      _______________________________________________         __________________
      Parent, Guardian or Responsible Adult Signature               Date

      _______________________________________________
      Relationship to Child(ren)

REMEMBER:

      YOU MUST ATTACH PROOF OF:
            The child(ren)'s age
            The child(ren)'s New York State Residency
            Last year's income tax return (if available)
            The household's income
            A copy of the insuranYce policy, if the child has other health
            coverage

<PAGE>

FOR OFFICE USE ONLY:                                       Reviewer:____________
Presumptively Eligible:  / /Yes  / /No
      / /Fully Subsidized  / / Partially Subsidized  / /Unsubsidized
More than 4 children applying?  / /Yes  / /No
      1st months family contribution paid? / /Yes  / /No
      Amount Paid_______
Referral to Medicaid?  / /Yes  / /No  / /Not Applicable

<PAGE>

                                   APPENDIX I

                                STANDARD CLAUSES

                                     FOR ALL

                            NEW YORK STATE CONTRACTS

<PAGE>

                                   APPENDIX A

                          STANDARD CLAUSES FOR ALL NEW
                              YORK STATE CONTRACTS

      The parties to the attached contract, license, lease, amendment or other
agreement of any kind (hereinafter, "the contract" or "this contract") agree to
be bound by the following clauses which are hereby made a part of the contract
(the word "Contractor" herein refers to any party other than the State, whether
a contractor, licensor, licensee, lessor, lessee or any other party):

      1. EXECUTORY CLAUSE. In accordance with Section 41 of the State Finance
Law, the State shall have no liability under this contract to the Contractor or
to anyone else beyond funds appropriated and available for this contract.

      2. NON-ASSIGNMENT CLAUSE. In accordance with Section 138 of the State
Finance Law, this contract may not be assigned by the Contractor or its right,
title or interest therein assigned, transferred, conveyed, sublet or otherwise
disposed of without the previous consent, in writing, of the State and any
attempts to assign and contract without the State's written consent are null and
void. The Contractor may, however, assign its right to receive payment without
the State's prior written consent unless this contract concerns Certificates of
Participation pursuant to Article 5-A of the State Finance Law.

      3. COMPTROLLER'S APPROVAL. In accordance with Section 112 of the State
Finance Law (or, if this contract is with the State University or City
University of New York, Section 355 or Section 6218 of the Education Law), if
this contract exceeds $5,000 ($20,000 for certain S.U.N.Y. and C.U.N.Y.
contracts), of if this is an amendment for any amount to a contract which, as so
amended, exceeds said statutory amount, or if, by this contract, the State
agrees to give something other than money, it shall not be valid, effective or
binding upon the State until it has been approved by the State Comptroller and
filed in his office.

      4. WORKERS' COMPENSATION BENEFITS. In accordance with Section 142 of the
State Finance Law, this contract shall be void and of no force and effect unless
the Contractor shall provide and maintain coverage during the life of this
contract for the benefit of such employees as are required to be covered by
the provisions of the Workers' Compensation Law.

      5. NON-DISCRIMINATION REQUIREMENTS. In accordance with Article 15 of the
Executive Law (also known as the Human Rights Law) and all other State and
Federal statutory and constitutional non-discrimination provisions, the
Contractor will not discriminate against any employee or applicant for
employment because of race, creed, color, sex, national origin, age,

<PAGE>

disability or marital status. Furthermore, in accordance with Section 220-e of
the Labor Law, if this is a contract for the construction, alteration or repair
of any public building or public work or for the manufacture, sale or
distribution of materials, equipment or supplies, and to the extent that this
contract shall be performed within the State of New York, Contractor agrees that
neither it not its subcontractors shall, by reason of race, creed, color,
disability, sex or national origin: (a) discriminate in hiring against any New
York State citizen who is qualified and available to perform the work; or (b)
discriminate against or intimidate any employee hired for the performance of
work under this contract. If this is a building service contract as defined in
Section 230 of the Labor Law, then, in accordance with Section 239 thereof,
Contractor agrees that neither it not its subcontractors shall, by reason of
race, creed, color, national origin, age, sex or disability: (a) discriminate in
hiring against any New York State citizen who is qualified and available to
perform the work; or (b) discriminate against or intimidate any employee hired
for the performance of work under this contract. Contractor is subject to fines
of $50.00 per person per day for any violation of Section 220-e or Section 239
as well as possible termination of this contract and forfeiture of all moneys
due hereunder for a second or subsequent violation.

      6. WAGE AND HOURS PROVISIONS. If this is a public work contract covered by
Article 8 of the Labor Law or a building service contract covered by Article 9
thereof, neither Contractor's employees nor the employees of its subcontractors
may be required or permitted to work more than the number of hours or days
stated in said statutes, except as otherwise provided in the Labor Law and as
set forth in prevailing wage and supplement schedules issued by the State Labor
Department. Furthermore, Contractor and its subcontractors must pay at least the
prevailing wage rate and pay or provide the prevailing supplements, including
the premium rates for overtime pay, as determined by the State Labor Department
in accordance with the Labor Law.

      7. NON-COLLUSIVE BIDDING REQUIREMENT. In accordance with Section 139-d of
the State Finance Law, if this contract was awarded based upon the submission of
bids, Contractor warrants, under penalty of perjury, that its bid was arrived at
independently and without collusion aimed at restricting competition. Contractor
further warrants that, at the time Contractor submitted its bid, an authorized
and responsible person executed and delivered to the State a non-collusive
bidding certification on Contractor's behalf.

      8. INTERNATIONAL BOYCOTT PROHIBITION. In accordance with Section 220-f of
the Labor Law and Section 139-h of the State Finance Law, if this contract
exceeds $5,000, the Contractor agrees, as a material condition of the contract,
that neither the Contractor nor any substantially owned or affiliated person,

<PAGE>

firm, partnership or corporation has participated, is participating, or shall
participate in an international boycott in violation of the federal Export
Administration Act of 1979 (50 USC App. Sections 2401 et seq.) or regulations
thereunder. If such Contractor, or any of the aforesaid affiliates of
Contractor, is convicted or is otherwise found to have violated said laws or
regulations upon the final determination of the United States Commerce
Department or any other appropriate agency of the United States subsequent to
the contract's execution, such contract, amendment or modification thereto shall
be rendered forfeit and void. The Contractor shall so notify the State
Comptroller within five (5) business days of such conviction, determination or
disposition of appeal (2 NYCRR 105.4).

      9. SET-OFF RIGHTS. The State shall have all of its common law, equitable
and statutory rights of set-off. These rights shall include, but not be limited
to, the State's option to withhold for the purposes of set-off any moneys due to
the Contractor under this contract up to any amounts due and owing to the State
with regard to this contract, any other contract with any State department or
agency including any contract for a term commencing prior to the term of this
contract, plus any amounts due and owing to the State for any other reason
including, without limitation, tax delinquencies, fee delinquencies or monetary
penalties relative thereto. The State shall exercise its set-off rights in
accordance with normal State practices including, in cases of set-off pursuant
to an audit, the finalization of such audit by the State agency, its
representatives, or the State Comptroller.

      10. RECORDS. The Contractor shall establish and maintain complete and
accurate books, records, documents, accounts and other evidence directly
pertinent to performance under this contract (hereinafter, collectively, "the
Records"). The Records must be kept for the balance of the calendar year in
which they were made and for six (6) additional years thereafter. The State
Comptroller, the Attorney General and any other person or entity authorized to
conduct an examination, as well as the agency or agencies involved in this
contract, shall have access to the Records during normal business hours at an
office of the Contractor within the State of New York or, if no such office is
available, at a mutually agreeable and reasonable venue within the State, for
the term specified above for the purposes of inspection, auditing and copying.
The State shall take reasonable steps to protect from public disclosure any of
the records which are exempt from disclosure under Section 87 of the Public
Officers Law (the "Statute") provided that: (i) the Contractor shall timely
inform an appropriate State official, in writing, that said records should not
be disclosed; and (ii) said records shall be sufficiently identified; and (iii)
designation of said records as exempt under the Statute is reasonable. Nothing
contained herein shall diminish, or in any way adversely affect, the State's
right to discovery in any pending or future litigation.

<PAGE>

      11. IDENTIFYING INFORMATION AND PRIVACY NOTIFICATION:

          (a)  FEDERAL EMPLOYER IDENTIFICATION NUMBER and/or FEDERAL SOCIAL
               SECURITY NUMBER.

      All invoices or New York State standard vouchers submitted for payment for
the sale of goods or services or the lease of real or personal property to a New
York State agency must include the payee's identification number, i.e., the
seller's or lessor's identification number. The number is either the payee's
Federal employer identification number or Federal social security number, or
both such numbers when the payee has both such numbers. Failure to include this
number or numbers may delay payment. Where the payee does not have such number
or numbers, the payee, on his invoice or New York State standard voucher, must
give the reason or reasons why the payee does not have such number or numbers.

          (b)  PRIVACY NOTIFICATION.

               (1) The authority to request the above personal information from
a seller of goods or services or a lessor of real or personal property, and the
authority to maintain such information, is found in Section 5 of the State Tax
Law. Disclosure of this information by the seller or lessor to the State is
mandatory. The principal purpose for which the information is collected is to
enable the State to identify individuals, businesses, and others who have been
delinquent in filing tax returns or may have understated their tax liabilities
and to generally identify persons affected by the taxes administered by the
Commissioner of Taxation and Finance. The information will be used for tax.
administration purposes and for any other purpose authorized by law.

               (2) The personal information is requested by the purchasing unit
of the agency contracting to purchase the goods or services or lease the real or
personal property covered by this contract or lease. The information is
maintained in New York State's Central Accounting System by the Director of
State Accounts, Office of the State Comptroller, AESOB, Albany, New York 12236.

      12. EQUAL EMPLOYMENT OPPORTUNITIES FOR MINORITIES AND WOMEN: In accordance
with Section 312 of the Executive Law, if this contract is: (i) a written
agreement or purchase order instrument, providing for a total expenditure in
excess of $25,000.00, whereby a contracting agency is committed to expend or
does expend funds in return for labor, services, supplies, equipment, materials
or any combination of the foregoing, to be performed for, or rendered or
furnished to the contracting agency; or (ii) a written agreement in excess of
$100,000.00 whereby a contracting agency is committed to expend or does expend
funds for the acquisition, construction, demolition, replacement, major repair
or renovation of real property and

<PAGE>

improvements thereon; or (iii) a written agreement in excess of $100,000.00
whereby the owner of a State assisted housing project is committed to expend or
does expend funds for the acquisition, construction, demolition, replacement,
major repair or renovation of real property and improvements thereon for such
project, then:

            (a) The contractor will not discriminate against employees or
            applicants for employment because of race, creed, color, national
            origin, sex, age, disability or marital status, and will undertake
            or continue existing programs of affirmative action to ensure that
            minority group members and women are afforded equal employment
            opportunities without discrimination. Affirmative action shall mean
            recruitment, employment, job assignment, promotion, upgradings,
            demotion, transfer, layoff, or termination and rates of pay or other
            forms of compensation;

            (b) at the request of the contracting agency, the Contractor shall
            request each employment agency, labor union, or authorized
            representative of workers with which it has a collective bargaining
            or other agreement or understanding, to furnish a written statement
            that such employment agency, labor union or representative will not
            discriminate on the basis of race, creed, color, national origin,
            sex, age, disability or marital status and that such union or
            representative will affirmatively cooperate in the implementation of
            the contractor's obligations herein; and

            (c) the Contractor shall state, in all solicitations or
            advertisements for employees, that, in the performance of the State
            contract, all qualified applicants will be afforded equal employment
            opportunities without discrimination because of race, creed, color,
            national origin, sex, age, disability or marital status.

      Contractor will include the provisions of "a", "b" and "c", above, in
every subcontract over $25,000.00 for the construction, demolition, replacement,
major repair, renovation, planning or design of real property and improvements
thereon (the "Work") except where the Work is for the beneficial use of the
Contractor. Section 312 does not apply to: (i) work, goods or services unrelated
to this contract; or (ii) employment outside New York State; or (iii) banking
services, insurance policies or the sale of securities. The State shall consider
compliance by a contractor or subcontractor with the requirements of any federal
<PAGE>

law concerning equal employment opportunity which effectuates the purpose of
this section. The contracting agency shall determine whether the imposition of
the requirements of the provisions hereof duplicate or conflict with any such
federal law and if such duplication or conflict exists, the contracting agency
shall waive the applicability of Section 312 to the extent of such duplication
or conflict. Contractor will comply with all duly promulgated and lawful rules
and regulations of the Governor's Office of Minority and Women's Business
Development pertaining hereto.

      13. CONFLICTING TERMS. In the event of a conflict between the terms of the
contract (including any and all attachments thereto and amendments thereof) and
the terms of this Appendix A, the terms of this Appendix A shall control.

      14. GOVERNING LAW. This contract shall be governed by the laws of the
State of New York except where the Federal supremacy clause requires otherwise.

      15. LATE PAYMENT. Timeliness of payment and any interest to be paid to
Contractor for late payment shall be governed by Article XI-A of the State
Finance Law to the extent required by law.

      16. NO ARBITRATION. Disputes involving this contract, including the breach
or alleged breach thereof, may not be submitted to binding arbitration (except
where statutorily authorized) but must, instead, be heard in a court of
competent jurisdiction of the State of New York.

      17. SERVICE OF PROCESS. In addition to the methods of service allowed by
the State Civil Practice Law & Rules ("CPLR"), Contractor hereby consents to
service of process upon it by registered or certified mail, return receipt
requested. Service hereunder shall be complete upon Contractor's actual receipt
of process or upon the State's receipt of the return thereof by the United
States Postal Service as refused or undeliverable. Contractor must promptly
notify the State, in writing, or each and every change of address to which
service of process can be made. Service by the State to the last known address
shall be sufficient. Contractor will have thirty (30) calendar days after
service hereunder is complete in which to respond.

August, 1989

<PAGE>

                                   APPENDIX J

                           ELECTRONIC BILLING PROCESS

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH

                                Child Health Plus

                            Monthly Voucher Bill and

                              Adjustment Guidelines

      This document provides instructions for the submission of monthly voucher
bills and adjustments to the Department of Health for the State's share of the
premium costs for children enrolled in Child Health Plus.

MONTHLY VOUCHER BILLS

      Contractors should submit their monthly voucher bill data files by the
tenth business day of the month for which payment is being claimed. The billing
data files should be based on the actual number of children enrolled in the
program during the month for which payment is being claimed. The billing data
files should contain a record for each child enrolled during the month for which
payment is being claimed as well as a record for each child disenrolled.

      Contractors must also submit a State of New York Standard Voucher for
receipt by the Department of Health by the tenth business day of the month.
Samples of the data file layout and the standard voucher form, as well as
instructions for completing them are enclosed (Exhibits A through D).

ADJUSTMENTS

      Adjustments should be submitted in conjunction with monthly voucher bills.
Adjustment data files should document any overpayments or underpayments relating
to the addition or deletion of enrollees, changes in coverage, audit citations,
and any other adjustments relating to monthly voucher bills submitted during a
previous period.

      Contractors should submit adjustments on a monthly basis. Samples of the
data file layout and instructions for completion are enclosed (Exhibits E
through F).

SUBMITTING MONTHLY VOUCHER BILLS AND ADJUSTMENTS

      Please review all New York State Standard Vouchers and all billing and
adjustment data files for completeness and accuracy. Submissions containing
errors may be returned for correction.

                                        1
<PAGE>

      Billing and adjustment data files should be submitted, via the Department
of Health's electronic mail network, by the tenth business day of the month for
which payment is being claimed.

      All corresponding New York State Standard Vouchers should be submitted for
receipt by the Department of Health by the seventh business day of the month,
and should be accompanied by a brief cover letter which identifies the name and
telephone number of the individual to be contacted in the event that questions
arise regarding the bill and/or adjustment.

      Mail completed New York State Standard Vouchers to:

                              Suzanne Moore, Ph.D.
                                    Director
                           Bureau of Health Economics
                       New York State Department of Health
                        Corning Tower Building, Room 1110
                               Empire State Plaza
                          Albany, New York 12237-0722

                                        2
<PAGE>

                                                                       Exhibit A

                      NEW YORK STATE DEPARTMENT OF HEALTH
                               CHILD HEALTH PLUS

           INSTRUCTIONS FOR COMPLETING FORMS AND DATA FILES REQUIRED
                  FOR THE SUBMISSION OF MONTHLY VOUCHER BILLS

A. COMPLETE A STATE OF NEW YORK STANDARD VOUCHER FORM (EXHIBIT B), photocopies
   are acceptable.

Complete the Standard Voucher form as follows:

ORIGINATING AGENCY: Enter "New York State Department of Health"

ORIGINATING AGENCY CODE: Enter "12000"

P-CONTRACT: Enter your State contract number.

PAYEE ID: Enter your organization's Federal Tax Identification number (your
voucher will not be processed without this number).

PAYEE NAME, ADDRESS, CITY, STATE AND ZIP CODE: Enter the complete name and
address, including zip code, of the person or organization to appear on the
check.

DESCRIPTION OF MATERIAL/SERVICE:

Enter Child Health Plus Program.

Monthly voucher bill for the month ending _______/________/_______ (Enter the
appropriate date).

Enter the Data Control Number (DCN) assigned to the billing data file submitted
electronically to substantiate the monthly billing amount claimed on the
standard voucher form.

If an adjustment is being submitted in conjunction with the monthly voucher
bill, enter:

Adjustment for the period ending _____/______/_______ (Enter the appropriate
data).

Enter the DCN assigned to the adjustment data file submitted electronically to
substantiate the adjustment amount claimed on the standard voucher form.

AMOUNT: Add the amounts entered into the field labeled, "State Share" on your
billing data file, Exhibit C, and enter the result.

                                        3
<PAGE>

If an adjustment is being submitted in conjunction with the monthly voucher
bill, add the amounts entered into the field labeled, "Adj_SS" on your
adjustment data file, Exhibit F, and enter the result.

TOTAL AND NET: Enter the sum of the amounts entered above.

NOTE: Please verify that the dollar amounts claimed on the standard voucher form
for all bills and adjustments equal the sum of the amounts entered into the
fields labeled "State Share" and "Adj_SS" on the billing and adjustment data
files submitted via the Department's electronic mail network. If the standard
voucher and data files are not in agreement, payment cannot be processed.

PAYEE CERTIFICATION:

The person authorized to process monthly voucher bills must sign and date the
standard voucher form. Enter the title of the person authorized to sign the form
and the name of the company.

B. SUPPORTING DOCUMENTATION - BILLING DATA FILE (EXHIBIT C)

      Each monthly billing amount claimed on a New York State Standard Voucher
must be substantiated by a data file containing information for children
enrolled in the program during the month for which payment is being claimed, as
well as a record for each child disenrolled. The data file should contain the
following information for each child. The specifications for the file layout are
provided as Exhibit C. The data files must be submitted via the Department's
electronic mail network.

FOR THE PERIOD ENDING: Enter the last day of the month for which payment is
being claimed. Entry must be six digits and in date format (MMDDYY). Check to
ensure a valid date was entered.

PLAN IDENTIFIER (NAME): Enter your organization's plan identifier, Exhibit G.
Entry must be left justified. Check to ensure the correct plan identifier was
entered.

CONTRACT NUMBER: Enter your State contract number, Exhibit G. Check to ensure
the correct contract number was entered.

SOCIAL SECURITY NUMBER: Enter the individual's Federal Tax Identification
number (if available). The Federal Tax Identification number must be nine
digits. If a Federal Tax Identification number is not available, projects must
assign a unique identifier. The first character in an assigned identifier must
be alphabetic. The assigned identifier may be nine characters or less. The
Federal Tax Identification number or assigned identifier shall be used for all
billing and claims processing functions. Entry must be left justified. Check
to ensure an entry was made in this field.

                                        4
<PAGE>

LAST NAME: Enter the individual's last name. Entry may be alphanumeric and
seventeen characters or less. Entry must be left justified. Check to ensure an
entry was made in this field.

FIRST NAME: Enter the individual's first name. Entry may be alphanumeric and ten
characters or less. Entry must be left justified. Check to ensure an entry was
made in this field.

MIDDLE INITIAL: Enter the individual's middle initial. Entry may be alphabetic
(A through Z) or blank. Check to ensure the entry is alphabetic or blank.

BIRTH DATE: Enter the individual's date of birth. Entry must be six digits and
in date format (MMDDYY). Check to ensure the child listed is less than thirteen
years of age on the last day of the previous month and that a valid date was
entered.

SEX: Enter the individual's gender. Entry must be M or F. Check to ensure M or F
was entered.

P.O. BOX OR HOUSE NUMBER AND STREET ADDRESS: Enter the individual's residential
street address. Entry may be alphanumeric and thirty-five characters or less.
Entry must be left justified. Check to ensure an entry was made in this field.

CITY: Enter the individual's city of residence. Entry may be alphanumeric and
fifteen characters or less. Entry must be left justified. Check to ensure an
entry was made in this field.

COUNTY: Enter the individual's county of residence as specified on the listing
of counties and corresponding codes, Exhibit D. Entry must be a numeral and two
digits. Check to ensure a valid code, Exhibit D, that is within the contractors
service area was entered.

STATE: Enter the individual's state of residence. Entry must be NY. Check to
ensure NY was entered.

ZIP CODE: Enter the individual's residential zip code. Entry must be a five
digit numeral. Check to ensure a valid New York State zip code within the
contractor's service area was entered.

APPLICATION NUMBER: Enter the application number assigned to the individual and
entered onto the supplemental enrollment form during the enrollment process.
Entry may be alphanumeric and nine characters or less. Entry must be left
justified.

                                        5
<PAGE>

ORIGINAL ENROLLMENT DATE: Enter the effective date of health insurance coverage.
Entry must be six digits and in date format (MMDDYY). Check to ensure a valid
date was entered and the entry represents a date that occurred on or after the
date the contractor began enrolling children and before the date entered into
the field labeled "PERIOD". Do not change the original enrollment date for the
duration of the child's Child Health Plus coverage. NOTE: All children must be
enrolled effective the first day of the month.

TERMINATION DATE: Enter the date that health insurance coverage is terminated.
Entry must be six digits and in date format (MMDDYY). If a date has been
entered, check to ensure a valid date was entered and the entry represents a
date that occurred after the date entered into the field labeled "Enrollment
Date" for that child. If the entry represents a date that occurred before the
date entered into the field labeled "PERIOD", check to ensure 0 was entered into
the field labeled "State Share of Premium". If the entry represents a date that
occured on or after the date entered into the field labeled "PERIOD", check to
ensure a numeral was entered into the field labeled "STATE SHARE". NOTE: All
children must be terminated on the last day of the month.

STATE SHARE OF PREMIUM: Enter the State's share of the monthly premium. This
must be a signed numeric field and eleven digits or less. Entry must be right
justified. (e.g. -$35.00 should be entered as -3500, +$35.00 should be entered
as 3500). Check to ensure the State's share of a valid premium rate or 0 was
entered.

NOTE: Please add the amounts entered into this field and verify that the result
is equal to the billing amount entered onto the State of New York Standard
Voucher form. Also, please verify that the DCN assigned to the data file was
entered onto the standard voucher form.

CURRENT ENROLLMENT/RECERTIFICATION DATE: Enter the current enrollment or
recertification date. Entry must be 6 digits and in date format (MMDDYY). Check
to ensure a valid date was entered and the entry represents a date that occurred
on or after the date the contractor began enrolling children and before the date
entered into the field labeled "PERIOD". NOTE: All children must be enrolled and
recertified effective the first day of the month.

TELEPHONE NUMBER: Enter the individual's area code and telephone number. Entry
must be numeric and ten numerals. (Not a required entry).

                                        6
<PAGE>

HOUSEHOLD/FAMILY IDENTIFIER: Enter the individual's household/family identifier.
All children in a household must be assigned an identifier. The identifier must
be identical for all members of a household/family. A unique identifier must be
assigned to each household/family. Entry may be alphanumeric and nine characters
or less. Entry must be left justified. Check to ensure entry was made in this
field.

PRESUMPTIVE ELIGIBILITY: This field identifies whether or not the child entered
Child Health Plus through the presumptive eligibility process. Enter a "P" if
the child was enrolled presumptively. If the child did not enroll presumptively,
leave this field blank.

PAYMENT CATEGORY: Enter the individual's subsidy level. Entry must be an F, A,
B, or S. (F=Full Subsidy, P=Partial Subsidy (120% - 160% FPL), B=Partial Subsidy
(160% - 222% FPL), and, S=Selfpay). Check to ensure F, A, B, or S was entered.

                                        7
<PAGE>

               SEE INSTRUCTIONS ON REVERSE SIDE BEFORE COMPLETING

C 92 (Rev. 6/94)

                                STANDARD VOUCHER          EXHIBIT
                                                             B
                [ILLEGIBLE]
                   OF
                 NEW YORK

<TABLE>
<S>              <C>    <C>              <C>       <C>   <C>         <C>          <C>               <C>
                                                                                                    Voucher No.
[ILLEGIBLE] Agency                       Orig. Agency Code           Interest Eligible (Y/N)         2 P-Contract
New York State Department of Health          12000                                                    123456
Payment Date (MM) (DD) (YY)              OSC Use Only                Liability Date (MM) (DD) (YY)
                 /    /                                                                /    /
3 Payee ID       Additional              Zip Code  Route Payee Amount                               MIR Date (MM) (DD) (YY)
  123456789                                                                                                      /    /

4 PAYEE NAME (Limit to 30 spaces)                        IRS Code    IRS Amount
XYZ Insurance Company
PAYEE NAME (Limit to 30 spaces)                          Stat. Type  Statistic    Indicator-Dept.   Indicator-Statewide
Attn: John Smith, President
Address (Limit to 30 spaces)                             5 Ref/Inv. No. (Limit to 20 spaces)
30 Park Place
Address (Limit to 30 spaces)                             Ref/Inv. Date (MM) (DD) (YY)
Room 160                                                                   /    /
City (Limit to 20 spaces) (Limit to 2 spaces) -    State Zip Code
Albany                                              NY    12208
</TABLE>

<TABLE>
<CAPTION>
6 Purchase                        Description of Material'Service
  Order No.      If items are too numerous to be incorporated into the block below.
  and Date                    use Form AC 93 and carry total forward.                 Quantity  Unit  Price   Amount
----------       ------------------------------------------------------------------   --------  ----  -----   ------
<S>              <C>                                                                  <C>       <C>   <C>     <C>
                 CHILD HEALTH PLUS PROGRAM 01/31/96

                 BILLING FILE DCN#_________________________________________________
                 # OF SUBSCRIBERS                        APPROVED RATE

                 __________________________      X       __________________________                           ______________________
                 __________________________      X       __________________________                           ______________________
                 __________________________      X       __________________________                           ______________________

                 ADJUSTMENT FILE DCN #_____________________________________________                           SUB-TOTAL BILL
                                                                                                              ==================
                 ITEM/DESCRIPTION                        PERIOD OF ADJ.      # SUBSCRIBERS      APPROVED RATE

                 Retroactive adjust _________________________________________   _______   X     __________________  ________________

                 Duplicate adjusts __________________________________________   _______   X     __________________  ________________

                                                                                                              SUB-TOTAL.ADJUSTMENT
                                                                                                              ====================
PAYEE CERTIFICATION:
I certify that the above bill is just, true and correct; that part thereof has been paid              Total        TOTAL BILL
except as stated and that the balance is actually due and owing, and that taxes from which            Discount
the State is exempt are excluded.                                                                           %

/S/ [ILLEGIBLE]                                                           DIRECTOR ACCTS RECEIVABLE
---------------------------------                                     --------------------------------
  Payee's Signature in Ink                                                          Title

1/3/96                               XYZ INSURANCE COMPANY
-------------    -------------------------------------------------------------------------------------            TOTAL MONTHLY
    Date                                           Name of Company                                        Net        BILLING
</TABLE>

<TABLE>
<CAPTION>
                                FOR AGENCY USE ONLY                                              STATE COMPTROLLER'S PRE-AUDIT
                                -------------------                                              -----------------------------
<S>                   <C>                                                                        <C>                   <C>
Merchandise Received  I certify that this voucher is correct and just. and payment is approved
                      and the goods or services rendered or furnished are for use in the
                      services and performance of the official functions and duties of this                             Certified
                      agency.                                                                                        For Payment of
Date                                                                                             Verified               Net Amount
                      -----------------------------------------------------------------------
                                          Authorized Signature
Page No.                                                                                         Audited

   By                 Date                                                      Title            Special Approval      By___________
                                                                                                  (as Required)
</TABLE>

<TABLE>
<CAPTION>

                       EXPENDITURE                                                             LIQUIDATION
      Cost Center Code                            Accum
pt.   Cost Center Unit Var   Yr     Object        Dept.     Statewide  Amount    Orig. Agency  PO/Contract    Line   [ILLEGIBLE]
<S>  <C>               <C>   <C>    <C>           <C>       <C>        <C>       <C>           <C>            <C>    <C>

--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      OSC              [ ]Check if Continuation

<PAGE>

                                                                       Exhibit C

                      NEW YORK STATE DEPARTMENT OF HEALTH
                           CHILD HEALTH PLUS PROGRAM

File Layout for the Submission of Monthly Voucher Bills

FILE NAME: Child Health Plus Billing/Data               Date:        Page 1 of 1

<TABLE>
<CAPTION>
Field                                 Position       Field
No.        Field Label               To    From      Size    Pic    Field Description/Remarks
-----      -----------               --    ----      ----    ---    -------------------------
<S>                                 <C>    <C>      <C>      <C>    <C>
 1         PERIOD                     1       6         6      9    For the period ending (MMDDYY)
 2         PLAN IDENTIFIER            7      43        37      X    Plan Identifier (NAME)
 3         CON - NO                  44      49         6      9    Contract Number
 4         SS - NO                   50      58         9      X    Social Security Number
 5         LAST NAME                 59      75        17      X    Last Name
 6         FIRST NAME                76      85        10      X    First Name
 7         M                         86      86         1      X    Middle Initial
 8         BIRTHDAY                  87      92         6      9    Birth Date (MMDDYY)
 9         S                         93      93         1      X    Sex Code
10         ADDRESS                   94     128        35      X    PO Box or House Number and Street Address
11         CITY                     129     143        15      X    City
12         CO                       144     145         2      9    County Code
13         ST                       146     147         2      X    State
14         ZIP                      148     152         5      9    Zip Code
15         APP-NO                   153     161         9      X    Application Number
16         0-ENR-D                  162     167         6      9    Original Enrollment Date (MMDDYY)
17         TERM-D                   168     173         6      9    Termination Date (MMDDYY)
18         STATE SHARE              174     184        11      9    State Share Premium (SIGNED NUMERIC)
19         O - ENR - D              185     190         6      9    Current Enrollment/Recertification Date (MMDDYY)
20         TEL - NO                 191     200        10      X    Telephone Number
21         FAMILY - ID              201     209         9      X    Family Identifier
22         PRESUMPTIVE ELIG         210     210         1      X    Presumptive Eligibility
23         PAY CATEGORY             211     211         1      X    Payment Category
</TABLE>

<PAGE>

                                                                       Exhibit D
                                  COUNTY CODES
<TABLE>
<CAPTION>
CODE          COUNTY             CODE       COUNTY
----          ------             ----       ------
<S>           <C>                <C>      <C>
   1          Albany              33      Orange
   2          Allegany            34      Orleans
   3          Broome              35      Oswego
   4          Cattaraugus         36      Otsego
   5          Cayuga              37      Putnam
   6          Chautauqua          38      Rensselaer
   7          Chemung             39      Rockland
   8          Chenango            40      St. Lawrence
   9          Clinton             41      Saratoga
  10          Columbia            42      Schenectady
  11          Cortland            43      Schoharie
  12          Delaware            44      Schuyler
  13          Dutchess            45      Seneca
  14          Erie                46      Steuben
  15          Essex               47      Suffolk
  16          Franklin            48      Sullivan
  17          Fulton              49      Tioga
  18          Genesee             50      Tompkins
  19          Greene              51      Ulster
  20          Hamilton            52      Warren
  21          Herkimer            53      Washington
  22          Jefferson           54      Wayne
  23          Lewis               55      Westchester
  24          Livingstone         56      Wyoming
  25          Madison             57      Yates
  26          Monroe              58      Bronx
  27          Montgomery          59      Kings
  28          Nassau              60      New York
  29          Niagara             61      Queens
  30          Oneida              62      Richmond
  31          Onondaga
  32          Ontario
</TABLE>
<PAGE>

                                                                       Exhibit E

                       NEW YORK STATE DEPARTMENT OF HEALTH
                                Child Health Plus

                           Instructions for Completing
                          Data - Files for Adjustments

A.    SUPPORTING DOCUMENTATION (Exhibit F)

      Each adjustment amount claimed on a New York State Standard Voucher must
be substantiated by a data file containing information for each child for whom
an adjustment is necessary. The data file should contain the following
information for each child. The specifications for the file layout are provided
as Exhibit F. The data files must be submitted via the Department's electronic
mail network.

FOR THE PERIOD ENDING: Enter the last day of the period for which the
adjustments are being billed. Entry must be six digits and in date format
(MMDDYY). Check to ensure a valid date was entered.

PLAN IDENTIFIER (NAME): Enter your organization's plan identifier, Exhibit G.
Entry must be left justified. Check to ensure the correct plan identifier was
entered.

CONTRACT NUMBER: Enter your State contract number, Exhibit G. Check to ensure
the correct contract number was entered.

SOCIAL SECURITY NUMBER: Enter the individual's Federal Tax Identification number
(if available). The Federal Tax Identification number must be nine digits. If a
Federal Tax Identification number is not available, projects must assign a
unique identifier. The first character in an assigned identifier must be
alphabetic. The assigned identifier may be nine characters or less. Entry must
be left justified. Check to ensure an entry was made in this field.

LAST NAME: Enter the individual's last name. Entry may be alphanumeric and
seventeen characters or less. Entry must be left justified. Check to ensure an
entry was made in this field.

FIRST NAME: Enter the individual's first name. Entry may be alphanumeric and ten
character or less. Entry must be left justified. Check to ensure an entry was
made in this field.

MIDDLE INITIAL: Enter the individual's middle initial. Entry may be alphabetic
or blank. Check to ensure the entry is alphabetic (A through Z) or blank.

                                       8

<PAGE>

Period of Adjustment:

-     From: Enter the date representing the first day of the period for which
      the adjustment is being claimed. Entry must be the first day of the month.
      Entry must be six digits and in date format (MMDDYY). Check to ensure a
      valid date was entered and the entry represents a date that occurred on or
      after the date the contractor began enrolling children and no later than
      the date entered into the field labeled "PERIOD".

-     To: Enter the date representing the last day of the period for which the
      adjustment is being claimed. Entry must be the last day of the month.
      Entry must be six digits and in date format (MMDDYY). Check to ensure a
      valid date was entered and the entry represents a date that occurred
      after the date entered into the field labeled "FROM" for that child and no
      later than the date entered into the field labeled "PERIOD".

      e.g. Individual's coverage terminated effective 03/01/91. State was billed
      for the period 03/01/91 through 04/30/91. Enter 030191 in the column
      labeled "from" and 043091 in the column labeled "to".

ADJUSTMENT TO STATE SHARE: Enter the State's share of the adjustment amount.
This must be a signed numeric field and eleven digits or less. Entry must be
right justified. (e.g. +$35.62 should be entered as 3562, - $35.62 should be
entered as -3562). Check to ensure a numeral was entered.

NOTE: Please add the amounts entered into this field and verify that the result
is equal to the adjustment amount entered onto the New York State Standard
Voucher form. Also, please verify that the DCN assigned to the data file was
entered onto the standard voucher form.

                                        9
<PAGE>

                                                                       Exhibit F

                       NEW YORK STATE DEPARTMENT OF HEALTH
                            CHILD HEALTH PLUS PROGRAM

File Layout for the Submission of Adjustments
FILE NAME: Child Health Plus Adjustment                 Date:        Page 1 of 1

<TABLE>
<CAPTION>
Field                                 Position        Field
No.         Field Label              To     From      Size       Pic   Field Description/Remarks
-----       -----------              --     ----      ----       ---   -------------------------
<S>         <C>                      <C>    <C>       <C>        <C>   <C>
 l          PERIOD                    1        6        6         9    For the period ending (MMDDYY)
 2          PLAN IDENTIFIER           7       43       37         X    Plan Identifier (NAME)
 3          CON - NO                 44       49        6         9    Contract Number
 4          SS - NO                  50       58        9         X    Social Security Number
 5          LAST NAME                59       75       17         X    Last Name
 6          FIRST NAME               76       85       10         X    First Name
 7          M                        86       86        1         X    Middle Initial
 8          FROM                     87       92        6         9    Period of Adjustment "from" Date (MMDDYY)
 9          TO                       93       98        6         9    Period of Adjustment "to" Date (MMDDYY)
10          ADJ_SS                   99      109       11         9    Adjustment to State Share (Signed Numeric Field)
</TABLE>

<PAGE>

                                   APPENDIX K

                                  BUDGET FORMS

<PAGE>

                                 PROJECT BUDGET
                               PERSONNEL EXPENSES

Budget Form 1

<TABLE>
<CAPTION>
PERSONNEL EXPENSES:
                      (1)       (2)        (3)          (4)          (5)
                      Annual    Fringe                  # of             Entire
Title                 Salary    Benefits   % FTE        Months       Expense Project
-----                 ------    --------   -----        ------       ---------------
<S>                   <C>       <C>        <C>          <C>         <C>
Subtotal for personnel
</TABLE>

(1)   Annual Salary should be listed for salaried personnel and should reflect
      the amount which would be paid for a full-time equivalent employee for 12
      months. For consultants, give the rate/hour. Please label each item, for
      example: Annual Salary - AS and Rate/Hour - R/H.

(2)   Fringe Benefits should be calculated on the annual salary amount from
      column (1) and the percent given.

(3)   Use only for salaried personnel. List the percentage of time the person
      will be working, for example, a person working 20 hours/week of a 40 hour
      work week should be shown as 50% of a full-time equivalent (FTE) in this
      column.

(4)   List the total of months for the contract period that the salaried person
      is working and label it (mos.). For consultants, list the number of hours
      which the person is contracted to provide and label (hrs.).

(5)   For salaried personnel, the "Entire Project Expense" should reflect the
      annual salary (1) plus fringe benefits (2) times the percentage FTE (3)
      (i.e., 0.5 for half-time), adjusted by the number of months (4). For
      consultants, the "Entire Project Expense" should reflect the rate/hour (1)
      times the number of hours (4). Note that the consultants, (2) and (3) are
      not acceptable.

<PAGE>

                                 PROJECT BUDGET
                             NON-PERSONNEL EXPENSES

Budget Form 2

<TABLE>
<CAPTION>
NON - PERSONNEL EXPENSES:*
Items and unit cost                                     Project Total
------------------------                                -------------
<S>                                                     <C>

---------------------------------------------------------------------
Subtotal for Non - Personnel
Subtotal for Personnel (from Budget Form 1)
GRAND TOTAL (Personnel + Non Personnel)
</TABLE>

*Include equipment and supplies, travel to sites, other travel, and any other
non-personnel items. List the unit cost, number of units, and total cost.

<PAGE>

                                   APPENDIX L

                                BIDDER'S SUMMARY

                                  OF PROPOSAL

<PAGE>

                               CHILD HEALTH PLUS
                               APPLICANT SUMMARY
                                   INSURER RFP

APPLICANT INFORMATION:

Organization Name: _____________________________________________________________

Date of Incorporation: _________________________________

Federal Identification Number: _________________________

Charity Registration Number: ___________________________

DESIGNATED PRIMARY CONTACT:

Name: __________________________________________________

Position/Title: ________________________________________

Address: _______________________________________________

         _______________________________________________

         _______________________________________________

Telephone: (__)_________________

Fax: (__)_______________________

PROJECT INFORMATION:

Project Name (If Different): ___________________________________________________

Proposal Submission Date: _________________

Premium Requested: Annual : $______________ Monthly:$___________________________

Service Area Requested (By County) : ___________________________________________

________________________________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

Projected Year End Enrollment: Year 1: _________________

                               Year 2: _________________

                               Year 3: _________________

                               TOTAL:  _________________

<PAGE>

ORGANIZATION NAME: ___________________________________

<TABLE>
<S>                           <C>                       <C>
Projected Amount Requested:   Year 1: $_______________  (April 1-December 1, 1997)

Projected Annual Request:     Year 2: $_______________  (January 1-December 31, 1998)

Projected Annual Request:     Year 3: $_______________  (January 1-December 31, 1999)

                              TOTAL:  $_______________
</TABLE>

SUBCONTRACT INFORMATION:

Subcontractor Organization: __________________________

Federal Identification Number: _______________________

Primary Contact: _____________________________________

Address: _____________________________________________

         _____________________________________________

         _____________________________________________

Telephone: (__)_______________________________________

On a separate sheet, please list the name, position, address, telephone number
and affiliation of any other project subcontractors.

<PAGE>

ORGANIZATION NAME: ___________________________________

                                  PLAN OUTLINE

<TABLE>
<CAPTION>
                          ACTIVITIES :
                          Tasks to be
                          performed to
STATEMENT OF              achieve the                       Person(s)     OUTCOMES/
OBJECTIVE: 1              objectives        TIME FRAME:     Responsible   PRODUCT
------------              ------------      -----------     -----------   ---------
<S>                       <C>               <C>             <C>           <C>
                               1a.                                           1a.
                               1b.                                           1b.
                               1c.                                           1c.
                               1d.                                           1d.
                               1e.                                           1e.
STATEMENT OF
OBJECTIVE: 2
                               2a.                                           2a.
                               2b.                                           2b.
                               2c.                                           2c.
                               2d.                                           2d.
                               2e.                                           2e.
</TABLE>

<PAGE>

                                   APPENDIX M

                             STANDARD CONTRACT/BID

                                  INSERT FORM

                         STOCK ITEM SPECIFICATION FORM

                                  OF PROPOSAL

<PAGE>

          BIDDER'S NAME:_______________________________________________________
          RFP NUMBER____________

                       STANDARD CONTRACT/BID INSERT FORM

      This form must be completed and returned with your response to this
proposal. If awarded to you, the contract will incorporate this form as
completed by you.

              NONDISCRIMINATION IN EMPLOYMENT IN NORTHERN IRELAND:
                       MacBRIDE FAIR EMPLOYMENT PRINCIPLES

      Note: Failure to stipulate to these principles may result in the contract
being awarded to another bidder. Governmental and non-profit organizations are
exempted from this stipulation requirement.

      In accordance with Chapter 807 of the Laws of 1992 (State Finance Law
Section 174 - b), the bidder, by submission of this bid, certifies that it or
any individual or legal entity in which the bidder holds a 10% or greater
ownership interest, or any individual or legal entity that holds a 10% or
greater ownership interest in the bidder, either:

      -     has business operations in Northern Ireland: Y __ N __

      -     if yes to above, shall take lawful steps in good faith to conduct
            any business operations they have in Northern Ireland in accordance
            with the MacBride Fair Employment Principles relating to
            nondiscrimination in employment and freedom of workplace opportunity
            regarding such operations in Northern Ireland, and shall permit
            independent monitoring of their compliance with such Principles:
             Y __ N __.

                              OMNIBUS PROCUREMENT ACT OF 1992

      Is the Bidder a New York State Business Enterprise? Y __ N __

      The State Finance Law defines a "New York State Business Enterprise" as a
business enterprise, including a sole proprietorship, partnership, or
corporation, which offers for sale or lease or other form of exchange, goods
which are sought by the department and which are substantially manufactured
produced or assembled in New York State, or services which are sought by the
department and which are substantially performed within New York State. The
Department of Health considers "substantially" to mean "over 50%".

                                       1
<PAGE>

      -     It is the policy of New York State to maximize opportunities for the
            participation of New York State business enterprises, including
            minority-and women-owned business enterprises as bidders,
            subcontractors and suppliers on its procurement contracts.

      -     Information on the availability of New York State subcontractors and
            suppliers is available from:

                    NYS Department of Economic Development
                    Division for Small Business
                    (518) 474 - 7756

      -     A directory of minority- and women-owned business enterprises is
            available from:

                    NYS Department of Economic Development
                    Minority and Women's Business Development
                    Division
                    (518) 474-6346

      FOR ALL CONTRACTS WHERE THE TOTAL BID AMOUNT IS $1 MILLION OR MORE

      The Omnibus Procurement Act of 1992 requires that, by signing this bid
proposal, contractors certify that whenever the total bid amount is greater than
$1 million:

      1.    The contractor has made all reasonable efforts to encourage the
            participation of New York State Business Enterprises as suppliers
            and subcontractors on this project, and has retained the
            documentation of these efforts to be provided upon request to the
            State;

      2.    The contractor has complied with the Federal Equal Opportunity Act
            of 1972 (P.L. 92 - 261), as amended;

      3.    The contractor agrees to make all reasonable efforts to provide
            notification to New York State residents of employment opportunities
            on this project through listing any such positions with the Job
            Service Division of the New York State Department of Labor, or
            providing such notification in such manner as is consistent with
            existing collective bargaining contracts or agreements. The
            contractor agrees to document these efforts and to provide said
            documentation to the State upon request;

      4.    The contractor acknowledges notice that New York State may seek to
            obtain offset credits from foreign countries as a result of this
            contract and agrees to cooperate with the State in these efforts.

                                       2
<PAGE>

                   CHECKLIST TO DETERMINE "REASONABLE" EFFORT

           BY BIDDERS/CONTRACTORS FOR CONTRACTS OF $1 MILLION OR MORE

      A copy of this form should be completed and retained on file by the
Contractor. The completed form should be available for review for the duration
of the contract.

      The contractor:

      1.    has a copy of the NYS Directory of Certified Minority and
            Women-Owned Business Enterprises? Y __ N __

      2.    has solicited quotes from firms listed in the Directory? Y __ N __

      3.    has contacted the NYS Department of Economic Development to obtain
            listings of NYS subcontractors and suppliers for products and
            services currently purchased from out-of-state/foreign firms?
            Y __ N __

      4.    has utilized other sources to identify NYS subcontractors and
            suppliers (such as Thomas Register, in-house vendor list)?
            Y __ N __ (If YES, Source: _______________)

      5.    has placed advertisements in NYS newspapers? Y __ N __

      6.    has participated in vendor outreach conferences?  Y __ N __

      7.    has provided New York State residents notice of new employment
            opportunities resulting from this contract through listing any such
            positions with the Job Service Division of the NYS Department of
            Labor, or providing such notification by another method? Y __ N __

                                       3
<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       STOCK ITEM SPECIFICATION FORM
                       (Submission of this form is optional)

      Whenever possible, practical, feasible and consistent with open
competitive bidding, the stock item specifications of manufacturers, producers
and/or assemblers located in New York State are used in the preparation of bid
documents for the commodity requirements of State agencies. Companies are
responsible for updating information as changes are made in their stocked items'
technology and/or design.

      The DOH maintains Stock Item Specification Forms and corresponding
specifications for a two year period; it is anticipated that within that time
companies will refile with updated information. These forms and updates may be
submitted to:

                       New York State
                       Department of Health
                       Purchase Unit
                       Corning Tower Room 1354
                       Albany, New York 12237-0016

      Please provide the information requested below, sign and date this form
where indicated, and submit the completed form and accompanying specifications
to the address given above.

      1.    Company Name and Principal Place of Business:

      2.    Number of persons employed at above location:____

      3.    Stocked Item (only one per form):

      4.    Production of Stocked Item (Name and address of Manufacturer,
            Producer, and/or assembler):

      5.    Product Specification (briefly below, or attach specification):

                                       4
<PAGE>

      To the best of my knowledge, the information provided is accurate. It may
be used by the State for the purpose of helping to retain jobs, business and
industry presently in the State of New York and attracting new business and
industry to the State of New York. False statements knowingly made herein are
punishable as a Class A misdemeanor under Section 210.45 of the Penal Law of the
State of New York.

      Company Representative (please print):

      Title and Telephone:

      Signature and Date:

                                       5
<PAGE>

                                  APPENDIX B-1

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       OFFICE OF HEALTH SYSTEMS MANAGEMENT
                           BUREAU OF HEALTH ECONOMICS

                            CHILD HEALTH PLUS PROGRAM
                       INSURANCE PLAN REQUEST FOR PROPOSAL

                              QUESTIONS AND ANSWERS
                   SUBMITTED IN WRITING BY DECEMBER 30, 1996

                               BIDDERS CONFERENCE:
                            FRIDAY, JANUARY 10, 1997

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 2

                                  INTRODUCTION

      This document contains answers to questions submitted by health plans with
respect to the Child Health Plus Insurance Plan Request for Proposal (RFP). The
questions and answers are grouped by evaluation category into three sections:

      I.   General Technical,

      II.  Network Comprehensiveness, and

      III. Fiscal Evaluation Criteria.

      The questions and answers presented here are questions which were
submitted in writing to the Department by December 30, 1996. Questions which
were handed in by insurance plans at the bidder's conference will be mailed to
everyone who submitted a letter of intent by January 23, 1997.

      Plans are reminded that in many instances, similar questions were asked by
multiple organizations. Where this occurred, the State in some cases selected
one or more representative questions to answer, rather than responding in
writing to every question asked. In doing so, the State has made a good faith
effort to ensure that all material issues raised by health plans are being
responded to in as complete a manner as possible.

      It is important to read this document in its entirety to assure that you
are informed about all policy statements being made with respect to individual
issues.

      To the extent to which the answers contained in this document are in
conflict with information provided in the RFP, these answers shall control.

<PAGE>

                                    PART I -

                          GENERAL TECHNICAL QUESTIONS

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 4

I.    GENERAL TECHNICAL QUESTIONS

      A.    ENROLLMENT/[ILLEGIBLE]

1*.   UNDER THE CURRENT PROGRAM, AN, APPLICANT WHO ONLY HAS INPATIENT COVERAGE
      IS DEEMED ELIGIBLE FOR CHILD HEALTH PLUS SINCE SUCH COVERAGE IS NOT
      CONSIDERED "EQUIVALENT HEALTH INSURANCE COVERAGE." UNDER THE NEW PROGRAM,
      WITH INCLUSION OF INPATIENT CARE, WILL SUCH APPLICANTS BE INELIGIBLE FOR
      CHILD HEALTH PLUS ENROLLMENT? IF YES, DOES THIS MEAN THAT CURRENT
      ENROLLEES WHO HAVE SEPARATE INPATIENT COVERAGE MUST BE DISENROLLED FROM
      CHILD HEALTH PLUS UPON IMPLEMENTATION OF THE NEW PROGRAM?

The current equivalent coverage policy will be revised prior to implementation
of the expanded program. It is likely that if a policy was not deemed equivalent
in the current program, it will not be equivalent in the expanded program as it
is anticipated that the current definition will merely be expanded to include
inpatient. A policy would still not be equivalent if it only covered inpatient
care.

2.    CAN THE EDUCATIONAL ORIENTATION AND APPLICATION PROCESS BE CONDUCTED OVER
      THE PHONE OR BY MAIL?

The current application process is typically conducted by mail. Completed
applications cannot be taken over the phone because documentation must be
submitted and the parent/guardian or legally responsible adult must provide an
original signature. Educational orientation may be conducted over the phone with
follow-up written information sent to enrollees.

3.    WHAT SHOULD CURRENT CHILD HEALTH PLUS INSURERS DO WHEN SUBSCRIBERS RESPOND
      PRIOR TO THE APPROVAL OF THE PROPOSAL?

Children should be enrolled using the existing eligibility review criteria prior
to implementation of the expanded program. Upon implementation, new enrollees
will be evaluated based upon new income levels. The plan will be allowed a 90
day period to transition existing enrollees to the expanded program by
determining their family contribution levels and collecting premiums. If the
family income level does not require a family contribution or if the first
month's family contribution is paid prior to implementation, the child can
transition upon implementation of the expanded program. Others will have up to
90 days to make payment and transition to the expanded program.

4.    ARE MARRIED MEMBERS ALLOWED TO ENROLL IN CHILD HEALTH PLUS?

Married members are allowed to enroll if they meet all eligibility criteria.
However,

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 5

coverage will be on an individual, rather than family, basis.

5.    ARE MOTHERS WITH CHILDREN [ILLEGIBLE] ENROLL IN CHILD HEALTH PLUS?
      IF SO, WILL CHILD HEALTH PLUS COVERAGE [ILLEGIBLE] BE ON AN INDIVIDUAL
      RATHER THAN FAMILY BASIS?

Mothers with children are allowed to enroll if they meet all eligibility
criteria. However, coverage will always be on an individual, rather than family,
basis.

6.    CAN A CHILD HEALTH PLUS PLAN REQUIRE A SIX-MONTH "LOCK IN" PERIOD FOR
      ENROLLMENT? IF YES, WILL THE STATE ENSURE PAYMENT OF AT LEAST ITS PORTION
      OF THE PREMIUM DURING THE LOCK-IN PERIOD ONCE INITIAL ELIGIBILITY HAS BEEN
      DETERMINED?

A Child Health Plus cannot require a six-month "lock-in" period for enrollment.

7*.   ARE THERE ANY NOTIFICATION REQUIREMENTS OR PROTOCOLS TO FOLLOW WHEN
      DISENROLLLNG A CHILD HEALTH PLUS MEMBER FOR NON-PAYMENT OF THE PREMIUM
      (I.E. PROPER DOCUMENTATION OF ADEQUATE NOTICE, OUTREACH ATTEMPTS, ETC.?)

Based upon general insurance practices no notice is required for non-payment of
premium. However, a plan may choose to notify a family if they have been
disenrolled for nonpayment.

8*.   WITH REGARD TO THE ISSUE OF MEMBER DISENROLLMENT DUE TO NON-PAYMENT OF
      PREMIUMS, THE DEPARTMENT HAS TRADITIONALLY ASKED INSURERS TO BE LENIENT IN
      DEALING WITH THIS SITUATION. WILL THE DEPARTMENT BE MORE EXPLICIT IN ITS
      DIRECTIVE ON THIS ISSUE?

Non-payment of premium is cause for automatic disenrollment. Disenrollment would
occur on the last day for which premium has been paid by an insurer. Legislation
allows an insurer flexibility in the temporal aspects of collection. However, it
is at the discretion of the family as to what payment schedule they choose to
abide by.

9*.   FOR PREGNANT ENROLLEES: SHOULD A MEMBER BE AUTOMATICALLY DISENROLLED FROM
      CHILD HEALTH PLUS WHEN THE PLAN FINDS OUT THAT SHE IS PREGNANT?

A member should not be automatically disenrolled from the Child Health Plus
program once the plan finds out she is pregnant. However, once a plan discovers
an enrollee is pregnant, that individual should be referred to Medicaid
(presumptive eligibility provider, local DSS Medicaid office, or outstation) as
a subsidized enrollee under Child Health Plus should qualify for the Medicaid
program. It should also be noted that a newborn child will also qualify for
Medicaid coverage. Plans should specify the

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 6

identification procedure(s) that will be implemented to expedite the referral of
a pregnant women to the Medicaid program. For example, a plan may require their
prenatal care providers to automatically notify the [ILLEGIBLE] a pregnant
women, covered by the Child Health Plus program, presents, for her first
prenatal visit.

10.   HOW "DELINQUENT" DOES A MEMBER HAVE TO BE BEFORE THE PLAN TAKES ACTION TO
      DISENROLL HIM OR HER?

Any delinquency is grounds for immediate disenrollment. All family contributions
to the premium must be paid in advance to the period in which coverage is in
effect.

11.   IN THE RFP THE STATE REQUESTS THAT THE BIDDER DETAIL PROVISIONS AND OR
      ARRANGEMENTS FOR OFFERING CONVERSION OF BENEFITS IN THE EVENT OF
      TERMINATION OF COVERAGE UNDER THE PLAN, OR FOR CHILDREN WHO AGE OUT OF THE
      PROGRAM. PLEASE CLARIFY WHAT PROVISIONS AND OR ARRANGEMENTS ARE REQUIRED.
      SECTION II.K.3 OF THE RFP STATES, "IF THE CONTRACTOR IS UNABLE TO OFFER A
      CONVERSION POLICY FROM THEIR OWN ORGANIZATION, THEN THEY MUST PROVIDE
      INFORMATION ON THE INSURANCE OPTIONS AVAILABLE WITH ANOTHER ORGANIZATION
      TO SUCH CHILDREN" IN THIS EVENT, IS THE PLAN REQUIRED TO MAKE CONTRACTUAL
      ARRANGEMENTS WITH OTHER INSURANCE ORGANIZATIONS TO OFFER NON-CHILD HEALTH
      PLUS PRODUCTS, OR IS THE PLAN REQUIRED TO SIMPLY PROVIDE A LIST OF
      AVAILABLE PLANS (INCLUDING ADDRESSES AND TELEPHONE NUMBERS)?

For organizations, such as Prepaid Health Services Plans, who cannot offer
conversion options, the plan should have information available on other
insurance options for enrollees who age out of the Child Health Plus program. If
an individual or child is ineligible due to income, Child Health Plus coverage
can be purchased at the un-subsidized level (i.e., full premium price). The
plan is not required to make contractual arrangements with other organizations
to offer non-Child Health Plus products.

12.   AT WHAT POINT DO WE DISENROLL A PREGNANT MEMBER? EFFECTIVE AT THE END OF
      THE MONTH IN WHICH REFERRAL TO A PRESUMPTIVE ELIGIBILITY PROVIDER IS
      MADE?

Individuals are not to be disenrolled because they become pregnant.
Disenrollment occurs when the insurer is advised that woman has been enrolled in
Medicaid. Such disenrollment is effective at midnight on the last day of a
month.

      B.    ELIGIBILITY

13*.  THE CHILD'S EFFECTIVE DATE FOR COVERAGE IN THE RFP IS STATED TO BE THE
      FIRST DAY OF THE MONTH. PLEASE EXPLAIN FURTHER. FOR MEDICAID MANAGED CARE,
      A PERSON ENROLLED BEFORE THE 15TH OF THE MONTH BECOMES EFFECTIVE THE
      FIRST

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 7

      DAY OF THE FOLLOWING MONTH. (i.e., ENROLLS MAY 6 - EFFECTIVE JUNE 1). IF
      THE PERSON ENROLLS AFTER THE 15TH, THE COVERAGE EFFECTIVE DATE WILL BE THE
      FIRST DAY OF THE SECOND FOLLOWING MONTH (i.e., ENROLLS [ILLEGIBLE]
      EFFECTIVE JULY 1). FOR CHILD HEALTH PLUS, WILL THE SAME BE TRUE?

Under Child Health Plus, all enrollment is effective the first day of the
month and disenrollment is effective midnight the last day of the month. There
is no retroactive enrollment or disenrollment allowed under the program. The
effective month of coverage is dependent on the insurer's internal processing
procedures and cut-off dates. For example, a plan may process applications
between the first and the 25th day of the month for the first day of the
following month while applications processed from the 26th of the month to the
last day of the month for the first day of the month two months following the
application. An insurer's specific enrollment policies needs to be presented in
their proposal.

14*.  CAN SDOH EXPLAIN IN MORE DETAIL WHAT IT EXPECTS IN TERMS OF PROVIDING
      INFORMATION ON THE "INSURANCE OPTIONS AVAILABLE WITH ANOTHER ORGANIZATION"
      WHEN THE CHILD AGES OUT OF THE CHILD HEALTH PLUS PROGRAM, OR IS INELIGIBLE
      DUE TO INCOME?

For organizations, such as Prepaid Health Services Plans, who cannot offer
conversion options, the plan should have information available on other
insurance options for enrollees who age out of the Child Health Plus program. If
an individual or child is ineligible due to income, Child Health Plus coverage
can be purchased at the un-subsidized level (i.e., full premium price).

15*.  IT IS OUR UNDERSTANDING THAT THE CURRENT SIXTY (60) DAY PRESUMPTIVE
      ELIGIBILITY PERIOD WILL ALSO BE AVAILABLE UNDER THE NEW PROGRAM. ARE THERE
      ANY CHANGES TO THE PRESUMPTIVE ELIGIBILITY PROCEDURES?

There are no changes to presumptive eligibility procedures contemplated at this
time.

16.   WHO IS RESPONSIBLE FOR THE COST OF MEDICAL CARE IF A PLAN IS NOTIFIED BY
      THE STATE THAT A CHILD HEALTH PLUS ENROLLEE IS NOT ELIGIBLE AT A TIME WHEN
      THE CHILD IS HOSPITALIZED AND RECEIVING INPATIENT CARE?

This situation should never occur as the individual insurer, not the State,
would be making the eligibility determination. The plan would not be responsible
for services rendered if the child was not enrolled.

17.   ARE THE RESPONSES PROVIDED IN THE ADVISORY MEMORANDUM STILL CORRECT?
      SPECIFICALLY, IS THE INFORMATION REGARDING INAPPROPRIATE EMERGENCY ROOM
      USE AND PRESUMPTIVE ELIGIBILITY UP TO DATE?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 8

Advisory memoranda currently in effect will be reviewed and updated, as needed,
prior to implementation of the program. However, the policies regarding
inappropriate emergency room use and presumptive eligibility are not expected to
change.

18.   WILL THE NEW REGULATIONS APPLY ONLY TO NEW ENROLLMENT EFFECTIVE MAY 1,
      1997?

New eligibility requirements for equivalent coverage and family contribution
level changes will apply to all program enrollees. However, existing insurers
will be allowed a 90-day period beyond the date of program implementation to
transition existing enrollees to the expanded program.

19.   IF A CHILD HAS A PERIOD OF PRESUMPTIVE ELIGIBILITY UNDER THE CURRENT
      PROGRAM, WILL HE OR SHE BE ALLOWED ANOTHER PRESUMPTIVE PERIOD UNDER THE
      NEW PROGRAM?

If a child has a period of presumptive eligibility under the current program,
they will not be allowed another presumptive period under the new program.

20.   WHAT ARE THE PRESUMPTIVE ELIGIBILITY PROCEDURES FOR CHILDREN WHO HAVE NOT
      PAID THE FIRST MONTH PREMIUM?

There are no presumptive eligibility procedures for children who have not paid
the first month of premium as a child cannot be enrolled without payment of the
first month.

21.   WHAT IS THE NEW DEFINITION FOR EQUIVALENT COVERAGE? WOULD BLUE CROSS AND
      BLUE SHIELD OF ROCHESTER AREA'S VALUE MED PROGRAM BE CONSIDERED EQUIVALENT
      COVERAGE?

The equivalent coverage definition will be revised prior to implementation of
the expanded program.

22.   FOR THOSE CHILDREN THAT ARE CURRENTLY IN CHILD HEALTH PLUS AND HAVE OTHER
      INSURANCE COVERAGE THAT TO DATE HAS NOT BEEN CONSIDERED EQUIVALENT
      COVERAGE, WHAT ARE THE PROCEDURES FOR REVIEW OF THESE POLICIES AND ARE
      THERE SUBSEQUENT PROCEDURES IF THESE POLICIES ARE CONSIDERED EQUIVALENT
      UNDER THE NEW PROGRAM?

A revised equivalent coverage policy will be formulated prior to implementation
of the expanded program. It is likely that if a policy was not deemed equivalent
in the current program, it will not be equivalent in the expanded program as
it is anticipated that the current definition will merely be expanded to include
inpatient.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                 PAGE 9

23.   WILL AN ENROLLEE BE DEEMED ELIGIBLE BY THE STATE FOR A FULL YEAR, EVEN IF
      THE ENROLLEE BECOMES INELIGIBLE SOONER BUT FAILS TO REPORT SUCH
      INELIGIBILITY TO THE PLAN?

The State does not make an eligibility determination, it is up to the insurance
contractor to make an eligibility determination. It is the responsibility of the
individual to report any changes in circumstance that may make the individual
ineligible for subsidized coverage within sixty (60) days of such change.

24.   IF ONLY ONE PERIOD OF PRESUMPTIVE ELIGIBILITY PER CHILD IS ALLOWED, HOW
      WOULD MANAGED CARE PLANS KNOW WHETHER THE PRESUMPTIVE ELIGIBILITY
      PROVISION HAS ALREADY BEEN USED BY ANOTHER MANAGED CARE PLAN?

One period of presumptive eligibility per child, per plan, is allowed.

25.   WHAT HAPPENS IF A PREGNANT WOMAN REFERRED TO A PRESUMPTIVE ELIGIBILITY
      PROVIDER NEVER GOES TO THE PROVIDER FOR DETERMINATION OF PRESUMPTIVE
      ELIGIBILITY OR IS FOUND INELIGIBLE FOR MEDICAID, BUT HAS BEEN DISENROLLED
      FROM CHILD HEALTH PLUS?

If a pregnant women does not go to the provider for determination of presumptive
eligibility, she is not disenrolled from the Child Health Plus program. Because
a woman is not disenrolled until she is enrolled in Medicaid, she would have
maintained her coverage under Child Health Plus.

26.   WHAT, IF ANY, DOCUMENTATION OF ESTABLISHED LINKAGES WITH PRESUMPTIVE
      ELIGIBILITY PROVIDERS MUST APPLICANTS SUBMIT WITH THEIR PROPOSALS?

Such documentation can include, but not be limited to, a listing of such
providers within an insurer's proposed service area(s).

27.   WHEN SIGNED TAX FORMS ARE SUBMITTED AS PROOF OF INCOME, CAN THE ADDRESS ON
      THESE FORMS ALSO BE USED AS PROOF OF ADDRESS (IN LIEU OF REQUESTING OTHER
      DOCUMENTATION), IF THE ADDRESS ON THE FORM IS THE SAME AS THAT ON THE
      APPLICATION?

Such documentation is acceptable only if it had been signed and sent within
three (3) months of the individual's application to the Child Health Plus
program.

28.   IS COMPLETION OF A HEALTH SCREENING FORM (BEYOND THAT WHICH A PCP FILLS
      OUT DURING THE INITIAL PHYSICAL EXAMINATION OF A NEW MEMBER) REQUIRED OR
      OPTIONAL?

Completion of such a form is optional.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 10

29.   IN REGARDS TO "PRESUMPTIVE ELIGIBILITY PROVIDERS" LISTED ON PAGE 15, WHAT
      DOES THE DEPARTMENT OF HEALTH CONSIDER TO BE A "SUFFICIENT NUMBER" OF
      PRESUMPTIVE ELIGIBILITY PROVIDERS?

The number of presumptive eligibility providers with which a plan affiliates is
left to the bidder based on how many such providers the bidder believes is
necessary to fulfill the objective of this aspect of the program.

30.   APPENDIX B. ADVISORY MEMORANDUM 2/1/92, PAGE 6. THERE ARE REFERENCES TO
      UNDOCUMENTED ALIENS IN RELATIONSHIP TO THE SELF-DECLARATION OF INCOME.
      WILL THERE BE REPERCUSSIONS FROM THE WELFARE REFORM BILL ON THE CHILD
      HEALTH PLUS COVERAGE OF CHILDREN WHO MAY BE UNDOCUMENTED ALIENS?

 The State has yet to pass legislation implementing the provisions of the
 Welfare Reform Bill. Plans will be expected to comply with any future
 requirements resulting from the any welfare reform legislation enacted by the
 State.

      C.    RECERTIFICATION

31*.  WHEN MUST THE ANNUAL RECERTIFICATION OF ELIGIBILITY BE CONDUCTED? CAN
      RECERTIFICATION BE SPACED OUT OVER THE YEAR? MUST ELIGIBILITY BE
      TERMINATED IF THE ENROLLEE FAILS TO MAKE TIMELY RECERTIFICATION?

 Annual recertification must occur on or prior to the year anniversary of
 coverage. An enrollees recertification date is determined by their effective
 month of coverage, and will vary by individual according to such anniversary
 date. An enrollee must have their coverage terminated if they fail to make
 timely recertification.

32.   WHEN WILL THE NEW PROGRAMMATIC CHANGES BECOME EFFECTIVE FOR CHILD HEALTH
      PLUS SUBSCRIBERS WHO ARE ALREADY ENROLLED IN THE CURRENT PROGRAM AND
      CERTIFIED BEYOND MAY 1, 1997?

For subscribers already enrolled in the program, existing insurers will be
allowed a 90 day period after implementation of the expanded program to
transition enrollees. Insurers should try to transition current enrollees to the
expanded program as quickly as possible.

33.   WILL CURRENT SUBSCRIBERS BE GRANDFATHERED IN? (FOR EXAMPLE, WILL THOSE
      CHILDREN RECEIVING THE CURRENT PROGRAM AT FULL SUBSIDY CONTINUE AT FULL
      SUBSIDY UNTIL THEIR CURRENT RECERTIFICATION DATE.)

Current subscribers will be allowed to maintain their current recertification
date and do not need to reapply to the program. Insurers must review income
levels and

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 11

determine what family contribution level will be required. Insurers will have an
additional 90 days from the date of program implementation to collect family
contributions for existing enrollees and to transition them to the expanded
program. If an existing enrollee fails to make the required family contribution
within this period, he or she will be disenrolled. If the family income level
does not require a family contribution or if the first months family
contribution is paid prior to implementation, the child can transition to the
expanded program at implementation. Others will have up to 90 days to make
payment and transition to the expanded program.

34.   THE MAY, 1997 RECERTIFICATION ARE DUE TO BE MAILED FEBRUARY 1, 1997. ARE
      THERE ANY CHANGES TO THIS RECERTIFICATION PROCESS?

The current recertification process will remain in effect. Upon implementation
of the expanded program, new family contribution levels will go into effect.
Insurers will be given a 90 day period to notify families of existing enrollees
of the revised family contribution levels and to collect premiums, where
applicable.

35.   WILL THERE BE A LIMIT TO THE NUMBER OF REINSTATEMENTS A FAMILY MAY HAVE
      DURING THE COURSE OF THE YEAR?

The Department is currently considering a reenrollment process in the instances
where an enrollee is cancelled because of nonpayment of premium. Plans will be
notified of the new policy when the Department completes its review.

36.   IF FAMILIES ARE REQUIRED TO PAY PREMIUMS ON A MONTHLY BASIS, IS IT LIKELY
      THAT THERE WILL BE A SUBSTANTIAL NUMBER OF CANCELLATIONS EACH MONTH FOR
      NON-PAYMENT OF PREMIUM. WILL REINSTATEMENTS BE ALLOWED AFTER CANCELLATION
      FOR NON-PAYMENT OF PREMIUM? IF SO, WHAT ARE THE GUIDELINES AND PROCEDURES?

The Department is currently considering a reenrollment process in the instances
where an enrollee is cancelled because of nonpayment of premium. Plans will be
notified of the new policy when the Department completes its review.

      D.    BENEFIT PACKAGE

37.   PLEASE CLARIFY - SPEECH AND HEARING SERVICES ARE NOT COVERED EXCEPT FOR
      AUDIOMETRIC TESTING WHEN MEDICALLY NECESSARY. DOES THIS MEAN THAT THE PLAN
      WOULD COVER THE AUDIOMETRIC TESTING THAT WOULD BE DONE PERIODICALLY AS
      PART OF THE CHILD'S SPEECH AND HEARING THERAPY REGIMEN?

Audiometric testing performed periodically as part of a child's speech and
hearing

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 12

therapy regimen are not covered. Audiometric testing performed to rule out or
diagnose a medical condition is covered.

38.   PLEASE CLARIFY - CO-PAYS. IF A MEMBER IS DELINQUENT ON CO-PAYS, DOES THIS
      COUNT TOWARDS DELINQUENCY OF PREMIUM PAYMENT?

There is no relation between delinquency of co-payments and premium payments.
Co-payments are made to the provider of service, not the insurer.

39.   ARE ABORTIONS AND STERILIZATIONS COVERED IF MEDICALLY NECESSARY? IF NOT
      MEDICALLY NECESSARY?

Pregnant members should be referred to Medicaid. Consistent with the Insurance
Law requirements, elective abortion and voluntary sterilizations are not
required to be covered.

40.   IS "SPEECH THERAPY" COVERED OR NOT? APPENDIX E, UNDER "LEVEL OF COVERAGE"
      FOR HOME HEALTH CARE SEEMS TO INDICATE THAT IT IS COVERED, BUT IT IS ALSO
      LISTED AS AN EXCLUDED BENEFIT.

Speech therapy as a "stand alone" benefit is not covered. However, as is
currently required by Insurance Law, speech therapy which is part of an
authorized home health care visit which is provided by the certified home health
care agency is covered within the parameters of that visit.

41*.  NON-EMERGENCY TRANSPORTATION IS LISTED AS AN EXCLUDED BENEFIT. PLEASE
      DEFINE EMERGENCY TRANSPORTATION. IN ADDITION TO AMBULANCE, DOES IT INCLUDE
      MEDICALLY NECESSARY AMBULETTE TRANSPORTATION? DOES IT INCLUDE TAXI
      TRANSPORTATION WHEN AN AFTER HOURS EMERGENCY ROOM VISIT IS AUTHORIZED BY
      THE PLAN THAT DOES NOT REQUIRE AN AMBULANCE, BUT THE MEMBER NEEDS
      TRANSPORTATION"?

The schedule of non-covered services should include all forms of transportation
since transportation is NOT a covered benefit under the Child Health Plus
program.

42.   IN THE BENEFIT PACKAGE, INPATIENT HOSPITAL MEDICAL OR SURGICAL CARE, LEVEL
      OF COVERAGE INDICATES THAT THE SERVICES OF SURGEONS AND ANESTHESIOLOGISTS
      ARE ONLY COVERED IF INCLUDED IN THE HOSPITAL BILL. WHY AREN'T THESE
      SERVICES COVERED IF BILLED SEPARATELY AS LONG AS THEY ARE MEDICALLY
      NECESSARY? AS WRITTEN, THIS LIMITATION WOULD PREVENT HIP FROM USING
      ANESTHESIOLOGY GROUPS AND SURGEONS WITH WHICH WE CONTRACT, BUT WHO ARE NOT
      HOSPITAL EMPLOYEES.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 13

The intent of the language in the benefit package description was not to exclude
the services of surgeons and anesthesiologist if billed separately. Such
services are as covered.

43.   ARE THE SERVICES OF ANESTHESIOLOGISTS COVERED FOR OUTPATIENT SURGERY?

Services of the anesthesiologist for outpatient surgery are covered under the
general benefit of "outpatient surgery". All costs associated with such surgery
are covered.

44*.  PLEASE DESCRIBE THE SCOPE OF THE OBSTETRICAL AND GYNECOLOGICAL SERVICES
      THAT ARE TO BE PROVIDED BY THE PLAN FOR CHILD HEALTH PLUS ENROLLEES.

The scope of OB/GYN services to be provided by the insurer are those identified
under the maternity care provision of Appendix E, as well as those required by
PHL Section 4406-b and DOH Memorandum Series 95-17, dated December 6, 1995.

45*.  DOES THE OUTPATIENT MENTAL HEALTH BENEFIT INCLUDE COLLATERAL VISITS FOR
      FAMILY MEMBERS WHO ARE NOT COVERED BY CHILD HEALTH PLUS?

The outpatient mental health benefit package does not include collateral visits
for family members who are not covered by Child Health Plus. Only the outpatient
alcohol/substance abuse treatment benefit contains a family visit requirement.

46*.  THE SIXTY (60) VISIT LIMIT FOR CHEMICAL DEPENDENCY AND MENTAL HEALTH HAVE
      A MINIMUM OF TWENTY (20) VISITS FOR FAMILY THERAPY FOR ALCOHOL ABUSE AND A
      MAXIMUM OF TWENTY (20) VISIT FOR MENTAL HEALTH. DO ANY OF THE VISITS HAVE
      TO BE RESERVED FOR SPECIFIED ME? CAN ALL OF THE VISITS BE USED FOR
      CHEMICAL DEPENDENCY, OR DO SOME HAVE TO BE RESERVED FOR MENTAL HEALTH? IS
      IT FIRST BILLED, FIRST PAID?

The visits in this category do not have to be reserved for specific use but are
first billed, first paid.

47*.  THE COVERED DURABLE MEDICAL EQUIPMENT ITEMS APPEARS TO BE FOR A MEDICARE
      POPULATION RATHER THAN A PEDIATRIC POPULATION. THE PLANS' MEDICAID
      EXPERIENCE SUGGESTS ITEMS SUCH AS NEBULIZERS SHOULD BE COVERED. IS THEN
      ANY FLEXIBILITY AS TO THE ITEMS REQUIRED FOR COVERAGE UNDER THIS BENEFIT?

There is no flexibility as to the items covered under this category. Only the
items listed will be covered.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 14

48.   ARE THERE ANY LIMITATIONS ON BENEFIT ENHANCEMENT?

 No enhancments should be offered to the benefit package. The benefit package is
 [ILLEGIBLE] Child Health Plus program providers.

49*.  COULD PLANS OPT NOT TO IMPOSE THE PHYSICIAN CO-PAYMENT?

There will be a $2 copayment required for all physician visits, except those
provided on an inpatient basis, for well child care, or as other prohibited by
Insurance Law.

50.   PLEASE EXPLAIN THE TERM "SHORT TERM" AS IT IS USED WITH PHYSICAL AND
      OCCUPATIONAL THERAPIES.

The term is intentionally undefined to  allow insurers the discretion to
provide the benefit at a level they typically offer to non-Child Health Plus
members. Acceptable levels have included a twenty visit per calendar standard as
well as no specific visit limitations but a requirement that the condition in
question be subject to significant clinical improvement through relatively short
term therapy.

      E.      COORDINATION WITH THE MEDICAID PROGRAM

51*.  THE RFP MENTIONS THAT THE CHILD HEALTH PLUS ENROLLMENT FILES ARE
      COMPARED TO THE STATE'S MEDICAID ENROLLMENT FILES TO DETERMINE IF A CHILD
      IS CURRENTLY ENROLLED IN BOTH PROGRAMS. HOW WILL THE INSURER BE NOTIFIED
      OF THE CHILD'S INELIGIBILITY? WILL THE CHILD HEALTH PLUS PROGRAM
      TERMINATION IN COVERAGE BE RETROACTIVE, SAME DAY AS DISCOVERY, OR AT THE
      END OF THE MONTH?

As stated in the RFP, the Child Health Plus billing/enrollment file is compared
to the current Medicaid enrollment file on a monthly basis to produce a list of
children dually enrolled in both programs. Each insurer receives a letter
transmitting their list of dually enrolled children. The insurer must inform the
parent/guardian of the child's dual enrollment status using a letter provided by
the Department. In this letter, the family is given ten business days from the
date of the letter to respond with proof of Medicaid disenrollment or Medicaid
spend down. If this cannot be provided, the child must be disenrolled from
Child Health Plus within 60 days from the first day of the month where the match
was performed.

52*.     UNDER THE CURRENT PROGRAM, INSURERS ARE REQUIRED TO REFER APPLICANTS
         WHO APPEAR ELIGIBLE FOR MEDICAID TO THE MEDICAID PROGRAM. APPLICANTS
         ARE NOT REQUIRED, HOWEVER, TO APPLY FOR MEDICAID, NOR TO DEMONSTRATE
         THAT THEY HAVE BEEN REJECTED BY MEDICAID IN ORDER TO BE ELIGIBLE FOR
         CHILD HEALTH PLUS ENROLLMENT. CONTRARY TO WHAT HAD BEEN INDICATED BY
         SDOH AT THE

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 15

      SEPTEMBER INSURERS' MEETING, THE RFP APPEARS TO CONTINUE THE CURRENT
      PRACTICE, I.E., UNDER THE NEW PROGRAM, INSURERS MUST MAKE MEDICAID
      REFERRALS [ILLEGIBLE] APPROPRIATE, BUT ONLY THOSE CHILDREN WHO ARE
      ACTUALLY "ON MEDICAID SHALL BE INELIGIBLE FOR CHILD HEALTH PLUS. IS
      THIS UNDERSTANDING CORRECT?

The existing policy where children who appear Medicaid eligible must be referred
by the insurer to Medicaid will remain in effect. Applicants who appear Medicaid
eligible will not be required to produce documentation of Medicaid denial in
order to be eligible to enroll in Child Health Plus.

53.   IS THE ON-SITE REVIEW SEPARATE AND IN ADDITION TO THE MEDICAID ANNUAL
      REVIEW? WILL ANY EFFORTS BE MADE TO COORDINATE THE TWO VISITS?

The on-site reviews which will be conducted for the Child Health Plus program
are separate and in addition to the Medicaid annual review. The Child Health
Plus site visit will be for the purposes of reviewing Child Health Plus
applications and enrollment documentation.

54*.  PLEASE CLARIFY WHAT INFORMATION YOU ARE LOOKING FOR IN RESPONSE TO THE
      REQUEST THAT WE DISCUSS HOW CHILD HEALTH PLUS WILL "INTERACT" WITH OTHER
      INSURANCE PRODUCTS, INCLUDING MEDICAID.

With regard to interaction of Child Health Plus insurers with other products,
including Medicaid, the plan should discuss areas such as referral of children
that appear Medicaid eligible to the Medicaid program and how that process will
occur, review of other policies the child may be covered under to determine if
coverage is equivalent, coordination of benefits if coverage is not equivalent,
coordination of duplicates among other Child Health Plus plans, assisting
enrollees who move from the service area of one plan to another to avoid a lapse
in coverage, and implementation of the joint Child Health Plus/Medicaid/WIC
application.

55*.  IS IT CORRECT THAT PREGNANT TEENS WHO DO NOT QUALIFY FOR MEDICAID ARE
      COVERED FOR PRENATAL CARE AND DELIVERY?

Subsidized enrollees under Child Health Plus who become pregnant should be
qualified for the Medicaid program. However, if an enrollee chooses not to apply
to the Medicaid program, or the enrollee is not subsidized, maternity care is a
covered benefit.

56.   FOR INSURERS WHO ARE LICENSED HEALTH MAINTENANCE ORGANIZATIONS, DO MANAGED
      CARE RULES APPLY FOR THE CHILD HEALTH PLUS PROGRAM? SPECIFICALLY, IS IT
      REASONABLE FOR THE HMO TO EXPECT CHILD HEALTH PLUS MEMBERS TO

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 16

      FOLLOW THE SAME BASIC REFERRAL POLICIES THAT HMO AND MEDICAID MANAGED CARE
      MEMBERS ABIDE? IF YES, WILL THE INSURER BE ALLOWED TO DISENROLL ENROLLEES
      WHO [ILLEGIBLE] SHOW" OR CREATE DISTURBANCES AT SCHEDULED DOCTOR
      APPOINTMENT [ILLEGIBLE] HABITUALLY MISUSE THE HMO'S REFERRAL SYSTEM
      DESPITE THE EDUCATION EFFORTS OF THE INSURER?

It is reasonable for the HMO/insurer to expect Child Health Plus members to
follow the same referral policies that non-Child health Plus members are
required to follow. The subscriber contract and any other member education
document should clearly set forth the insurers protocol for receipt of covered
services.

With respect to disenrolling a recalcitrant enrollee, the Insurance Department,
after consulting with the Department of Health and recognizing the HMOs dual
role as provider and payor of health care services, did permit HMOs the option
of adopting termination provisions to address the non-compliant enrollee.
However, it has always been understood that such termination provisions would
only be invoked in the most egregious of circumstance. For example, where an
enrollee's persistent refusal to follow recommended treatment has resulted in an
irreparable breach of the provider-patient relationship, termination may be
invoked. Also, where an enrollee is physically or verbally threatening to HMO
staff or providers, termination may be pursued. It was never contemplated that
an HMO invoke termination for "no shows" or the misuse of the referral system.
The HMOs recourse in this latter case is to deny coverage for the unauthorized
service.

57.   IN SITUATIONS WHERE ENROLLEES ARE COVERED BY TWO INSURANCE POLICIES, IS
      THE CHILD HEALTH PLUS POLICY ALWAYS CONSIDERED SECONDARY PAYER TO THE
      OTHER POLICY?

With the exception of Medicaid, Child Health Plus is always considered the
secondary payer to the other policy when an enrollee is covered by two insurance
policies. However, if a child is enrolled in Medicaid and Child Health Plus for
the period covered by both, prior to disenrollment from Child Health Plus,
Medicaid will be the secondary payer to Child Health Plus.

58.   BECAUSE THE STAFFING REQUIREMENTS ARE VERY SIMILAR FOR MEMBER/CUSTOMER
      SERVICE FOR CHILD HEALTH PLUS AND MEDICAID, IS IT POSSIBLE FOR THE CHILD
      HEALTH PLUS TWENTY-FOUR HOUR 1800 PHONE LINE TO BE THE SAME NUMBER AS THE
      TWENTY-FOUR 1-800 PHONE LINE FOR MEDICAID?

It is possible to use the same Member/Customer Service hotline for Child Health
Plus and Medicaid.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 17

59*.  ON PAGE 47 OF THE RFP IN THE [ILLEGIBLE] ENTITLED "R. TRADEMARK," THE RFP
      INDICATES THAT EACH INSURER [ILLEGIBLE] THE NYSDOH DESIGNATED LOGO FOR
      CHILD HEALTH PLUS IN ANY [ILLEGIBLE] DOES THIS INCLUDE THE ID CARD WHICH
      ALL MEMBERS RECEIVE? PLEASE [ILLEGIBLE] IN ACCORDANCE WITH THE NYSDOH'S
      POSITION, MEDICAID MEMBERS HAVE THE SAME ID CARD AS COMMERCIAL MEMBERS. IF
      THE STATE REQUIRES THE CHILD HEALTH PLUS LOGO ON MEMBERS' ID CARDS: 1) IT
      IS AN OPPOSING POSITION TO THE ONE REQUIRED FOR MEDICAID MEMBERS; AND 2)
      IT MAY CREATE A LARGE ADMINISTRATIVE EXPENSE TO PLANS -(I.E., ORDERING NEW
      ID CARD STOCK, PROGRAMMING COMPUTERS, ETC.).

After further consideration, the Child Health Plus logo does not have to be
included on a subscriber's identification card. The State will require an
identification process of the Child Health Plus program on an enrollees card
(e.g., stick-on tabs may be used). The State designated logo should be used on
all marketing materials, subscriber contracts, and on any appropriate
correspondence with enrollees related to the program.

60.   IS THE STATE MANDATING THE USE OF THE CHILD HEALTH PLUS NAME ON THE PLAN'S
      BENEFIT CARD OR THE ACTUAL LOGO?

After further consideration of the cost to insurers of such a mandate, the State
withdraws its mandate to have plans use the Child Health Plus logo on benefit
cards.

61*.  FOR PREGNANT ENROLLEES: CAN A MEDICAID MANAGED CARE PROVIDER WHICH ALSO
      COVERS CHILD HEALTH PLUS EASILY TRANSFER PREGNANT MEMBERS OVER TO THEIR
      MEDICAID MANAGED CARE PROGRAM, OR IS THE PLAN OBLIGATED TO OFFER OTHER
      PRENATAL CARE OPTIONS?

However, once a plan discovers an enrollee is pregnant, that individual should
be referred to Medicaid (presumptive eligibility provider, local DSS Medicaid
office, or outstation) as a subsidized enrollee under Child Health Plus should
qualify for the Medicaid program. It should also be noted that a newborn child
will also qualify for Medicaid coverage. Plans should specify the identification
procedure(s) that will be implemented to expedite the referral of a pregnant
women to the Medicaid program. For example, a plan may require their prenatal
care providers to automatically notify the plan when a pregnant women, covered
by the Child Health Plus program, presents for her first prenatal visit.

62*.  IS THE CHILD HEALTH PLUS PROGRAM GOVERNED BY THE SAME STATE, AND WHERE
      APPLICABLE, CITY MARKETING GUIDELINES?

All insurers must perform their own marketing and outreach activities in
accordance

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 18

with the guidelines found in the RFP. There will also be an independent Child
Health Plus marketing and outreach contractor in place as well as independent
Department of Health marketing activities.

63.   WHAT PROCEDURES WILL BE ADOPTEED TO ENSURE A "SEAMLESS" TRANSITION BETWEEN
      MEDICAID AND CHILD HEALTH PLUS? FOR EXAMPLE, WILL A MEDICAID MANAGED CARE
      ENROLLEE BE DEEMED PRESUMPTIVELY ELIGIBLE FOR CHILD HEALTH PLUS AT THE
      TIME S/HE IS DISENROLLED FROM MEDICAID?

A child who is disenrolled from Medicaid must apply and complete a Child Health
Plus application and can be presumptively enrolled if the application is
complete, signed, and the applicant appears to meet all eligibility requirements
but lacks documentation. However, they will not be deemed presumptively enrolled
if they do not apply for the Child Health Plus program.

64*.  CAN A CHILD HEALTH PLUS PROVIDER REACH OUT DIRECTLY TO FORMER MEDICAID
      MANAGED CARE ENROLLEES WHO HAVE BECOME DISENROLLED FROM THAT PLAN'S
      MEDICAID PROGRAM?

A Child Health Plus provider can reach out directly to former Medicaid managed
care enrollees who have become disenrolled from the plans Medicaid managed care
program.

65*.  WILL A CHILD HEALTH PLUS ENROLLEE WHO BECOMES ELIGIBLE FOR MEDICAID BE
      AUTOMATICALLY ENROLLED IN THE SAME PLAN?

A Child Health Plus enrollee who become eligible for Medicaid will not
automatically be enrolled in the same plan. The child must first be determined
eligible for Medicaid and then select a Medicaid managed care plan.

66.   MAY AN ENROLLEE CHOOSE TO MAKE SUCH "AUTOMATIC" TRANSITIONS AT THE TIME
      S/HE ENROLLS IN EITHER MEDICAID MANAGED CARE OR CHILD HEALTH PLUS?

An enrollee may not choose to make such an automatic transition at the time of
enrollment in either Medicaid or Child Health Plus.

        F.    CONTRACT ISSUES

67*.    THE CURRENT CHILD HEALTH PLUS SUBSCRIBER AGREEMENTS, UNDER DEPARTMENT OF
        HEALTH REGULATIONS, ARE FOR ONE YEAR FROM THE DATE OF ENROLLMENT.
        CONSEQUENTLY, THE MAJORITY OF CHILD HEALTH PLUS ENROLLEES WILL HAVE AN
        EXISTING SUBSCRIBER AGREEMENT AT THE TIME WHEN THE BENEFIT PACKAGE
        CHANGES WHICH EXPIRES AFTER THE BEGINNING OF THE NEW CONTRACT.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 19

      A.    WILL EXISTING CONTRACTS CONTINUE THROUGH THE EXPIRATION DATE WITH
            THE EXISTING BENEFIT PACKAGE OR

      B.    WILL EXISTING CONTRACTS BE TERMINATED/[ILLEGIBLE] TO INCLUDE THE
            ADDITIONAL BENEFITS AND WILL ENROLLEES BE ASPECTED TO PAY THE
            MONTHLY PREMIUM AND COPAYMENTS? IF YES:

            (1)   WILL ENROLLEES WHO DO NOT PAY THE MONTHLY PREMIUM BE
                  TERMINATED FROM THE PROGRAM? IF SO, HAS THE NYSDOH CONDUCTED A
                  SURVEY OR STUDY TO ESTIMATE THE NUMBER OF CURRENT CHILD HEALTH
                  PLUS ENROLLEES WHO WILL NO LONGER BE IN THE PROGRAM DUE TO
                  NON-PAYMENT OF PREMIUM?

The current Child Health Plus subscriber agreements are not technically one year
contracts. The contract will continue in force until termination for one of the
reasons set forth in the contract. It is anticipated that the existing contracts
will be terminated and replaced by the new contract if the existing insurer
continues in the Child Health Plus program. Existing Child Health Plus
enrollees will be transitioned to the expanded program prior to their
recertification date. Insurers participating in the current program and the
expanded program will be given a 90 day period to transition enrollees to the
expanded program. Existing enrollees will not need to submit a new application
for the expanded program and will be allowed to maintain their current
recertification date. However, insurers will be required to review income levels
on all existing enrollment to determine new family contribution levels. If
enrollees fail to make the required family contribution, they will be terminated
from the program. If family income level does not require a family contribution,
or if the first month's family contribution is paid prior to the implementation
of the expanded program, the child can transition to the expanded program at
implementation. Others will have up to 90 days to make payment and transition to
the expanded program.

If the family income level does not require a family contribution or if the
first months family contribution is paid prior to implementation, the child can
transition to expanded program at implementation. Others will have up to 90 days
to make payment and transition to the expanded program.

68*.  HOW WILL THE STATE ESTABLISH THE MAXIMUM COMPENSATION AMOUNT FOR EACH
      CONTRACT?

Maximum compensation will be established based upon the number of approved
organizations, their enrollment projections, and the total available funding for
the program.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 20

69.   WILL THE MAXIMUM COMPENSATION AMOUNT FOR A CHILD HEALTH PLUS CONTRACT BE
      ESTABLISHED FOR THE ENTIRE CONTRACT PERIOD THROUGH DECEMBER 31, 1999, OR
      WILL THE AMOUNT BE NEGOTIATED ON AN ANNUAL BASIS, ALONG [ILLEGIBLE] ANNUAL
      RATE FILING?

Contracts for successful bidders will be for the period May 1, 1997 through
December 31, 1999, however, the funding amounts for each contract year will be
identified and will be subject to adjustment by the State as needed based on
enrollment trends and premiums.

70.   WILL THE STATE FREEZE A CONTRACTOR'S ENROLLMENT IF THE MAXIMUM
      COMPENSATION IS REACHED?

Contract provisions will allow DOH to change funding levels (subject to
available program funding) as needed if a plan's enrollment exceeds their
maximum funding level. If in the aggregate the Child Health Plus program reaches
its approved funding levels then enrollment freezes could be implemented.

71*.  THEM RFP INDICATES THAT THE CONTRACT PERIOD WILL BE FROM MAY 1, 1997
      THROUGH DECEMBER 31, 1999, A 32 MONTH PERIOD. WILL PLAN CONTRACTS WITH THE
      NYSDOH BE FOR THE SAME 32 MONTH PERIOD OR WILL CONTRACTS BE AWARDED ON A
      YEAR TO YEAR BASIS?

      a.    IF THE CONTRACT AWARD PERIODS ARE FOR ONE YEAR ONLY, HOW ARE PLANS
            EXPECTED TO REACH A FINANCIAL BREAK EVEN WITHIN THAT PERIOD
            (ESPECIALLY IN LIGHT OF THE LOW ADMINISTRATIVE PERCENTAGE ALLOWED IN
            THE RFP).

Contracts for successful bidders will be for the period May 1, 1997 through
December 31, 1999, however, the funding amounts for each contract year will be
identified and will be subject to adjustment by the State as needed based on
enrollment trends and premiums.

72*.  PAGE 44, SECTION K. DO APPLICANTS DEVISE THEIR OWN ADDITIONAL REPORTING
      FORMATS, OR ARE THE REQUIRED REPORTS LIMITED TO THE THREE OUTLINED IN
      APPENDIX G?

At the present time, the forms contained in Appendix G are draft documents which
summarize what the DOH anticipates to be comprehensive reporting formats for
essential data elements which need to be collected for monitoring and
evaluation of the expanded program. Applicants do not devise their own report
forms and DOH will provide final reporting documents to selected contractors
prior to implementation.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 21

73.   SUBCONTRACTS: DOES SECTION III, J "SOLE SOURCE RESPONSIBILITY" REFER TO
      ADMINISTRATIVE SUBCONTRACTS, MEDICAL SERVICES SUBCONTRACTS (PROVIDER
      CONTRACTS) OR BOTH? PLEASE IDENTIFY THE KIND OF SUBCONTRACTS OR SERVICE IN
      WHICH SDOH IS INTERESTED.

This refers to subcontracts relevant to any and all of the insurer's operation
and performance of the requirements of the Child Health Plus program.

      G.    PROPOSAL SUBMISSION

74.   PLEASE DESCRIBE IN DETAIL THE INFORMATION YOU WOULD LIKE US TO INCLUDE IN
      THE PLAN OUTLINE CONTAINED IN APPENDIX L.

The data summary sheet which is provided should be completed by the bidder.
However, please disregard the plan outline as it is no longer necessary to
provide that information.

75.   WHEN APPROPRIATE, CAN WE SUBSTITUTE (AS AN EXHIBIT) A DOCUMENT THAT
      ANSWERS THE QUESTION RATHER THAN DRAFTING A WRITTEN RESPONSE? FOR EXAMPLE,
      CAN WE SUBMIT OUR QUALITY ASSURANCE PLAN, WHICH OUTLINES ALL THE
      STANDARDS, POLICIES AND PROCEDURES THAT APPLY TO OUR CHILD HEALTH PLUS
      PROGRAM AS AN EXHIBIT IN LIEU OF DRAFTING A TEXTUAL RESPONSE.

A document that answers specific questions in the RFP can be used in place of
drafting a written response to that question.

76.   WE ASSUME THAT PHSPS, AS WELL AS HMOS, LICENSED UNDER ARTICLE 44 ARE
      ELIGIBLE ORGANIZATIONS, CORRECT?

Yes. However, Prepaid Health Services Plans (PHSPs) licensed under Article 44 of
the Public Health Law are eligible organizations only if the operating
certificate of the PHSP allows for non-Medicaid enrollment.

77.   WHAT SPECIFIC DOCUMENTATION DOES THE STATE REQUIRE TO DEMONSTRATE
      COMPLIANCE WITH THE NON-CONCLUSIVE BIDDING REQUIREMENT ON PAGE 47 OF THE
      RFP?

There is no specific documentation required by the State, but it must be stated
clearly in the bidders proposal that there were no special agreements made
between parties in the formulation of the bid and that the bid which is
submitted was reached in accordance with Section 139-d of State Finance Law and
is free from fraud and collusion.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 22

At this time it is important to note that there was a typographical error in the
RFP. The section should read Non-collusive, not non-conclusive.

78.   ARE APPLICANTS EXPECTED TO SUBMIT PROOF OF WORKERS' COMPENSATION INSURANCE
      WITH THEIR RFP RESPONSES, OR, ONLY IF APPROVED, PRIOR TO EXECUTION OF THE
      STATE CONTRACT?

Proof of Worker's Compensation Insurance should be provided with the response
to the RFP.

79.   WHY DOES THE STATE NEED FIFTEEN (15) COPIES OF THE PROPOSAL? THAT SEEMS
      EXCESSIVE COMPARED TO THAT REQUIRED BY OTHER STATE RFPS (E.G., THE
      MEDICAID MANAGED CARE RFP), AND TRANSLATES INTO AN ENORMOUS AMOUNT OF
      PAPER AND DELIVERY COSTS. WOULD THE STATE CONSIDER REDUCING THE NUMBER OF
      COPIES?

The State cannot reduce the number of copies because of the following needs:
seven (7) copies of the proposal must be submitted to the Office of the State
Comptroller (OSC). The additional copies are needed for contract managers and
the members of the review teams.

80.   THE RFP (PAGE 50) ASKS PLANS TO IDENTIFY THEIR "CAPABILITY TO MEET THE
      DEPARTMENT'S ELECTRONIC PREMIUM PAYMENT," AND REFERS TO APPENDIX J.
      HOWEVER, APPENDIX J,"ELECTRONIC BILLING PROCESS" DOES NOT CONTAIN THE
      DEPARTMENT'S SPECIFICATIONS FOR ELECTRONIC PREMIUM PAYMENTS.

Appendix J of the RFP outlines an example of the draft data guidelines and data
elements. The draft file layout is to give the bidder's an idea of what elements
will be required by the State. A formalized data specification layout will be
provided to all selected bidders.

81.   ON PAGE 9 OF THE RFP IN THE SECTION ENTITLED "A. ELIGIBLE ORGANIZATIONS,"
      THE SECOND BULLET POINT STATES "A CORPORATION OR HEALTH MAINTENANCE
      ORGANIZATION LICENSED UNDER ARTICLE 43 OF THE INSURANCE LAW." DOES THIS
      MEAN THAT AN HMO LICENSED BY ARTICLE 44 OF THE PUBLIC HEALTH LAW AND
      ARTICLE 43 OF THE INSURANCE LAW MAY PROPOSE TO OPERATE A CHILD HEALTH PLUS
      PROGRAM IN A COUNTY OUTSIDE OF ITS ARTICLE 44 TERRITORY? WHAT IS THE
      SERVICE AREA TO WHICH THE PROPOSAL APPLIES?

If an insurer has dual licensure they need to choose one license under which to
apply to the Child Health Plus program. The service area it will be permitted to
serve will depend on the license under which it applies.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 23

82.   ON PAGE 59 OF THE RFP IN THE SECTION ENTITLED "C. PROJECT DESIGN AND
      TIME PLAN FOR IMPLEMENTATION," THE NYSDOH REQUESTS CURRICULUM VITAE OF KEY
      PERSONNEL. WILL A RESUME BE ACCEPTABLE? IF NOT, COULD A DESCRIPTION OF THE
      STATE'S REQUEST BE INCLUDED IN THE RESPONSE TO THE BIDDER'S QUESTIONS?

A resume or a Curriculum Vitae will be acceptable.

83.   WE NEED THE MOST CURRENT LIST OF SCHOOL-BASED HEALTH CENTERS IN NEW YORK
      STATE.

A list of current school based health care centers will be provided to you by
the Department as an attachment to the written response to questions.

84.   WE NEED THE MOST CURRENT LIST OF PRESUMPTIVE ELIGIBILITY PROVIDERS.

A list of the most current presumptive eligibility providers will be provided to
you by the Department as an attachment to the written response to questions.

85.   ENROLLMENT PROJECTIONS ARE TO BE PROVIDED FOR WHAT PERIOD OF TIME?

Enrollment projections should be included for the full contract period of May 1,
1997 through December 31, 1999. These projections should also be broken down by
county/borough, calendar year and monthly within the calendar year.

86.   CAN SDOH PROVIDE A LIST OF MEDICAID "OUTSTATIONS"?

The Department will provide a list of Medicaid outstations as an attachment to
the written response to questions.

87.   WITH REGARD TO THE PROVISION OF A "TIMELINE" FOR PROGRAM IMPLEMENTATION,
      FOR MATURE CHILD HEALTH PLUS PROVIDERS, DOES THIS PERTAIN TO THE
      IMPLEMENTATION OF CHANGES IN THE PROGRAM?

The timeline for program implementation for purposes of this RFP refers to
implementation of programmatic changes.

88.   RESOURCES THAT WILL BE COMMITTED TO IMPLEMENTING AND OPERATING THIS
      PROGRAM. WHAT TYPE OF RESOURCES DOES THIS REFER TO: FINANCIAL, STAFF,
      PROGRAMMATIC?

Resources refer to financial, staff and programmatic areas.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 24

89.   SHOULD THE INDIVIDUAL RESPONSES TO QUESTIONS BE DIVIDED BY TABS? ARE THERE
      ANY INSTRUCTIONS REGARDING TABS FOR ATTACHMENTS AND APPENDICES?

Use of tabs or any other organizing aid, which facilitates the review of a
proposal, is welcome.

90.   IN THE GENERAL REQUIREMENTS SECTION, PARAGRAPH 1, THE INSTRUCTIONS STATE
      THAT "THE BIDDER SHOULD STATE HOW THE ENROLLMENT, MARKETING AND OTHER
      OPERATING PLANS MAY CHANGE DURING THE LENGTH OF THE PROGRAM". IS THIS A
      QUESTION THAT SHOULD BE ANSWERED WITH A SEPARATE NARRATIVE UNDER THE
      GENERAL REQUIREMENTS SECTION OR SHOULD THIS INFORMATION BE INCORPORATED
      WITH THE RESPONSES TO OTHER QUESTIONS?

The proposal should follow the outline offered in Section IV of the RFP.
Specifies about a bidder's proposal, such as the aspects of plan operations
noted in this question, should be provided under sections of the proposal.

91.   THE RFP STATES THAT A NARRATIVE DESCRIPTION OF THE ORGANIZATION, INCLUDING
      THE PARENT COMPANY AND ALL SUBSIDIARY COMPANIES SHOULD BE PROVIDED. SHOULD
      THIS NARRATIVE BE INCLUDED AS PART OF APPENDIX I, OR SHOULD IT BE INCLUDED
      IN THE RESPONSES TO THE QUESTIONS? A SIMILAR NARRATIVE IS REQUESTED IN
      CONJUNCTION WITH APPENDIX III. SHOULD THIS NARRATIVE BE INCLUDED WITH THE
      APPENDIX OR SHOULD IT BE INCLUDED AS PART OF THE QUESTIONS?

A narrative description of the organization should be provided in Appendix I.
Appendix III addresses the plan's financial operations, not organizational
descriptions.

92.   GIVEN THE COST AND LABOR INTENSIVE PROCESS ASSOCIATED WITH THE RFP
      APPLICATION, HOW WILL NON-MEDICAID PLANS BE EVALUATED FOR PARTICIPATION IN
      THE CHILD HEALTH PLUS PROGRAM (I.E. WILL IT ONLY BE CONSIDERED AFTER THE
      MEDICAID CERTIFIED PLANT ARE EVALUATED)?

All submissions will be given the attention and consideration they are due and
will be evaluated on the same criteria. However, the evaluation of network
composition will reflect the appropriate Medicaid managed care criteria
applicable to the Child Health Plus program objectives.

93.   SECTION L, 2 ON PAGE 37 OF THE RFP STATES THAT "INSURERS MUST SUBMIT A
      GENERAL PLAN OF A MARKETING PROGRAM OUTLINE WITH THEIR PROPOSAL ALONG WITH
      A COMPLETE DESCRIPTION OF HOW THEY EXPECT TO CONDUCT COMMUNITY OUTREACH
      AND MARKETING ACTIVITIES". "GENERAL PLAN" AND "OUTLINE" SEEM CONTRADICTORY
      TO "COMPLETE DESCRIPTION".

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 25

The bidder should submit a general plan of a marketing proposal, not an outline.

94.   PLEASE CLARIFY THE DIFFERENCE AND EXACTLY WHAT SDOH EXPECTS APPLICANTS TO
      SUBMIT WITH THEIR PROPOSALS.

Bidders should include in their proposals a plan which describes the marketing
services and resources devoted to this plan.

95.   WHAT INFORMATION MUST BE INCLUDED IN THE "TRANSMITTAL LETTER".

Transmittal letters should include, but not be limited to, the bidder's name,
address, and phone number, including appropriate contact person(s); a statement
that the plan and all provisions of the offer price are to remain in effect for
one-hundred and twenty (120) days from the date of the letter; and be signed by
an official of the organization authorized to bind the bidder to the
requirements of the RFP.

96.   IN SECTION IV, B, 3, B, PLEASE CLARIFY THE DIFFERENCE, IF ANY, BETWEEN THE
      USE OF THE WORDS "PROGRAM" AND "PROJECT" IN THE FORTH, FIFTH AND SIXTH
      BULLETS. DO BOTH REFER TO THE ACTUAL PROGRAM IMPLEMENTED AFTER CONTRACT
      AWARD?

The words "program" and "project" have been used here interchangeably.

97.   THERE IS REDUNDANT INFORMATION REQUESTED IN THE BULLETS UNDER SECTION IV,
      C (E.G., ONE BULLETS REQUESTS "EXPECTED NUMBER OF COVERED LIVES AND
      ANOTHER THE "NUMBER OF INDIVIDUALS EXPECTED TO BE SERVED; AND TWO BULLETS
      REQUEST THE COUNTIES TO BE SERVED). CAN APPLICANTS USE THEIR JUDGEMENT IN
      ELIMINATING SUCH REDUNDANCIES OR DOES SDOH WANT THIS INFORMATION INCLUDED
      IN THE RESPONSES TO THE EACH BULLET WHERE REQUESTED?

These appear to be redundancies, and bidders may use their best judgment in
responding to the information requested.

98.   WHY DOES THE EVALUATION CRITERIA SECTION OF THE RFP (SECTION V) INDICATE
      THAT SDOH WILL EVALUATE PROPOSALS BASED ON INFORMATION NOT
      REQUESTED/REQUIRED TO BE INCLUDED IN PROPOSALS AS PER SECTION IV.

While the DOH requests or requires certain specific information be included in
submissions, the DOH is free to consider any information voluntarily offered by
a bidder and which may enhance the evacuation of that bidder's proposal.

99.   WITH REGARD TO THE REQUIREMENT TO LIST NAME AND ADDRESS OF APPROPRIATE
      OFFICERS, WILL BUSINESS ADDRESSES SUFFICE IN RESPONDING TO THE QUESTION?

Business addresses of appropriate officers will suffice.

<PAGE>

                                    PART II -

                           NETWORK COMPREHENSIVENESS
<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 27

II.   NETWORK QUESTIONS

      A.    [ILLEGIBLE] SUBMISSION

100*. WHAT FORMAT SHOULD WE USE TO DESCRIBE OUR PROVIDER NETWORK? FOR EXAMPLE,
      CAN WE USE THE SPREADSHEET FORMATS THAT WERE REQUIRED FOR THE RECENT
      MEDICAID MANAGED CARE REQUEST FOR PROPOSALS? IF SO, CAN WE USE THE CODING
      SPECIFIED IN THE "DATA DICTIONARY FOR MANAGED CARE PROVIDER NETWORK
      INFORMATION, VERSION 1.0" AS PUBLISHED BY THE SDOH OFFICE OF MANAGED CARE?

Insurers currently participating in the NYS Medicaid Managed Care initiative are
not required to submit descriptions of their provider networks except for
aspects of their networks which may not be reflected in their submission to the
DOH's Office of Managed Care which are due January 23, 1997. Applicants that are
not participants in the Medicaid Managed Care initiative should submit provider
network composition information on diskette (.WK3 or Excel) as required by the
Child Health Plus request for proposal, preferably following the spreadsheet
formats developed by the Office of Managed Care. These formats will be made
available to applicants by forwarding a request to the Bureau of Health
Economics.

101.  MANY OF THE RFP REQUIREMENTS ARE EQUIVALENT TO THOSE IN THE RECENTLY
      COMPLETED MEDICAID MANAGED CARE PROCUREMENT PROCESS. HEALTH PLANS WHICH
      ARE APPROVED UNDER THAT PROCUREMENT, THEREFORE, HAVE ALREADY MET THE
      DEPARTMENT'S EXTENSIVE MEDICAID MANAGED CARE REQUIREMENTS. PLEASE CLARIFY
      EXACTLY WHAT INFORMATION MUST BE PROVIDED BY THESE PLANS IN RESPONSE TO
      THE CHILD HEALTH PLUS RFP, ESPECIALLY RELATED TO THE PROVIDER NETWORK,
      QUALITY ASSURANCE, UTILIZATION REVIEW, MANAGED CARE MECHANISMS, PROVIDER
      SUB-CONTRACTS, AND OTHER FEATURES WHICH ARE EQUIVALENT TO THOSE OF THE
      MEDICAID PROGRAM. WILL THE STATE CONSIDER "DEEMED" STATUS FOR
      PROGRAM-EQUIVALENT FEATURES OF SUCH PLANS, I.E., IS MEDICAID APPROVAL
      SUFFICIENT EVIDENCE OF PROVIDER NETWORK, ETC., THUS WAIVING THE NECESSITY
      TO DISCUSS THOSE FEATURES, IN DETAIL, IN THE CHILD HEALTH PLUS RESPONSE?

Only the network composition component of the Medicaid managed care participant
will be used for evaluation by the Child Health Plus program. The network
composition evaluation will be done on data submitted to the Office of Managed
Care on January 23, 1997. All other aspects of the RFP need to be addressed
within a bidder's proposal.

102.  THE RFP STATES THAT HEALTH PLANS MUST INSTITUTE A PROCESS FOR OBTAINING
      AND VERIFYING THE NAMES OF HOSPITALS, HMOS, PHPS, AND MEDICAL GROUPS WITH
      WHICH THE PROVIDER HAS BEEN ASSOCIATED, AS WELL AS INFORMATION FROM

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 28

      OTHER HMOS OR HOSPITALS REGARDING PROFESSIONAL MISCONDUCT OR MEDICAL
      MALPRACTICE, AND ASSOCIATED JUDGEMENTS/SETTLEMENTS, AND ANY REPORTS OF
      PROFESSIONAL [ILLEGIBLE]  BY A HOSPITAL PURSUANT TO NYS PUBLIC HEALTH LAW
      SECTION 2803-E. [ILLEGIBLE], THE STATE HAS NOT REQUIRED PLANS TO OBTAIN
      INFORMATION FROM HMOS, PHPS, AND MEDICAL GROUPS. IS IT SUFFICIENT TO
      OBTAIN THIS INFORMATION FROM THE NEW YORK STATE DEPARTMENT OF HEALTH AND
      THE EDUCATION DEPARTMENT, AS WELL AS FROM THE INDIVIDUAL PHYSICIANS,
      RATHER THAN REQUIRE THE HEALTH PLAN TO OBTAIN THIS INFORMATION DIRECTLY
      FROM HMOS, PHPS, AND MEDICAL GROUPS?

To the extent possible, information about potential providers should be obtained
from all possible sources. Health plans must describe the process used for
credentialling/recredentialling.

103.  WILL THERE BE AN ON-SITE REVIEW OF THE PLAN BY DEPARTMENT OF HEALTH PRIOR
      TO THE CONTRACT AWARD?

None are planned at this time. However, the State reserves the right to conduct
an on-site review.

104.  APPLICANT IS ASKED TO IDENTIFY THE ADDITIONAL NUMBER OF CHILD HEALTH PLUS
      ENROLLEES THAT THE PRIMARY CARE PROVIDERS ARE WILLING TO ACCEPT. PLEASE
      CLARIFY WHETHER YOU ARE ASKING FOR AN AGGREGATE NUMBER OF ENROLLEES FOR
      THE PCPS IN A COUNTY'S NETWORK OR ARE YOU ASKING FOR A SPECIFIC NUMBER BY
      PCP?

We are asking for a specific number by PCP.

105.  ON PAGE 50 OF THE RFP IN THE SECTION ENTITLED "C. PLAN AND PROJECT
      DESIGN," THE SECOND BULLET POINT REFERS TO IDENTIFYING AN ADDITIONAL
      NUMBER OF CHILD HEALTH PLUS ENROLLEES THAT A PROVIDER IS WILLING TO
      ACCEPT. DURING THE READINESS REVIEW PROCESS FOR MEDICAID, THE NYSDOH
      PROVIDED A DEFAULT NUMBER IF THE PLAN INDICATED A PROVIDER HAD AN OPEN
      PANEL. IS THIS DEFAULT NUMBER APPLICABLE TO THE CHILD HEALTH PLUS
      PROPOSAL?

No. You must provide the number of enrollees that each PCP is willing to accept.
If no number is provided, that PCP will not be counted in your network.

      B.    EXPANSION / SERVICE AREA

106*. IF A PLAN IS APPROVED BY NYSDOH TO EXPAND INTO ADDITIONAL
      COUNTIES/BOROUGHS AND THERE IS AN ADEQUATE PEDIATRIC NETWORK IN THESE
      COUNTIES/BOROUGHS WILL THE PLAN BE ABLE TO EXPAND ITS CHILD HEALTH PLUS

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 29

      SERVICE AREA (AS IS CURRENTLY PERMITTED UNDER THE EXISTING CHILD HEALTH
      PLUS PROGRAM)?

Yes, however the plan needs to secure approval from the State before offering
the Child Health Plus program in the expanded service area. The State reserves
the right to limit an insurer's service area in the Child Health Plus program
even though the insurer may be certified.

107*  IS THERE ANY GEOGRAPHIC SERVICE AREA REQUIREMENTS, SUCH AS INSURERS
      COVERING THE SAME SERVICE AREA FOR CHILD HEALTH PLUS AS WELL AS ITS OTHER
      LINES OF BUSINESS?

No such requirement exists. However, if applicable, insurers can only
participate in Child Health Plus in service areas in which they are certified to
operate. The Department expects that proposed service areas will cover the
entire county.

108*. IS THERE A TARGETED NUMBER OF CHILD HEALTH PLUS INSURERS THAT THE
      DEPARTMENT OF HEALTH HOPES TO ACHIEVE OR LIMIT IN EACH COUNTY?

There is no targeted number of insurers to be approved. However, the State
reserves the right to limit an insurer's service area or, on the other hand, to
waive certain restrictions to permit any expansion of coverage where deemed
necessary.

109.  WHAT INFORMATION WOULD YOU LIKE US TO PROVIDE IN RESPONSE TO THE REQUEST
      THAT WE DESCRIBE THE GEOGRAPHIC ACCESSIBILITY OF OUR PROVIDERS TO OUR
      MEMBERS? DO YOU WANT A MAP OF OUR PROVIDER LOCATIONS? IS THERE A SPECIFIC
      FORMAT YOU WOULD LIKE US TO USE IN MAPPING OUR PROVIDER NETWORK?

For non-Medicaid managed care plans, maps can be submitted which provide some
indication of potential enrollee clusters, the locations of network providers,
and approximate travel times or distances between these clusters and providers.
Separate maps depicting provider types (e.g., primary care, specialties,
hospitals, etc.) are preferred.

      C.    QARR AND OTHER STANDARDS

110*. THE PROPOSED REPORTING REQUIREMENTS (RFP PAGE 45) REFER TO "NEW BORN CARE"
      UTILIZATION MEASURES. IT IS OUR UNDERSTANDING THAT, SINCE CHILD HEALTH
      PLUS IS AN INDIVIDUAL ENROLLMENT PROGRAM (I.E., THERE IS NO "FAMILY"
      COVERAGE) AND THERE IS NO RETROACTIVE ENROLLMENT, THERE IS NO MECHANISM
      FOR A NEWBORN TO BE ENROLLED FROM DATE OF BIRTH. IS THIS CORRECT? IF SO,
      HOW CAN THERE BE ANY "NEWBORN CARE" MEASUREMENTS IN THIS PROGRAM?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 30

This measure was included due to the remote possibility of a newborn having a
prolonged hospital stay after becoming enrolled in Child Health Plus. However,
newborn coverage would not be retroactive to any [ILLEGIBLE] prior to the actual
enrollment date. If upon further analysis reporting of such measures is
determined to be of marginal, if any, usefulness, consideration can be given to
removing them from future reporting.

111*. ON PAGE 24 OF THE RFP IN THE SECTION ENTITLED "(9) SERVICE ACCESSIBILITY,"
      THE NARRATIVE STATES THAT "HEALTH PLANS WILL BE EXPECTED TO TAKE ALL
      NECESSARY MEASURES TO ENSURE COMPLIANCE WITH THE ACCESS STANDARDS ISSUED."
      PRESENTLY, PHP MONITORS ACCESS WITH PERIODIC SATISFACTION SURVEYS OF A
      SAMPLE OF EACH PCP'S PATIENTS. IS THIS METHOD ACCEPTABLE TO THE STATE AND
      TRANSFERABLE TO THE CHILD HEALTH PLUS POPULATION?

Periodic satisfaction surveys can be considered part of a program intended to
monitor compliance with access standards. However, an insurer will be
responsible for taking all necessary measures to ensure compliance with these
standards. Such measures may include appointment availability and 24-hour access
studies.

112*. ON PAGE 25 OF THE RFP IN THE SECTION ENTITLED "(E) DAYS TO APPOINTMENT,"
      WILL THERE BE ANY STANDARDS GOVERNING PRENATAL, NEWBORN OR FAMILY PLANNING
      HEALTH CARE TO ABIDE BY?

Such standards include: initial prenatal visits within three weeks during the
first trimester and two weeks thereafter initial visit for newborns to their PCP
within two weeks of hospital discharge; and initial family planning visits
within two weeks.

113*. WHEN WILL THE FIRST SET OF QARR-LIKE INDICATORS BE DUE AND FOR WHAT
      ENROLLMENT PERIOD?

The set of QARR indicators presented in the RFP is provided as a proposed set of
variables that will be more definitively developed over time. It is expected
that insurers will be required to submit the first set of indicators, which will
reflect the first year's enrollment period (from the implementation date of May
1, 1997), during the third quarter of calendar year 1998.

114*. THE CHART ON PAGE 45 INDICATES THE DATA MUST BE REPORTED ON MATERNITY CARE
      FOR MEMBERS. DOES THE STATE ANTICIPATE THAT A PREGNANT FEMALE WILL BE
      ENROLLED IN CHILD HEALTH PLUS AS WELL AS PCAP? IF YES, HOW WILL HEALTH
      PLANS OBTAIN ENCOUNTER DATA IN ORDER TO MEET THE REQUIREMENTS LISTED ON
      PAGE 45?

No. Although a provider may be both a Medicaid and a Child Health Plus provider,
an

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 31

individual will be enrolled in either Medicaid or Child Health Plus, not both.

115*. THE "QUALITY" SECTION OF THE REPORTING TABLE ON PAGE [ILLEGIBLE] OF THE
      RFP INDICATES THAT "LOW BIRTH WEIGHT, AND WELL CHILD [ILLEGIBLE] VISITS IN
      THE FIRST YEAR OF LIFE" AND "PREGNANT AT TIME OF ENROLLMENT" NEEDS TO BE
      REPORTED. ADDITIONALLY, THE "UTILIZATION" SECTION OF THE SAME TABLE
      INDICATES THAT NEWBORN CARE NEEDS TO BE REPORTED. ARE THE ABOVE REPORTING
      REQUIREMENTS NEEDED TO ACCOUNT FOR THE PREGNANT WOMEN AND NEWBORNS WHO ARE
      ENROLLED DUE TO INELIGIBILITY FOR MEDICAID?

Yes, in the situation where an individual either is not enrolled in Medicaid or
chooses not to enroll in Medicaid.

116*. WHY WILL PLANS BE REQUIRED TO REPORT THIS DATA GIVEN SDOH'S EXPECTATION
      THAT SUCH A SMALL NUMBER OF PREGNANT WOMEN AND CHILDREN UNDER 1 YEAR WILL
      BE ENROLLED OR STAY ENROLLED IN CHILD HEALTH PLUS?

Such data are considered important indicators of quality of services offered by
a provider network and are required variables for other enrollees covered by
non-public services. However, if analyses indicates that such data is not of
significant effect, consideration will be given to eliminating reporting
requirements.

      D.    NETWORK COMPOSITION / SELECTION

117*  CAN WE INCLUDE ALL OF OUR CONTRACTED MEDICAID PROVIDERS IN THE NETWORK
      SUBMISSION IF THEY HAVE ORALLY CONFIRMED THEIR WILLINGNESS TO EXTEND THEIR
      CONTRACT TO THE CHILD HEALTH PLUS PROGRAM? IS IT NECESSARY TO HAVE A
      SIGNED LETTER OF INTENT FROM EACH PROVIDER BY THE TIME OF THE NETWORK
      SUBMISSION?

The insurer should identify in their submission those providers who have signed
at least a letter of intent to participate in the Child Health Plus program or
have previously contract to provide services to any product lines of the
insurer. Insurers will be required to demonstrate that providers who have filed
a letter of intent are under contract for Child Health Plus program services at
the time of contract negotiations.

118.  PLEASE PROVIDE GUIDANCE FOR THE MEASURE WE SHOULD USE TO DETERMINE THE
      ADDITIONAL NUMBER OF CHILD HEALTH PLUS ENROLLEES THAT A PRIMARY CARE
      PROVIDER IS WILLING TO ACCEPT. IS THERE A MAXIMUM ALLOWABLE PANEL SIZE?
      SHOULD WE ASSUME THAT THE MAXIMUM CAPACITY FOR CHILD HEALTH PLUS AND
      MEDICAID ENROLLEES CANNOT EXCEED 1,500 PER PROVIDER?

The maximum allowable panel size of 1,500 enrollees is applicable to the
Medicaid

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 32

Managed Care program only.

119.  CAN FEMALES SELECT AN OB/GYN AS A SECOND PRIMARY CARE PROGRAM?

Health plans, at their option, may permit OB/GYN providers to serve as PCPs,
subject to DOH qualifications. Plans must also permit direct access for female
members to obstetrics and gynecology services pursuant to Public Health Law
Section 4406-b(1).

120*  GIVEN THAT PLANS MUST PERMIT DIRECT ACCESS TO OBSTETRICAL AND
      GYNECOLOGICAL SERVICES PURSUANT TO PHL SECTION 4406-b, CAN PLANS LIMIT THE
      REIMBURSEMENT TO THESE PROVIDERS TO THE AMOUNT THAT WOULD HAVE BEEN PAID
      TO A COMPARABLE IN-NETWORK PROVIDER?

The provisions concerning direct access to obstetrical and gynecological
services pursuant to PHL Section 4406-b, are limited to in-network providers and
therefore reimbursement arrangements would be in place.

121*  WILL SUBSCRIBERS HAVE THE OPTION OF SELECTING A CLINIC OR HEALTH CENTER IN
      ADDITION TO A PRIMARY CARE PROVIDER?

Staff or group practice or center-based models may require that enrollees first
select a site (clinic or health center) and subsequently select a PCP from among
those available at the site.

122.  WILL A BIDDER RECEIVE CREDIT FOR PAST SUCCESSFUL EXPERIENCE IN
      ADMINISTERING A CHILD HEALTH PLUS PLAN IF IT NOW PROPOSES AN ENTIRELY NEW
      NETWORK?

Additional "credit" is not awarded to current insurers.

123*  WHAT PEDIATRIC SPECIALISTS ARE NECESSARY FOR A CHILD HEALTH PLUS NETWORK?

A network must include an array of pediatric specialists required to meet the
medical needs of enrollees.

124.  For Primary CARE Providers you must identify the additional number of
      CHILD HEALTH PLUS ENROLLEES THE PROVIDER IS WILLING TO ACCEPT. DOES THIS
      QUESTION REFER TO EXISTING PLANT AND PROVIDER NETWORKS WHICH ARE ALREADY
      SERVING CHILD HEALTH PLUS ENROLLEES? SPECIFICALLY, COMMUNITY PREMIER PLUS
      WILL BEGIN OPERATIONS IN THE FIRST QUARTER OF 1997, AND ITS PRIMARY CARE
      PROVIDERS DO NOT YET SERVE CHILD HEALTH PLUS ENROLLEES. IN THIS CASE, DOES
      COMMUNITY PREMIER PLUS PROVIDE AN ESTIMATE OF THE TOTAL NUMBER OF CHILD
      HEALTH PLUS ENROLLEES THAT THESE PROVIDERS COULD SERVE?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 33

Insurers are required to identify the total number of Child Health Plus
enrollees that each PCP is willing to accept.

125.  WHAT IS THE MEDICAID CERTIFICATE OF AUTHORITY?

The certificate of authority that is required pertains to the Article 44
certificate of authority that is issued by the NYSDOH for an entity to operate a
HMO or PHSP. It is not specific to the Medicaid program.

126.  NOTIFICATION TO MEMBERS MUST BE PROVIDED WITHIN 30 DAYS OR 3 DAYS AS
      REQUIRED IN CURRENT PARTNERSHIP PLAN AGREEMENTS (PAGE 22, SECTION 3(h)).?

Health plans must notify their members of any of the following PCP changes
within thirty (30) business days of the effective date of change: office
address/telephone number change; office hours change; and separation from plan
(termination from network).

127.  PAGE 25, SECTION 9(d). WOULDN'T PLANS HAVE TO REQUIRE NOTIFICATION WITHIN
      24 HOURS GIVEN $35 CO-PAYMENT? WHAT OBLIGATIONS MUST A PLAN INCUR FOR
      PAYMENT OF OUT-OF-NETWORK EMERGENCY MEDICAL CARE? IS IT ACCEPTABLE TO
      LIMIT SUCH PAYMENTS, EVEN FOR EMERGENCY CARE, EITHER TO MEDICAID RATES OR
      TO A PERCENTAGE OF REASONABLE AND CUSTOMARY CHARGES?

Under the statute, insurers have the option of imposing a $35 copayment on
emergency room services when the member fails to provide notice to the insurer
of receipt of emergency services within 24 hours. The 24 hours is viewed as a
minimum. An insurer can allow for a longer period of time in which notice must
be given.

Covered emergency services received "out of network" are viewed as authorized
out of plan care. The enrollee incurs no financial liability beyond that which
would have been incurred if a participating provider were used, i.e., the
copayment, if applicable. Thus, the insurer may not limit its payment for
out-of-network services to Medicaid rates or to a percentage of UCR unless the
out of network provider agrees

      E.    SCHOOL BASED HEALTH CENTERS

128*. ON PAGE 55, SECTION 3 OF THE REQUEST FOR PROPOSAL, THE INCLUSION OF
      SCHOOL-BASED HEALTH CENTERS IS MENTIONED AS A CRITERIA FOR EVALUATION OF
      THE ACCESSIBILITY OF THE NETWORK. IS THE STATE GOING TO PROVIDE GUIDANCE
      TO THE PLANS FOR CONTRACTING WITH SCHOOL-BASED HEALTH CENTERS?

<PAGE>

Contract guidelines will be made available shortly which can be used for the
Child Health Plus program. In year one of the program, insurers are encouraged
but not required to contract with school-based health centers. Such contracts
are required in the second and subsequent years of the Child Health Plus
contract.

129*  IS THERE A REQUIRED PERCENTAGE OF SCHOOL-BASED HEALTH CENTERS WITH WHICH
      BIDDERS MUST CONTRACT IN YEAR 1 OF THE CHILD HEALTH PLUS PROGRAM? ARE THE
      CONTRACT EXPECTATIONS COMPARABLE TO THOSE UNDER PARTNERSHIP PLAN
      GUIDELINES?

No. In year one, insurers are encouraged but not required to contract with
school-based health centers. Such contracts are required in the second and
subsequent years of the Child Health Plus contract. The contract expectations
are comparable to those under the Partnership Plan.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 35

                                   PART III-

                               FISCAL EVALUATION

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 36

PREMIUM / FISCAL

130.  ARE THE PARENTS OF CHILDREN ENROLLED IN CHILD HEALTH PLUS PROGRAM
      INSULATED FROM LIABILITY, BY OPERATION OF LAW, FOR THE COST OF MEDICAL
      CARE DELIVERED TO THEIR CHILDREN AS PARTICIPANTS IN THIS PROGRAM TO THE
      EXTENT THAT THESE COSTS EXCEED THE AMOUNT THAT PROVIDERS ARE PAID AS
      REIMBURSEMENT?

This situation should never occur as the insurance carrier will have
arrangements in place with participating providers for reimbursement of
services. However, parents of enrollees are not insulated from costs of services
not covered under the program.

131.  THE BILL TO THE STATE MAY BE SENT BEFORE THE SUBSCRIBER HAS PAID THAT
      MONTHLY PREMIUM. THIS MAY RESULT IN A CANCELLATION FOR NON-PAYMENT WHERE
      THE SUBSCRIBER'S PAID TO DATE AND THE STATE'S PAID TO DATE ARE NOT EQUAL.
      HOW SHOULD THE CANCELLATION FOR NON-PAYMENT BE HANDLED? (CLAIMS MAY HAVE
      BEEN PAID DURING THE PERIOD THAT THE SUBSCRIBER WAS ACTIVE WITH THE STATE,
      YET THE SUBSCRIBER'S PREMIUM PORTION WAS NOT PAID.)

Since all family contributions to premium must be paid in advance, an insurer
would not be billing the State for the remaining portion of the premium if the
family contribution was not paid. Cancellation for non-payment should be
immediate to avoid retroactive disenrollment.

132*  IT IS OUR UNDERSTANDING THAT AT LEAST ONE (1) MONTH OF THE FAMILY'S SHARE
      OF THE PREMIUM FOR EACH APPLICANT MUST BE PAID AT THE TIME OF APPLICATION.
      THE BALANCE DUE WILL BE PAID ON A MONTHLY BASIS ONE (1) MONTH BEFORE THE
      PERIOD IT COVERS TO ALLOW FOR A THIRTY (30) DAY GRACE PERIOD PRIOR TO THE
      EFFECTIVE DATE OF COVERAGE. WILL FAMILIES OR INSURERS HAVE THE OPTION OF
      SELECTING A DIFFERENT BILLING CYCLE (I.E., QUARTERLY, SEMI-ANNUALLY, OR
      ANNUALLY)?

Insurers may offer families the option of quarterly, semi-annual, or annual
modes in addition to a monthly mode of payment, but the choice of mode lies with
the family. A monthly mode option must always be available.

133*  "GRACE PERIODS" GENERALLY REFER TO A PERIOD OF TIME, AFTER A PAYMENT IS
      DUE, DURING WHICH PAYMENT MAY BE MADE WITHOUT PENALTY OR DISENROLLMENT.
      THE RFP (PAGE 16) APPEARS TO DEFINE THE SUBSCRIBER PREMIUM PAYMENT GRACE
      PERIOD AS THE 30 DAYS PRIOR TO THE PAYMENT DUE DATE. THIS WOULD MEAN THAT
      THE INSURER MUST TERMINATE COVERAGE FOR A CHILD HEALTH PLUS ENROLLEE IF
      THE PREMIUM CONTRIBUTION IS NOT PREPAID, I.E., RECEIVED BY THE FIRST MONTH
      FOR THE MONTH COVERED BY THAT PAYMENT. IS THIS CORRECT? IF SO,

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 37

      IT IS NOT ONLY DIFFICULT TO ADMINISTER, IT IS ALSO A MORE SEVERE PAYMENT
      RULE THAT APPLIES TO THE STATE WHICH, ACCORDING TO THE RFP, WOULD NOT PAY
      THE SUBSIDY PORTION OF THE PREMIUM UNTIL AT LEAST THE MONTH FOLLOWING THE
      MONTH OF COVERAGE. WHAT IS THE RATIONALE FOR THIS INEQUITY IN PAYMENT
      RULES BETWEEN THE SUBSCRIBER AND THE STATE? IS THE STATE WILLING TO
      RECONSIDER THE GRACE PERIOD PROVISION?

The RFP states that the family contribution to the premium is due 30 days in
advance for the period of coverage. However, the insurer may allow the family an
additional 30 days to submit the payment. For example, for coverage for the
month of October, payment is due on September 1. However, the family has until
September 30 to submit the payment without disenrollment. The rationale for
requiring advance payment on behalf of the family is to avoid retroactive
disenrollment for failure to pay subsequent to the covered period and so that
families do not insure medical expenses for a period where the family fails to
make payment and was disenrolled resulting in denied claims for that period.

134.  WHAT ARE THE PROCEDURES FOR THE $25.00 ANNUAL FEE ALREADY PAID BY
      SUBSCRIBERS WHO HAVE BEEN APPROVED BEYOND MAY 1, 1997?

If the family requests a refund of any unused portion of the $25.00 annual
premium family contribution the plan must pay the refund.

135.  WILL RETROACTIVE BILLING BE ALLOWED?

No retroactive billing will be allowed.

136.  DOES THE PLAN HAVE THE OPTION TO WAIVE THE PREMIUM IN ANY SPECIAL
      CIRCUMSTANCE?

No. The intent of legislation was to have families contribute to the cost of
the premium.

137.  PAGE 16, SECTION I. THE RFP STATES THAT MEMBER PREMIUMS MUST BE PAID 30
      DAYS IN ADVANCE, BUT THAT ONLY ONE MONTH'S PREMIUM MUST BE TENDERED AT THE
      TIME OF ENROLLMENT? WON'T IT BE NECESSARY TO COLLECT TWO MONTHS' PREMIUM
      AT THE TIME OF ENROLLMENT IN ORDER TO MAINTAIN THE PRINCIPLE OF ADVANCE
      PAYMENT?

The first month's premium must be paid with the application. The next month's
premium will be required prior to the last day of the first month of coverage.

138.  PAGE 33, SECTION 3. ARE THERE ANY PARAMETERS FOR AN ACCEPTABLE POLICY
      REGARDING TERMINATION FOR NON-PAYMENT OF PREMIUMS? MAY A PLAN

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 38

      IMMEDIATELY TERMINATE AN ENROLLEE FOR NON-PAYMENT, SUBJECT TO THE GENERAL
      REQUIREMENTS OF THE INSURANCE LAW?

Insurance Law does not require notification of termination due to nonpayment of
premium. Termination may be immediate as of the last day for which the premium
has been paid.

139*. WHAT INFORMATION WOULD YOU LIKE US TO PROVIDE IN RESPONSE TO THE REQUEST
      THAT WE DETAIL THE ARRANGEMENTS FOR THE REIMBURSEMENT OF PARTICIPATING
      PROVIDERS? IS THERE A SPECIFIC FORMAT YOU WOULD LIKE US TO USE IN
      DETAILING THESE ARRANGEMENTS?

We need to know the specific payment arrangements that will be used to
compensate your providers and any related fee schedules or payment rates that
will be used for payment purposes. For example, if primary care providers are
paid on a global capitation basis you need to identify the specific components
of the payment model including monthly payment levels, utilization targets etc.
If specialist are paid on a discounted fee for service basis you need to
identify what fee schedule you are using (e.g. RBRVS) and the level of
compensation. The fee schedule(s) however, do not have to be transmitted to the
Department. The compensation arrangements can be presented in narrative format.
All shared risk or profit management should be described as well any reinsurance
or stop-loss available to providers.

140.  FOR THE FINANCIAL RATE FILING, CAN THE PLAN PROPOSE DIFFERENT RATES FOR
      DIFFERENT AGE/SEX CLASSES OR IS THE PROPOSAL ONLY FOR ONE GLOBAL RATE FOR
      ALL PARTICIPANTS? IS THERE ANY CAP ON THE ADMINISTRATIVE SHARE THAT WILL
      BE ALLOWED?

Since this product is considered a community rated product the plan must propose
a single global rate for all participants. The administrative portion of the
rate proposal will be reviewed in relation to the overall rate request. However,
the rate filing guidelines require that the actuarial memorandum include the
specific formulas, methods, and assumptions used in calculating the premium
rates and requires identification of any special assumptions with respect to
children under one year of age and children ages 15-19.

141*. PLEASE CLARIFY WHETHER THE FINANCIAL RESERVE REQUIREMENTS WILL BE BASED
      UPON ANTICIPATED ENROLLMENT AND HOW THEY SHOULD BE COMPUTED? AT WHAT
      POINT MUST THESE RESERVES BE PUT IN ESCROW?

The financial reserve and escrow requirements, as they pertain to Health
Maintenance Organizations and Prepaid Health Service Plans, are set forth in
Article 44 of the Public Health Law and Part 98 of the Commissioner of
Health's Rules and

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 39

Regulations. The reserve requirement is based on current year premium revenue.
The escrow requirement is based on total projected health care expenditures for
the upcoming year.

142.  PLEASE SPECIFY THE CONTENTS TO BE INCLUDED IN THE ACTUARIAL MEMORANDUM.

The contents of the actuarial memorandum are identified in Appendix F of the
Request for Proposal.

143.  PLEASE CLARIFY HOW POINTS WILL BE AWARDED BASED UPON THE "FISCAL
      EVALUATION CRITERIA". FOR EXAMPLE, CAN A PLAN RECEIVE A FULL 20 POINTS IF
      ITS PREMIUM RATE PROPOSAL IS OBJECTIVELY "REASONABLE IN RELATION TO THE
      BENEFITS PROVIDED", EVEN IF THE PROPOSED PREMIUM RATE IS SOMEWHAT HIGHER
      THAN THAT PROPOSED BY OTHER PLANS OFFERING THE SAME BENEFITS?

While the scoring algorithm for the evaluation criteria was identified in the
proposal, the specific weighting scheme for each section of the proposal has not
been finalized at this time.

144.  WILL THE DEPARTMENT OF HEALTH PROVIDE BUDGET, RATE CALCULATION, AND
      PROVIDER SPREADSHEETS, TO ASSIST INSURERS INTERESTED IN RESPONDING TO THE
      RFP?

An example of a provider rate filing has been included as Attachment F in the
proposal. The Department will not provide any additional rate filing materials
except for the data reports that are being made available.

145*. IS AN ACTUARIAL DATA BOOK AVAILABLE FOR ANALYSIS?

The Department will forward the following data reports to all insurers that
submitted a letter of intent within the required time frame.

            -     1992 Maternal, Child & Adolescent Health Profile - (please
                  note: selected hospital inpatient discharge tables have been
                  updated using 1994 data);

            -     A schedule listing the current approved Child Health Plus
                  premiums;

            -     A schedule listing the December 1996 Child Health Plus
                  enrollment by county; and

            -     A schedule projecting the number of uninsured children for New

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 40

                  York City and rest of state by age and federal poverty level
                  based on the 1995 Current Population Survey (CPS).

      In addition to the above, data reports, the Department is also making
available for public inspection and photocopying the 1995 annual financial and
statistical reports filed by the current Child Health Plus insurers. To date,
thirteen 1995 annual reports have been filed with the Department. The reports
can be accessed by calling the Departments' Records Access Officer Gene
Therriault, at (518) 474-8734 for an appointment.

146*. AS LISTED IN THE APPENDIX F, PROCEDURES FOR PREMIUM RATE FILING, PREMIUM
      RATE DEVELOPMENT FORM, PLEASE EXPLAIN WHAT COMPRISES THE 2% STATUTORY
      CONTRIBUTION.

The 2% reference in the premium rate development form does not apply to the
Child Health Plus program.

147.  TO WHAT EXTENT WILL THE RATE FILING BE A FACTOR IN THE SELECTION PROCESS
      (i.e. IS THERE AN ACCEPTABLE RANGE OF PREMIUMS, AS THERE WAS WITH THE
      MEDICAID MANAGED CARE PROCUREMENT PROCESS)?

As stated in the RFP, all proposals will be evaluated on a competitive basis
based on the scoring algorithm that was identified. Premiums submitted as part
of this process will be evaluated for their reasonableness in relation to the
benefits provided.

148.* WE WANT TO ENCOURAGE GOOD PRENATAL CARE, THEREFORE DOES THE $2.00
      PHYSICIAN CO-PAYMENT APPLY TO OBSTETRICAL CARE, OR IS IT WAIVED IN THIS
      SITUATION?

The statute states that, with limited exception, a $2 co-payment shall be
imposed on a per visit basis for physician services. To the extent that the
prenatal visit constitutes a visit for physician services, the $2 co-payment may
not be waived.

149.  WILL THE BUREAU OF HEALTH ECONOMICS BE PROVIDING ANY RATE GUIDELINES, OR
      INSTRUCTIONS REGARDING THE CALCULATION OF RATES?

The Department will not be providing any additional guidelines or instructions
regarding the calculation of the rates. The rate filing guidelines are presented
in Appendix F of the proposal.

150.  ARE PLANS REQUIRED TO CARRY STOP-LOSS INSURANCE FOR CHILD HEALTH PLUS?

Plans that are governed by Article 44 of the Public Health Law are generally
required

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 41

to have stop-loss or re-insurance coverage.

151*  SDOH HAS RECOGNIZED THAT THE [ILLEGIBLE] OF HEALTH CARE VARIES FROM ONE
      REGION TO THE NEXT, AS WELL AS FROM [ILLEGIBLE] PREMIUM GROUP (AGE AND
      SEX) TO THE NEXT. CONSEQUENTLY, EACH REGION AND PREMIUM GROUP HAS
      DIFFERENT RATES. ARE APPLICANTS TO PROPOSE UNIFORM RATES ACROSS ALL
      COUNTIES OR DIFFERENT RATES FOR EACH COUNTY/REGION? FOR ENROLLEES IN
      DIFFERENT PREMIUM GROUPS (AGE AND SEX)?

Since this product is considered a community rated product, the plan must
propose a single global rate for all participants within a region. The rates can
be varied by county/region as actuarial justified and in accordance with State
Insurance regulations. However, the rate filing guidelines require that the
actuarial memorandum include the specific formulas, methods, and assumptions
used in calculating the premium rates and requires identification of any special
assumptions with respect to children under one year of age and children ages
15-19.

152*  ARE THE CO-PAYS FOR EMERGENCY ROOM USAGE AND PHARMACY REQUIRED OR
      OPTIONAL?

The co-payments identified in the proposal for emergency room usage and pharmacy
are optional, however, if co-payments are proposed, they cannot exceed $3 for
prescriptions and nutritional supplements, as defined in the benefit package, or
$35 for failure to notify an insurer within 24 hours of emergency room use
and/or inappropriate emergency room visits.

153.  PLEASE CLARIFY THE LINK BETWEEN THE NEW YORK STATE/FAMILY'S SHARE PREMIUM
      REVENUE AND THE BUDGET FORM 1, APPENDIX K. SHOULD THE BUDGET ALSO INCLUDE
      ESTIMATED MEDICAL EXPENSES?

The reference to submission of an agency's budget on page 51 of the proposal
relates only to the administrative costs of the organization submitting the
proposal. The proposal inappropriately referenced the inclusion of the family's
share of the premium and New York State' premium. Do not include these items or
medical expenses on the budget forms in Appendix K.

154*. IS IT NECESSARY FOR APPLICANTS TO PROVIDE SALARY INFORMATION FOR ALL THE
      PERSONNEL (BOTH DIRECTED AND ALLOCATED) IN BUDGET FORM 1 ?

Salary information and related fringe benefit costs must be reported for
personnel who are directly charged to the program. Salary and related fringe
benefit costs can be allocated for indirect personnel however, the statistical
bases which supports the allocation must be provided.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 42

155*  APPLICANTS ARE TO PROVIDE ACTUAL EXPERIENCE FOR THE BASE PERIOD (APPENDIX
      F). WHAT IS THE "BASE PERIOD"? HOW CAN  APPLICANTS PROVIDE ACTUAL
      EXPERIENCE FOR INPATIENT BENEFITS WHEN IT [ILLEGIBLE] HERETOFORE NOT BEEN
      A COVERED BENEFIT?

The base period is the most current 12 month period, or other period, for which
actual data is available. The Department recognizes that applicants will be
using other inpatient or ambulatory information as a basis for their projections
where specific Child Health Plus experience may be insufficient for premium
development. Utilization and cost variances between the base period (actual
experience) and rate period should be detailed in the actuarial memorandum.

156.  UNDER MEDICAID MANAGED CARE, SCHOOL BASED HEALTH CENTERS WILL NOT BE
      INCLUDED IN THE BENEFIT PACKAGE BEFORE THE NEXT MEDICAID PROCUREMENT. GOOD
      UTILIZATION DATA HAS BEEN UNAVAILABLE. HOW WILL THESE SERVICES, THEREFORE,
      BE FACTORED INTO THE CHILD HEALTH PLUS PREMIUM?

The New York State School Health Program and the Department's Office of Managed
Care are working with managed care plans and school based health centers to
[ILLEGIBLE], utilization data which will be available to estimate primary care
needs.

157.  REFERENCE IS MADE THAT THERE IS LANGUAGE REGARDING PAYMENT AND REPORTING
      REQUIREMENTS. WILL THERE BE MANDATED PAYMENT LEVELS? IF SO, WHAT ARE THEY?
      WHAT ARE THE REPORTING REQUIREMENTS?

Mandated payment levels will not be specified in the model contract. The
reporting requirements have not been finalized at this time.

158.  IF THE PROGRAM IS BEING ADMINISTERED VIA A MANAGEMENT SERVICES
      ARRANGEMENT, IS IT ACCEPTABLE TO SHOW THE ADMINISTRATIVE BUDGET AS THE
      AMOUNT PAID TO THE MANAGEMENT SERVICES COMPANY?

The administrative budget would reflect the amount paid to the management
services company as a sub contracted administrative expense however, the cost
for specific administrative functions (i.e. data processing, marketing, legal,
accounting etc.) need to be identified in a supporting schedule.

159.  EVALUATION OF THE CHILD HEALTH PLUS IN NEW YORK STATE SUMMARY, PAGE 5,
      TABLES 3 & 4: REFERENCE CHILD HEALTH PLUS ELIGIBLES BY REGION. IS THIS
      INFORMATION AVAILABLE BY ZIP CODE AND/OR BOROUGH?

No. This information is not available by zip code and/or borough.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 43

160.  APPENDIX K APPEARS TO CONTAIN ONLY ONE SCHEDULE RELATED TO PERSONNEL
      COSTS. ARE OTHER SCHEDULES GOING TO BE ADDED?

Appendix K is a double sided copy. Please turn the page over to complete the non
personnel related expense section.

161*  PLEASE CLARIFY WHAT THE DEPARTMENT WOULD LIKE SUBMITTED IN RESPONSE TO THE
      REQUEST TO "DEMONSTRATE THE FINANCIAL FEASIBILITY OF YOUR ORGANIZATION'S
      PROPOSED CHILD HEALTH PLUS PROGRAM, INCLUDING THE FINANCIAL REQUIREMENTS
      OF THE NEW YORK STATE INSURANCE LAW AND PUBLIC HEALTH LAW".

The Department is requesting that revenue and expense projections be provided
for the Child Health Plus program for 1997 and 1998. In addition, the applicant
must identify the current financial condition of the corporation (latest
available certified financial statements are acceptable) and the financial
condition projected to the end of the first period (e.g. 12/31/97) during which
the new rates will be effective. The plan must demonstrate that it is able to
meet reserve and escrow requirements in its financial projections as well.

162.  WHAT COUNTIES COMPRISE EACH NEW YORK STATE REGION?

The Department does not have sufficient information to respond to this question.

163.  ARE APPLICANTS TO PROJECT ONE TOTAL ENROLLMENT NUMBER OR ENROLLMENT FOR
      EACH COUNTY THEY PROPOSED TO SERVE AND TOTAL ENROLLMENT FOR ALL COUNTIES?

The applicant needs to identify projected enrollment for each county they
propose to serve and total projected enrollment for all counties.

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       OFFICE OF HEALTH SYSTEMS MANAGEMENT
                        DIVISION OF HEALTH CARE FINANCING
                           BUREAU OF HEALTH ECONOMICS

                            CHILD HEALTH PLUS PROGRAM
                      INSURANCE PLAN REQUEST FOR PROPOSAL

                              QUESTIONS AND ANSWERS
                        RECEIVED AT BIDDER'S CONFERENCE

                              BIDDER'S CONFERENCE:
                            FRIDAY, JANUARY 10, 1997

<PAGE>

                                  INTRODUCTION

      This document contains answers to questions submitted by health plans with
respect to the Child Health. Plus Insurance Plan Request for Proposal (RFP). The
questions and answers are grouped in this document as follows:

      I.    General Technical - Read at Bidder's Conference;

      II.   Network Comprehensiveness - Read at Bidder's Conference;

      III.  Fiscal Evaluation Criteria - Read at Bidder's Conference; and

      IV.   Additional Questions - Not Read at Bidder's Conference.

      The questions and answers presented here are questions which were
submitted in writing on index cards to the Department at the Bidder's Conference
held in Albany, New York on January 10, 1997. All of these questions were
received at the bidder's conference, however, some were not presented at the
Bidder's Conference because they required additional research and discussion.
(Answers to the questions that were submitted by plans and received by the
Department by December 30, 1996 is a separate document which all plans received
at the Bidder's Conference and/or a separate mailing after the Bidder's
Conference.)

      Plans are reminded that in many instances, similar questions were asked by
multiple organizations. Where this occurred, the State in some cases selected
one or more representative questions to answer, rather than responding in
writing to every question asked. In doing so, the State has made a good faith
effort to ensure that all material issues raised by health plans are being
responded to in as complete a manner as possible.

      It is important to read this document in its entirety to assure that you
are informed about all policy statements being made with respect to individual
issues.

      To the extent to which answers contained in this document are in conflict
with information provided at the Bidder's Conference, and in the RFP, these
answers shall control.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 3

1.    GENERAL TECHNICAL
      (READ AT BIDDER'S CONFERENCE)

A1.   MUST THE MODEL SUBSCRIBER APPLICATION BE USED AS IS?

      No, as stated in the RFP, each insurer will be allowed to use an
      application form that is unique to their plan, but the variables
      identified in the Model will need to be collected.

A2.   REGARDING EMERGENCY SERVICES, IF THE ENROLLEE FAILS TO NOTIFY THE PLAN
      WITHIN 24 HOURS OF A VISIT FOR A "TRUE EMERGENCY," CAN THE $35 COPAYMENT
      BE CHARGED?

      Yes.

A3.   CAN IT BE LESS THAN $35?

      Yes.

A4.   WHEN A MEMBER IS DELINQUENT ON PREMIUM PAYMENT, THERE IS A 30 DAY GRACE
      PERIOD. IF A MEMBER HAS NOT PAID FOR JANUARY, THEY ARE STILL CONSIDERED
      ACTIVE MEMBERS UNTIL JANUARY 30TH. IF PAYMENT IS NOT RECEIVED, THEY ARE
      TERMINATED EFFECTIVE JANUARY 1ST. HOWEVER, THE PLAN WOULD HAVE SUBMITTED A
      BILL FOR THIS MEMBER ON JANUARY 10TH. DO YOU MEAN THESE MEMBERS SHOULD BE
      RECONCILED IN FEBRUARY OR IS IT THAT WE SHOULD BE BILLING THE STATE ON
      FEBRUARY 10TH FOR JANUARY MEMBERSHIP?

      The payment for January coverage would be due on December 1st with 30
      days grace ending December 31st. Failure to pay by December 31st would
      result in disenrollment on December 31 as the last day of paid coverage.
      Therefore, there would not be any retroactive disenrollment nor would the
      state be billed for January in this case.

A5.   IT IS OUR UNDERSTANDING THAT THERE ARE SOME EXCLUSIONS IN THE CURRENT
      PHARMACY BENEFIT. IS THAT TRUE? IF SO, WILL THOSE EXCLUSIONS REMAIN IN THE
      NEW PROGRAM?

      Any pharmaceutical the state has previously excluded will continue to be
      excluded.

A6.   WHAT IS CONSIDERED SUFFICIENT DOCUMENTATION OF INCOME AND OVER WHAT
      TIMEFRAME IS ONE MONTH OF PAY STUBS THAT WAS EARNED WITHIN THE PAST THREE
      MONTHS SUFFICIENT?

      Advisory memorandum A-1 and A-16 address documentation of income sources.
      Most recent tax returns must be submitted if available. If income has
      changed since the last tax return was filed, then other documentation must
      be submitted to support current income. Three months would be an
      acceptable current period. Therefore, one month of paystubs earned within
      the past 3 months would be sufficient.

A7.   DOES THE PLAN OR THE STATE DETERMINE THE CUTOFF DATE FOR APPLICATIONS FOR
      THE EFFECTIVE MONTH OF MEMBERSHIP?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 4

      For processing applications, the plan will utilize their internal
      procedures and cutoff dates which must be acceptable to the Department of
      Health.

A8.   IS THERE A LIMIT TO THE NUMBER OF PARTICIPATING PLANS IN EACH
      COUNTY/REGION?

      No, there is no absolute limit. However, we will be accepting plans based
      on need to assure adequate statewide coverage.

A9.   WILL EXISTING ENROLLEES BE GIVEN THE OPPORTUNITY TO SWITCH PLANS ON 5/1/97
      IF THERE ARE NEW ENTRANTS IN THE MARKETPLACE?

      Yes.

A10.  DOES THE STATE HAVE ESTIMATES OF ELIGIBLE CHILDREN FOR CHILD HEALTH PLUS
      BY COUNTY OR REGION?

      No, the CPS data set does not break down the uninsured any further
      geographically then New York City and the rest of the State.

A11.  FOR PLANS THAT ALREADY HAVE A CHILD HEALTH PLUS CONTRACT: WE MUST SIGN AN
      ADDENDUM TO OUR EXISTING CONTRACT? WHAT IS THE TERM OF THIS CONTRACT AND
      WHEN WILL THE DEPARTMENT OF HEALTH ISSUE THE CONTRACT EXTENSION?

      New contracts will be issued to those plans selected for the expanded
      program.

A12.  IN AREAS WITH MORE THAN ONE PARTICIPATING PLAN, WILL THE OUTREACH
      ORGANIZATION INCLUDE ALL PLANS ON ITS EFFORTS OR WILL STEERAGE OCCUR BY
      SOME CRITERIA?

      The outreach organization will provide families with a list of all
      insurers available in their area.

A13.  IN REFERENCE TO THE RESPONSE TO QUESTION 8, WHAT IS MEANT BY "IT IS AT
      THE DISCRETION OF THE FAMILY AS TO WHAT PAYMENT SCHEDULE THEY CHOOSE TO
      ABIDE BY?" THE RFP STATES THAT PAYMENT IS ON A MONTHLY BASIS.

      Insurers will have the option of offering alternative modes of premium
      payment, for example, quarterly, annually or semi-annually, in addition to
      a monthly rate. It is up to the family to decide the mode from the options
      offered by the insurer.

A14.  PLEASE CLARIFY WHETHER CHILDREN UNDER AGE ONE MAY ENROLL IN CHILD HEALTH
      PLUS?

      Children under age one may enroll in Child Health Plus. However, if family
      income is below 222% of gross Federal Poverty Level, then the children
      should be referred to Medicaid.

A15.  BACK TO QUESTION 59 AND THE RESPONSE READ TODAY, DOES THE PROGRAM NAME
      "CHILD

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 5

      HEALTH PLUS" IMPRINTED ON A CARD SUFFICE AS AN IDENTIFICATION
      PROCESS ON ID CARDS?

      Yes.

A16.  IS THERE DATA ON THE NUMBER OF CHILDREN DISENROLLED FROM CHILD HEALTH PLUS
      DUE TO NON-PAYMENT OF PREMIUMS?

      No data is available at this time regarding disenrollment due to
      non-payment. However, under the current system, with the exception of
      families between 160 and 222 of gross Federal Poverty Level with multiple
      children, the $25 family contribution must be paid with application prior
      to enrollment. For families with multiple children, only the first $25
      must be paid initially. The $25 for remaining children is paid based upon
      procedures of the individual plan.

A17.  MAY A MEDICAID MANAGED CARE PLAN ASSUME PRESUMPTIVE ELIGIBILITY FOR A
      MEDICAID MEMBER WHERE THE ROSTER INDICATES THE CASE HAS BEEN CLOSED?

      No, children cannot be assumed presumptive eligible for Child Health Plus
      just because they were disenrolled from Medicaid? The family must apply to
      Child Health Plus, submit a completed and signed application. However if
      the child appears eligible but lacks documentation needed to support the
      application, the child can be enrolled presumptively for sixty (60) days.

A18.  WILL THE STATE TRANSMIT INFORMATION FOR A PLAN'S MEDICAID MEMBERS THAT
      WOULD INDICATE THAT A CASE IS CLOSED DUE TO INCOME REASONS?

      No, the state will not transmit data as to reason for closure of Medicaid
      case as cases are closed at the local district.

A19.  QUESTION 41 OF BIDDER'S CONFERENCE DOCUMENT STATES THAT NO FROM OF
      TRANSPORTATION IS COVERED BY CHILD HEALTH PLUS. HOWEVER, THE BENEFIT
      PACKAGE EXCLUSIONS ONLY REFER TO "NON-EMERGENCY" TRANSPORTATION, AND THE
      RATE FILING WORKSHEET IN APPENDIX F INCLUDES A LINE FOR AMBULANCE SERVICE.
      IS AMBULANCE USE FOR AN EMERGENCY A COVERED BENEFIT?

      The exclusions to the benefit package should have indicated that all
      transportation is excluded. The rate filling application should not have
      emergency transportation included.

A20.  WILL THERE BE AN ON-SITE REVIEW OF SELECTED BIDDERS PRIOR TO PROGRAM START
      UP?

      On site review is not planned. However, the Department of Health reserves
      the right to do a site visit if questions should arise.

A21.  MUST PLANS HAVE THE ABILITY TO BILL ELECTRONICALLY BY THE TIME PROPOSALS
      ARE SUBMITTED OR BY THE PROGRAM START DATE?

      Plans must guarantee within their proposal that they have the ability to
      submit electronic

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN REP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 6

      billing data by implementation date.

A22.  PLEASE RE-CLARIFY - CAN A PLAN DENY A MEDICALLY APPROPRIATE ER VISIT FOR
      FAILURE TO NOTIFY THE PLAN OF THE VISIT?

      The plan may impose a $35 copayment for failure to notify.

A23.  ARE MEDICAID DRG RATES AVAILABLE TO PARTICIPATING PLANS BY STATUTE?

      Yes, this is available under FOIL (Freedom of Information Law).

A24.  PLEASE CLARIFY: IS THERE AN APPLICATION FEE OF $25 AS THERE IS IN THE
      CURRENT PROGRAM?

      No, the application/enrollment fee has been replaced by the statutory
      family contribution to premium.

A25.  WHAT ARE THE PRESCRIPTION DRUG EXCLUSIONS?

      The exclusions would be those typically permitted under Insurance Law and
      Regulation such as those for experimental or investigational drugs, drugs
      prescribed for a cosmetic purpose, etc.

A26.  WHEN THE ENROLLEE AGES OUT OF A HEALTH PLAN, THE PLAN IS THEN RESPONSIBLE
      TO OFFER THEM A CONVERSION PACKAGE; ARE THERE ANY SPECIFIC BENEFITS THAT
      HAVE TO BE OFFERED?

      No, those plans capable of issuing conversion coverage must make the
      contract they generally offer available to Child Health Plus enrollees.

A27.  IF THE PLAN ASSESSES THE $35 ER CO-PAY FOR FAILURE TO NOTIFY PLAN OF AN ER
      VISIT ON INAPPROPRIATE ER VISIT AND THE MEMBER IS DELINQUENT, DOES THIS
      DELINQUENCY APPLY TO THE DELINQUENCY OF THE PREMIUM?

      No, failure to pay a copayment is unrelated to failure to pay a premium.

A28.  MAY A CHILD BE ENROLLED IN CHILD HEALTH PLUS PRIOR TO BIRTH AS IS
      CURRENTLY THE CASE UNDER MEDICAID.

      No, in order for enrollment in Child Health Plus, the family must submit
      an application with the child's name and date of birth as well as required
      documentation. Enrollment is established for the first day of a future
      month unlike Medicaid who enrolls retroactive to the date of application
      and at any point within the month. There is no family coverage in this
      program, only individual coverage.

A29.  WHAT HAPPENS WHEN A CHILD WHO IS RECEIVING CHILD HEALTH PLUS SERVICES
      BECOMES ELIGIBLE FOR MEDICAID AND THE PLAN DOES NOT KNOW ABOUT THE
      MEDICAID COVERAGE FOR SEVERAL MONTHS? ARE WE TO RETURN PREMIUMS? ARE WE TO
      DISENROLL RETROACTIVELY?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN REP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 7

      The Department has a procedure to match Child Health Plus
      enrollment/billing files against the Medicaid enrollment file to identify
      children dually enrolled in both programs. The Department notifies the
      plans of the dual enrollment status of these children and advises the plan
      to disenroll children prospectively for a future month and not
      retroactively. The premium for the month where the child is identified as
      a duplicate is not recouped.

A30.  PLEASE CLARIFY WHAT BIRTH CONTROL/PRESCRIPTIONS, DEVICES, AND SUPPLIES ARE
      COVERED IN CHILD HEALTH PLUS.

      Any family planning services or birth control/prescriptions, devices and
      supplies that are prescribed by a qualified, participating provider are
      covered.

A31.  HOW WILL DOH CHOOSE QUALIFIED PLAN - MINIMUM SCORE, # PLANS PER COUNTY, #
      IN THE WHOLE STATE?

      Total score of all parts of the proposal will be considered. A ranking
      will be assigned. Plans will be chosen in order to ensure an adequate
      statewide coverage.

A32.  WHAT FACTORS WILL BE EVALUATED IN DETERMINING THE EFFECTIVENESS OF PLANS
      IN TARGETING MINORITY POPULATION?

      We will evaluate the reasonableness of the plan's proposed marketing plan
      and outreach efforts with respect to achieving their projected enrollments
      and particularly including under-represented minorities in the current
      program.

A33.  CLARIFY CHILD HEALTH PLUS COVERAGE FOR CHILDREN LESS THAN 1 IF THE MOTHER
      DOESN'T OBTAIN MEDICAID COVERAGE FOR HIM/HER.

      A child maintains Child Health Plus enrollment until he or she is enrolled
      in Medicaid.

A34.  APPENDIX D HAS A PIE CHART THAT SHOWS THE SECOND QUARTER 1996 ENROLLMENT
      BY SUBSIDY AND AGE. TWO OF THE AGE CATEGORIES AN 0-1 AND 1-5. DOES THE 0-1
      CATEGORY REPRESENT CHILDREN UNDER 12 MONTHS? IF SO, THIS SEEMS TO BE
      INCONSISTENT WITH PAGE 13 OF THE RFP WHICH SAID THAT THERE IS VERY LITTLE
      ENROLLMENT UNDER AGE 1 (PIE CHART SHOWS 5.4% OF ENROLLMENT 0-1). PLEASE
      CLARIFY THIS.

      Under the new program, it is expected that insurers' referrals to Medicaid
      for this population will be more aggressive than under the existing
      program.
<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 8

II.   NETWORK COMPREHENSIVENESS
      (READ AT [ILLEGIBLE] CONFERENCE)

A35.  UNDER ELIGIBLE ORGANIZATIONS, PLEASE DEFINE: A COMPREHENSIVE HEALTH
      SERVICE PLAN OPERATING UNDER THE REGULATIONS OF THE DEPARTMENT OF HEALTH.

      These organizations are Article 44 health maintenance organizations and
      prepaid health services plans.

A36.  RE: PAGE 57 - EVALUATION CRITERIA PLEASE EXPLAIN WHAT IS EXPECTED FOR
      INFORMATION. THE RFP ALREADY DESCRIBES THE BENEFIT PACKAGE. PMPMs WILL BE
      IN THE RATE SUBMISSION.

      The benefit package evaluation will be based on the narrative description
      of the benefit package which should be provided in the proposal.

A37.  RE: PATIENT EDUCATION. THE TITLE STATES "PATIENT" EDUCATION BUT THE TERM
      "PUBLIC" EDUCATION IS USED WITHIN THE SECTION. PLEASE CLARITY.

      These terms are used interchangeably

A38.  QUESTION #62 INDICATES THAT "INSURERS MUST PERFORM THEIR OWN MARKETING AND
      OUTREACH IN ACCORDANCE WITH THE GUIDELINES IN THE RFP. MAY THE INSURERS
      SUB-CONTRACT WITH COMMUNITY BASED ORGANIZATIONS TO CONDUCT THIS OUTREACH?

      Yes. However, the insurer remains responsible for assuring that the
      sub-contractor performs these activities consistent with program
      requirements. In addition, the proposal should include the actual outreach
      and education strategies that may be subcontracted.

A39.  YOUR ANSWER TO QUESTION #100 REFERS TO A PROVIDER NETWORK SUBMISSION "DUE
      JANUARY 23, 1997." IS THIS THE QUARTERLY PROVIDER NETWORK SUBMISSION FOR
      MEDICAID MANAGED CARE PLANS OR IS IT SOME OTHER SUBMISSION?

      It is the quarterly provider network submission for Medicaid Managed Care
      plans.

A40.  FOR PLANS WHO SUBMITTED THE LETTER OF INTENT WITHIN THE APPROPRIATE TIME
      FRAME, WHEN CAN WE EXPECT TO RECEIVE THE DATA REPORTS MENTIONED IN
      QUESTION 145?

      These reports are included in your packet.

A41.  RE: QUESTION 121 - HOW MUCH TIME IS PERMITTED TO ELAPSE BETWEEN SELECTION
      OF A CENTER AND SELECTION OF A SPECIFIC PCP FROM THAT CENTER.

      The Child Health Plus program does not intend to specify any time limits
      in this selection. However, since PCPs coordinate care and are required to
      be available 24 hours per day, 7 days per week, it is in the insurer's and
      enrollee's best interest that PCP selection or

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 9

      assignment occur shortly after enrollment.

A42.  ARE WE EXPECTED TO POLL EACH AND EVERY PARTICIPATING PCP TO DETERMINE THE
      NUMBER OF CHILD HEALTH PLUS ENROLLEES HE OR SHE IS WILLING TO ACCEPT? WILL
      YOU ACCEPT WHATEVER NUMBER THE PCP SUPPLIES, EVEN IF IT FILES IN THE FACE
      OF REASON?

      Non-Medicaid managed care plans will need to provide PCP specific
      enrollment information with their submissions. The numbers provided by
      each PCP should realistically reflect that the PCP can actually
      accommodate those enrollees. For Managed care plans participating in the
      Partnership Plan, the quarterly provider network submission will be used
      to assess PCP capacity.

A43.  DO THE PLANS NEED TO PROVIDE ENROLLMENT PROJECTIONS BY REGION OR WILL
      OVERALL PROJECTIONS SUFFICE?

      Enrollment projections should be submitted by county.

A44.  PLEASE CLARIFY THAT APPLICANTS WILL NEED TO SUBMIT A COMPREHENSIVE LIST OF
      PHARMACIES AND LABS AS PART OF APPENDIX L.

      The applicant summary forms contained in Appendix L must be completed for
      any subcontracted provider.

A45.  THE ANSWER TO QUESTION #118 SAYS THAT 1500 MAX IS APPLICABLE TO MEDICAID
      ONLY, BUT DOES THIS MEAN THERE'S NO MAXIMUM FOR CHILD HEALTH PLUS? (I.E..
      SO THAT A PROVIDER CAN HAVE 1500 FOR MEDICAID AND ANOTHER 1000 FOR CHILD
      HEALTH PLUS?)

      Yes. However, plans must abide by appointment availability standards and
      networks will be monitored to assure service accessibility.

A46.  WILL THE STATE ALLOW PAPER SUBMISSIONS OF SOME OF THE NETWORK IF THE PLAN
      HAS DIFFICULTY IN SUBMITTING COMPLETE NETWORK INFORMATION IN THE FORMAT
      REQUIRED BY THE STATE JANUARY 23, 1997.

      Medicaid managed care plans must submit their provider network information
      by January 23, 1997 in the format specified by the Office of Managed Care.
      For non-Medicaid managed care plans, network submissions may be in paper
      medium, however, we prefer the spreadsheet format previously specified.

A47.  FOR MEDICAID MANAGED CARE PLANS, WILL THE STATE DETERMINE EACH PCP's
      ADDITIONAL CAPACITY BASED ON THE 1/23/97 QUARTERLY PROVIDER NETWORK
      SUBMISSION, OR ARE THE PLANS EXPECTED TO DETERMINE THIS CAPACITY?
      SPECIFICALLY, WHAT DOES THE MEDICAID MANAGED CARE PLAN NEED TO SUBMIT
      UNDER PROVIDER NETWORK? (ASIDE FROM NETWORK CHANGES AFTER THE 1/23/97
      SUBMISSION.)

      The 1/23/97 quarterly network submission to the Office of Managed Care
      will be utilized

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 10

      to determine adequacy of network as well as capacity to serve Child Health
      Plus enrollees. No additional network information is required for managed
      care plans participating in the Medicaid program.

A48.  THE RFP REQUESTS THAT PLANS IDENTIFY ANY SERVICES TO BE PROVIDED BY
      SUBCONTRACTORS, INCLUDING PROVIDERS, PHARMACEUTICAL AND DIAGNOSTIC
      LABORATORY NETWORKS. PLEASE PROVIDE A DEFINITION OF "SUBCONTRACTORS" AND
      EXPLAIN HOW THIS QUESTION DIFFERS FROM THE QUESTION ON PAGE 50 OF THE RFP,
      "IDENTIFY THE PROVIDER NETWORK (BY TYPE, NUMBER, AND COUNTY)..."

      Plans may have to enter into subcontracts for certain services which are
      not part of their existing network. The insurer should identify which
      services - physician, hospital, laboratory, pharmacy, home health care,
      etc. - will be subcontracted.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 11

III.  FISCAL EVALUATION
      (READ AT BIDDER'S CONFERENCE)

A49.  IS IT A REGULATORY REQUIREMENT FOR A LICENSED ACTUARY TO SIGN OFF ON THE
      RATE SUBMISSION OR CAN ANY QUALIFIED FINANCIAL STAFF PERSON PERFORM THIS
      FUNCTION?

      The actuarial memorandum should be signed by a member of the American
      Academy of Actuaries or a Fellow of the Society of Actuaries. Attestation
      from other financial officers of the plan will be acceptable provided they
      are able to demonstrate appropriate qualifications and experience. An FSA
      signature can be from an independent actuarial firm or an employee of the
      plan.

A50.  PLEASE CONFIRM THE PERIOD OF TIME THAT THE RATE PROPOSAL WILL COVER?

      We would anticipate that the rate proposals will be for a 12 month period
      but should at least be through December 31, 1997.

A51.  WHAT SHOULD WE ANTICIPATE THE PREMIUM RECEIVABLE LAG TO BE?

      Billing are required monthly and the Department will process bills within
      30 days. Please refer to sections 5 on pages 30 and 31 for the specific
      billing timelines.

A52.  IS REINSURANCE AVAILABLE FROM THE STATE?

      No. Reinsurance is not available from the state.

A53.  CAN THE FORM IN APPENDIX K BE COMPUTED BY FUNCTIONAL AREA (E.G., MMIS
      CLAIMS ETC.) RATHER THAN BY LISTING OF INDIVIDUAL PERSONNEL?

      The key administrative staff need to be identified on the form. All
      support staff can be grouped by functional area.

A54.  PER THE DRAFT RATE FILING GUIDELINES UNDER APPENDIX F OF THE RFP, IS THE
      EXPECTED INCURRED LOSS RATIO MANDATED TO BE 90% OR MAY PLANS PROVIDE
      ALTERNATE PROJECTIONS?

      No. plans may provide alternate projections. The 90% referenced in
      Appendix F was for illustrative purposes.

A55.  WILL FAMILY PLANNING SERVICES BE CONSIDERED FOR A REIMBURSEMENT CARVE-OUT,
      AND/OR MAY PLANS SUBCONTRACT WITH OTHER PLANS TO PROVIDE FAMILY PLANNING
      SERVICES?

      Plans may subcontract with other plans to provide services subject to
      approval by the State DOH.

A56.  CPS DATA IS NOT BROKEN DOWN BY COUNTY. WHEN WILL PLANS RECEIVE COUNTY
      SPECIFIC INFORMATION?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 12

      The state released CPS data for New York City and rest of state by age and
      income category at the bidders conference on January 10, 1997. No
      [ILLEGIBLE] breakdown will be provided by the state.

A57.  ARE THERE ASSUMPTIONS REGARDING TREND FACTORS FOR OUTLYING YEARS?

      No. We are not offering any actuarial assumptions regarding trend factors.
      However, we do expect the plans to provide them in their bid.

A58.  WHY IS AN ACTUARIAL CERTIFICATION NEEDED FOR THIS PROGRAM WHEN IT WAS NOT
      REQUIRED FOR MEDICAID?

      It is required by New York State Insurance regulation.

A59.  PERTAINING TO QUESTION 162 ABOUT RATING REGIONS- WHEN WILL THIS BE
      AVAILABLE? WHAT COUNTIES WILL BE INCLUDED IN WHAT REGIONS?

      Please refer to question #151. The rates can be varied by county/region as
      actuarially justified...

A60.  STATUTORY CONTRIBUTION- SINCE THE 2% CONTRIBUTION DOES NOT APPLY TO CHILD
      HEALTH PLUS, I ASSUME THAT A 1% CONTRIBUTION IS ACCEPTABLE. IS THIS SO?

      Statutory contributions are described in State Insurance Law Section 4310.

A61.  BASE PERIOD TO RATE PERIOD -- IS IT ACCEPTABLE TO HAVE A BASE PERIOD OF
      1995 AND A RATE PERIOD OF 5/12/97? (1995 IS TOO INCOMPLETE TO SERVE AS A
      BASE PERIOD).

      Please refer to question 155. The most current available credible data
      should be used, however the data need not be for a calendar year period.

A62.  THE STATE HAS CAPPED THE MAXIMUM FAMILY CONTRIBUTION AT FOUR CHILDREN?
      HOWEVER, WILL THE STATE BE PAYING THE PLANS AN INDIVIDUAL PREMIUM FOR EACH
      WHERE THERE ARE MORE THAN FOUR CHILDREN IN THE FAMILY? WILL IT BE THE SAME
      SUBSIDIZED PREMIUM AMOUNT AS THE OTHER CHILDREN OR WILL IT BE A HIGHER
      AMOUNT THAT ADDS IN THE CONTRIBUTION THE FAMILY WOULD HAVE MADE IF THE
      HOUSEHOLD HAD FOUR KIDS OR LESS?

      The insurer will bill the State the total premium for all children that
      are fully subsidized. However, for partially subsidized children, the
      insurer will "net out" the monthly family contribution that is required
      for each child from the total premium to arrive at the State share. In
      those instances where more than four children from a partially subsidized
      family are enrolled in a plan, there is no family contribution offset to
      the total premium for the fifth or more child(ren).

A63.  ARE THE RATES TO BE AGE ADJUSTED IN ANY WAY?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 13

      No, please refer to question #140 for additional information.

A64.  CAN CONSULTANTS (ACTUARIES) NOT AFFILIATED WITH A PLAN RECEIVE COPIES OF
      THE DATA?

      Yes, it will be made available. Please call the Bureau of Health
      Economics.

A65.  CAN YOU PROVIDE A PHONE NUMBER FOR THE BUREAU OF HEALTH ECONOMICS?

      As listed on page 41 of the RFP, the official phone for inquiries
      regarding this RFP process is (518)486-7897.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 14

IV.   ADDITIONAL QUESTIONS
      (NOT READ AT BIDDER'S CONFERENCE)

A66.  DOES NYHCRA ALLOW CHILD HEALTH PLUS PLANS THE ABILITY TO PAY MEDICAID DRGs
      FOR INPATIENT CARE, OR MUST THE REIMBURSEMENT BE NEGOTIATED?

      The New York State Health Care Reform Act of 1996 (HCRA of 1996) allows
      any Child Health Plus insurer to negotiate an inpatient rate with
      hospitals. The rate can be based on the DRG but that is between the payer
      and provider.

A67.  CAN A HEALTH CARE PROVIDER PAY ALL OR PART OF A MEMBER'S PREMIUM ON THEIR
      BEHALF TO ASSIST THEM IN REMAINING ENROLLED IN CHILD HEALTH PLUS?

      The insurer will only bill the family for the family contribution of the
      premium, not a third party. However, if someone chooses to pay the family
      contribution on behalf of the family, that is permitted. If the "health
      care provider" referenced in this question is the insurer, the insurer
      does not have the option to waive the family contribution to the premium
      as legislative intent was to have families contribute to the cost of the
      premium.

A68.  CAN AN INSURER CHOOSE TO COVER CHILDREN WITHIN THE < 19 GROUP, i.e., 0-14
      FOR EXAMPLE?

      An insurer cannot choose to cover only a subset of the Child Health Plus
      population of less than 19 year of age.

A69.  IN APPENDIX L, BIDDER'S SUMMARY OF PROPOSAL, WHAT IS A CHARITY
      REGISTRATION NUMBER? DOES THIS APPLY ONLY TO NOT-FOR-PROFITS?

      Charitable organizations are required to be registered with the Secretary
      of State pursuant to Article 7-A of the New York State Executive Law. The
      charity registration number is proof that an organization has registered
      with the Secretary of State.

A70.  RELATED TO QUESTION 67 REGARDING CURRENT MEMBERS IN THE PROGRAM
      TRANSITIONS TO THE EXPANDED PROGRAM, IF A MEMBER EITHER PAYS A PARTIAL OR
      FULL PREMIUM, WILL THE AMOUNT THEY-PAID AT THE LAST RECERTIFICATION DATE
      NEED TO BE CREDITED TO ANY REMAINING MONTHS NEW PREMIUM AMOUNTS, i.e.,
      MEMBER PAYS $25 PER YEAR NOW. RECERTIFIED IN JANUARY AND PAID $25. AS OF
      JULY, THEY NEED TO PAY $9 PER MONTH (OR $36 UNTIL THE END OF THE YEAR).
      DOES THIS AMOUNT NEED TO BE ADJUSTED AGAINST THE $25 ALREADY PAID?

      If the family requests a refund of any unused portion of the $25 annual
      premium contribution, the plan must pay the refund. If the family and the
      insurer wish to apply this to the newly required family contribution
      rather than refund the unused portion, this can be done. However, the
      insurer must document this in the enrollment file.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 15

A71.  EQUIVALENT COVERAGE: PLEASE CONFIRM THAT ANY DIFFERENCE IN COVERAGE
      BETWEEN CHILD HEALTH PLUS AND ANOTHER COVERAGE IS CONSIDERED
      NON-EQUIVALENT COVERAGE DESPITE HOW SIMILAR THE TWO WOULD BE.

      The current definition of equivalent coverage is stated in Child Health
      Plus Advisory Memoranda A-12 found in Appendix B of the Request for
      Proposals(RFP). A revised equivalent coverage policy will be formulated
      prior to the implementation of the expanded program. It is anticipated
      that under the expanded program, the current definition will merely be
      expanded to include inpatient care.

A72.  DO THE NYHCRA SURCHARGES AND/OR ASSESSMENTS APPLY TO THE CHILD HEALTH PLUS
      PROGRAM?

      The New York State Health Care Reform Act surcharges and/or assessments
      currently apply to the Child Health Plus program.

A73.  RFP ASKS FOR RESOURCES COMMITTED TO IMPLEMENT/OPERATE: IF PLAN ALREADY
      OPERATIONAL, DO WE JUST STATE HUMAN RESOURCES CURRENTLY IN PLACE? IS THE
      "MANAGEMENT TEAM" ALSO THE PERSONS RESPONSIBLE IN EACH DEPARTMENT?

      If a plan is currently a Child Health Plus insurer, they can state that
      the resources to operate the expanded program are in place. The
      "management team" should be a list of the persons responsible in each
      Department.

A74.  WHAT FACTORS WILL BE EVALUATED IN DETERMINING THE EFFECTIVENESS OF PLANS
      IN TARGETING MINORITY POPULATIONS?

      As part of the response to the Request for Proposals, the bidder must
      submit a general plan for marketing the program along with a description
      of how community outreach and marketing activities will be conducted to
      attract applicants. This should include a discussion of the strategies the
      bidder will use to target minority populations in their service area. The
      overall marketing plan will be evaluated as a component of the General
      Technical Evaluation Criteria.

A75.  A RECENT SURVEY WE CONDUCTED ON OUR CURRENT CHILD HEALTH PLUS ENROLLEES
      REVEALED THAT MANY FAMILIES, ESPECIALLY THOSE WITH MORE THAN ONE CHILD,
      WOULD NOT ENROLL IN THE NEW PROGRAM DUE TO THE REQUIRED PREMIUM
      CONTRIBUTION. CLIENTS CURRENTLY ENROLLING IN OUR PLAN - PLUS THOSE WHO
      WILL ENROLL BETWEEN NOW AND MAY 1ST - MAY ACCUSE US OF "BAIT AND SWITCH"
      TECHNIQUES, i.e., WE "SELL" THEM A FREE PROGRAM, AND THEN CHANGE IT TO ONE
      WITH A PREMIUM CONTRIBUTION REQUIREMENT. THIS SITUATION WILL CAST OUR PLAN
      AND THE STATE IN A POOR LIGHT. WHAT IS THE STATE WILLING AND ABLE TO DO TO
      ADDRESS, AVOID, AND/OR MINIMIZE THE POTENTIAL NEGATIVE CONSEQUENCES OF
      THIS SITUATION?

      The dollar amounts are defined by Statute.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 16

A76.  A RECENT SURVEY WE CONDUCTED OF OUR CHILD HEALTH PLUS SUBSCRIBERS REVEALED
      EXTREME PRICE SENSITIVITY, i.e., OVER 50% OF RESPONDENTS INDICATED THEY
      WOULD BE UNWILLING AND/OR UNABLE TO MAKE THE REQUIRED PREMIUM
      CONTRIBUTIONS, AND, THEREFORE, WOULD NOT ENROLL THEIR CHILDREN. ONE
      IMPLICATION OF THIS FUNDING IS POTENTIAL ADVERSE SELECTION. WILL THE STATE
      FACTOR THIS INTO THE EVALUATION OF RATE FILINGS?

      The State will consider all supportable actuarial methods and assumptions
      utilized in the rate making process as submitted by bidders.

A77.  DOES THE STATE HAVE PARTICULAR REQUIREMENTS FOR CHILD HEALTH PLUS PROVIDER
      CONTRACTS, AS IT DOES FOR MEDICAID MANAGED CARE? DO INSURERS HAVE TO
      SUBMIT MODEL CONTRACTS TO SDOH FOR REVIEW AND APPROVAL?

      There are no specific requirements for Child Health Plus provider
      contracts other than those contract provisions that are otherwise required
      of health plans (e.g. enrollee non liability language, access to medical
      records etc.)

A78.  CURRENT CHILD HEALTH PLUS INSURERS RECEIVED CONTRACT EXTENSIONS FROM JULY
      1, 1996 THROUGH DECEMBER 31, 1996, WHEN WILL DOH ISSUE EXTENSIONS FOR THE
      PERIOD OF JANUARY 1, 1997 - JUNE 30, 1997?

      It is anticipated that DOH will issue contract extensions to current Child
      Health Plus insurers within the next month. These extensions will be for
      the period January 1, 1997 through September 30, 1997 to allow for
      transition of current enrollees to the expanded program. If a current
      insurer is selected to continue in the expanded program, the terms of the
      new contract will supersede the extension.

A79.  ARE THERE GUIDELINES RELATIVE TO THE RATIO BETWEEN PROVIDER SERVICES STAFF
      AND ENROLLEES?

      There are no guidelines relative to the ratio between provider services
      staff and enrollees.

A80.  SHOULD THE CHILD HEALTH PLUS PREMIUM RATE INCLUDE THE GME ADD ON?

      The New York State Health Care Reform Act surcharges and/or assessments
      currently apply to the Child Health Plus program.

A81.  WHAT IS THE DEFINITION OF SCHOOL BASED HEALTH CENTER?

      A school-based health center is a clinic established at a school site.
      It's purpose is to provide convenient access to medical and/or behavioral
      services to the children.

A82.  HOW SHOULD OLDER CHILDREN LIVING ON THEIR OWN BE ENROLLED? WHAT SHOULD BE
      USED AS INCOME VERIFICATION? CAN THE TEENS SIGN THEIR OWN APPLICATION?
      WHAT WOULD THE INSURERS DO ABOUT PROOF OF RESIDENCY IN THE CASE OF
      HOMELESS CHILDREN?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 17

      The issue of older children living on their own is currently under
      investigation by the Department's Office of Counsel. A policy concerning
      this issue and the related issues surrounding it will be issued prior to
      implementation of the expanded program. With regard to the question of
      proof of residency in the case of homeless children, legislation requires
      proof of New York State residency. No specific provision is made for
      homeless children.

A83.  THE RFP STATES THAT ROUTINE OB/GYN VISITS WILL NOT BE COVERED. WILL THE
      OB/GYN MANDATE REGARDING ANNUAL VISITS AND PAP SMEARS FOR WOMEN 18 YEARS
      AND OVER BE COVERED?

      Consistent with Insurance Law, a pelvic exam, pap smear and the laboratory
      testing related to the pap smear must be offered as a routine, preventive
      benefit for women 18 years and older. For females under age 18, this
      service would be covered for purposes of diagnosis and treatment of
      illness or injury. Pelvic exams and pap smears that are performed more
      than once a year for diagnosis of illness or injury are also a covered
      benefit. As stated in the American Academy of Pediatric Guidelines found
      in Appendix E of the RFP, all sexually active patients should be screened
      for sexually transmitted diseases and should have a pelvic exam.

A84.  THE RFP STATES THAT ENROLLEES MUST PAY THEIR PREMIUM CONTRIBUTION MONTHLY,
      AND THAT THEY WILL BE ALLOWED A 30 DAY GRACE PERIOD. ENROLLEES WHO HAVE
      NOT PAID THEIR CONTRIBUTION WITHIN THIS TIME WILL BE RETROACTIVELY
      DISENROLLED. RETROACTIVE DISENROLLMENT PRESENTS SEVERAL ISSUES, FOR
      EXAMPLE, WHAT WILL INSURERS BE REQUIRED TO DO IN THE EVENT THAT THEY
      RECEIVE CLAIMS FOR THIS PERIOD?

      The RFP states that family contributions to premium must be paid 30 days
      in advance of the period of coverage. However, the insurer may allow the
      family an additional 30 days to submit payment before disenrolling the
      child from the program. Family contributions are due in advance to avoid
      retroactive disenrollment as retroactive enrollment and disenrollment is
      not permitted under this program.

A85.  WE WOULD LIKE TO BE ABLE TO PROVIDE CONTINUOUS COVERAGE VIA CHILD HEALTH
      PLUS TO THOSE TERMINATING FROM MEDICAID DUE TO LOSS OF ELIGIBILITY DUE TO
      INCOME REASONS. WHAT PRELIMINARY INFORMATION WOULD BE REQUIRED FOR
      PRESUMPTIVE ELIGIBILITY AND IN WHAT TIME FRAME IF WE ARE TO TRY TO AVOID
      ANY GAPS IN MEMBERSHIP? WOULD THE PREMIUM PAYMENT ALSO BE REQUIRED AT THE
      TIME OF APPLICATION?

      To be deemed presumptively eligible under Child Health Plus, a family must
      submit a completed, signed enrollment application to a participating
      insurer. The insurer must determine that the applicant appears to meet all
      eligibility requirements but lacks the documentation necessary to support
      the application. Plans will enroll children based on their internal
      processing cut-off dates. Enrollment will be for the first day of the
      month with no retroactive enrollment permitted. The first month's family
      premium contribution is required prior to enrollment. If an individual
      submits an application to Child Health Plus knowing they will be
      disenrolled from Medicaid at a point during that month, the child can

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 18

      apply to Child Health Plus in advance of the disenrollment. For example,
      if a child is due to be disenrolled from Medicaid for the 15th of a
      particular month, the child can apply in advance for Child Health Plus and
      can enroll for the first day of the month if the application is completed
      and any required family contribution is paid prior to the insurer's
      internal processing schedule to avoid a lapse in coverage.

A86.  CONVERSELY, WHAT ACTIONS CAN BE TAKEN TO ELIMINATE ANY GAPS IN COVERAGE
      FOR A CHILD HEALTH PLUS MEMBER WHO IS APPLYING FOR MEDICAID? THERE IS
      USUALLY A GAP OF TIME BETWEEN WHEN THE RECIPIENT IS EFFECTIVE FOR MEDICAID
      AND WHEN THEY CAN BE ENROLLED IN A PLAN.

      if a Child Health Plus member applies for Medicaid, there will not be a
      gap in coverage as the member would not be disenrolled from Child Health
      Plus until after they are enrolled in Medicaid. The enrollee would also be
      retroactively enrolled in Medicaid back to the date of application.

A87.  THE INCOME TABLES START WITH A HOUSEHOLD OF ONE. IS IT TO BE ASSUMED THAT
      THE NUMBER IN THE HOUSEHOLD REFERS TO THE NUMBER OF CHILDREN AND NO ADULTS
      ARE TO BE COUNTED?

      Income guidelines are based on the family's gross household income. The
      number in the household refers to both the number of children and the
      number of adults residing in the households.

A88.  SHOULD A NEW HOUSEHOLD BUDGET BE CALCULATED FOR A PREGNANT TEEN BASED ON
      THE UNBORN AND HER FINANCIAL RESPONSIBILITY FOR IT. THAT IS, IF SHE
      CHOOSES NOT TO APPLY FOR MEDICAID?

      No, a household budget should not be calculated for a pregnant teen which
      includes an unborn child.

<PAGE>

                                  APPENDIX B-2

                 BIDDER'S NAME: WellCare of New York, Inc.
                 RFP NUMBER___________

                        STANDARD CONTRACT/BID INSERT FORM

      This form must be completed and returned with your response to this
proposal. If awarded to you, the contract will incorporate this form as
completed by you.

              NONDISCRIMINATION IN EMPLOYMENT IN NORTHERN IRELAND:
                      MacBRIDE FAIR EMPLOYMENT PRINCIPLES

      Note: Failure to stipulate to these principles may result in the contract
being awarded to another bidder. Governmental and non-profit organizations are
exempted from this stipulation requirement.

      In accordance with Chapter 807 of the Laws of 1992 (State Finance Law
Section 174-b), the bidder, by submission of this bid, certifies that it or any
individual or legal entity in which the bidder holds a 10% or greater ownership
interest, or any individual or legal entity that holds a 10% or greater
ownership interest in the bidder, either:

      -     has business operations in Northern Ireland: Y [ ] N [X]

      -     if yes to above, shall take lawful steps in good faith to conduct
            any business operations they have in Northern Ireland in accordance
            with the MacBride Fair Employment Principles relating to
            nondiscrimination in employment and freedom of workplace opportunity
            regarding such operations in Northern Ireland, and shall permit
            independent monitoring of their compliance with such Principles:
            Y [ ] N [X]

                         OMNIBUS PROCUREMENT ACT OF 1992

      Is the Bidder a New York State Business Enterprise? Y [X] N [ ]

      The State Finance Law defines a "New York State Business Enterprise" as a
business enterprise, including a sole proprietorship, partnership, or
corporation, which offers for sale or lease or other form of exchange, goods
which are sought by the department and which are substantially manufactured
produced or assembled in New York State, or services which are sought by the
department and which are substantially performed within New York State. The
Department of Health considers "substantially" to mean "over 50%".

                                       1
<PAGE>

                                  INTRODUCTION

      This document contains answers to questions submitted by health plans with
respect to the Child Health Plus Insurance Plan Request for Proposal (RFP). The
questions and answers are grouped in this document as follows:

      I. General Technical - Read at Bidder's Conference;

      II. Network Comprehensiveness - Read at Bidder's Conference;

      III. Fiscal Evaluation Criteria - Read at Bidder's Conference; and

      IV. Additional Questions - Not Read at Bidder's Conference.

      The questions and answers presented here are questions which were
submitted in writing on index cards to the Department at the Bidder's Conference
held in Albany, New York on January 10, 1997. All of these questions were
received at the bidder's conference, however, some were not presented at the
Bidder's Conference because they required additional research and discussion.
(Answers to the questions that were submitted by plans and received by the
Department by December 30, 1996 is a separate document which all plans received
at the Bidder's Conference and/or a separate mailing after the Bidder's
Conference.)

      Plans are reminded that in many instances, similar questions were asked by
multiple organizations. Where this occurred, the State in some cases selected
one or more representative questions to answer, rather than responding in
writing to every question asked. In doing so, the State has made a good faith
effort to ensure that all material issues raised by health plans are being
responded to in as complete a manner as possible.

      It is important to read this document in its entirety to assure that you
are informed about all policy statements being made with respect to individual
issues.

      To the extent to which answers contained in this document are in conflict
with information provided at the Bidder's Conference, and in the RFP, these
answers shall control.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 3

I.    GENERAL TECHNICAL
      (READ AT BIDDER'S CONFERENCE)

A1.   MUST THE MODEL SUBSCRIBER APPLICATION BE USED AS IS?

      No, as stated in the RFP, each insurer will be allowed to use an
      application form that is unique to their plan, but the variables
      identified in the Model will need to be collected.

A2.   REGARDING EMERGENCY SERVICES, IF THE ENROLLEE FAILS TO NOTIFY THE PLAN
      WITHIN 24 HOURS OF A VISIT FOR A "TRUE EMERGENCY " CAN THE $35 COPAYMENT
      BE CHARGED?

      YES.

A3.   CAN IT BE LESS THAN $35?

      Yes.

A4.   WHEN A MEMBER IS DELINQUENT ON PREMIUM PAYMENT, THERE IS A 30 DAY GRACE
      PERIOD. IF A MEMBER HAS NOT PAID FOR JANUARY, THEY ARE STILL CONSIDERED
      ACTIVE MEMBERS UNTIL JANUARY 30TH. IF PAYMENT IS NOT RECEIVED, THEY ARE
      TERMINATED EFFECTIVE JANUARY 1ST. HOWEVER, THE PLAN WOULD HAVE SUBMITTED A
      BILL FOR THIS MEMBER ON JANUARY 10TH. DO YOU MEAN THESE MEMBERS SHOULD BE
      RECONCILED IN FEBRUARY OR IS IT THAT WE SHOULD BE BILLING THE STATE ON
      FEBRUARY 10TH FOR JANUARY MEMBERSHIP?

      The payment for January coverage would be due on December 1st with 30 days
      grace ending December 31st. Failure to pay by December 31st would result
      in disenrollment on December 31 as the last day of paid coverage.
      Therefore, there would not be any retroactive disenrollment nor would the
      state be billed for January in this case.

A5.   IT IS OUR UNDERSTANDING THAT THERE ARE SOME EXCLUSIONS IN THE CURRENT
      PHARMACY BENEFIT. IS THAT TRUE? IF SO, WILL THOSE EXCLUSIONS REMAIN IN THE
      NEW PROGRAM?

      Any pharmaceutical the state has previously excluded will continue to be
      excluded.

A6.   WHAT IS CONSIDERED SUFFICIENT DOCUMENTATION OF INCOME AND OVER WHAT
      TIMEFRAME IS ONE MONTH OF PAY STUBS THAT WAS EARNED WITHIN THE PAST THREE
      MONTHS SUFFICIENT?

      Advisory memorandum A-1 and A-16 address documentation of income sources.
      Most recent tax returns must be submitted if available. If income has
      changed since the last tax return was filed, then other documentation must
      be submitted to support current income. Three months would be an
      acceptable current period. Therefore, one month of paystubs earned within
      the past 3 months would be sufficient.

A7.   DOES THE PLAN OR THE STATE DETERMINE THE CUTOFF DATE FOR APPLICATIONS FOR
      THE EFFECTIVE MONTH OF MEMBERSHIP?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN
BIDDER'S CONFERENCE QUESTIONS AND ANSWERS                                PAGE 43

160.  APPENDIX K APPEARS TO CONTAIN ONLY ONE SCHEDULE RELATED TO PERSONNEL
      COSTS. ARE OTHER SCHEDULES GOING TO BE ADDED?

Appendix K is a double sided copy. Please turn the page over to complete the non
personnel related expense section.

161   PLEASE CLARIFY WHAT THE DEPARTMENT WOULD LIKE SUBMITTED IN RESPONSE TO THE
      REQUEST TO "DEMONSTRATE THE FINANCIAL FEASIBILITY OF YOUR ORGANIZATION'S
      PROPOSED CHILD HEALTH PLUS PROGRAM, INCLUDING THE FINANCIAL REQUIREMENTS
      OF THE NEW YORK STATE INSURANCE LAW AND PUBLIC HEALTH LAW".

The Department is requesting that revenue and expense projections be provided
for the Child Health Plus program for 1997 and 1998. In addition, the applicant
must identify the current financial condition of the corporation (latest
available certified financial statements are acceptable) and the financial
condition projected to the end of the first period (e.g. 12/31/97) during which
the new rates will be effective. The plan must demonstrate that it is able to
meet reserve and escrow requirements in its financial projections as well.

162.  WHAT COUNTIES COMPRISE EACH NEW YORK STATE REGION?

The Department does not have sufficient information to respond to this question.

163.  ARE APPLICANTS TO PROJECT ONE TOTAL ENROLLMENT NUMBER OR ENROLLMENT FOR
      EACH COUNTY THEY PROPOSED TO SERVE AND TOTAL ENROLLMENT FOR ALL COUNTIES?

The applicant needs to identify projected enrollment for each county they
propose to serve and total projected enrollment for all counties.

<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       OFFICE OF HEALTH SYSTEMS MANAGEMENT
                        DIVISION OF HEALTH CARE FINANCING
                           BUREAU OF HEALTH ECONOMICS

                            CHILD HEALTH PLUS PROGRAM
                       INSURANCE PLAN REQUEST FOR PROPOSAL

                              QUESTIONS AND ANSWERS
                        RECEIVED AT BIDDER'S CONFERENCE

                              BIDDER'S CONFERENCE:
                            FRIDAY, JANUARY 10, 1997

<PAGE>

      -     It is the policy of New York State to maximize opportunities for the
            participation of New York State business enterprises, including
            minority- and women-owned business enterprises as bidders,
            subcontractors and suppliers on its procurement contracts.

      -     Information on the availability of New York State subcontractors and
            suppliers is available from:

               NYS Department of Economic Development
               Division for Small Business
               (518) 474-7756

      -     A directory of minority- and women-owned business enterprises is
            available from:

               NYS Department of Economic Development
               Minority and Women's Business Development Division
               (518) 474-6346

      FOR ALL CONTRACTS WHERE THE TOTAL BID AMOUNT IS $1 MILLION OR MORE

      The Omnibus Procurement Act of 1992 requires that, by signing this bid
proposal, contractors certify that whenever the total bid amount is greater than
$1 million:

      1.    The contractor has made all reasonable efforts to encourage the
            participation of New York State Business Enterprises as suppliers
            and subcontractors on this project, and has retained the
            documentation of these efforts to be provided upon request to the
            State;

      2.    The contractor has complied with the Federal Equal Opportunity Act
            of 1972 (P.L. 92-261), as amended;

      3.    The contractor agrees to make all reasonable efforts to provide
            notification to New York State residents of employment opportunities
            on this project through listing any such positions with the Job
            Service Division of the New York State Department of Labor, or
            providing such notification in such manner as is consistent with
            existing collective bargaining contracts or agreements. The
            contractor agrees to document these efforts and to provide said
            documentation to the State upon request;

      4.    The contractor acknowledges notice that New York State may seek to
            obtain offset credits from foreign countries as a result of this
            contract and agrees to cooperate with the State in these efforts.

                                        2

<PAGE>

                   CHECKLIST TO DETERMINE "REASONABLE" EFFORT

            BY BIDDERS/CONTRACTORS FOR CONTRACTS OF $1 MILLION OR MORE

      A copy of this form should be completed and retained on file by the
Contractor. The completed form should be available for review for the duration
of the contract.

      The contractor:

      1.    has a copy of the NYS Directory of Certified Minority and
            Women-Owned Business Enterprises? Y [ ] N [X]

      2.    has solicited quotes from firms listed in the Directory?
            Y [ ] N [X]

      3.    has contacted the NYS Department of Economic Development to obtain
            listings of NYS subcontractors and suppliers for products and
            services currently purchased from out-of-state/foreign firms?
            Y [X] N [ ]

      4.    has utilized other sources to identify NYS subcontractors and
            suppliers (such as Thomas Register, in-house vendor list)?

            Y [X] N [ ] (If YES, Source: in-house vendor list)

      5.    has placed advertisements in NYS newspapers? Y [X] N [ ]

      6.    has participated in vendor outreach conferences? Y [ ] N [ ]

      7.    has provided New York State residents notice of new employment
            opportunities resulting from this contract through listing any such
            positions with the Job Service Division of the NYS Department of
            Labor, or providing such notification by another method? Y [X] N [ ]

                                       3
<PAGE>

                       NEW YORK STATE DEPARTMENT OF HEALTH
                       STOCK ITEM SPECIFICATION FORM
                       (Submission of this form is optional)

      Whenever possible, practical, feasible and consistent with open
competitive bidding, the stock item specifications of manufacturers, producers
and/or assemblers located in New York State are used in the preparation of bid
documents for the commodity requirements of State agencies. Companies are
responsible for updating information as changes are made in their stocked items'
technology and/or design.

      The DOH maintains Stock Item Specification Forms and corresponding
specifications for a two year period; it is anticipated that within that time
companies will refile with updated information. These forms and updates may be
submitted to:

                       New York State
                       Department of Health
                       Purchase Unit
                       Corning Tower Room 1354
                       Albany, New York 12237-0016

      Please provide the information requested below, sign and date this form
where indicated, and submit the completed form and accompanying specifications
to the address given above.

      1.    Company Name and Principal Place of Business:

      2.    Number of persons employed at above location: 273

      3.    Stocked Item (only one per form):

      4.    Production of Stocked Item (Name and address of Manufacturer,
            Producer, and/or assembler):

      5.    Product Specification (briefly below, or attach specification):

      WellCare of New York, Inc. (WCNY), a Health Maintenance Organization (HMO)
      licensed as an Article 44 for-profit corporation under the New York Public
      Health Law, is a subsidiary of The WellCare Management Group, Inc. (WCMG).

                                       4

<PAGE>

      To the best of my knowledge, the information provided is accurate. It
may be used by the State for the purpose of helping to retain jobs, business and
industry presently in the State of New York and attracting new business and
industry to the State of New York. False statements knowingly made herein are
punishable as a Class A misdemeanor under Section 210.45 of the Penal Law of the
State of New York.

      Company Representative (please print):Donald A. [ILLEGIBLE]

      Title and Telephone:

      Signature and Date:[ILLEGIBLE] 9/26/97

                                       5
<PAGE>

                                   APPENDIX D
                            SCHEDULE OF DELIVERABLES

Relevant Dates
Ongoing             Marketing Plans

                    a. Design and develop marketing materials as approved by
                    DOH.

                    b. Implement marketing strategies specified in the
                    proposal/workplan and consistent with subsequently issued
                    STATE guidelines.

                    c. Coordinate marketing and outreach activities consistent
                    with the designated STATE Outreach CONTRACTOR and the STATE
                    DOH Mass Media Marketing Campaign.

Ongoing             Enrollment Activities

                    a. Design and finalize revised enrollment process and forms.

                    b. Hire enrollment staff as necessary.

                    c. Develop and finalize eligibility determination
                    mechanisms.

                    d. Implement enrollment process. The CONTRACTOR may process
                    new enrollment applications in accordance with its own
                    internal processing schedule. However, the cut off date for
                    processing new applications effective the first day of the
                    following month can be no earlier than the 20th day of the
                    previous month and for recertification, any application
                    received through the last day of the twelve(12) month
                    enrollment period must be processed as a recertification
                    effective the first day of the following month.

                    e. Participate in the development and implementation of the
                    Medicaid linkage and referral process with State and local
                    agencies in order to maximize the use of Medicaid for
                    eligible children. The referral process shall include use of
                    the Medicaid screening and referral form provided by the
                    STATE, a copy of which must be maintained in the

<PAGE>

                    enrollment file and use of the joint Medicaid, WIC and Child
                    Health Plus enrollment form.

                    f. Participate in the monthly match process to eliminate
                    duplicate enrollment in Child Health Plus and Medicaid. The
                    STATE may recoup premiums from the CONTRACTOR when a
                    Medicaid/Child Health Plus duplicate is identified and not
                    disenrolled from Child Health Plus within the specified
                    timeframe.

                    g. Capture data on marketing and enrollment outcomes.

                    h. Capture data on demographic characteristics of enrollees.

Ongoing             Quality Assurance

                    a. Adapt and finalize quality assurance and utilization
                    review mechanisms.

                    b. Maintain quality assurance and utilization review
                    mechanisms in accordance with STATE issued guidelines and/or
                    advisory memoranda in cooperation with STATE designated
                    CONTRACTORS and provide requested data to STATE and any
                    designated CONTRACTORS.

Ongoing             Billing/Electronic Mail

                    a. Implement billing processing systems such that:

                    The CONTRACTOR shall prepare and submit to the STATE
                    monthly voucher bills and adjustments pursuant to this
                    AGREEMENT through the electronic mail system.

Ongoing             Insurance Coverage/Miscellaneous

                    a. Provide insurance coverage for enrollees.

                    b. Implement project such that health services are provided
                    to enrollees. Continue enrollment and marketing programs as
                    needed in cooperation with other STATE CONTRACTORS and the
                    DOH Mass Media Marketing Campaign as directed by

<PAGE>

                    the STATE.

                    c. Initiate the collection of utilization data on enrollees.

                    d. Monitor program enrollment to ensure that enrollment does
                    not reach a number that would result in exceeding the annual
                    funding allocation as specified in Appendix E.

                    e. Meet data requirements of an independent evaluator as
                    needed.

Ongoing             Reporting Requirements

                    a. Initiate subsidy process with STATE. Thereafter, the
                    submittal of monthly voucher bills and supporting
                    documentation shall be on a monthly basis, pursuant to this
                    AGREEMENT.

                    b. Cost and utilization data reports shall be submitted at
                    least on a semi-annual and annual basis, based on a calendar
                    year, due seventy five (75) days after the close of the
                    second quarter and one hundred and twenty (120) days after
                    the close of the calendar year, respectively, using the
                    forms and format supplied by the STATE.

                    c. Submit other reports as required by Appendix F.

                    d. Conform with additional reporting requirements imposed by
                    the STATE which are based on need or as legislatively
                    mandated.

December 31, 1999   Conclusion of insurance coverage for enrollees unless
                    continuation of the Child Health Plus program is approved by
                    the New York State Legislature.

January 1, 2000     Initiate conversion coverage as stipulated in the request
                    for proposals, proposal/workplan and benefit contract.

April 1, 2000       Final report due from the CONTRACTOR.

December 31, 2001   Data relating to the Child Health Plus program shall be
                    maintained and retained by the CONTRACTOR until this date.

<PAGE>

                                   APPENDIX E
                              FINANCIAL INFORMATION

Wellcare shall receive, for the period effective the date of this contract
through December 31, 1997, an amount up to, but not to exceed, the sum of
$802,430 to provide and administer a Child Health Plus program for uninsured
children in the counties identified in Appendix A-2, Section II B 1 of this
AGREEMENT or as modified by the STATE. The premium identified below will be
valid at least through December 31, 1997. Premiums may be modified periodically
under the Child Health Plus program subject to approval of a request from the
CONTRACTOR through the New York State Department of Health and the State
Insurance Department. In the absence of an approved premium modification by the
New York State Department of Health and the State Insurance Department, the
premium contained herein or any subsequent premium (whichever is in effect),
shall continue as the premium for the STATE's subsidy through December 31, 1999.
Payment of this amount is based on the CONTRACTOR meeting the responsibilities
provided in this AGREEMENT.

Wellcare shall receive, for the period of January 1, 1998 through December 31,
1998, an amount up to, but not to exceed, the sum of $2,681,222 to provide and
administer a Child Health Plus program for uninsured children in the counties
identified in Appendix A-2, Section II B 1 of this AGREEMENT or as modified by
the STATE. Payment of this amount is based on the CONTRACTOR meeting the
responsibilities provided in this AGREEMENT.

Wellcare shall receive, for the period of January 1, 1999 through December 31,
1999, an amount up to, but not to exceed, the sum of $3,720,880 to provide and
administer a Child Health Plus program for uninsured children in the counties
identified in Appendix A-2, Section II B 1 of this AGREEMENT or as modified by
the STATE. Payment of this amount is based on the CONTRACTOR meeting the
responsibilities provided in this AGREEMENT.

Premium Information:

Upstate Counties

-     For Upstate counties defined as Albany, Broome, Columbia, Delaware,
Dutchess, Greene, Orange, Otsego, Rensselaer, Rockland, Schoharie, Sullivan and
Ulster the total monthly premium shall be: $75.93.

-     The State Share of the total monthly premium shall be $75.93 or the total
monthly premium for children in families with gross household income less than
120% of the federal poverty level.

-     The State Share of the total monthly premium shall be $66.93 or the total
monthly premium minus $9 for children in families with gross household income
between 120 and 159% of the federal poverty level.

-     The State Share of the total monthly premium shall be $62.93 or the total
monthly premium minus $13 for children in families with gross household income
between 160 and 222% of the federal

<PAGE>

poverty level.

Downstate Counties

-     For Downstate counties defined as Kings, New York and Queens, the total
monthly premium shall be: $93.81.

-     The State Share of the total monthly premium shall be $93.81 or the total
monthly premium for children in families with gross household income less than
120% of the federal poverty level.

-     The State Share of the total monthly premium shall be $84.81 or the total
monthly premium minus $9 for children in families with gross household income
between 120 and 159% of the federal poverty level.

-     The State Share of the total monthly premium shall be $80.81 or the total
monthly premium minus $13 for children in families with gross household income
between 160 and 222% of the federal poverty level.

<PAGE>

                                   APPENDIX F

                         PAYMENT AND REPORTING SCHEDULE

I.    Payment and Reporting Terms and Conditions

      A. The STATE may, at its discretion, make an advance payment to the
CONTRACTOR, during the initial or any subsequent PERIOD, in an amount to be
determined by the STATE but not to exceed twenty five percent of the maximum
amount indicated in the budget as set forth in the most recently approved
Appendix E. If this payment is to be made, it will be due thirty calendar days,
excluding legal holidays, after the later of either:

            -     the first day of the contract term specified in the Initial
                  Contract Period identified on the face page of the AGREEMENT
                  or, if renewed, in the PERIOD identified in the Appendix X, OR

            -     if this contract is wholly or partially supported by Federal
                  funds, availability of the federal funds;

provided, however, that the STATE has not determined otherwise in a written
notification to the CONTRACTOR suspending a Written Directive associated with
this AGREEMENT, and that a proper voucher for such advance has been received in
the STATE's designated payment office. If no advance payment is to be made, the
initial payment under this AGREEMENT shall be due thirty calendar days,
excluding legal holidays, after the later of either:

            -     the end of the first quarterly period of this AGREEMENT; or

            -     if this contract is wholly or partially supported by federal
                  funds, availability of the federal funds;

provided, however, that a proper voucher for this payment has been received in
the STATE's designated payment office.

      B. No payment under this AGREEMENT, other than advances as authorized
herein, will be made by the STATE to the CONTRACTOR unless proof of performance
of required services or accomplishments is provided. If the CONTRACTOR fails to
perform the services required under this AGREEMENT the STATE shall, in addition
to any remedies available by law or equity, recoup payments made but not earned,
by set-off against any other public funds owed to CONTRACTOR.

      C. Any optional advance payment(s) shall be applied by the STATE to
future payments due to the CONTRACTOR for services provided during initial or
subsequent PERIODS. Should funds for subsequent PERIODS not be appropriated or
budgeted by the STATE for the purpose herein specified, the STATE shall, in
accordance with Section 41 of the State Finance Law, have no liability under
this AGREEMENT to the CONTRACTOR, and this AGREEMENT shall be considered

<PAGE>

terminated and cancelled.

      D. The CONTRACTOR will be entitled to receive payments for work, projects,
and services rendered as detailed and described in the program
workplan/proposal, Appendix C. All payments shall be in conformance with the
rules and regulations of the Office of the State Comptroller.

      E. The CONTRACTOR will provide the STATE with the reports of progress or
other specific work products pursuant to this AGREEMENT as described in this
Appendix F, below. In addition, a final report must be submitted by the
CONTRACTOR no later than March 31, 2000. All required reports or other work
products developed under this AGREEMENT must be completed as provided by the
agreed upon work schedule in a manner satisfactory and acceptable to the STATE
in order for the CONTRACTOR to be eligible for payment.

      F. By the tenth (10th) business day of the month, the CONTRACTOR shall
submit to the STATE monthly billing information electronically to the Department
of Health through an electronic mail (E-Mail) account established by the
Department of Health. In addition, an original signed voucher must be submitted
to the Department of Health by the tenth (10th) business day of the month.
Reimbursement shall be based on the actual number of children enrolled in the
program during the month for which payment is being claimed who are eligible for
a subsidy. All billing adjustments shall include a listing by enrollee of any
change in enrollment occurring in that period. The CONTRACTOR shall submit
vouchers to the State's designated payment office located in the New York State
Department of Health.

      In no event shall the amount received by the CONTRACTOR exceed the budget
amount approved by the STATE as stated in Appendix E, and, if actual
disbursements by the CONTRACTOR are less than such sum, the amount payable by
the STATE to the CONTRACTOR shall not exceed the amount of actual disbursements.
All contract advances in excess of actual disbursements will be recouped by
the STATE prior to the end of the applicable budget period.

<PAGE>

II.   Reporting Requirements

      The CONTRACTOR is responsible for submitting reports to DOH as defined in
the Appendix G of the RFP (Appendix B) contained herein. Additional reporting
requirements may be imposed based on need or legislative requirements. The
following are the reports currently required:

A. Monthly enrollment reports which detail new and ongoing enrollment and
disenrollment. These reports are due by the tenth (10th) business day of the
report period month.

B. Quarterly report on the reasons for denied applicants and disenrollment due
thirty (30) days after the close of the quarter.

C. Semi-annual and annual financial and utilization reports. The semi-annual
report is due seventy five (75) days after the close of the second quarter and
the annual report is due one hundred and twenty (120) days after the end of the
calendar year.

D. An annual progress report detailing marketing and enrollment outcomes,
demographic characteristics of enrollees and utilization outcomes. This report
will be required ninety (90) days after the close of the calendar year.

E. Plans must provide quality performance data which is consistent with the New
York State Department of Health Quality Assurance Reporting Requirements (QARR)
data specifications, on an annual basis for the Child Health Plus population.
Some of the general QARR data categories which will be required to be collected
include membership, utilization, quality, access, member satisfaction and
general plan management.

F. The CONTRACTOR will submit a final report, as required by the contract,
reporting on all aspects of the program, detailing how the use of funds were
utilized in achieving the goals set forth in the program workplan/proposal.
This report will be due ninety (90) days after the close of the contract period.

<PAGE>

                                   APPENDIX X

Agency Code_______________               Contract No.____________________
                                         Period __________________________
                                          Funding Amount for Period_______

This is an AGREEMENT between THE STATE OF NEW YORK, acting by and through
____________________________________, having its principal office at
___________________________________, (hereinafter referred to as the STATE),
and ____________________________________(hereinafter referred to as the
CONTRACTOR), for modification of Contract Number ____________, as amended in
attached Appendix (ices)_____________________________________.

All other provisions of said AGREEMENT shall remain in full force and effect

IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of the
dates appearing under their signatures.

___________________________________       _____________________________________

CONTRACTOR SIGNATURE                      STATE AGENCY SIGNATURE

By:________________________________       By:__________________________________

   ________________________________          __________________________________
            Printed Name                               Printed Name

Title:_____________________________       Title:_______________________________

Date:______________________________       Date:________________________________

                                          State Agency Certification:
                                          "In addition to the acceptance
                                          of this contract, I also
                                          certify that original copies
                                          of this signature page will be
                                          attached to all other exact
                                          copies of this contract."
___________________________________         ___________________________________
   STATE OF NEW YORK               )
                                   )      SS.:
      County of ___________________)

On the_____day of________, 19___, before me personally appeared_______, to me
known, who being by me duly sworn, did depose and say that he she resides
at______________, that he/she is the_______________of the_________________, the
corporation described herein which executed the foregoing instrument; and that
he/she signed his/her name thereto by order of the board of directors of said
corporation. Notary)___________________________

<PAGE>

                                          STATE COMPTROLLER'S SIGNATURE

                                          _______________________________

                                          Title:_________________________

                                           Date:_________________________

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 4

      For processing applications, the plan will utilize their internal
      procedures and cutoff dates which must be acceptable to the Department of
      Health.

A8.   IS THERE A LIMIT TO THE NUMBER OF PARTICIPATING PLANS IN EACH
      COUNTY/REGION?

      No, there is no absolute limit. However, we will be accepting plans based
      on need to assure adequate statewide coverage.

A9.   WILL EXISTING ENROLLEES BE GIVEN THE OPPORTUNITY TO SWITCH PLANS ON 5/1/97
      IF THERE AN NEW ENTRANTS IN THE MARKETPLACE?

      Yes.

A10.  DOES THE STATE HAVE ESTIMATES OF ELIGIBLE CHILDREN FOR CHILD HEALTH PLUS
      BY COUNTY OR REGION?

      No, the CPS data set does not break down the uninsured any further
      geographically then New York City and the rest of the State.

A11.  FOR PLANS THAT ALREADY HAVE A CHILD HEALTH PLUS CONTRACT: WE MUST SIGN AN
      ADDENDUM TO OUR EXISTING CONTRACT? WHAT IS THE TERM OF THIS CONTRACT AND
      WHEN WILL THE DEPARTMENT OF HEALTH ISSUE THE CONTRACT EXTENSION?

      New contracts will be issued to those plans selected for the expanded
      program.

A12.  IN AREAS WITH MORE THAN ONE PARTICIPATING PLAN, WILL THE OUTREACH
      ORGANIZATION INCLUDE ALL PLANS ON ITS EFFORTS OR WILL STEERAGE OCCUR BY
      SOME CRITERIA?

      The outreach organization will provide families with a list of all
      insurers available in their area.

A13.  IN REFERENCE TO THE RESPONSE TO QUESTION 8, WHAT IS MEANT BY "IT IS AT THE
      DISCRETION OF THE FAMILY AS TO WHAT PAYMENT SCHEDULE THEY CHOOSE TO ABIDE
      BY?" THE RFP STATES THAT PAYMENT IS ON A MONTHLY BASIS.

      Insurers will have the option of offering alternative modes of premium
      payment, for example, quarterly, annually or semi-annually, in addition to
      a monthly rate. It is up to the family to decide the mode from the options
      offered by the insurer.

A14.  PLEASE CLARIFY WHETHER CHILDREN UNDER AGE ONE MAY ENROLL IN CHILD HEALTH
      PLUS?

      Children under age one may enroll in Child Health Plus. However, if family
      income is below 222% of gross Federal Poverty Level, then the children
      should be referred to Medicaid.

A15.  BACK TO QUESTION 59 AND THE RESPONSE READ TODAY, DOES THE PROGRAM NAME
      "CHILD

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 5

      HEALTH PLUS" IMPRINTED ON A CARD SUFFICE AS AN IDENTIFICATION PROCESS ON
      ID CARDS?

      Yes.

A16.  IS THERE DATA ON THE NUMBER OF CHILDREN DISENROLLED FROM CHILD HEALTH PLUS
      DUE TO NON-PAYMENT OF PREMIUMS ?

      No data is available at this time regarding disenrollment due to
      non-payment. However, under the current system, with the exception of
      families between 160 and 222 of gross Federal Poverty Level with multiple
      children, the $25 family contribution must be paid with application prior
      to enrollment. For families with multiple children, only the first $25
      must be paid initially. The $25 for remaining children is paid based upon
      procedures of the individual plan.

A17.  MAY A MEDICAID MANAGED CARE PLAN ASSUME PRESUMPTIVE ELIGIBILITY FOR A
      MEDICAID MEMBER WHERE THE ROSTER INDICATES THE CASE HAS BEEN CLOSED?

      No, children cannot be assumed presumptive eligible for Child Health Plus
      just because they were disenrolled from Medicaid? The family must apply to
      Child Health Plus, submit a completed and signed application. However if
      the child appears eligible but lacks documentation needed to support the
      application, the child can be enrolled presumptively for sixty (60) days.

A18.  WILL THE STATE TRANSMIT INFORMATION FOR A PLAN'S MEDICAID MEMBERS THAT
      WOULD INDICATE THAT A CASE IS CLOSED DUE TO INCOME REASONS?

      No, the state will not transmit data as to reason for closure of Medicaid
      case as cases are closed at the local district.

A19.  QUESTION 41 OF BIDDER'S CONFERENCE DOCUMENT STATES THAT NO FROM OF
      TRANSPORTATION IS COVERED BY CHILD HEALTH PLUS. HOWEVER, THE BENEFIT
      PACKAGE EXCLUSIONS ONLY REFER TO "NON-EMERGENCY" TRANSPORTATION, AND THE
      RATE FILING WORKSHEET IN APPENDIX F INCLUDES A LINE FOR AMBULANCE SERVICE.
      IS AMBULANCE USE FOR AN EMERGENCY A COVERED BENEFIT?

      The exclusions to the benefit package should have indicated that all
      transportation is excluded. The rate filling application should not have
      emergency transportation included.

A20.  WILL THERE BE AN ON-SITE REVIEW OF SELECTED BIDDERS PRIOR TO PROGRAM START
      UP?

      On site review is not planned. However, the Department of Health reserves
      the right to do a site visit if questions should arise.

A21.  MUST PLANS HAVE THE ABILITY TO BILL ELECTRONICALLY BY THE TIME PROPOSALS
      ARE SUBMITTED OR BY THE PROGRAM START DATE?

      Plans must guarantee within their proposal that they have the ability to
      submit electronic

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 6

      billing data by implementation date.

A22.  PLEASE RE-CLARIFY - CAN A PLAN DENY A MEDICALLY APPROPRIATE ER VISIT FOR
      FAILURE TO NOTIFY THE PLAN OF THE VISIT?

      The plan may impose a $35 copayment for failure to notify.

A23.  ARE MEDICAID DRG RATES AVAILABLE TO PARTICIPATING PLANS BY STATUTE?

      Yes, this is available under FOIL (Freedom of Information Law).

A24.  PLEASE CLARIFY: IS THERE AN APPLICATION FEE OF $25 AS THERE IS IN THE
      CURRENT PROGRAM?

      No, the application/enrollment fee has been replaced by the statutory
      family contribution to premium.

A25.  WHAT ARE THE PRESCRIPTION DRUG EXCLUSIONS?

      The exclusions would be those typically permitted under Insurance Law and
      Regulation such as those for experimental or investigational drugs, drugs
      prescribed for a cosmetic purpose, etc.

A26.  WHEN THE ENROLLEE AGES OUT OF A HEALTH PLAN, THE PLAN IS THEN RESPONSIBLE
      TO OFFER THEM A CONVERSION PACKAGE; ARE THERE ANY SPECIFIC BENEFITS THAT
      HAVE TO BE OFFERED?

      No, those plans capable of issuing conversion coverage must make the
      contract they generally offer available to Child Health Plus enrollees.

A27.  IF THE PLAN ASSESSES THE $35 ER CO-PAY FOR FAILURE TO NOTIFY PLAN OF AN ER
      VISIT ON INAPPROPRIATE ER VISIT AND THE MEMBER IS DELINQUENT, DOES THIS
      DELINQUENCY APPLY TO THE DELINQUENCY OF THE PREMIUM?

      No, failure to pay a copayment is unrelated to failure to pay a premium.

A28.  MAY A CHILD BE ENROLLED IN CHILD HEALTH PLUS PRIOR TO BIRTH AS IS
      CURRENTLY THE CASE UNDER MEDICAID.

      No, in order for enrollment in Child Health Plus, the family must submit
      an application with the child's name and date of birth as well as required
      documentation. Enrollment is established for the first day of a future
      month unlike Medicaid who enrolls retroactive to the date of application
      and at any point within the month. There is no family coverage in this
      program, only individual coverage.

A29.  WHAT HAPPENS WHEN A CHILD WHO IS RECEIVING CHILD HEALTH PLUS SERVICES
      BECOMES ELIGIBLE FOR MEDICAID AND THE PLAN DOES NOT KNOW ABOUT THE
      MEDICAID COVERAGE FOR SEVERAL MONTHS? ARE WE TO RETURN PREMIUMS? ARE WE TO
      DISENROLL RETROACTIVELY?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 7

      The Department has a procedure to match Child Health Plus
      enrollment/billing files against the Medicaid enrollment file to identify
      children dually enrolled in both programs. The Department notifies the
      plans of the dual enrollment status of these children and advises the plan
      to disenroll children prospectively for a future month and not
      retroactively. The premium for the month where the child is identified as
      a duplicate is not recouped.

A30.  PLEASE CLARIFY WHAT BIRTH CONTROL/PRESCRIPTIONS, DEVICES, AND SUPPLIES ARE
      COVERED IN CHILD HEALTH PLUS.

      Any family planning services or birth control/prescriptions, devices and
      supplies that are prescribed by a qualified, participating provider are
      covered.

A31.  HOW WILL DOH CHOOSE QUALIFIED PLAN - MINIMUM SCORE, # PLANS PER COUNTY, #
      IN THE WHOLE STATE?

      Total score of all parts of the proposal will be considered. A ranking
      will be assigned. Plans will be chosen in order to ensure an adequate
      statewide coverage.

A32.  WHAT FACTORS WILL BE EVALUATED IN DETERMINING THE EFFECTIVENESS OF PLANS
      IN TARGETING MINORITY POPULATION?

      We will evaluate the reasonableness of the plan's proposed marketing plan
      and outreach efforts with respect to achieving their projected enrollments
      and particularly including under-represented minorities in the current
      program.

A33.  CLARIFY CHILD HEALTH PLUS COVERAGE FOR CHILDREN LESS THAN 1 IF THE MOTHER
      DOESN'T OBTAIN MEDICAID COVERAGE FOR HIM/HER.

      A child maintains Child Health Plus enrollment until he or she is enrolled
      in Medicaid.

A34.  APPENDIX D HAS A PIE CHART THAT SHOWS THE SECOND QUARTER 1996 ENROLLMENT
      BY SUBSIDY AND AGE. TWO OF THE AGE CATEGORIES ARE 0-1 AND 1-5. DOES THE
      0-1 CATEGORY REPRESENT CHILDREN UNDER 12 MONTHS? IF SO, THIS SEEMS TO BE
      INCONSISTENT WITH PAGE 13 OF THE RFP WHICH SAID THAT THERE IS VERY LITTLE
      ENROLLMENT UNDER AGE 1 (PIE CHART SHOWS 5.4% OF ENROLLMENT 0-1). PLEASE
      CLARIFY THIS.

      Under the new program, it is expected that insurers' referrals to Medicaid
      for this population will be more aggressive than under the existing
      program.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 8

II.   NETWORK COMPREHENSIVENESS
      (READ AT [ILLEGIBLE] CONFERENCE)

A35.  UNDER ELIGIBLE ORGANIZATIONS, PLEASE DEFINE: A COMPREHENSIVE HEALTH
      SERVICE PLAN OPERATING UNDER THE REGULATIONS OF THE DEPARTMENT OF HEALTH.

      These organizations are Article 44 health maintenance organizations and
      prepaid health services plans.

A36.  RE: PAGE 57 - EVALUATION CRITERIA PLEASE EXPLAIN WHAT IS EXPECTED FOR
      INFORMATION. THE RFP ALREADY DESCRIBES THE BENEFIT PACKAGE. PMPMS WILL BE
      IN THE RATE SUBMISSION.

      The benefit package evaluation will be based on the narrative description
      of the benefit package which should be provided in the proposal.

A37.  RE: PATIENT EDUCATION. THE TITLE STATES "PATIENT" EDUCATION BUT THE TERM
      "PUBLIC" EDUCATION IS USED WITHIN THE SECTION. PLEASE CLARIFY.

      These terms are used interchangeably.

A38.  QUESTION #62 INDICATES THAT "INSURERS MUST PERFORM THEIR OWN MARKETING AND
      OUTREACH IN ACCORDANCE WITH THE GUIDELINES IN THE RFP. MAY THE INSURERS
      SUB-CONTRACT WITH COMMUNITY BASED ORGANIZATIONS TO CONDUCT THIS OUTREACH?

      Yes. However, the insurer remains responsible for assuring that the
      sub-contractor performs these activities consistent with program
      requirements. In addition, the proposal should include the actual outreach
      and education strategies that may be subcontracted.

A39.  YOUR ANSWER TO QUESTION #100 REFERS TO A PROVIDER NETWORK SUBMISSION "DUE
      JANUARY 23, 1997", IS THIS THE QUARTERLY PROVIDER NETWORK SUBMISSION FOR
      MEDICAID MANAGED CARE PLANS OR IS IT SOME OTHER SUBMISSION?

      It is the quarterly provider network submission for Medicaid Managed Care
      plans.

A40.  FOR PLANS WHO SUBMITTED THE LETTER OF INTENT WITHIN THE APPROPRIATE TIME
      FRAME, WHEN CAN WE EXPECT TO RECEIVE THE DATA REPORTS MENTIONED IN
      QUESTION 145?

      These reports are included in your packet.

A41.  RE: QUESTION 121 - HOW MUCH TIME IS PERMITTED TO ELAPSE BETWEEN SELECTION
      OF A CENTER AND SELECTION OF A SPECIFIC PCP FROM THAT CENTER.

      The Child Health Plus program does not intend to specify any time limits
      in this selection. However, since PCPs coordinate care and are required to
      be available 24 hours per day, 7 days per week, it is in the insurer's and
      enrollee's best interest that PCP selection or

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                          PAGE 9

      assignment occur shortly after enrollment.

A42.  ARE WE EXPECTED TO POLL EACH AND EVERY PARTICIPATING PCP TO DETERMINE THE
      NUMBER OF CHILD HEALTH PLUS ENROLLEES HE OR SHE IS WILLING TO ACCEPT? WILL
      YOU ACCEPT WHATEVER NUMBER THE PCP SUPPLIES, EVEN IF IT FLIES IN THE FACE
      OF REASON?

      Non-Medicaid managed care plans will need to provide PCP specific
      enrollment information with their submissions. The numbers provided by
      each PCP should realistically reflect that the PCP can actually
      accommodate those enrollees. For Managed care plans participating in the
      Partnership Plan, the quarterly provider network submission will be used
      to assess PCP capacity.

A43.  DO THE PLANS NEED TO PROVIDE ENROLLMENT PROJECTIONS BY REGION OR WILL
      OVERALL PROJECTIONS SUFFICE?

      Enrollment projections should be submitted by county.

A44.  PLEASE CLARIFY THAT APPLICANTS WILL NEED TO SUBMIT A COMPREHENSIVE LIST OF
      PHARMACIES AND LABS AS PART OF APPENDIX L.

      The applicant summary forms contained in Appendix L must be completed for
      any sub-contracted provider.

A45.  THE ANSWER TO QUESTION #118 SAYS THAT 1500 MAX IS APPLICABLE TO MEDICAID
      ONLY, BUT DOES THIS MEAN THERE'S NO MAXIMUM FOR CHILD HEALTH PLUS? (I.E.
      SO THAT A PROVIDER CAN HAVE 1500 FOR MEDICAID AND ANOTHER 1000 FOR CHILD
      HEALTH PLUS?)

      Yes. However, plans must abide by appointment availability standards and
      networks will be monitored to assure service accessibility.

A46.  WILL THE STATE ALLOW PAPER SUBMISSIONS OF SOME OF THE NETWORK IF THE PLAN
      HAS DIFFICULTY IN SUBMITTING COMPLETE NETWORK INFORMATION IN THE FORMAT
      REQUIRED BY THE STATE JANUARY 23, 1997.

      Medicaid managed care plans must submit their provider network information
      by january 23, 1997 in the format specified by the Office of Managed Care.
      For non-Medicaid managed care plans, network submissions may be in paper
      medium, however, we prefer the spreadsheet format previously specified.

A47.  FOR MEDICAID MANAGED CARE PLANS, WILL THE STATE DETERMINE EACH PCP'S
      ADDITIONAL CAPACITY BASED ON THE 1/23/97 QUARTERLY PROVIDER NETWORK
      SUBMISSION, OR ARE THE PLANS EXPECTED TO DETERMINE THIS CAPACITY?
      SPECIFICALLY, WHAT DOES THE MEDICAID MANAGED CARE PLAN NEED TO SUBMIT
      UNDER PROVIDER NETWORK? (ASIDE FROM NETWORK CHANGES AFTER THE 1/23/97
      SUBMISSION.)

      The 1/23/97 quarterly network submission to the Office of Managed care
      will be utilized

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 10

      to determine adequacy of network as well as capacity to serve Child Health
      Plus enrollees. No additional network information is required for managed
      care plans participating in the Medicaid program.

A48.  THE RFP REQUESTS THAT PLANS IDENTIFY ANY SERVICES TO BE PROVIDED BY
      SUBCONTRACTORS, INCLUDING PROVIDERS, PHARMACEUTICAL AND DIAGNOSTIC
      LABORATORY NETWORKS. PLEASE PROVIDE A DEFINITION OF "SUBCONTRACTORS" AND
      EXPLAIN HOW THIS QUESTION DIFFERS FROM THE QUESTION ON PAGE 50 OF THE RFP,
      "IDENTIFY THE PROVIDER NETWORK (BY TYPE, NUMBER, AND COUNTY)..."

      Plans may have to enter into subcontracts for certain services which are
      not part of their existing network. The insurer should identify which
      services-physician, hospital, laboratory, pharmacy, home health care, etc.
      - will be subcontracted.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 11

III.  FISCAL EVALUATION
      (READ AT BIDDER'S CONFERENCE)

A49.  IS IT A REGULATORY REQUIREMENT FOR A LICENSED ACTUARY TO SIGN OFF ON THE
      RATE SUBMISSION OR CAN ANY QUALIFIED FINANCIAL STAFF PERSON PERFORM THIS
      FUNCTION?

      The actuarial memorandum should be signed by a member of the American
      Academy of Actuaries or a Fellow of the Society of Actuaries. Attestation
      from other financial officers of the plan will be acceptable provided they
      are able to demonstrate appropriate qualifications and experience. An FSA
      signature can be from an independent actuarial firm or an employee of the
      plan.

A50.  PLEASE CONFIRM THE PERIOD OF TIME THAT THE RATE PROPOSAL WILL COVER?

      We would anticipate that the rate proposals will be for a 12 month period
      but should at least be through December 31, 1997.

A51.  WHAT SHOULD WE ANTICIPATE THE PREMIUM RECEIVABLE LAG TO BE?

      Billing are required monthly and the Department will process bills within
      30 days. please refer to sections 5 on pages 30 and 31 for the specific
      billing timelines.

A52.  IS REINSURANCE AVAILABLE FROM THE STATE?

      No. Reinsurance is not available from the state.

A53.  CAN THE FORM IN APPENDIX K BE COMPUTED BY FUNCTIONAL AREA (E.G., MMIS
      CLAIMS ETC.) RATHER THAN BY LISTING OF INDIVIDUAL PERSONNEL?

      The key administrative staff need to be identified on the form. All
      support staff can be grouped by functional area.

A54.  PER THE DRAFT RATE FILING GUIDELINES UNDER APPENDIX F OF THE RFP, IS THE
      EXPECTED INCURRED LOSS RATIO MANDATED TO BE 90% OR MAY PLANS PROVIDE
      ALTERNATE PROJECTIONS?

      No, plans may provide alternate projections. The 90% referenced in
      Appendix F was for illustrative purposes.

A55.  WILL FAMILY PLANNING SERVICES BE CONSIDERED FOR A REIMBURSEMENT CARVE-OUT,
      AND/OR MAY PLANS SUBCONTRACT WITH OTHER PLANS TO PROVIDE FAMILY PLANNING
      SERVICES ?

      Plans may subcontract with other plans to provide services subject to
      approval by the State DOH.

A56.  CPS DATA IS NOT BROKEN DOWN BY COUNTY. WHEN WILL PLANS RECEIVE COUNTY
      SPECIFIC INFORMATION?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 12

      The state released CPS data for New York City and rest of state by age and
      income category at the bidders conference on January 10, 1997. No other
      breakdown will be provided by the state.

A57.  ARE THERE ASSUMPTIONS REGARDING TREND FACTORS FOR OUTLYING YEARS?

      No. We are not offering any actuarial assumptions regarding trend factors.
      However, we do expect the plans to provide them in their bid.

A58.  WHY IS AN ACTUARIAL CERTIFICATION NEEDED FOR THIS PROGRAM WHEN IT WAS NOT
      REQUIRED FOR MEDICAID?

      It is required by New York State Insurance regulation.

A59.  PERTAINING TO QUESTION 162 ABOUT RATING REGIONS- WHEN WILL THIS BE
      AVAILABLE? WHAT COUNTIES WILL BE INCLUDED IN WHAT REGIONS?

      Please refer to question #151. The rates can be varied by county/region as
      actuarially justified...

A60.  STATUTORY CONTRIBUTION- SINCE THE 2% CONTRIBUTION DOES NOT APPLY TO CHILD
      HEALTH PLUS, I ASSUME THAT A 1% CONTRIBUTION IS ACCEPTABLE. IS THIS SO?

      Statutory contributions are described in State Insurance Law Section 4310.

A61.  BASE PERIOD TO RATE PERIOD -- IS IT ACCEPTABLE TO HAVE A BASE PERIOD OF
      1995 AND A RATE PERIOD OF 5/12/97? (1995 IS TOO INCOMPLETE TO SERVE AS A
      BASE PERIOD).

      Please refer to question 155. The most current available credible data
      should be used, however the data need not be for a calendar year period.

A62.  THE STATE HAS CAPPED THE MAXIMUM FAMILY CONTRIBUTION AT FOUR CHILDREN?
      HOWEVER, WILL THE STATE BE PAYING THE PLANS AN INDIVIDUAL PREMIUM FOR EACH
      WHERE THERE ARE MORE THAN FOUR CHILDREN IN THE FAMILY? WILL IT BE THE SAME
      SUBSIDIZED PREMIUM AMOUNT AS THE OTHER CHILDREN OR WILL IT BE A HIGHER
      AMOUNT THAT ADDS IN THE CONTRIBUTION THE FAMILY WOULD HAVE MADE IF THE
      HOUSEHOLD HAD FOUR KIDS OR LESS?

      The insurer will bill the State the total premium for all children that
      are fully subsidized. However, for partially subsidized children, the
      insurer will "net out" the monthly family contribution that is required
      for each child from the total premium to arrive at the State share. In
      those instances where more than four children from a partially subsidized
      family are enrolled in a plan, there is no family contribution offset to
      the total premium for the fifth or more child(ren).

A63.  AT THE RATES TO BE AGE ADJUSTED IN ANY WAY?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 13

      No, please refer to question #140 for additional information.

A64.  CAN CONSULTANTS (ACTUARIES) NOT AFFILIATED WITH A PLAN RECEIVE COPIES OF
      THE DATA?

      Yes, it will be made available. Please call the Bureau of Health
      Economics.

A65.  CAN YOU PROVIDE A PHONE NUMBER FOR THE BUREAU OF HEALTH ECONOMICS?

      As listed on page 41 of the RFP, the official phone for inquiries
      regarding this RFP process is (518)486-7897.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 14

IV.   ADDITIONAL QUESTIONS
      (NOT READ AT BIDDER'S CONFERENCE)

A66.  DOES NYHCRA ALLOW CHILD HEALTH PLUS PLANS THE ABILITY TO PAY MEDICAID DRGS
      FOR INPATIENT CARE, OR MUST THE REIMBURSEMENT BE NEGOTIATED?

      The New York State Health Care Reform Act of 1996 (HCRA of 1996) allows
      any Child Health Plus insurer to negotiate an inpatient rate with
      hospitals. The rate can be based on the DRG but that is between the Payer
      and provider.

A67.  CAN A HEALTH CARE PROVIDER PAY ALL OR PART OF A MEMBER'S PREMIUM ON THEIR
      BEHALF TO ASSIST THEM IN REMAINING ENROLLED IN CHILD HEALTH PLUS?

      The insurer will only bill the family for the family contribution of the
      premium, not a third party. However, if someone chooses to pay the family
      contribution on behalf of the family, that is permitted. If the "health
      care provider" referenced in this question is the insurer, the insurer
      does not have the option to waive the family contribution to the premium
      as legislative intent was to have families contribute to the cost of the
      premium.

A68.  CAN AN INSURER CHOOSE TO COVER CHILDREN WITHIN THE <19 GROUP, I.E., 0-14
      FOR EXAMPLE?

      An insurer cannot choose to cover only a subset of the Child Health Plus
      population of less than 19 year of age.

A69.  IN APPENDIX L, BIDDER'S SUMMARY OF PROPOSAL, WHAT IS A CHARITY
      REGISTRATION NUMBER? DOES THIS APPLY ONLY TO NOT-FOR-PROFITS?

      Charitable organizations are required to be registered with the Secretary
      of State pursuant to Article 7-A of the New York State Executive Law. The
      charity registration number is proof that an organization has registered
      with the Secretary of State.

A70.  RELATED TO QUESTION 67 REGARDING CURRENT MEMBERS IN THE PROGRAM
      TRANSITIONS TO THE EXPANDED PROGRAM, IF A MEMBER EITHER PAYS A PARTIAL OR
      FULL PREMIUM, WILL THE AMOUNT THEY-PAID AT THE LAST RECERTIFICATION DATE
      NEED TO BE CREDITED TO ANY REMAINING MONTHS NEW PREMIUM AMOUNTS, I.E.,
      MEMBER PAYS $25 PER YEAR NOW. RECERTIFIED IN JANUARY AND PAID $25. AS OF
      JULY, THEY NEED TO PAY $9 PER MONTH (OR $36 UNTIL THE END OF THE YEAR).
      DOES THIS AMOUNT NEED TO BE ADJUSTED AGAINST THE $25 ALREADY PAID?

      If the family requests a refund of any unused portion of the $25 annual
      premium contribution, the plan must pay the refund. If the family and the
      insurer wish to apply this to the newly required family contribution
      rather than refund the unused portion, this can be done. However, the
      insurer must document this in the enrollment file.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 15

A71.  EQUIVALENT COVERAGE: PLEASE CONFIRM THAT ANY DIFFERENCE IN COVERAGE
      BETWEEN CHILD HEALTH PLUS AND ANOTHER COVERAGE IS CONSIDERED
      NON-EQUIVALENT COVERAGE DESPITE HOW SIMILAR THE TWO WOULD BE.

      The current definition of equivalent coverage is stated in Child Health
      Plus Advisory Memoranda A-12 found in Appendix B of the Request for
      Proposals(RFP). A revised equivalent coverage policy will be formulated
      prior to the implementation of the expanded program. It is anticipated
      that under the expanded program, the current definition will merely be
      expanded to include inpatient care.

A72.  DO THE NYHCRA SURCHARGES AND/OR ASSESSMENTS APPLY TO THE CHILD HEALTH PLUS
      PROGRAM?

      The New York State Health Care Reform Act surcharges and/or assessments
      currently apply to the Child Health Plus program.

A73.  RFP ASKS FOR RESOURCES COMMITTED TO IMPLEMENT/OPERATE: IF PLAN ALREADY
      OPERATIONAL, DO WE JUST STATE HUMAN RESOURCES CURRENTLY IN PLACE? IS THE
      "MANAGEMENT TEAM" ALSO THE PERSONS RESPONSIBLE IN EACH DEPARTMENT?

      If a plan is currently a Child Health Plus insurer, they can state that
      the resources to operate the expanded program are in place. The
      "management team" should be a list of the persons responsible in each
      Department.

A74.  WHAT FACTORS WILL BE EVALUATED IN DETERMINING THE EFFECTIVENESS OF PLANS
      IN TARGETING MINORITY POPULATIONS?

      As part of the response to the Request for Proposals, the bidder must
      submit a general plan for marketing the program along with a description
      of how community outreach and marketing activities will be conducted to
      attract applicants. This should include a discussion of the strategies the
      bidder will use to target minority populations in their service area. The
      overall marketing plan will be evaluated as a component of the General
      Technical Evaluation Criteria.

A75.  A RECENT SURVEY WE CONDUCTED ON OUR CURRENT CHILD HEALTH PLUS ENROLLEES
      REVEALED THAT MANY FAMILIES, ESPECIALLY THOSE WITH MORE THAN ONE CHILD,
      WOULD NOT ENROLL IN THE NEW PROGRAM DUE TO THE REQUIRED PREMIUM
      CONTRIBUTION. CLIENTS CURRENTLY ENROLLING IN OUR PLAN - PLUS THOSE WHO
      WILL ENROLL BETWEEN NOW AND MAY 1ST - MAY ACCUSE US OF "BAIT AND SWITCH"
      TECHNIQUES, I.E., WE "SELL" THEM A FREE PROGRAM, AND THEN CHANGE IT TO ONE
      WITH A PREMIUM CONTRIBUTION REQUIREMENT. THIS SITUATION WILL CAST OUR PLAN
      AND THE STATE IN A POOR LIGHT. WHAT IS THE STATE WILLING AND ABLE TO DO TO
      ADDRESS, AVOID, AND/OR MINIMIZE THE POTENTIAL NEGATIVE CONSEQUENCES OF
      THIS SITUATION?

      The dollar amounts are defined by Statute.

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 16

A76.  A RECENT SURVEY WE CONDUCTED OF OUR CHILD HEALTH PLUS SUBSCRIBERS REVEALED
      EXTREME PRICE SENSITIVITY, I.E., OVER 50% OF RESPONDENTS INDICATED THEY
      WOULD BE UNWILLING AND/OR UNABLE TO MAKE THE REQUIRED PREMIUM
      CONTRIBUTIONS, AND, THEREFORE, WOULD NOT ENROLL THEIR CHILDREN. ONE
      IMPLICATION OF THIS FUNDING IS POTENTIAL ADVERSE SELECTION. WILL THE STATE
      FACTOR THIS INTO THE EVALUATION OF RATE FILLINGS?

      The State will consider all supportable actuarial methods and assumptions
      utilized in the rate making process as submitted by bidders.

A77.  DOES THE STATE HAVE PARTICULAR REQUIREMENTS FOR CHILD HEALTH PLUS PROVIDER
      CONTRACTS, AS IT DOES FOR MEDICAID MANAGED CARE? DO INSURERS HAVE TO
      SUBMIT MODEL CONTRACTS TO SDOH FOR REVIEW AND APPROVAL?

      There are no specific requirements for Child Health Plus provider
      contracts other than those contract provisions that are otherwise required
      of health plans (e.g. enrollee non liability language, access to medical
      records etc.)

A78.  CURRENT CHILD HEALTH PLUS INSURERS RECEIVED CONTRACT EXTENSIONS FROM JULY
      1, 1996 THROUGH DECEMBER 31, 1996, WHEN WILL DOH ISSUE EXTENSIONS FOR THE
      PERIOD OF JANUARY 1, 1997, JUNE 30, 1997

      It is anticipated that DOH will issue contract extensions to current Child
      Health Plus insurers within the next month. These extensions will be for
      the period January 1, 1997 through September 30, 1997 to allow for
      transition of current enrollees to the expanded program. If a current
      insurer is selected to continue in the expanded program, the terms of the
      new contract will supersede the extension.

A79.  ARE THERE GUIDELINES RELATIVE TO THE RATIO BETWEEN PROVIDER SERVICES STAFF
      AND ENROLLEES?

      There are no guidelines relative to the ratio between provider services
      staff and enrollees.

A80.  SHOULD THE CHILD HEALTH PLUS PREMIUM RATE INCLUDE THE GME ADD ON?

      The New York State Health Care Reform Act surcharges and/or assessments
      currently apply to the Child Health Plus program.

A81.  WHAT IS THE DEFINITION OF SCHOOL BASED HEALTH CENTER?

      A school-based health center is a clinic established at a school site.
      It's purpose is to provide convenient access to medical and/or behavioral
      services to the children.

A82.  HOW SHOULD OLDER CHILDREN LIVING ON THEIR OWN BE ENROLLED? WHAT SHOULD BE
      USED AS INCOME VERIFICATION? CAN THE TEENS SIGN THEIR OWN APPLICATION?
      WHAT WOULD THE INSURERS DO ABOUT PROOF OF RESIDENCY IN THE CASE OF
      HOMELESS CHILDREN?

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 17

      The issue of older children living on their own is currently under
      investigation by the Department's Office of Counsel. A policy concerning
      this issue and the related issues surrounding it will be issued prior to
      implementation of the expanded program. With regard to the question of
      proof of residency in the case of homeless children, legislation requires
      proof of New York State residency. No specific provision is made for
      homeless children.

A83.  THE RFP STATES THAT ROUTINE OB/GYN VISITS WILL NOT BE COVERED. WILL THE
      OB/GYN MANDATE REGARDING ANNUAL VISITS AND PAP SMEARS FOR WOMEN 18 YEARS
      AND OVER BE COVERED?

      Consistent with Insurance Law, a pelvic exam, pap smear and the laboratory
      testing related to the pap smear must be offered as a routine, preventive
      benefit for women 18 years and older. For females under age 18, this
      service would be covered for purposes of diagnosis and treatment of
      illness or injury. Pelvic exams and pap smears that are performed more
      than once a year for diagnosis of illness or injury are also a covered
      benefit. As stated in the American Academy of Pediatric Guidelines found
      in Appendix E of the RFP, all sexually active patients should be screened
      for sexually transmitted diseases and should have a pelvic exam.

A84.  THE RFP STATES THAT ENROLLEES MUST PAY THEIR PREMIUM CONTRIBUTION MONTHLY,
      AND THAT THEY WILL BE ALLOWED A 30 DAY GRACE PERIOD. ENROLLEES WHO HAVE
      NOT PAID THEIR CONTRIBUTION WITHIN THIS TIME WILL BE RETROACTIVELY
      DISENROLLED. RETROACTIVE DISENROLLMENT PRESENTS SEVERAL ISSUES, FOR
      EXAMPLE, WHAT WILL INSURERS BE REQUIRED TO DO IN THE EVENT THAT THEY
      RECEIVE CLAIMS FOR THIS PERIOD?

      The RFP states that family contributions to premium must be paid 30 days
      in advance of the period of coverage. However, the insurer may allow the
      family an additional 30 days to submit payment before disenrolling the
      child from the program. Family contributions are due in advance to avoid
      retroactive disenrollment as retroactive enrollment and disenrollment is
      not permitted under this program.

A85.  WE WOULD LIKE TO BE ABLE TO PROVIDE CONTINUOUS COVERAGE VIA CHILD HEALTH
      PLUS TO THOSE TERMINATING FROM MEDICALID DUE TO LOSS OF ELIGIBILITY DUE TO
      INCOME REASONS. WHAT PRELIMINARY INFORMATION WOULD BE REQUIRED FOR
      PRESUMPTIVE ELIGIBILITY AND IN WHAT TIME FRAME IF WE ARE TO TRY TO AVOID
      ANY GAPS IN MEMBERSHIP? WOULD THE PREMIUM PAYMENT ALSO BE REQUIRED AT THE
      TIME OF APPLICATION?

      To be deemed presumptively eligible under Child Health Plus, a family must
      submit a completed, signed enrollment application to a participating
      insurer. The insurer must determine that the applicant appears to meet all
      eligibility requirements but lacks the documentation necessary to support
      the application. Plans will enroll children based on their internal
      processing cut-off dates. Enrollment will be for the first day of the
      month with no retroactive enrollment permitted. The first month's family
      premium contribution is required prior to enrollment. If an individual
      submits an application to Child Health Plus knowing they will be
      disenrolled from Medicaid at a point during that month, the child can

<PAGE>

CHILD HEALTH PLUS INSURANCE PLAN RFP
ADDITIONAL QUESTIONS AND ANSWERS                                         PAGE 18

      apply to Child Health Plus in advance of the disenrollment. For example,
      if a child is due to be disenrolled from Medicaid for the 15th of a
      particular month, the child can apply in advance for Child Health Plus and
      can enroll for the first day of the month if the application is completed
      and any required family contribution is paid prior to the insurer's
      internal processing schedule to avoid a lapse in coverage.

A86.  CONVERSELY, WHAT ACTIONS CAN BE TAKEN TO ELIMINATE ANY GAPS IN COVERAGE
      FOR A CHILD HEALTH PLUS MEMBER WHO IS APPLYING FOR MEDICAID? THERE IS
      USUALLY A GAP OF TIME BETWEEN WHEN THE RECIPIENT IS EFFECTIVE FOR MEDICAID
      AND WHEN THEY CAN BE ENROLLED IN A PLAN.

      If a Child Health Plus member applies for Medicaid, there will not be a
      gap in coverage as the member would not be disenrolled from Child Health
      Plus until after they are enrolled in Medicaid. The enrollee would also be
      retroactively enrolled in Medicaid back to the date of application.

A87.  THE INCOME TABLES START WITH A HOUSEHOLD OF ONE. IS IT TO BE ASSUMED THAT
      THE NUMBER IN THE HOUSEHOLD REFERS TO THE NUMBER OF CHILDREN AND NO ADULTS
      ARE TO BE COUNTED?

      Income guidelines are based on the family's gross household income. The
      number in the household refers to both the number of children and the
      number of adults residing in the households.

A88.  SHOULD A NEW HOUSEHOLD BUDGET BE CALCULATED FOR A PREGNANT TEEN BASED ON
      THE UNBORN AND HER FINANCIAL RESPONSIBILITY FOR IT. THAT IS, IF SHE
      CHOOSES NOT TO APPLY FOR MEDICAID?

      No, a household budget should not be calculated for a pregnant teen which
      includes an unborn child.

<PAGE>

[DOH LOGO]                     STATE OF NEW YORK
                              DEPARTMENT OF HEALTH
      Corning Tower The Governor Nelson A. Rockefeller Empire State Plaza
                             Albany, New York 12237

Antonia C. Novello, M.D., M.P.H., Dr.P.H.         Dennis P. Whalen
  Commissioner                                     Executive Deputy Commissioner

DATE:             Aug. 10, 2004

CONTRACT  #:      C014386

CONTRACTOR:       WELLCARE  OF  NEW  YORK, INC.

CONTRACT PERIOD:  Oct. 01, 1997 - Dec. 31, 2004

      Attached is your copy of the approved contract. The Contract number must
appear on all vouchers and correspondence.

      Reports of the Expenditures and Budget Statements should be submitted as
outlined in the Contract.

      In accordance with the contract, properly completed vouchers and/or
programmatic questions should be addressed to the State's designated payment
office as stated in the Contract.

      Failure of the contracting Agency to comply with payment provisions as set
forth in the approved Contract may result in non-payment.

      An additional supply of vouchers to be used in submitting claims may be
obtained by written request from the Office of the State Comptroller, Supply
Room, 110 State Street, 2nd Floor, Albany, New York 12236.

New York State Department of Health
Contract Unit

<PAGE>

                                      Page 2

      Please note the following new information regarding payments:

                  OSC now offers Electronic Payments. Payments formerly made by
                  check can be made by electronic funds transfer through the
                  Automated Clearinghouse (ACH) network, and with OSC optional
                  e-mail notification service, you will receive advance notice
                  of your electronic payments. Additional information is
                  available on-line at http://www.osc.state.ay.us/epay/how.htm
                  or by calling 518-474-4032.

<PAGE>

                                STATE OF NEW YORK
                                    AGREEMENT

Section I.B.1. is revised to read as follows:

I. Conditions of Agreement

B.1. This AGREEMENT is extended through December 31, 2004.

<PAGE>

                                   APPENDIX E
                             FINANCIAL INFORMATION

 Sections A is revised to read as follows:

A. WellCare of New York, Inc. shall receive, for the period July 1, 2004
through December 31, 2004 an amount up to, but not to exceed, $ 5,900,000.00 to
provide and administer a Child Health Plus program for uninsured children in the
counties identified in Appendix A-2, Section II.B.1 of this AGREEMENT or as
modified by the STATE. Payment of this amount is based on the CONTRACTOR meeting
the responsibilities provided in this AGREEMENT.

Additional Premium Information:

For Columbia, Greene, Albany:

      The total monthly premium shall be: $ 96.63

      The State share of the total monthly premium shall be $ 96.63 or the total
      monthly premium for children in families with gross household income less
      than 160% of the federal poverty level and children who are American
      Indians or Alaskan Natives (AI/AN).

      The State share of the total monthly premium shall be $ 87.63 or the total
      monthly premium minus $9 for children in families with gross household
      income between 160% and 222% of the federal poverty level with a maximum
      of $27 per month per family. The State share is the total monthly premium
      less $9 for each of the first three children. For additional children, the
      State share is the total monthly premium.

      The State share of the total monthly premium shall be $ 81.63 or the total
      monthly premium minus $15 for children in families with gross household
      income between 223% and 250% of the federal poverty level with a maximum
      of $45 per month per family. The State share is the total monthly premium
      less $15 for each of the first three children. For additional children,
      the State share is the total monthly premium.

For Rensselaer:

      The total monthly premium shall be: $ 95.93

      The State share of the total monthly premium shall be $ 95.93 or the total
      monthly premium for children in families with gross household income less
      than 160% of the federal poverty level and children who are American
      Indians or Alaskan Natives- AI/AN.

      The State share of the total monthly premium shall be $ 86.93 or the total
      monthly

<PAGE>

      premium minus $9 for children in families with gross household income
      between 160% and 222% of the federal poverty level with a maximum of $27
      per month per family. The State share is the total monthly premium less $9
      for each of the first three children. For additional children, the State
      share is the total monthly premium.

      The State share of the total monthly premium shall be $ 80.93 or the total
      monthly premium minus $15 for children in families with gross household
      income between 223% and 250% of the federal poverty level with a maximum
      of $45 per month per family. The State share is the total monthly premium
      less $15 for each of the first three children. For additional children,
      the State share is the total monthly premium.

For Bronx, Kings, New York, Queens:

      The total monthly premium shall be: $ 20.84

      The State share of the total monthly premium shall be $ 120.84 or the
      total monthly premium for children in families with gross household income
      less than 160% of the federal poverty level and children who are American
      Indians or Alaskan Natives (AI/AN).

      The State share of the total monthly premium shall be $ 111.84 or the
      total monthly premium minus $9 for children in families with gross
      household income between 160% and 222% of the federal poverty level with a
      maximum of $27 per month per family. The State share is the total monthly
      premium less $9 for each of the first three children. For additional
      children, the State share is the total monthly premium.

      The State share of the total monthly premium shall be $ 105.84 or the
      total monthly premium minus $15 for children in families with gross
      household income between 223% and 250% of the federal poverty level with a
      maximum of $45 per month per family. The State share is the total monthly
      premium less $15 for each of the first three children. For additional
      children, the State share is the total monthly premium.

For Dutchess, Orange, Rockland, Ulster, Sullivan:

      The total monthly premium shall be: $ 97.62

      The State share of the total monthly premium shall be $ 97.62 or the total
      monthly premium for children in families with gross household income less
      than 160% of the federal poverty level and children who are American
      Indians or Alaskan Natives (AI/AN).

      The State share of the total monthly premium shall be $ 88.62 or the total
      monthly premium minus $9 for children in families with gross household
      income between 160%
<PAGE>

      and 222% of the federal poverty level with a maximum of $27 per month per
      family. The State share is the total monthly premium less $9 for each of
      the first three children. For additional children, the State share is the
      total monthly premium.

      The State share of the total monthly premium shall be $ 82.62 or the total
      monthly premium minus $15 for children in families with gross household
      income between 223% and 250% of the federal poverty level with a maximum
      of $45 per month per family. The State share is the total monthly premium
      less $15 for each of the first three children. For additional children,
      the State share is the total monthly premium.

      In the absence of an approved premium modification by the Department of
Health and State Insurance Department, the premium above or subsequent premium
approved (whichever is in effect) shall continue as the State's subsidy through
December 31, 2004.

<PAGE>

                                   Appendix L
                           PRIVACY AND CONFIDENTIALITY

Section II is revised as follows:

      II. Effective April 14, 2003, the CONTRACTOR shall comply with the
      following agreement:

       Federal Health Insurance Portability and Accountability Act (HIPAA)
                   Business Associate Agreement ("Agreement")

      This Business Associate Agreement between the New York State Department of
Health and Wellcare of New York, Inc., hereinafter referred to as the Business
Associate, is effective on April 14, 2003 to December 31, 2004.

<PAGE>

                                   APPENDIX X

AGENCY CODE 12000                       CONTRACT NO. C-014386
PERIOD 10/1/1997 TO 12/31/04            FUNDING AMOUNT FOR PERIOD $71,010,771.00

This is an AGREEMENT between THE STATE OF NEW YORK, acting by and through the
Department of Health, having its principal office at Corning Tower, Empire State
Plaza, Albany, NY, (hereinafter referred to as the STATE), and WELLCARE OF NEW
YORK, INC. hereinafter referred to as the CONTRACTOR), for modification of
Contract Number C-014386 as reflected in the attached provisions to Section
I.B.I. of the Agreement and Appendices E and L, and to extend the period of the
contract through December 31, 2004.

All other provisions of said AGREEMENT shall remain in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT as of the
dates appearing under their signatures.

_________________________________              _________________________________

CONTRACTOR SIGNATURE                           STATE AGENCY SIGNATURE

By: /s/ Todd S. Farha                          By: /s/ Judith Arnold
    -----------------------------                  -----------------------------
    Todd S. Farha                                  Judith Arnold
    -----------------------------                  -----------------------------
      Printed Name                                   Printed Name

Title: President & Chief                       Title: Deputy Commissioner
       Executive Officer                               Division of Planning,
                                                       Policy, and Resource
                                                       Development

Date: June 3, 2004                             Date: 6/7/04

                                                 State Agency Certification:
                                                 "In addition to the acceptance
                                                 of this contract, I also
                                                 certify that original copies of
                                                 this signature page will be
                                                 attached to all other exact
                                                 copies of this contract."

_________________________________
STATE OF FLORIDA                  ) SS.:
                                  )
 County of Hillsborough           )

On the 3rd day of June 2004, before me personally appeared Jodd S. Farha, to me
known, who being by me duly sworn, did depose and say that he resides at
[ILLEGIBLE], Florida, that he is the President & CEO of the [ILLEGIBLE] the
corporation described herein which executed the foregoing instrument; and that
he signed his name thereto by order of the board of directors of said
corporation.

(Notary) Kathleen R. Casey

STATE COMPTROLLER SIGNATURE                [SEAL]

_________________________________          Title: ______________________________

                                           Date: _______________________________

                                                          [APPROVED
                                                     DEPT. OF AUDIT & CONTROL
                                                           AUG 04 2004
                                                           ILLEGIBLE]<PAGE>

                                                                  EXHIBIT 10.10

                          PURCHASE OF SERVICE CONTRACT

                                    BETWEEN

                 THE CONNECTICUT DEPARTMENT OF SOCIAL SERVICES

                                       AND

                                       MCO

<PAGE>

PART I: STANDARD CONNECTICUT CONTRACT TERMS

PART II: GENERAL CONTRACT TERMS FOR MCOS

1.    DEFINITIONS

2.    DELEGATIONS OF AUTHORITY

3.    FUNCTIONS AND DUTIES OF THE MCO

      3.01  Provision of Services

      3.02  Non-Discrimination

      3.03  Gag Rules

      3.04  Coordination and Continuation of Care

      3.05  Emergency Services

      3.06  Geographic Coverage

      3.07  Choice of Health Professional

      3.08  Provider Network

      3.09  Network Adequacy and Maximum Enrollment Levels

      3.10  Provider Contracts

      3.11  Provider Credentialing and Enrollment

      3.12  Specialist Providers and the Referral Process

      3.13  PCP Selection, Scheduling and Capacity

      3.14  Family Planning Access and Confidentiality

      3.15  Pharmacy Access

      3.16  Mental Health and Substance Abuse Access

      3.17  Children's Issues and EPSDT Compliance

      3.18  Special Services for Children /Reinsurance

      3.19  Prenatal Care

      3.20  Dental Care

      3.21  Other Access Features

      3.22  Pre-Existing Conditions

      3.23  Newborn Enrollment

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

      3.25  Open Enrollment

      3.26  Special Disenrollment

      3.27  Linguistic Access

      3.28  Services to Members

      3.29  Information to Potential Members

      3.30  Marketing Requirements

      3.31  Health Education

      3.32  Internal and External Quality Assurance

      3.33  Inspection of Facilities

      3.34  Examination of Records

      3.35  Medical Records

      3.36  Audit Liabilities

      3.37  Clinical Data Reporting

                                       10

<PAGE>

      3.38  Utilization Management

      3.39  Financial Records

      3.40  Insurance

      3.41  Third Party Coverage

      3.42  Coordination of Benefits and Delivery of Services

      3.43  Passive Billing

      3.44  Subcontracting for Services

      3.45  Timely Payment of Claims

      3.46  Copayment Limits and Member Charges for Noncovered Services

      3.47  Insolvency Protection

      3.48  Acceptance of DSS Rulings

      3.49  Policy Transmittals

      3.50  Fraud and Abuse

      3.51  Children with Special Health Care Needs

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT

      4.01  Eligibility Determinations

      4.02  Populations Eligible to Enroll

      4.03  Enrollment/Disenrollment

      4.04  Default Enrollment

      4.05  Lock-In

      4.06  Capitation Payments to MCO

      4.07  Retroactive Adjustments

      4.08  Information

      4.09  Ongoing MCO monitoring

      4.10  Utilization Review and Control

5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

      5.01  Competition Not Restricted

      5.02  Nonsegregated Facilities

      5.03  Offer of Gratuities

      5.04  Employment/Affirmative Action Clause

      5.05  Confidentiality

      5.06  Independent Capacity

      5.07  Liaison

      5.08  Freedom of Information

      5.09  Waivers

      5.10  Force Majeure

      5.11  Financial Responsibilities of the MCO

      5.12  Capitalization and Reserves

      5.13  Provider Compensation

      5.14  Members Held Harmless

      5.15  Compliance with Applicable Laws, Rules and Policies

      5.16  Federal Requirements and Assurances

      5.17  Civil Rights

      5.18  Statutory Requirements

                                       11

<PAGE>

      5.19  Disclosure of Interlocking Relationships

      5.20  DEPARTMENT's Data Files

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

      5.22  Hold Harmless

      5.23  Executive Order Number 16

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

      6.01  Notices of Action

      6.02  Grievances and Administrative Hearing Process

      6.03  Expedited Review and Administrative Hearings

      6.04  Provider Appeal Process

7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

      7.01  Performance Review

      7.02  Settlement of Disputes

      7.03  Administrative Errors

      7.04  Suspension of New Enrollment

      7.05  Sanctions

      7.06  Payment Withhold, Class C Sanctions or Termination for Clause

      7.07  Emergency Services Denials

      7.08  Termination for Default

      7.09  Termination for Mutual Convenience

      7.10  Termination for the MCO Bankruptcy

      7.11  Termination for Unavailability of Funds

      7.12  Termination for Collusion in Price Determination

      7.13  Termination Obligations of Contracting Parties

      7.14  Waiver of Default

8.    OTHER PROVISIONS

      8.01  Severability

      8.02  Effective Date

      8.03  Order of Precedence

      8.04  Correction of Deficiencies

      8.05  This is not a Public Works Contract

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9.    APPENDICES

      A.    Covered Benefits HUSKY A Covered Benefits

      B.    Provider Credentialing and Enrollment Requirements

      C.    EPSDT Periodicity Schedule

      D.    DSS Marketing Guidelines

      E.    Quality Assurance Program for Managed Care

      F.    Unaudited Quarterly Financial Reports

      G.    Medicaid Managed Care Eligibility Categories

      H.    Managed Care Policy Transmittals

      I.    Capitation Payment Amounts

      J.    Physician Incentive Payments

      K.    Recategorization Chart

      L.    Non-Hyde Amendment Abortions

10.   SIGNATURES

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PART I: STANDARD CONNECTICUT CONTRACT TERMS

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PART II: GENERAL CONTRACT TERMS FOR MCOs

1. DEFINITIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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2. DELEGATIONS OF AUTHORITY

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

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3.    FUNCTIONS AND DUTIES OF THE MCO

The MCO agrees to the following duties:

3.01  PROVISION OF SERVICES

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

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

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

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

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

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

3.02  NON-DISCRIMINATION

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

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

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

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

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

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

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

3.03  GAG RULES

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

3.04  COORDINATION AND CONTINUATION OF CARE

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

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

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

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

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

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

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

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

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

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

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

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

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

            g.    Providing health education as needed; and

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

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

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

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3.05  EMERGENCY SERVICES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.06  GEOGRAPHIC COVERAGE

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

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

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

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

3.07  CHOICE OF HEALTH PROFESSIONAL

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

3.08  PROVIDER NETWORK

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

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

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

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3.09  NETWORK ADEQUACY AND MAXIMUM ENROLLMENT LEVELS

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

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

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

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

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

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

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

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

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

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

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

3.10  PROVIDER CONTRACTS

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

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

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

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

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

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

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

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

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

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

3.11  PROVIDER CREDENTIALING AND ENROLLMENT

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

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

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

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

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

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

      5.    Board certification or eligibility, as appropriate;

      6.    A current statement from the provider addressing:

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

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            b.    physical and mental health status;

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

            d.    revocation and suspension of hospital privileges;

            e.    a history of malpractice claims; and

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

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

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

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

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

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

      4.    Continuing medical education credits;

      5.    A valid DEA certification; and

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

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

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

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

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

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

3.12  SPECIALIST PROVIDERS AND THE REFERRAL PROCESS

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

3.13  PCP SELECTION, SCHEDULING AND CAPACITY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.14  FAMILY PLANNING ACCESS AND CONFIDENTIALITY

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

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

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

c.    Family planning services which must be covered include:

      1.    reproductive health exams;

      2.    patient counseling;

      3.    patient education;

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

      5.    sterilizations;

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

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

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

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

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

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

3.15  PHARMACY ACCESS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.16  MENTAL HEALTH AND SUBSTANCE ABUSE ACCESS

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

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

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

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

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

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

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

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

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

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

3.17  CHILDREN'S ISSUES AND EPSDT COMPLIANCE

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

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

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

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

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

      2.    A comprehensive unclothed or partially draped physical exam;

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

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

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

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

      7.    Health education, including anticipatory guidance.

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

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

      1.    Providing assistance in arranging and scheduling appointments;

      2.    Providing and arranging transportation;

      3.    Following up on missed appointments; and

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

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

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

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

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

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

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

      1.    Healthy Families Connecticut;

      2.    Connecticut Community Health Initiative (CCHI);

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

      4.    Birth-to-Three;

      5.    Head Start;

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

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

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<PAGE>

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

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

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

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

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

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

      6.    Any other mutually agreed upon provisions.

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

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

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

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

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

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<PAGE>

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

3.18  SPECIAL SERVICES FOR CHILDREN/REINSURANCE

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

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

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

      1.    REINSURANCE FOR ADMINISTRATIVELY NECESSARY DAYS

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

      2.    REINSURANCE FOR MEDICALLY NECESSARY DAYS

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<PAGE>

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

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

3.    THE SCHEDULE FOR REINSURANCE IS AS FOLLOWS:

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

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

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

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

                                       44

<PAGE>

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

            The DEPARTMENT will designate a contact person for reinsurance
            claims.

3.    RESPONSIBILITIES OF THE DEPARTMENT OF CHILDREN AND FAMILIES

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

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

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

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

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

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

                                       45

<PAGE>

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

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

5.    SPECIALIZED OUTPATIENT SERVICES FOR CHILDREN UNDER DCF CARE

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

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

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

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

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

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<PAGE>

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

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

3.19  PRENATAL CARE

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

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

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

      3.    Refer enrolled pregnant women to the WIC program;

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

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

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

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

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

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

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

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<PAGE>

3.20  DENTAL CARE

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

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

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

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

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

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

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

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

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

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<PAGE>

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

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

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

3.21  OTHER ACCESS FEATURES

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

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

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

      3.    Contacting and counseling Members who miss scheduled appointments;

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

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

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

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

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

                                       49

<PAGE>

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

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

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

3.22  PRE-EXISTING CONDITIONS

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

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

3.23  NEWBORN ENROLLMENT

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

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

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

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<PAGE>

a.    INPATIENT AT TIME OF ENROLLMENT

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

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

b.    HOSPITALIZATION AT TIME OF DISENROLLMENT

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

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

3.25  OPEN ENROLLMENT

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

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

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<PAGE>

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

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

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

3.26  SPECIAL DISENROLLMENT

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

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

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

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

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

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

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<PAGE>

3.27  LINGUISTIC ACCESS

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

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

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

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

3.28  SERVICES TO MEMBERS

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

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<PAGE>

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

      1.  Covered services;

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

      3.  Prior authorization process;

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

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

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

      7.  Assistance with appointment scheduling;

      8.  Member rights and responsibilities;

      9.  Member services, including hours of operation;

      10. Enrollment/disenrollment/plan changes;

      11. Procedures for selecting and changing PCPs;

      12. Availability of provider network directory and updates;

      13. That a Member is not liable for copayments;

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

      15. Access and availability standards;

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

      17. Family planning services;

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

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

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

      21. EPSDT services for children;

      22. Coordination of benefits and third party liability; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3.29  INFORMATION TO POTENTIAL MEMBERS

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

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

      b.    rights and responsibilities of Members;

      c.    grievance procedures; and

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

3.30  MARKETING REQUIREMENTS

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

a.    PROHIBITED MARKETING ACTIVITIES

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

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

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

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

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

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

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

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

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

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

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

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3.31  HEALTH EDUCATION

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

3.32  INTERNAL AND EXTERNAL QUALITY ASSURANCE

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

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

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

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

      1.    Is consistent with applicable federal regulations;

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

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

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

      5.    Provides for making needed changes;

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

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

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

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

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

      1.    A Quality Assessment and Performance Improvement plan.

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

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

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

                  b.    administrative staff; and

                  c.    Board of Directors of the MCO.

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

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

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

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

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

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

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

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

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

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

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

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

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

      1.    Focuses on one of the following areas:

            a.    Prevention and care of acute and chronic conditions;

            b.    High volume services;

            c.    Continuity and coordination of care;

            d.    Appeals, grievances and complaints;

            e.    Access to and availability of services; or

            f.    Other projects subject to DEPARTMENT approval.

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

            a.    Objective;

            b.    Clearly and unambiguously defined;

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

            d.    Valid and reliable;

            e.    Systematically collected; and

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

      3.    Implements system interventions to achieve quality improvement;

      4.    Evaluates the effectiveness of the interventions;

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

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

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

3.33  INSPECTION OF FACILITIES

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

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

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

3.34  EXAMINATION OF RECORDS

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

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

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

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

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

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

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

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

3.35  MEDICAL RECORDS

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

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

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

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3.36  AUDIT LIABILITIES

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

3.37  CLINICAL DATA REPORTING

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

      Utilization reports shall cover the following areas:

      1.    Inpatient Care;

      2.    Preventive Care;

      3.    Dental Care;

      4.    Behavioral Health Care;

      5.    Other Services;

      6.    Maternal and Child Health;

      7.    EPSDT, known as HealthTrack; and

      8.    Immunization Information.

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

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

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

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

f.    Maternal and Prenatal Care:

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

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

      2.    Number of live births;

      3.    Number of fetal deaths;

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

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

      6.    Number of deliveries by cesarean section;

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

      8.    Number of women with inadequate prenatal care;

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

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

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

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g.    Encounter Data:

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

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

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

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

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

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

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

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3.38  UTILIZATION MANAGEMENT

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

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

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

3.39  FINANCIAL RECORDS

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

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

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

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

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

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

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

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

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

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

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

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

3.40  INSURANCE

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

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

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

      3.    workers compensation; and

      4.    unemployment insurance.

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

3.41  THIRD PARTY COVERAGE

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

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

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

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

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

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

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

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

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

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

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

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

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

3.42  COORDINATION OF BENEFITS AND DELIVERY OF SERVICES

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

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

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

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

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

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

3.43  PASSIVE BILLING

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

3.44  SUBCONTRACTING FOR SERVICES

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

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

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

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

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

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

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

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

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

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

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

3.45  TIMELY PAYMENT OF CLAIMS

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

3.46  CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES

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

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

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3.47  INSOLVENCY PROTECTION

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

3.48  ACCEPTANCE OF DSS RULINGS

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

3.49  POLICY TRANSMITTALS

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

3.50  FRAUD AND ABUSE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      6.    Establishing procedures for reporting information to the DEPARTMENT.

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

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

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

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

3.51  CHILDREN WITH SPECIAL HEALTH CARE NEEDS

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

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

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

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT

4.01  ELIGIBILITY DETERMINATIONS

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

4.02  POPULATIONS ELIGIBLE TO ENROLL

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

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4.03  ENROLLMENT/DISENROLLMENT

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

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

4.04  DEFAULT ENROLLMENT

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

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

4.05  LOCK-IN

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

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

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

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

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

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

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

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

a.    documented long waiting times for appointments:

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

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

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

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

      1.    phone calls not answered promptly;

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

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

      4.    repeated rude and demeaning treatment by MCO staff.

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

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

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

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

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

4.06  CAPITATION PAYMENTS TO MCO

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

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

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

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

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4.07  RETROACTIVE ADJUSTMENTS

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

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

4.08  INFORMATION

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

4.09  ONGOING MCO MONITORING

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

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

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

      3.    Review the MCO certifications on a regular basis.

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

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

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

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

4.10  UTILIZATION REVIEW AND CONTROL

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

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5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

5.01  COMPETITION NOT RESTRICTED

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

5.02  NONSEGREGATED FACILITIES

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

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

5.03  OFFER OF GRATUITIES

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

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5.04  EMPLOYMENT/AFFIRMATIVE ACTIOIN CLAUSE

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

5.05  CONFIDENTIALITY

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

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

5.06  INDEPENDENT CAPACITY

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

5.07  LIAISON

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

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5.08  FREEDOM OF INFORMATION

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

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

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5.09  WAIVERS

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

5.10  FORCE MAJEURE

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

5.11  FINANCIAL RESPONSIBILITIES OF THE MCO

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

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

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

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

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5.12  CAPITALIZATION AND RESERVES

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

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

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

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

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

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

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

5.13  PROVIDER COMPENSATION

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

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

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

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

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

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

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

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

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

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

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

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

5.14  MEMBERS HELD HARMLESS

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

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

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

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

5.15  COMPLIANCE WITH APPLICABLE LAWS, RULES AND POLICIES

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

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5.16  FEDERAL REQUIREMENTS AND ASSURANCES

GENERAL

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

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

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

LOBBYING

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

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

BALANCED BUDGET ACT

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

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CLEAN AIR AND WATER ACTS

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

ENERGY STANDARDS

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

MATERNITY ACCESS AND MENTAL HEALTH PARITY

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

5.17  CIVIL RIGHTS

FEDERAL AUTHORITY

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

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DISCRIMINATION

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

MERIT QUALIFICATIONS

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

CONFIDENTIALITY

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

5.18  STATUTORY REQUIREMENTS

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

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

5.19  DISCLOSURE OF INTERLOCKING RELATIONSHIPS

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

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

5.20  DEPARTMENT'S DATA FILES

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

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

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

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

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

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

5.22  HOLD HARMLESS

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

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

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

5.23  EXECUTIVE ORDER NUMBER 16

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

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

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

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

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

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

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

6.01  NOTICES OF ACTION

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

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

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

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

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

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

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

      2.    the reasons for the action;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

      16.   any other information specified by the DEPARTMENT.

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

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

      1.    denial of goods or services;

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

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

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

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

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

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

6.02  GRIEVANCE AND ADMINISTRATIVE HEARING PROCESS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6.03  EXPEDITED REVIEW AND ADMINISTRATIVE HEARINGS

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

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

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

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

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

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

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

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

6.04  PROVIDER APPEAL PROCESS

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

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

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7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

7.01  PERFORMANCE REVIEW

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

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

7.02  SETTLEMENT OF DISPUTES

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

7.03  ADMINISTRATIVE ERRORS

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

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7.04  SUSPENSION OF NEW ENROLLMENT

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

7.05  SANCTIONS

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

a. SANCTIONS FOR NONCOMPLIANCE

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

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

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

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

      2. CLASS B SANCTIONS. SANCTIONS WARRANTED UPON SINGLE OCCURRENCE

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

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

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

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

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

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

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

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

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

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

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

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

 2.    assessment of liquidated damages:

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

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

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

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

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

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

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

c. OTHER REMEDIES

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

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

7.06 PAYMENT WITHHOLD, CLASS C SANCTIONS OR TERMINATION FOR CAUSE

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

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7.07  EMERGENCY SERVICES DENIALS

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

7.08 TERMINATION FOR DEFAULT

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

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

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

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

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

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

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

7.09  TERMINATION FOR MUTUAL CONVENIENCE

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

7.10  TERMINATION FOR FINANCIAL INSTABILITY OF THE MCO

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

7.11  TERMINATION FOR UNAVAILABILITY OF FUNDS

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

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

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

7.12  TERMINATION FOR COLLUSION IN PRICE DETERMINATION

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

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

7.13  TERMINATION OBLIGATIONS OF CONTRACTING PARTIES

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

                                       110
<PAGE>

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

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

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

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

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

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

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

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

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

7.14  WAIVER OF DEFAULT

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

                                       111
<PAGE>

8.    OTHER PROVISIONS

8.01  SEVERABILITY

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

8.02  EFFECTIVE DATE

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

8.03  ORDER OF PRECEDENCE

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

8.04  CORRECTION OF DEFICIENCIES

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

8.05  THIS IS NOT A PUBLIC WORKS CONTRACT

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

                                       112
<PAGE>

                                   APPENDIX A
                            HUSKY A Covered Services

<PAGE>

                                HUSKY A CONTRACT
                                   APPENDICES

APPENDIX A        HUSKY A COVERED SERVICES

APPENDIX B        PROVIDER CREDENTIALING AND ENROLLMENT

APPENDIX C        EPSDT PERIODICITY SCHEDULE

APPENDIX D        DSS MARKETING GUIDELINES

APPENDIX E        QUALITY ASSURANCE PROGRAM

APPENDIX F        UNAUDITED QUARTERLY FINANCIAL REPORTS

APPENDIX G        MEDICAID MANAGED CARE ELIGIBILITY CATEGORIES

APPENDIX H        MANAGED CARE POLICY TRANSMITTALS

APPENDIX I        CAPITATION PAYMENT AMOUNTS

APPENDIX J        PHYSICIAN INCENTIVE PAYMENTS

APPENDIX K        RECATEGORIZATION CHART

APPENDIX L        ABORTION REPORTING

<PAGE>
08/03/01                                                                       2

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

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

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

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

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

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       3

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

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

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

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

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       4

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

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

-     Copayment not required for preventive services.

<PAGE>
08/03/01                                                                       5

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

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       6

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       7

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       8

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                       9

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      10

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

                                LIMITED BENEFITS

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

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

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

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

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

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      11

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

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

                         EXCLUSIONS AND LIMITATIONS

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

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

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

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

5.    Cosmetic and reconstructive surgery is excluded, except when surgery
      is required for:

      a)    reconstructive surgery in connection with the treatment of
            malignant tumors or other destructive pathology that causes
            dysfunction;

      b)    reduction mammoplasty in females when Medically Necessary and
            breast surgery in males only in cases of suspected malignancy.
            Surgery must be necessary to achieve normal physical or bodily
            function.

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

08/03/01                                                                      12

6.    Routine foot care rendered:

      a)    in the examination, treatment or removal of all or part of
            corns, callosities, hypertrophy or hyperplasia of the skin or
            subcutaneous tissues of the foot;

      b)    in the cutting, trimming or other non-operative partial removal
            of toenails, except when Medically Necessary in the treatment
            of neuro-circulatory conditions.

7.    Evaluation, treatment and procedures related to, and performance of,
      sex-change operations.

8.    Surgical treatment or hospitalization for the treatment of morbid
      obesity except where prior authorized as Medically Necessary.

9.    Care, treatment, procedures, services or supplies that are primarily
      for dietary control including, but not limited to, any exercise or
      weight reduction programs, whether formal or informal, and whether or
      not recommended by an In-network Physician or an Out-of-Network
      Physician.

10.   Acupuncture biofeedback, or hypnosis.

11.   Treatment at pain clinics unless determined to be Medically
      Necessary.

12.   Ambulatory blood pressure monitoring.

13.   Any court order for testing, diagnosis, care or treatment deemed not
      Medically Necessary.

-     Prior authorization may be required by the MCO unless otherwise
      noted by an asterisk (*).

-     Copayment not required for preventive services.

<PAGE>

                                   APPENDIX B

                     PROVIDER CREDENTIALING AND ENROLLMENT

<PAGE>

                HUSKY PROVIDER CREDENTIALING AND ENROLLMENT
                                REQUIREMENTS

1.    PROVIDER CREDENTIALING AND ENROLLMENT DISTINCTION

Provider Credentialing and provider enrollment are separate and distinct
processes in the HUSKY Programs. However, credentialing and enrollment are
linked in that these requirements affect direct service providers as well
as the manner in which MCOs submit provider network information to the
Department of Social Services.

2.    CREDENTIALING DEFINITION

For the purpose of the HUSKY programs, the term Credentialing means the
requirements for provider participation specified in the contracts between
the Department of Social Services (DSS or the Department) and the MCO (Part
II, 3.11, Provider Credentialing and Enrollment). In this section of the
contract, the Department specifies the minimum criteria that the MCOs must
require for provider participation in a health plan. The MCOs must ensure
that their providers meet the Department's Credentialing requirements.

3.    OTHER SOURCES CREDENTIALING

Credentialing is sometimes used to refer to a variety of requirements or
entities, which issue credentialing standards. Examples include: the MCO's
individual credentialing requirements; the managed care subcontractor's
credentialing requirements; an accreditation organization requirements,
such as the National Committee on Quality Assurance (NCQA); the licensure
process; a trade organization or association such as the Joint Commission
on Accreditation of Health Organizations (JCAHO).

4.    DSS REQUIREMENTS AND OTHER CREDENTIALING SOURCES

DSS credentialing requirements represent the minimum criteria for provider
participation in a health plan. The Department will allow flexibility to
the MCOs to use more stringent criteria, particularly as it concerns
quality level of care for clients. While the MCOs may require additional,
more stringent criteria, the Department is concerned with the impact on
access to care. Therefore, DSS expects the MCOs to balance the need for
stringent credentialing standards with the need to assure accessibility and
continuity of care.

5.    DELEGATED CREDENTIALING

The contract between the Department and the MCOs permits the plan to
delegate credentialing of individual providers to a facility. However, the
MCO is ultimately responsible and accountable to DSS for compliance with
the Department's credentialing requirements.

<PAGE>

For the purpose of HUSKY, delegated credentialing means that the MCO
entrusts the Department's credentialing requirements to another entity.
MCOs delegate credentialing to a variety of entities depending on the
nature of the services and the type of provider.

In delegated credentialing, the MCO remains responsible to DSS to verify and
monitor compliance with the Department's credentialing requirements. The
Department views delegated credentialing as a form of subcontract, therefore,
similar oversight issues arise in the performance of the credentialing
requirements. The Department requires the plans to demonstrate and document to
DSS the plan's strong oversight of its delegated credentialing facilities. (Part
II, Section 3.41 in B 3.44 in A, Subcontracting for Services).

6.    IMPLICATIONS OF DELEGATED CREDENTIALING

In some instances, the MCO credentials the individual provider directly or
delegates credentialing of the providers to the following entities:

-     A subcontractor providing specific services (e.g., behavioral health
      or dental care);

-     A credentialing subcontractor; or

-     A facility (e.g., a freestanding clinic or hospital)

The relationship between the MCO and the delegated entity as well as the
interplay with various credentialing requirements may take any number of
configurations. Currently, the Department reiterates that the MCO may
delegate credentialing of individual providers to a facility (e.g., a
school based health center, freestanding clinic or hospital). However, the
Department emphasizes that the MCO is ultimately responsible and
accountable to DSS for compliance with all of the Department's
credentialing requirements.

7.    OVERSIGHT OF DELEGATED CREDENTIALING

The Department requires the MCO to demonstrate strong oversight of their
delegated credentialing facilities, as with any subcontact. Therefore, the
Department reiterates that these arrangements are subject to the
Department's review and approval. For the purpose of delegated
credentialing, the MCOs must provide assurances to DSS at a minimum of the
following:

-     The MCO and the delegated entity should clearly identify in detail
      each party's responsibility for credentialing of providers.

-     The Department's credentialing requirements should be clearly
      identified as well as each party's role in adhering to these
      requirements.

-     The credentialing files must be available to the plan in order to
      perform its oversight of the credentialing requirements. The
      Department must also have adequate access to credentialing files for
      the purposes of administering the managed care contracts.

(DSS/MCO Contract, Part II, Section 3.41 in B 3.44 in A Subcontracting for
Services.)

                                     2
<PAGE>

8.    PROVIDER ENROLLMENT CLARIFICATIONS

For the purpose of HUSKY, the Department refers to provider enrollment as
the process of capturing information on providers participating with MCOs
contracted by DSS to provide services to clients. This process results in a
profile of an MCO's provider network. The MCOs submit the provider network
information to DSS via the Department's agent on a continuous basis. The
Department utilizes the provider network information to facilitate the
administration of managed care contracts and the Medicaid program.

Provider enrollment information serves the following purposes:

      a)    to evaluate each MCO's service area and access to services
            which are used to establish enrollment ceiling or cap
            (currently summarized by plan submittals of provider tables);

      b)    to provide accurate information to clients for the purpose of
            client enrollment in an MCO; and

      c)    to maintain each plan's provider network information consistent
            with the provider directory.

Based on the previous discussion of credentialing, the Department
clarifies the relationship between credentialing or delegated credentialing
and provider enrollment as follows:

a)    Enrollment for purposes of cap determination.

      -     The MCO must credential and enroll individual providers when
            the providers are counted towards the member enrollment
            ceiling.

      -     DSS credentialing requirements and provider enrollment
            processes also apply to individual providers in a facility when
            the individual provider is included in the count for cap
            determination.

      -     The MCO may delegate credentialing of individual providers to a
            facility (e.g., a clinic or hospital) and enroll the facility
            as such. In this case, neither the facility nor the individual
            providers are provided in the count for cap determination.

b)    Enrollment for purposes of accurate information to clients

      -     The MCO must enroll and credential individual providers as well
            as facilities in order to maintain accurate and updated
            information on the providers participating with a health plan.
            The provider network information is used by the Department's
            enrollment broker during enrollment.

                                     3
<PAGE>

      -     The Department stresses the importance of maintaining provider
            network information accurate and up-to-date. It is crucial that
            clients should have access to provider network information
            during the MCO selection process.

c)    Enrollment for purposes of inclusion in the provider network
      directory.

      -     The MCO must credential and enroll individual providers when
            the providers are included and listed as individual providers
            in the health plan's provider directory.

      -     DSS credentialing requirements and provider enrollment
            processes also apply to individual providers in a facility when
            the individual provider is included and listed in the provider
            directory.

      -     If the MCO delegates credentialing of individual providers to a
            facility and enrolls the facility, the facility is included and
            listed in the provider directory. The facility's individual
            providers are listed in the provider directory. The facility's
            providers are not listed in the provider directory.

9.    SPECIFIC ISSUES AND DSS CREDENTIALING REQUIREMENTS

a)    Medicaid participation

The MCO or the delegated credentialing entity is responsible for the
determination and verification that the provider meets the minimum
requirements for Medicaid participation. The MCO or its subcontractors may
not delegate this provision to the Department nor require providers to
enroll or participate in fee-for-service Medicaid to fulfill the
requirement. While the Department encourages the MCO to contract with
traditional and existing Medicaid providers, Medicaid participation in
itself is not a requirement of the HUSKY contracts.

b)    Allied Health Professional Licensed Clinics or Hospitals

The Department pays freestanding clinics participating in the Medicaid
program for a variety of services. In Connecticut, clinic services include
for example, medical services, well-child care, dental care, mental health
and substance abuse services, rehabilitation services and other services.
Clinic providers must meet federal and state requirements for participation
in the Medicaid program. In accordance with Title 42 of the Code of Federal
Regulations, Part 440.90 and Section 171 of the Medical Services Policy of
the Connecticut Medical Assistance Program clinic services are provided by
or under the direction or a physician, dentist or psychiatrist.

The physician direction requirement means that the free-standing clinic's
services may be provided by the clinic's allied health professionals
whether or not the physician is physically present at the time that the
services are provided. An allied health professional

                                     4
<PAGE>

is further defined as an individual, employed in a clinic, who is qualified
by special education and training, skills, and experience in providing care
and treatment. The clinic is staffed by physicians and allied health
professionals who are directly involved in the facility's programs. The
allied health professionals provide services under the direction of a
physician who is a licensed practitioner performing within the scope of
his/her practice.

Based on the Department's definition of clinic services, the services provided
by allied health professionals are included under the terms of the contracts
between the Department and the MCOs.

As with all services, clinic services must be properly credentialed according to
the Department's requirements, including licensure and certification standards.
Allied health professionals may have licensure or certification requirements,
such as Certified Addition Counselors or Licensed Social Workers. In accordance
with the Department's definition, other allied health professions may qualify by
virtue of their skills or experience and must function under the direction of a
physician. In this case the directing physician, as opposed to the allied health
professional, is subject to the credentialing requirements as well as provider
enrollment. The MCO may credential the physician directly or may delegate
credentialing.

The Department's provisions for credentialing, delegated and provider enrollment
would remain in effect for the directing physician (please refer to Section 8,
Provider Enrollment Clarifications).

c) NCQA Standards and DSS requirements

While NCQA standards do not address credentialing of allied health
professionals, services provided by allied health professionals may qualify for
reimbursement by virtue of their skills or experience, however, the allied
health professionals must function under the direction of a physician. In this
case, the directing physician is subject to the credentialing requirements.

MAY 2001

                                     5
<PAGE>

                                   APPENDIX C
                           EPSDT PERIODICITY SCHEDULE

<PAGE>

[LOGO]           State of Connecticut
                 Department of Social Services
                 Health Care Financing Division
                 25 Sigourney Street
                 Hartford, CT 06106-5033

                                                      Policy Transmittal 2001-07
PB 2001-18                                            March 20, 2001

                                                      Contact: James Linnane
                                                               (860)424-5111

                                                      July 1, 2001
                                                      --------------
/s/ Michael P. Starkowski                             Effective Date
----------------------------------------
Michael P. Starkowski
Deputy Commissioner

TO:   PHYSICIANS, CLINICS, HOSPITALS, MANAGED CARE PLANS, NURSE PRACTITIONERS,
      HOME HEALTH AGENCIES, NURSE MIDWIVES, DENTISTS AND DENTAL HYGIENISTS

SUBJECT:   NEW EPSDT (EARLY, AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT
           SERVICES) PERIODICITY SCHEDULE AND IMMUNIZATION SCHEDULE

The Department of Social Services is revising the EPSDT Periodicity Schedule to
follow the recently issued American Academy of Pediatrics (AAP) guidelines. This
Policy Transmittal contains the EPSDT Periodicity Schedule that is to be
effective as of 7/1/2001 and a revised immunization schedule. Please replace the
enclosed pages in Chapter 8 of your Connecticut Medical Assistance Provider
Manual. Changes to the periodicity schedule include the following:

      -     A newborn hearing screening is now required by Connecticut law and
            is recommended by the AAP. Therefore, this screening is being
            changed from a subjective to objective screen on the periodicity
            schedule.

      -     Infants at high risk for tuberculosis should receive a tuberculin
            test at 12 months, 15 Months and 18 Months.

      -     Infants who have anemia at 1 year should be retested for it at 15
            and 18 Months.

      -     A hematocrit/hemoglobin test has been added at age 2 in accordance
            with AAP guidelines. The hematocrit/hemoglobin test should be
            repeated for high-risk clients and WIC clients at age 3, 4, and 5.

      -     The 3-year-old vision screening has been changed from subjective to
            objective. An asterisk has been added indicating that if the child
            is uncooperative, he or she should be rescreened within six months.

                                       1
<PAGE>

      -     Objective hearing and vision screenings have been added to the
            periodicity schedule for ages 6 and 8. Section 10-214 of the
            Connecticut General Statutes requires local or regional boards of
            education in Connecticut to provide these screenings in kindergarten
            through sixth grade. Objective hearing and vision screenings should
            be done by the Primary Care Provider (PCP) at age 6 and 8 if there
            is reason to believe that the screenings were not done at school.

      -     A note has been added that the screenings given at age 7-8 and age
            9-10 should be performed at two-year intervals.

The American Academy of Pediatrics recommends a prenatal visit to a pediatrician
for high-risk parents. Such a visit is medically necessary for the well-being of
a yet-to-be-born child and is a covered EPSDT service under Connecticut
Medicaid.

The new Recommended Childhood Immunization Schedule recommends administering
four doses of pneumococcal conjugate vaccine at age 2 months, 4 months, 6 months
and 12-15 months. The immunization schedule recommends administration of "DTaP"
not "DTP" at age 2 months, 4 months, 6 months, 15-18 months and 4-6 years.
Hepatitis A appears on the immunization schedule as recommended in some parts of
the United States, but is not a recommended vaccine in Connecticut.

A new Women, Infants and Children (WIC) Coordinators contact sheet is also
included.

POSTING INSTRUCTIONS: Holders of the Connecticut Medical Assistance Program
Provider Manual should replace the current EPSDT Periodicity Schedule,
Immunization Schedule and WIC Coordinators contact sheet with the attached
schedules and contact sheet for use effective 7/1/2001. Policy transmittals can
also be downloaded from EDS' Web site at www.ctmedicalprogram.com.

DISTRIBUTION: This policy transmittal is being distributed to holders of the
Medical Services Policy Manual by EDS, and the Medicaid Mailing List by the
Department of Social Services. Managed Care Organizations are requested to send
this information to their network providers and subcontractors.

RESPONSIBLE UNIT: DSS,HUSKY, James Linnane, Manager, Program Analysis
and-Enrollment at (860) 424-5111.

DATE ISSUED : March 20, 2001

                                       2
<PAGE>

     HEALTHTRACK/EPSDT PERIODICITY "SCHEDULE OF PREVENTIVE HEALTH SERVICES

DEPARTMENT OF SOCIAL SERVICES                                 [ILLEGIBLE] 7/1/01

<TABLE>
<CAPTION>
                                             INFANCY                                              EARLY CHILDHOOD
                                             -------                                              ---------------
[ILLEGIBLE]                                 [ILLEGIBLE]                                             [ILLEGIBLE]
-----------                                 -----------                                             -----------
<S>                          <C>    <C>    <C>       <C>          <C>      <C>      <C>         <C>    <C> <C>  <C>  <C> <C> <C>
[ILLEGIBLE]
History: Initial/Interval    X      X      X         X            X        X        X           X      X   X    X    X   X     X
Physical Examination (2)     X      X      X         X            X        X        X           X      X   X    X    X   X     X
Height/Weight                X      X      X         X            X        X        X           X      X   X    X    X   X     X
Head Circumference           X      X      X         X            X        X        X           X      X   X    X
Blood Pressure                                                                                                       X   X     X
Health Education(3)                                        SEE ATTACHED RECOMMENDATIONS
Anticipatory Guidance
Developmental/ Beh.
Assessment(4)                X      X      X         X            X        X        X           X      X   X    X    X   X     X
Immunizations(5)                                           SEE ATTACHED IMMUNIZATIONS SCHEDULE
Hereditary Metabolic         X------------->
Screening(6)
Lead Screening(7)                                                                    X------------>             X
Hematocrit /Hemoglobin                                                               X------------>  W-HR  W-HR X  W-HR W-HR W-HR
Cholesterol Screening                                                                                           HR  HR   HR   HR
Tuberculin Test                                                                                 HR    HR    HR  HR  HR   HR   HR
Hearing Screening           O      S      S          S           S         S         S           S     S     S   S   S    O*   O
Vision Screening            S      S      S          S           S         S         S           S     S     S   S   O*   O    O
Initial Dental Referral                                                                                          X--->
(9)
Evaluate Dental Fluoride                                                   X         X          X      X   X    X    X    X    X
Access
</TABLE>

KEY: X = To be performed; HR = To be performed for patients at risk; S =
Subjective, by history; O = By Objective Standardized Test (SNELLEN;
AUDIOMETRIC); < --- > = The range during which a service may be provided, * If
child uncooperative, re-screen within 6 months. W-HR = Required by WIC. Covered
for WIC clients or high risk clients.

FOOTNOTES: (1) For Newborns discharged less than 48 hours after delivery;(2)At
each visit, a complete physical examination is essential, with infant totally
unclothed, older child undressed and suitably draped; (3) Age
appropriate/patient specific health education and counselling should be part of
every visit; (4) By history and appropriate physical examination; if suspicious,
by specific objective development testing;(5)Childhood immunizations are based
on age and health history, and should be screened each visit. (6) Metabolic
Screening (e.g., thyroid, hemoglobinopathies, PK galactosemia) should be done
according to State law. Sickle Cell Screening if appropriate; (7) Further venous
blood level measurement is required for children showing elevated lead level
(greater than or equal to 10ug/deciliter of whole blood); Children aged 2-5
should be screened at annual exam if there is no record of a negative lead
screen. (9) Earlier referral should be made if problem indicated.

<PAGE>

      HEALTHTRACK/EPSDT PERIODICITY SCHEDULE OF PREVENTIVE HEALTH SERVICES

DEPARTMENT OF SOCIAL SERVICES                                 [ILLEGIBLE] 7/1/01

<TABLE>
<CAPTION>
                                              MIDDLE CHILDHOOD                                     ADOLESCENCE
                                              ----------------                                     -----------
[ILLEGIBLE]                                     [ILLEGIBLE]                                        [ILLEGIBLE]
-----------                                     -----------                                        -----------
<S>                               <C>    <C>     <C>       <C>          <C>      <C>      <C>     <C>    <C>   <C>  <C>  <C> <C> <C>
Screening Components:
History: Initial/Interval         X      X       X         X            X        X        X       X      X     X    X    X   X   X
Physical Examination (2)          X      X       X         X            X        X        X       X      X     X    X    X   X   X
Height/Weight                     X      X       X         X            X        X        X       X      X     X    X    X   X   X
Blood Pressure                    X      X       X         X            X        X        X       X      X     X    X    X   X   X
Health Education(3)                                              SEE ATTACHED RECOMMENDATIONS
Anticipatory Guidance
Developmental/ Beh.
Assessment(4)                     X      X       X         X            X        X        X       X      X     X    X    X   X   X
Immunizations(5)                                                 SEE ATTACHED IMMUNIZATION SCHEDULE
Hematocrit/Hemoglobin                                   <-----------------------------(9)---------------------------->
Urinalysis                                              <------------------------------------(10)------------------------>
Cholesterol Screening             HR    HR      HR         HR           HR      HR        HR      HR     HR   HR   HR   HR  HR   HR
Tuberculin Test                   HR    HR      HR         HR           HR      HR        HR      HR     HR   HR   HR   HR  HR   HR
Pelvic Exam/PAP Smear                                               <--------------------------------------(11-HR)
STD Screenings                                                      <--------------------------------------(12-HR)
Hearing Screening                O(8)   O(8)    O          S            O       S         S       O      S     S   O    S   S    S
Vision Screening                 O(8)   O(8)    O          S            O       S         S       O      S     S   O    S   S    S
Evaluate Dental Fluoride Access   X      X      X          X
</TABLE>

KEY: X = To be performed; HR = To be performed for patients at risk; S =
Subjective, by history; O = By Objective Standardized Test; <---> = The range
during at which a service may be provided; Appropriate provision of EPSDT
services is required through age 20, up to, but not including, the 21st
birthday. (b) Biannually, at 2 year intervals.

FOOTNOTES: (2) At each visit, a complete physical examination is essential with
infant totally undressed and older child undressed and suitably draped; (3) Age
appropriate and patient specific health education and counseling should be a
part of every visit; (4) By history and appropriate physical examination, if
suspicious, by specific objective developmental testing; (5) Childhood
immunizations are based on age and health history and should be screened each
visit. (8) State law requires screening at school. Screening should be done if
there is evidence it was not done at school. (9) Hemoglobin or Hematocrit to be
administered x1 during adolescence, annually for menstruating females that are
at risk for anemia; (10) Urinalysis to be administered x1 during adolescence,
annually for sexually active clients at risk for STD's (i.e. gonorrhea,
syphilis/serology, chlamydia, HIV, etc.); (11) All sexually active females
should have a pelvic examination and a routine pap smear annually. A pelvic
examination and routine pap smear should be offered as part of preventive health
maintenance between 18-21 years. (12) All sexually active patient should be
screened for sexually transmitted diseases(STD's)

<PAGE>

                   RECOMMENDED CHILDHOOD IMMUNIZATION SCHEDULE
                     UNITED STATES, JANUARY - DECEMBER 2001

Vaccines(1) are listed under routinely recommended ages. Bars indicate range of
  recommended ages for immunization. Any dose not given at the recommended age
    should be given as a "catch-up" immunization at any subsequent visit when
indicated and feasible. [ILLEGIBLE] indicate vaccines to be given if previously
            recommended doses were missed or given earlier than the
                            recommended minimum age.

      Information in bold has been added by the American Academy of Family
                               Physicians (AAFP).

<TABLE>
<CAPTION>
     AGE                         1        2       4         6      12       15      18       24        4-6     11-12      14-18
   VACCINE           BIRTH       MO      MOS     MOS       MOS    MOS      MOS      MOS      MOS       YRS      YRS        YRS
   -------           -----       --      ---     ---       ---    ---      ---      ---      ---       ---      ---        ---
<S>                  <C>         <C>     <C>     <C>       <C>    <C>      <C>      <C>      <C>       <C>     <C>         <C>
HEPATITIS B(2)            HEP B #1
                                       HEP B #2                        HEP B #3                                HEP B
DIPTHERIA,
 TETANUS,                               DTAP     DTAP     DTAP                 DTAP(2)                DTAP           TD
PERTUSSIS(2)
H. INFLUENZAE
  TYPE B(4)                              HIB     HIB      HIB           HIB
INACTIVATED
  POLLO [ILLEGIBLE]                      IPV     IPV                  IPV [ILLEGIBLE]                IPV [ILLEGIBLE]
PNEUMOCOCCAL
CONJUGATE [ILLEGIBLE]                    PCV     PCV      PCV          PCV
MEASLES, MUMPS,                                                        MMR                           MMR(7)     MMR
RUBELLA(7)
VARICELLA [ILLEGIBLE]                                                      VAR                                  VAR [ILLEGIBLE]
HEPATITIS A [ILLEGIBLE]                                                                       HEP A -- IN SELECTED AREAS [ILLEGIBLE]
</TABLE>

   Approved by the Advisory Committee on Immunization Practices (ACIP), the
             American Academy of Pediatrics (AAP),and the American
                      Academy of Family Physicians (AAFP).

<PAGE>

1.    This schedule indicates the recommended ages for routine administration of
      currently licensed childhood vaccines, as of 11/1/00, for children through
      18 years of age. Additional vaccines may be licensed and recommended
      during the year. Licensed combination vaccines may be used whenever any
      components of the combination are indicated and its other components are
      not contraindicated. Provides should consult the manufacturer's package
      inserts for detailed recommendations.

2.    INFANTS BORN TO HBSAG-NEGATIVE MOTHERS should receive the 1st dose of
      hepatitis B (HEP B) vaccine by age 2 months. The 2nd dose should be at
      least one month after the 1st dose. The 3rd dose should be administered at
      least 4 months after the 1st dose and at least 2 months after the 2nd
      dose, but not before 6 months of age for infants.

      INFANTS BORN TO HBSAG-POSITIVE MOTHERS should receive hepatitis B vaccine
      and 0.5 mL hepatitis B immune globulin (HBIG) within 12 hours of birth at
      separate sites. The 2nd dose is recommended at 1-2 months of age and the
      3rd dose at 6 months of age.

      INFANTS BORN TO MOTHERS WHOSE HBSAG STATUS IS UNKNOWN should receive
      hepatitis B vaccine within 12 hours of birth. Maternal blood should be
      drawn at the time of delivery to determine the mother's HBsAg status; if
      the HBsAg test is positive, the infant should receive HBIG as soon as
      possible (no later than 1 week of age).

      ALL CHILDREN AND ADOLESCENTS who have not been immunized against hepatitis
      B should begin the series during any visit. Special efforts should be
      made to immunize children who were born in or whose parents were born in
      areas of the world with moderate or high endemicity of hepatitis B virus
      infection.

3.    The 4th dose of DTaP (diphtheria and tetanus toxoids and acellular
      pertussis vaccine) may be administered as early as 12 months of age,
      provided 6 months have elapsed since the 3rd dose and the child is
      unlikely to return at age 15-18 months. Td(tetanus and diphtheria toxoids)
      is recommended at 11-12 years of age if at least 5 years have elapsed
      since the last dose of DTP, DTaP or DT. Subsequent routine Td boosters are
      recommended every 10 years.

4.    Three Haemophilus influenzae type b(Hib) conjugate vaccines are licensed
      for infant use. If PRP-OMP (PedvaxHIB(R) or ComVax(R) [Merck]) is
      administered at 2 and 4 months of age, a dose at 6 months is not required.
      Because clinical studies in infants have demonstrated that using some
      combination products may induce a lower immune response to the Hib vaccine
      component, DTaP/Hib combination products should not be used for primary
      immunization in infants at 2, 4 or 6 months of age, unless FDA-approved
      for these ages.

5.    An all-IPV schedule is recommended for routine childhood polio vaccination
      in the United State. All children should receive four doses of IPV at 2
      months, 4 months, 6-18 months, and 4-6 years of age. Oral polio vaccine
      (OPV) should be used only in selected circumstances. (See MMWR May 19,
      2000/49(RR-5);1-22).

6.    The heptavalent conjugate pneumococcal vaccine (PCV) is recommended for
      all children 2-23 months of age. It also is recommended for certain
      children 24-59 months of age. (See MMWR Oct. 6, 2000/49(RR-9);1-35). THE
      FULL AAFP CLINICAL POLICY ON PNEUMOCOCCAL CONJUGATE VACCINE IS available
      at www.aafp.org/policy/camp/24.html.

7.    The 2nd dose of measles,mumps, and rubella (MMR)vaccine is recommended
      routinely at 4-6 years of age but may be administered during any visit,
      provided at least 4 weeks have elapsed since receipt of the 1st dose and
      that both doses are administered beginning at or after 12 months of age.
      Those who have not previously received the second dose should complete the
      schedule by the 11-12 year old visit.

8.    Varicella (Var) vaccine is recommended at any visit on or after the first
      birthday for susceptible children, i.e. those who lack a reliable history
      of chickenpox (as judged by a health care provider) and who have not been
      immunized. Susceptible persons 13 years of age or older should receive 2
      doses, given at least 4 weeks apart.

9.    Hepatitis A (Hep A) is shaded to indicate its recommended use in selected
      states and/or regions, and for certain high risk groups; consult your
      local public health authority. (See MMWR Oct. 1, 1999/48(RR-12); 1-37).

For additional information about the vaccines listed above, please visit the
National Immunization Program Home Page at http://www.cdc.gov/nip/ or call the
National Immunization Hotline at 800-232-2522 (English) or 800-232-0233
(Spanish).

FULL AAFP IMMUNIZATION POLICIES CAN BE FOUND AT THE AAFP WEBSITE
WWW.AAFP.ORG/CLINICAL.
<PAGE>

                                 APPENDIX D

                          DSS MARKETING GUIDELINES

<PAGE>

A.    DETAILED MARKETING GUIDELINES

1)    GENERAL HUSKY MARKETING MATERIALS

Marketing materials are defined as all media, including brochures and
leaflets; newspaper, magazine, radio, television, billboard and yellow
pages advertisements; and presentation materials used by MCO
representatives.

The DEPARTMENT will not restrict the MCO's general communications to the
public. However, the MCO must obtain prior approval from the DEPARTMENT
prior to any written material or advertisement that is mailed to,
distributed to, or aimed at HUSKY recipients or individuals potentially
eligible for HUSKY, specifically, material that mentions Medicaid, Medical
Assistance, Title XIX, Title XXI State Children's Health Insurance Program
(SCHIP) or HUSKY. Examples of HUSKY-specific materials would be those which
are in any way targeted to HUSKY populations (such as billboards or bus
posters disproportionately located in low-income neighborhoods); those that
mention the MCO's HUSKY product name; or those that contain language or
information specifically designed to attract HUSKY enrollment.

2)    GENERAL MCO MARKETING/ADVERTISING

All MCO-specific marketing activities for the HUSKY population, as defined
above, and all marketing materials /advertising put forth by HUSKY-only MCO
require DEPARTMENT prior approval.

In determining whether to approve a particular marketing activity, the
DEPARTMENT will apply a variety of criteria, including, but not limited to:

a)    Accuracy: The content of the material must be accurate. Any
      information that is deemed inaccurate will be disallowed.

b)    Misleading references to the MCO's positive attributes: Misleading
      information will be disallowed even if it is accurate. For example,
      the MCO may seek to advertise that its health care services are free
      to its Medicaid (HUSKY A) Members. In this situation, DEPARTMENT
      would disallow the language since this could be construed by
      Members as being a particular advantage of the plan (e.g. they might
      believe they would have to pay for health services if they chose
      another MCO or remained in fee-for-service).

c)    Threatening Messages: MCOs shall not imply that the managed care
      program or the failure to join a particular MCO would endanger the
      Member's health status, personal dignity, or the opportunity to
      succeed in various aspects of their lives. MCOs are strictly
      prohibited from creating threatening implications about the State's
      mandatory assignment process for HUSKY A Members or other aspects of
      the HUSKY A or HUSKY B programs.

d)    MCO's Legitimate Strengths: MCOs may differentiate themselves by
      promoting their legitimate positive attributes.

                                     1
<PAGE>

3)    MCO ADVERTISING AT PROVIDER CARE SITES

Promotional and health education materials at care delivery sites
(including patient waiting areas) are permitted, subject to prior
DEPARTMENT content approval. MCO member services staff may provide member
services (e.g. face-to-face member education) at provider care sites,
however, face-to-face meetings, for purposes of marketing, at care delivery
sites between individual Members and MCO staff are not permitted.

4)    MCO ADVERTISING IN DEPARTMENT ELIGIBILITY OFFICES

MCOs may make their materials available at DEPARTMENT offices only through
the DEPARTMENT or its agent. This restriction applies to all eligibility
offices, including those based in hospitals. MCO marketing staff and
provider staff are not permitted to solicit Member enrollment by
positioning themselves at or near eligibility offices. Note that the only
face-to-face marketing activities allowed are those directly permitted
under items #5, #7, #11 and #12 of these guidelines. All other face-to-face
marketing activities are prohibited.

5)    PROVIDER COMMUNICATIONS WITH HUSKY PATIENTS ABOUT MCO OPTIONS

DEPARTMENT marketing restrictions apply to the MCO's participating
providers as [ILLEGIBLE] as to the MCOs. MCOs must notify all of their
participating providers of the DEPARTMENT marketing restrictions and provide
them with a copy of this document.

Each provider entity is allowed to notify its patients of the HUSKY-certified
MCOs it participates in, and to explain that the patients must enroll in one of
these MCOs if they wish to preserve their existing relationship. This must be
done through written materials prior-approved by DEPARTMENT, and must be
distributed to HUSKY patients without regard to health status. Providers must
not indicate a preference between the MCOs in which they participate.

6)    MEMBER-INITIATED TELEPHONE CONVERSATIONS WITH MCOS AND PROVIDERS

These conversations are permitted and do not require prior approval by the
DEPARTMENT, but information given to potential Members, during such
telephone conversation must be in accordance with the DEPARTMENT's marketing
guidelines. However, telephone conversations must be initiated by the
potential Member, not by the MCO staff (or provider staff). MCOs and
providers may return calls to Members and potential Members when Members
and potential Members leave a message requesting that this occur.

                                     2
<PAGE>

7)    MEMBER-INITIATED ONE-ON-ONE MEETINGS WITH MCO STAFF PRIOR TO
      ENROLLMENT

Such meetings, when requested by the Member, are permitted but may not occur
at a participating provider's care delivery site or at the Member's
residence. These meetings must occur at the MCO's offices or another
mutually-agreed upon public location. All verbal interaction with the
Member must be in compliance with the DEPARTMENT's marketing guidelines.

8)    MAILINGS BY MCO IN RESPONSE TO MEMBER REQUESTS

MCO mailings are permitted in response to Member verbal or written requests
for information. The content of such mailings must be prior-approved by the
DEPARTMENT. MCOs may include gifts of nominal value (unit cost less than
$2, e.g. magnets, pens, bags, jar grippers, etc.) in these mailings.

9)    UNSOLICITED MCO MAILINGS

MCOs are permitted to send unsolicited mailings. The content of such
mailings must be prior-approved by DEPARTMENT. In addition, the target
audiences must be prior-approved by DEPARTMENT, and the MCOs must explain
how they obtained the list of names, addresses and phone numbers.

10)   TELEMARKETING

Telemarketing is not a permitted marketing activity

11)   MCO GROUP MEETINGS HELD AT MCO

These meetings must be prior approved by the DEPARTMENT. The MCO may not
notify prospective Members until DEPARTMENT prior approval has been
obtained

12)   MCO GROUP MEETINGS HELD IN PUBLIC FACILITIES, CHURCHES, HEALTH FAIRS,
OR OTHER COMMUNITY SITES

These are permitted activities as long as DEPARTMENT approved materials are
utilized in the presentations and the DEPARTMENT's marketing guidelines are
followed. The DEPARTMENT reserves the right to monitor such meetings on an
ad hoc basis. MCOs are required to notify the DEPARTMENT sufficiently in
advance to allow DEPARTMENT representatives to attend such meetings in
order to monitor MCO activities if desired. As soon as the MCO has
scheduled these activities, the DEPARTMENT should be notified.

                                     3
<PAGE>

13)   MCO GROUP MEETINGS HELD IN PRIVATE CLUBS OR HOMES

These activities are prohibited. The only permitted group meetings are
those described under items #11 and #12.

14)   INDIVIDUAL SOLICITATION, RESIDENCES

MCO (and provider) staff are not permitted to visit potential Members at
their places of residence for purposes of explaining MCO features and
promoting enrollment. This prohibition is absolute, and applies even in
situations where the potential Member desires and/or requests a home visit.
MCO staff can visit Member homes after enrollment becomes effective, as
part of their orientation/education efforts.

15)   GIFTS, CASH INCENTIVES, OR REBATES TO POTENTIAL MEMBERS AND MEMBERS.

MCOs (and their providers) are prohibited from disseminating gift items,
except those of a nominal value (pens, key chains, magnets, etc.), to
potential Members. DEPARTMENT-approved written materials may also be
disseminated to prospective Members along with similar nominal value gifts.
MCOs may give items of nominal value (unit cost less than $2), with their
logo on it, to persons (potential Members and others) attending health
fairs, presentations at community forums organized through or other
sanctioned events, with DEPARTMENT approval. Such items would include
magnets, pens, bags, plastic band-aid dispensers, etc. Pre-approved nominal
value items may also be included with new Member information packets.

16)   GIFTS TO MEMBERS FOR SPECIFIC HEALTH-RELATED EVENTS

Gifts to Members are allowed for medically "good" behavior (e.g. baby
T-shirt showing immunization schedule once a woman completes targeted
series of prenatal visits). All such gifts, including any written materials
included with them (or on them), must be prior-approved by the DEPARTMENT.
The criteria for providing such gifts must also be prior-approved by
DEPARTMENT. MCOs must not provide gifts in any situations other than those
that have been prior-approved by DEPARTMENT. Additional DEPARTMENT prior
approval is required for all additional uses of the gift items or for new
gifts.

                                     4
<PAGE>

The DEPARTMENT may approve magnets, phone labels, and other nominal items
that reinforce a MCO's care coordination programs (e.g. through advertising
the Member Services hotline and/or the PCP office phone number). All such
items must be prior-approved by the DEPARTMENT. The criteria for
disseminating this information must also be prior-approved, although the
DEPARTMENT is likely to be amenable to the MCOs' inclusion of this
information in "welcome" packets sent to new Members.

Health education videos are also allowed, but must be prior-approved by
DEPARTMENT.

17)   PHONING BY MEMBERS FROM HEALTH CARE PROVIDER LOCATIONS

Providers may provide the use of a phone to potential HUSKY Members or
HUSKY Members subject to the following restrictions:

a) MCO or provider staff may not coach or instruct the caller;

b) Privacy must be given to the MEMBER during their phone conversation with the
HUSKY application and enrollment center.

18)   NON-ALCOHOLIC BEVERAGES AND LIGHT REFRESHMENTS FOR POTENTIAL MEMBERS
AT MEETINGS

Non-alcoholic beverages and light refreshments are permitted at DEPARTMENT
approved group meetings.

                                     5
<PAGE>

C. USE OF HUSKY NAME; HUSKY LOGO AND MANDATORY LANGUAGE REQUIREMENTS

MCOs will be allowed use of the HUSKY logo and name for use in their
marketing materials, subject to the following:

1)    must be used in conjunction with the following language unless
      alternative language has been prior approved by the DEPARTMENT.

            HUSKY GIVES FAMILIES THE FREEDOM OF CHOICE TO ENROLL IN ONE OF
            SEVERAL PARTICIPATING HEALTH PLANS. TOLL-FREE INFORMATION:
            1-877-CT-HUSKY;

2)    the above mandatory language must be placed in the vicinity of the
      HUSKY logo; and

                                     6
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                                  Permitted With
                                                                                    DEPARTMENT
Type of Marketing Activity                       Permitted     Not Permitted         Approval
------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>                <C>
1. General HUSKY marketing                                                              X
materials
------------------------------------------------------------------------------------------------
2. General, MCO                                                                         X
advertising/marketing
------------------------------------------------------------------------------------------------
3. MCO advertising in provider care                                                     X
sites
------------------------------------------------------------------------------------------------
4. MCO advertising in all                                                               X
DEPARTMENT
eligibility offices, including
hospital-based (Must be made available
only through the DEPARTMENT or its agent)
------------------------------------------------------------------------------------------------
5. Provider communications with                                                         X
Medicaid patients about MCO options
------------------------------------------------------------------------------------------------
6. Member-initiated telephone                        X
conversations with MCO and Provider staff
------------------------------------------------------------------------------------------------
7. Member-initiated one-on-one                       X
meetings with MCO staff prior to enrollment
------------------------------------------------------------------------------------------------
8. Mailings by MCO in response to                                                      X
Member requests
------------------------------------------------------------------------------------------------
9. Unsolicited MCO mailings to                                                         X
Members
------------------------------------------------------------------------------------------------
10. Telemarketing                                                    X
------------------------------------------------------------------------------------------------
11. MCO group meetings held at MCO                                                     X
------------------------------------------------------------------------------------------------
12. MCO group meetings held in public                                                  X
facilities such as churches, health fairs, WIC
program or other community sites
------------------------------------------------------------------------------------------------
13. MCO group meetings held in private                               X
clubs or homes
------------------------------------------------------------------------------------------------
</TABLE>

                                     7
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                                                                                 PERMITTED, WITH
                                                                                    DEPARTMENT
Type of Marketing Activity                       Permitted     Not Permitted         APPROVAL
------------------------------------------------------------------------------------------------
<S>                                              <C>           <C>                <C>
14. Individual solicitation at                                       X
residences
------------------------------------------------------------------------------------------------
15. Items of nominal value along with                                                   X
written information about the MCO or
general health education information to
potential Members or included in new
Member information packets.
------------------------------------------------------------------------------------------------
16. Gifts to Members (e.g. baby                                                         X
T-shirt showing immunization schedule) based
on specific health events unrelated to
enrollment
------------------------------------------------------------------------------------------------
17. Phoning by Members from health                  X
care provider locations
------------------------------------------------------------------------------------------------
18. Non-alcoholic beverages and                     X
light refreshments (e.g. fruit,
cookies) for potential Members at
meetings (may not mention
refreshments in advertisements for
meetings)
------------------------------------------------------------------------------------------------
</TABLE>

                                     8
<PAGE>

                                 APPENDIX E

                        QUALITY ASSURANCE PROGRAM

<PAGE>

STANDARDS FOR INTERNAL QUALITY ASSURANCE PROGRAMS FOR HEALTH PLANS

Standard I: Written QAP Description

The organization has a written description of its Quality Assurance Program
(QAP). This written description meets the following criteria:

A     Goals and objectives - There is a written description of the QA
      program with detailed goals and annually developed objectives that
      outline the program structure and design and include a timetable for
      implementation and accomplishment.

B.    Scope -

      1. The scope of the QAP is comprehensive, addressing both the quality
      of clinical care and quality of non-clinical aspects of services,
      such as and including: availability, accessibility, coordination, and
      continuity of care.

      2. The QAP methodology provides for review of the entire range of
      care provided by the organization, by assuring that all demographic
      groups, care settings (e.g. inpatient, ambulatory, [including care
      provided in private practice offices] and home care), and types of
      services (e.g. preventive, primary, specialty care and ancillary) are
      included in the scope of the review. This review should be carried
      out over multiple review periods and not on just a concurrent basis.

C.    Specific activities - The written description specifies quality of
      care studies and other activities to be undertaken over a prescribed
      period of time, and methodologies and organizational arrangements to
      be used to accomplish them. Individuals responsible for the studies
      and other activities are clearly identified and are appropriate.

D.    Continuous activity - The written description provides for continuous
      performance of the activities, including tracking of issues over
      time.

E     Provider review - The QAP provides:

      1. Review by physicians and other health professionals of the process
      followed in the provision of health services;

      2. Feedback to health professionals and HMO staff regarding
      performance and patient results.

F.    Focus on health outcomes - The QAP methodology addresses health
      outcomes to the extent consistent with existing technology.

<PAGE>

Standard II: Systematic Process of Quality Assessment and Improvement

The QAP objectively and systematically monitors and evaluates the quality
and appropriateness of care and service provided members, through quality
of care studies and related activities, and pursues opportunities for
improvement on an ongoing basis.

The QAP has written guidelines for its quality of care studies and related
activities which include:

A.    Specification of clinical or health services delivery areas to be
      monitored

      1. Monitoring and evaluation of clinical care reflects the population
      served by the MCO, in terms of age groups, disease categories, and
      special risk status.

      2. For the Medicaid population, the QAP monitors and evaluates at a
      minimum, care and services in certain priority areas of concern
      selected by the State. It is recommended that these be taken from
      among those identified by the Health Care Financing Administration's
      (HCFA's) Medicaid Bureau and jointly determined by the State and the
      Managed Care Organization (MCO).

      3. At its discretion and/or as DSS directs, the MCO's QAP also
      monitors and evaluates other aspects of care and service.

B.    Use of quality indicators

Quality indicators are measurable variables relating to a specified
clinical or health services delivery area, which are reviewed over a period
of time to monitor the process or outcomes of care delivered in that area.

      1. The MCO identifies and uses quality indicators that are
      measurable, objective, and based on current knowledge and clinical
      experience.

      2. For the priority area selected by DSS from the HCFA Medicaid
      Bureau's list of priority clinical and health service delivery areas
      of concern, the MCO monitors and evaluates quality of care through
      studies, which include, but are not limited to, the quality
      indicators also specified by the HCFA Medicaid Bureau.

      3. Methods and frequency of data collection are appropriate and
      sufficient to detect need for program change.

C.    Use of clinical care standards/practice guidelines

                                     2
<PAGE>

      1. The QAP studies and other activities monitor quality of care
      against clinical care or health services delivery standards or
      practice guidelines specified for each area identified.

      2. The clinical standards/practice guidelines are based on reasonable
      scientific evidence and are developed or reviewed by plan providers.

      3. The clinical standards/practice guidelines focus on the process
      and outcomes of health care delivery, as well as access to care.

      4. A mechanism is in place for continuously updating the
      standards/practice guidelines.

      5. The clinical standards/practice guidelines shall be included in
      provider manuals developed for use by MCO providers or otherwise
      disseminated to the providers as they are adopted.

      6. The clinical standards/practice guidelines address preventive
      health services.

      7. The clinical standards/practice guidelines are developed for the
      full spectrum of populations enrolled in the plan.

      8. The QAP shall use these clinical standards/practice guidelines to
      evaluate the quality of care provided by the MCO's providers, whether
      the providers are organized in groups, as individuals, as IPAs, or in
      combinations thereof.

D.    Analysis of clinical care and related services

      1. Appropriate clinicians monitor and evaluate quality through review
      of individual cases where there are questions about care and through
      studies analyzing patterns of clinical care and related service. For
      quality issues identified in the QAP's targeted clinical areas, the
      analysis includes the identified quality indicators and uses clinical
      care standards or practice guidelines.

      2. Multidisciplinary teams are used, where indicated, to analyze and
      address system issues.

      3. For the D.1. and D.2. above, clinical and related services
      requiring improvement are identified.

E.    Implementation of remedial/corrective actions

The QAP includes written procedures for taking appropriate remedial action
whenever, as determined under the QAP, inappropriate or substandard
services are furnished, or services that should have been furnished were
not.

                                     3
<PAGE>

These written remedial corrective action procedures include:

      1. Specification of the types of problems requiring
      remedial/corrective action.

      2. Specification of the person(s) or body responsible for making the
      final determinations regarding quality problems.

      3. Specific actions to be taken.

      4. Provision of feedback to appropriate health professionals,
      providers and staff.

      5. The schedule and accountability for implementing corrective
      actions.

      6. The approach to modify the corrective action if improvements do
      not occur.

      7. Procedures for terminating the affiliation with the physician, or
      other health professional or provider.

F.    Assessment of effectiveness of corrective actions

      1. As actions are taken to improve care, there is monitoring and
      evaluation of corrective actions to assure that appropriate changes
      have been made. In addition, changes in practice patterns are
      tracked.

      2. The MCO assures follow-up on identified issues to ensure that
      actions for improvement have been effective.

G.    Evaluation of continuity and effectiveness of the QAP

      1. The MCO conducts a regular and periodic examination of the scope
      and content of the QAP to ensure that it covers all types of services
      in all settings, as specified in standard I.B.2.

      2. At the end of each year, a written report on the QAP is prepared
      that addresses: QA studies and other activities completed, trending
      of clinical and services indicators and other performance data;
      demonstrated improvements in quality; areas of deficiency and
      recommendations for corrective action; and an evaluation of the
      overall effectiveness of the QAP

      3. There is evidence that QA activities have contributed to
      significant improvements in the care and services delivered to
      members.

Standard III: Accountability to the Governing Body

                                     4
<PAGE>

The QA committee is accountable to the governing body of the managed care
organization. The governing body should be the board of directors, or a
committee of senior management may be designated in instances in which the
board's participation with QA issues is not direct. There is evidence of a
formally designated structure, accountability at the highest levels of the
organization, and ongoing and/or continuous oversight of the QA program.
Responsibilities of the Governing Board for monitoring, evaluating, and
making improvements to care include:

A. Oversight of the QAP - There is documentation that the governing body
has approved the overall QAP and the annual QAP.

B. Oversight of entity - The Governing Body has formally designated an
accountable entity or entities within the organization to provide oversight
of QA, or has formally decided to provide such oversight as a committee of
the whole.

C. QAP progress reports - The Governing body routinely receives written
reports from the QAP describing actions taken, progress in meeting QA
objectives, and improvements made.

D. Annual QAP review - The Governing Body formally reviews on a periodic
basis (but no less frequently than annually) a written report on the QAP
that includes: studies undertaken, results, subsequent actions, and
aggregate data on utilization and quality of services rendered, to assess
the QAP's continuity, effectiveness and current acceptability.

E. Program modification - Upon receipt of regular written reports from the
QAP delineating actions taken and improvements made, the Governing Body
takes actions when appropriate and directs that the operational QAP be
modified on an ongoing basis to accommodate review findings and issues of
concern within the MCO. Minutes of the meetings of the Governing Board
demonstrate that the Board has directed and followed up on necessary
actions pertaining to QA.

Standard IV: Active QA Committee

The QAP delineates an identifiable structure responsible for performing QA
functions within the MCO. The committee or other structure has:

A. Regular meetings - The structure/committee meets on a regular basis with
specified frequency to oversee QAP activities. This frequency is sufficient
to demonstrate that the structure committee is following up on all findings
and required actions, but in no case are such meetings less frequent than
quarterly.

B. Established parameters for operating - The role, structure and function of
the structure committee are specified.

                                     5
<PAGE>

C. Documentation - There are contemporaneous records documenting the
structure's committee's activities, findings, recommendations and actions.

D. Accountability - The QAP committee is accountable to the Governing Body
and reports to it (or its designee) on a scheduled basis on activities,
findings, recommendations and actions.

E. Membership - There is active participation in the QA committee from
health plan providers, who are representative of the composition of the
health plan's providers.

Standard V: QAP Supervision

There is a designated senior executive who is responsible for program
implementation. The organization's Medical Director has substantial
involvement in QA activities.

Standard VI: Adequate Resources

The QAP has sufficient material resources, and staff with the necessary
education, experience, or training to effectively carry out its specified
activities.

Standard VII: Provider Participation in the QAP

A. Participating physicians and other providers are kept informed about the
written QA plan.

B. The MCO includes in all its provider contracts and employment
agreements, for both physicians and nonphysician providers, a requirement
securing cooperation with the QAP.

C. Contracts specify that hospitals, physicians, and other contractors will
allow the MCO access to the medical records of its members.

Standard VIII: Delegation of QAP Activities

The MCO remains accountable for all QAP functions, even if certain
functions are delegated to other entities. If the MCO delegates any QA
activities to contractors:

A. There is a written description of delegated activities; the delegate's
accountability for these activities; and the frequency of reporting to the
MCO.

B. The MCO has written procedures for monitoring the implementation of the
delegated functions and for verifying the actual quality of care being
provided.

                                     6
<PAGE>

C. There is evidence of continuous and ongoing evaluation of delegated
activities, including approval of quality improvement plans and regular
specified reports.

Standard IX: Members Rights and Responsibilities

The MCO demonstrates a commitment to treating members in a manner that
acknowledges their rights and responsibilities.

A. Written policy on members rights

The MCO has a written policy that recognizes the following rights of
members:

      1. To be treated with respect, and recognition of their dignity and
      need for privacy;

      2. To be provided with information about the MCO, its services, the
      practitioners providing care, and members' rights and
      responsibilities;

      3. To be able to choose primary care practitioners, within the limits
      of the plan network, including the right to refuse care from specific
      practitioners;

      4. To participate in decision-making regarding their health care;

      5. To voice grievances about the MCO or care provided;

      6. To formulate advance directives; and

      7. To have access to his/her medical records on accordance with
      applicable Federal and State laws.

A.    Written policy members responsibilities - The MCO has a written policy
      that addresses members' responsibility for cooperating with those
      providing health care services. This written policy addresses
      members' responsibility for:

      1. Providing, to the extent possible, information needed by
      professional staff in caring for the member; and

      2. Following instructions and guidelines given by those providing
      health care services.

C. Communication of policies to providers - A copy of the organization's
policies on members' rights and responsibilities is provided to all
participating providers.

D. Communication of policies to members - Upon enrollment, members are
provided a written statement that includes information on the following:

                                     7
<PAGE>

      1. Rights and responsibilities of members;

      2. Benefits and services included and excluded as a condition of
      membership, and how to obtain them, including a description of:

            a. any special benefit provisions (example, co-payment, higher
      deductibles, rejection of claim) that may apply to service obtained
      outside the system; and

            b. the procedures for obtaining out-of-area coverage;

      3. Provisions for after-hours and emergency coverage;

      4. The organization's policy on referrals for specialty care;

      5. Charges to members, if applicable, including:

            a. policy on payment of charges; and

            b. copayment and fees for which the member is responsible.

      6. Procedures for notifying those members affected by the termination or
      changes in any benefit services, or service delivery office/site;

      7. Procedures for appealing decisions adversely affecting the members'
      coverage, benefits, or relationship with the organization;

      8. Procedures for changing practitioners;

      9. Procedures for disenrollment; and

      10. Procedures for voicing complaints and/or grievances and for
      recommending changes in policies and services.

E. Member grievance procedures - The organization has a system(s) linked to the
QAP, for resolving members' complaints and formal grievances. This system
includes:

1. Procedures for registering and responding to complaints and grievances in a
timely fashion (organizations should establish and monitor standards for
timeliness);

2. Documentation of the substance of the complaint or grievances, and actions
taken;

3. Procedures to ensure a resolution of the compliant or grievance;

                                       8
<PAGE>

4. Aggregation and analysis of complaint and grievance data and use of the data
for quality improvement; and

5. An appeal process for grievances.

F. Member suggestions - Opportunity is provided for members to offer suggestions
for changes in policies and procedures.

G. Steps to assure accessibility of services - The MCO takes steps to promote
accessibility of services offered to members. These steps include:

      1. The points of access to primary care, specialty care and hospital
      services are identified for members;

      2. At a minimum, members are given information about:

            a. How to obtain services during regularly hours of operation

            b. How to obtain emergency and after-hours care; and

            c. How to obtain the names qualifications, and titles of the
professionals providing and/or responsible for their care.

H. Written information for members

1. Member information is written in prose that is readable and easily
understood; and

2. Written information is available, as needed, in the languages of the major
population groups served. A "major" population group is one which represents at
least 10% of plan's membership.

L Confidentiality of patient information - The MCO acts to ensure that the
confidentiality of the specified patient information and records is protected.

      1. The MCO has established in writing, and enforced, policies and
      procedures on confidentiality of medical records.

      2. The MCO ensures that patient care offices/sites have implemented
      mechanisms that guard against the unauthorized or inadvertent disclosure
      of confidential information to persons outside of the medical care
      organization.

      3. The MCO shall hold confidential all information obtained by its
      personnel about members related to their examination, care and treatment
      and shall not divulge it without the members's authorization, unless:

            a. it is required by law;

                                       9
<PAGE>

            b. it is necessary to coordinate the patient's care with physicians,
      hospitals, or other health care entities, or to coordinate insurance or
      other matters pertaining to payment; or

            c. it is necessary in compelling circumstances to protect the health
      or safety of an individual.

      4. Any release of information in response to a court order is reported to
      the patient in a timely manner; and

      5. Member records may be disclosed, whether or not authorized by the
      members, to qualified personnel for the purpose of conducting scientific
      research, but these personnel may not identify, directly or indirectly,
      any individual members in any report of the research or otherwise disclose
      participant identity in any manner.

J. Treatment of minors - The MCO has written policies regarding the appropriate
treatment of minors.

K. Assessment of member satisfaction - The MCO conducts periodic surveys of
member satisfaction with its services.

      1. The surveys include content on perceived problems in the quality,
      accessibility, and availability of care.

      2. The surveys assess at least a sample of:

      a. All Medicaid members;

      b. Medicaid member requests to change practitioners and/or facilities; and

      c. Disenrollment by Medicaid members.

      3. As a results of the surveys, the organization:

      a. Identifies and investigates sources of dissatisfaction;.

      b. Outlines action steps to follow-up on the findings; and

      c. Informs practitioners and providers of assessment results.

      3. The MCO reevaluates the effects of the above activities.

Standard X: Standards for Availability and Accessibility

The MCO has established standards for access (e.g. to routine, urgent and
emergency care; telephone appointment; advice; and member service lines).

                                       10
<PAGE>

Performance on these dimensions of access are assessed against the standards.

Standard XI:  Medical Records Standards

A. Accessibility and availability of medical records - The MCO shall include
provisions in provider contracts for appropriate access to the medical records
of its members for purposes of quality reviews conducted by the Secretary of
HHS, DSS, or agents thereof.

B. Record keeping - Medical records nay be on paper or electronic. The plan
takes steps to promote maintenance of medical records in a legible, current,
detailed, organized and comprehensive manner that permits effective patient care
and quality review as follows:

      1. Medical records standards- The MCO sets standards for medical records.
      The records reflect all aspects of patient care, including ancillary
      services. These standards shall at a minimum, include requirements for:

            a. Patient identification information - Each page or electronic file
      in the record contains the patient's name or patient ID number.

            b. Personal/biographical data - Personal/biographical data includes:
      age, sex, address; employer; home and work telephone numbers; and marital
      status.

            c. Entry date - All entries are dated.

            d. Provider identification - All entries are identified as to
            author.

            e. Legibility - The record is legible to someone other than the
            writer. A second reviewer should evaluate any record judged
            illegible by one physician reviewer.

            f. Allergies - Medication allergies and adverse reactions are
            prominently noted on the record. Absence of allergies (no known
            allergies-NKA) is noted in an easily recognizable location.

            g. Past medical history - (for patients seen 3 or more times) Past
            medical history is easily identified including serious accidents,
            operations, illnesses. For children, past medical history relates to
            prenatal care and birth.

            h. Immunizations- For pediatric records (ages 12 and under) there is
            a completed immunization record or a notation that immunizations are
            up- to-date.

                                       11
<PAGE>

            i Diagnostic information

            j. Medication information

            k. Identification of current problems - Significant illness, medical
            conditions and health maintenance concerns are identified in the
            medical record.

            l. Smoking/ETOH/substance abuse - Notation concerning cigarettes and
            alcohol use and substance abuse is present (for patients 12 years
            and over and seen three or more times). Abbreviations and symbols
            may be appropriate.

            m. Consultations, referral and specialist reports - Notes from
            consultations are in the record. Consultation, lab, and x-ray
            reports filed in the chart have the ordering physicians initials or
            other documentation signifying review. Consultation and
            significantly abnormal lab and imaging study results have an
            explicit notation in the record of follow-up plans.

            n. Emergency care

            o. Hospital discharge summaries - Discharge summaries are included
            as part of the medical record for (1) all hospital admissions which
            occur while the patient is enrolled in the MCO and (2) prior
            admissions as necessary.

            p. Advance directives - For medical records of adults, the medical
            record documents whether or not the individual has executed an
            advance directive. An advance directive is a written instruction
            such as a living will or durable power of attorney for health care
            relating to the provision of health care when the individual is
            incapacitated.

      2. Patient visit data - Documentation of individual encounters must
      provide adequate evidence of, at a minimum;

            a. History and physical examination - Appropriate subjective and
            objective information is obtained for the presenting complaints.

            b. Plan of treatment

            d. Diagnostic tests

            e. Therapies and other prescribed regimens; and

                                       12
<PAGE>

            f. Follow-up - Encounter forms or notes have a notation, when
            indicated, concerning follow-up care, call, or visit. Specific time
            to return is noted in weeks, months, or PRN. Unresolved problems
            from previous visits are addressed in subsequent visits.

            f. Referrals and results thereof; and

            g. All other aspects of patient care, including ancillary services.

      3. Record review process-

            a. The MCO has a system (record review process) to assess the
            content of medical records for legibility, organization, completion
            and conformance to its standards.

            b. The record assessment system addresses documentation of the items
            listed in B, above.

Standard XII: Utilization Review

A. Written program description- The MCO has a written utilization management
program description which includes, at a minimum, procedures to evaluate medical
necessity, criteria used, information sources and the process used to review and
approve the provision of medical services.

B. Scope - The program has mechanisms to detect underutilization as well as
overutilization.

C. Preauthorization and concurrent review - For MCO with preauthorization or
concurrent review programs:

      1. Preauthorization and concurrent review decisions are supervised by
      qualified medical professionals;

      2. Efforts are made to obtain all necessary information, including
      pertinent clinical information, and consult with the treating physician as
      appropriate;

      3. The reasons for decisions are clearly documented and available to the
      member.

      4. There are well-publicized and readily available appeals-mechanisms for
      both providers and patients. Notification of a denial includes a
      description of how file an appeal;

      5. Decisions and appeals are made in a timely manner as required by the
      exigencies of the situation;

                                       13
<PAGE>

      6. There are mechanisms to evaluate the effects of the program using data
      on member satisfaction, provider satisfaction or other appropriate; and

      7. If the MCO delegates responsibilities for utilization management, it
      has mechanisms to ensure that these standards are met by the delegate.

Standard XIII. Continuity of Care System

The MCO has put a basic system in place which promotes continuity of care and
case management.

Standard XIV: QAP Documentation

A. Scope - The MCO shall document that it is monitoring the quality of care
across all services and all treatment modalities, according to its written QAP.

B. Maintenance and availability of documentation - The IVICO must maintain and
make available to the State, and upon request to the Secretary of HHS, studies,
reports, appropriate, concerning the activities and corrective actions.

'Standard XV: Coordination of QA Activity with other Management Activity

The findings, conclusions, recommendations, actions taken, and results of
actions taken as a result of QA activity, are documented and reported to
appropriate individuals within the MCO and through established QA channels.

A. QA information is used in recredentialing, recontracting, and/or annual
performance evaluations.

B. QA activities are coordinated with other performance monitoring activities,
including utilization management, risk management, and resolution and monitoring
of member complaints and grievances.

C. There is a linkage between QA and other management functions of the MCO, such
as: network changes, benefit redesign, medical management systems, practice
feedback to providers, patient education and member services.

                                       14
<PAGE>

                                   APPENDIX F
                      UNAUDITED QUARTERLY FINANCIAL REPORTS

<PAGE>

                                   APPENDIX F
                      UNAUDITED QUARTERLY FINANCIAL REPORTS

<PAGE>

<TABLE>
<CAPTION>
CURRENT ASSETS:                                                                 CURRENT YEAR   PREVIOUS YEAR
---------------                                                                 ------------   -------------
<S>                                                                             <C>            <C>
1. Cash and Cash Equivalents
2. Short-term Investments
3. Premiums Receivable
4. Investment Income Receivables
5. Health Care Receivables
6. Amounts Due from Affiliates
7. Aggregate Write-Ins for Current Assets
8. TOTAL CURRENT ASSETS (Items 1 to 7)

OTHER ASSETS:
9. Restricted Cash and Other Assets
10. Long-term investments
11. Amounts Due from Affiliates
12. Aggregate Write-Ins for Other Assets
13. TOTAL OTHER ASSETS (items 9 to 12)

PROPERTY AND EQUIPMENT:
14. Land, Building and Improvements
15. Furniture and Equipment
16. Leasehold Improvements
17. Aggregate Write-Ins for Other Equipment
18. TOTAL PROPERTY (items 7 to 14)
19. TOTAL ASSETS (items 8, 13 and 18)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR CURRENT ASSETS:
701
702
703
704
705
798 Summary of remaining write-ins tor item 7 from overflow page
799 TOTALS (items 701 thru 705 plus 798) Page 2, item 7

DETAILS OF WRITE-INS AGGREGATED AT ITEM 12 FOR OTHER ASSETS
1201
1202
1203
1204
1205
1298 Summary of remaining write-ins for item 12 from overflow page
1299 TOTALS (items 1201 thru 1205 plus 1298) (Page 2, item 12)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 17 FOR OTHER EQUIPMENT
1701
1702
1703
1704
1705
1798 Summary of remaining write-ins for item 17 from overflow page
1799 TOTALS (items 1701 thru 1705 plus 1798) (Page 2, item 17)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
REVENUES:
1. Premium
2. Fee-For-Service
3. Title XVIII - Medicare
4. Title XIX O Medicaid
5. Investment
6. Aggregate Write-Ins for Other Revenues
7. TOTAL REVENUES (items 1 to 6)

EXPENSES:
8. Medical and Hospital
9. Other Professional Services
10. Outside Referrals
11. Emergency Room & Out of Area
12. Occupancy, Depreciation & Amortization
13. [ILLEGIBLE]
14. Incentive Pool and Withhold Adjustments
15. Aggregate Write-Ins for Other Medical & Hospital Expenses
16. Subtotal (items 8 to 15)
17. Reinsurance Expenses Net of Recoveries

LESS:
18. Copayments
19. COB and [ILLEGIBLE]
20. Subtotal (items 18 and 19)
21. TOTAL MEDICAL AND HOSPITAL (items 16 and 17 less 20)

Administration
22. Compensation
23. Interest Expense
24. Occupancy, Depreciation and Amortization
25. Marketing
26. Aggregate Write-Ins for Other Administration Expenses
27. TOTAL ADMINISTRATION (items 22 to 26)
28. TOTAL EXPENSES (items 21 and 27)
29. Income (LOSS) (item 21 and 27
30. Cumulative Effect of [ILLEGIBLE] Change
31. Provision for Federal Income Taxes
32. NET INCOME (item 29, less items 30 and 31)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 6 FOR OTHER REVENUES
601 Other Income
602
603
604
605
698
699 Summary of remaining write-ins for item 6 from overflow page
699 TOTALS (items 601 through 605 plus 698) (page 4, item 6)
</TABLE>

<PAGE>

           QUARTERLY CLAIMS AGING [ILLEGIBLE] AS OF _______ (DOLLARS)

<TABLE>
<CAPTION>
                                        0-30     31-45                    61-90   91-120   GREATER THAN
CLAIMS IN-PROCESS (1)                   DAYS      DAYS   [ILLEGIBLE]       DAYS    DAYS      120 DAYS     [ILLEGIBLE]
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>     <C>              <C>     <C>      <C>            <C>
Institutional (UB92)                   1,050       750                                                       1,800

Non - Institutional (HCFA 1500)        1,000     2,000                                                       3,000
------------------------------------------------------------------------------------------------------------------
Subtotal - Claims In Process           2,050     2,750       -                -        -            -        4,800
==================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60            61-90   91-120   GREATER THAN      TOTAL
UNPAID ADJUDICATED CLAIMS (2)           DAYS      DAYS    DAYS             DAYS    DAYS      120 DAYS     OUTSTANDING
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>       <C>     <C>              <C>     <C>      <C>            <C>
Institutional (UB92)                     500       250                                                         750

Non - Institutional (HCFA 1500)        1,000     2,000                                                       3,000
------------------------------------------------------------------------------------------------------------------
Subtotal - Unpaid Adjudicated Claims   1,500     2,250       -                -        -            -        3,750
==================================================================================================================
</TABLE>

      TICK MARK LEGAND

  (1) Claims in-process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (2) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

Note: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together as long In addition, alt source
      documentation used to complete this schedule should be available for
      review at the DEPARTMENT's request.

<PAGE>

  CLAIMS TURN AROUND TIME REPORT FROM_ _THROUGH ____________ (NUMBER OF CLAIMS)

<TABLE>
<CAPTION>
                                                                                                    GREATER THAN
                                                     0-30   31-[ILLEGIBLE] 46-60   61-90   91-120     120 DAYS     TOTAL [ILLEGIBLE]
                                                     ------------------------------------------------------------------------
<S>                                                  <C>    <C>            <C>     <C>     <C>      <C>            <C>
Paper Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500

                            Subtotal Paper Claims
Electronic Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                            Subtotal Electronic
-----------------------------------------------------------------------------------------------------------------------------
                              Total Claims Paid
=============================================================================================================================
</TABLE>

      Please file a claims incurred to paid triangle which would show the entire
      population of claims paid by HUSKY A & B lines of business.

      In addition, for those claims processed in excess of 45 days, include a
      list of the claims, date of service, date received, date paid, the the
      amount paid on the claim, the age of the claim when paid and amount of
      interest paid.

Note: The titles above have been identified as Medicaid, the MCO can elect to
report HUSKY A & B separately or together.

<PAGE>

<TABLE>
<CAPTION>
CURRENT ASSETS:                                                                 CURRENT YEAR   PREVIOUS YEAR
---------------                                                                 ------------   -------------
<S>                                                                             <C>            <C>
1. Cash and Cash Equivalents
2. Short-term Investments
3. Premiums Receivable
4. Investment Income Receivables
5. Health Care Receivables
6. Amounts Due from Affiliates
7. Aggregate Write-Ins for Current Assets
8. TOTAL CURRENT ASSETS (items 1 to 7)

OTHER ASSETS:
9. Restricted Cash and Other Assets
10. Long-term Investments
11. Amounts Due from Affiliates
12. Aggregate Write-Ins for Other Assets
13. TOTAL OTHER ASSETS (items 9 to 12)

PROPERTY AND EQUIPMENT:
14. Land, Building and Improvements
15. Furniture and Equipment
16. Leasehold Improvements
17. Aggregate Write-Ins for Other Equipment
18. TOTAL PROPERTY (items 7 to 14)
19. TOTAL ASSETS (items 8, 13 and 18)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR  CURRENT ASSETS
701
702
703
704
705
798 Summary of remaining write-ins for item 7 from overflow page
799 TOTALS (items 701 thru 705 plus 798) Page 2, item 7

DETAILS OF WRITE-INS AGGREGATED AT ITEM 12 FOR OTHER ASSETS
1201
1202
1203
1204
1205
1298 Summary of remaining write-ins for item 12 overflow page
1299 TOTALS (items 1201 thru 1205 plus 1298) (Page 2, item 12)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 17 FOR OTHER EQUIPMENT
1701
1702
1703
1704
1705
1798 Summary of remaining write-ins for item 17 from overflow page
1799 TOTALS (items 1701 thru 1705 plus 1798) (Page 2, item 17)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
CURRENT LIABILITIES:                                                            CURRENT YEAR   PREVIOUS YEAR
--------------------                                                            ------------   -------------
<S>                                                                             <C>            <C>
1. Accounts Payable (Schedule G)
2. Claims Payable (Reported and Unreported) (Schedule H)
3. Accrued Medical Incentive Pool (Schedule H)
4. Unearned Premiums.
6. Amounts Due to Affiliates (Schedule J)
7. Aggregate Write-Ins for Current Liabilities
8. TOTAL CURRENT LIABILITIES (items 1 to 7)

OTHER LIABILITIES:
9. Loans and Notes Payable (Schedule I)
10. Amounts Due to Affiliates (Schedule J)
11. Aggregate Write-Ins for Other Liabilities
12. TOTAL OTHER LIABILITIES (items 9 to 11)
13. TOTAL LIABILITIES (items 8 and 12)

NET WORTH:
14. Common Stock
15. Preferred Stock
16. Paid in Surplus
17. Contigency Capital
18. Surplus Notes (Schedule K)
19. Contingency Reserves
20. Retained Earnings/Fund Balance
21. Aggregate Write-Ins for Other Net Worth Items
22. TOTAL NET WORTH (Items 14 to 21)
23. TOTAL LIABILITIES AND NET WORTH (items 13 and 22)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 7 FOR CURRENT LIABILITIES
701 Payroll & Related Liabilities
702 Accrued Audit & Actuarial Fees
703
704
705
798 Summary of remaining Write-ins for item 7 from overflow page
799 TOTALS (items 0701 thru 0705 plus 0798 Page 3, item 7)

DETAILS OF WRITE-INS AGGREGATE AT ITEM 11 FOR OTHER LIABILITIES
1101
1102
1103
1104
1105
1198 Summary of remaining write-ins for item 11 from overflow page
1199 TOTALS (items 1101 thru 1105 plus 1198 Page 3, Item 11)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 21 FOR OTHER NET WORTH ITEMS
2101
2102
2103
2104
2105
2198 Summary of remaining write-Ins for item 21 from overflow page
2199 TOTALS items 2101 thru 2105 plus 2198 Page 3, item 21
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
REVENUES:
1. Premium
2. Fee-For-Service
3. Title XVIII - Medicare
4. Title XIX O Medicaid
5. Investment
6. Aggregate Write-Ins for Other Revenues
7. TOTAL REVENUES (items 1 to 6)

EXPENSES:
8. Medical and Hospital
9. Other Professional Services
10. Outside Referrals
11. Emergency Room & Out of Area
12. Occupancy, Depreciation & Amortization
13. [ILLEGIBLE]
14. Incentive Pool and Withhold Adjustments
15. Aggregate Write-Ins for Other Medical & Hospital Expenses
16. Subtotal (items 8 to 15)
17. Reinsurance Expenses Net of Recoveries

LESS:
18. Copayments
19. COB and [ILLEGIBLE]
20. Subtotal (items 18 and 19)
21. TOTAL MEDICAL AND HOSPITAL (items 16 and 17 less 20)

Administration
22. Copayments
23. Interest [ILLEGIBLE]
24. Occupancy, Depreciation and Amortization
25. Marketing
26. Aggregate Write-Ins for Other Administration Expenses
27. TOTAL ADMINISTRATION (items 22 to 26)
28. TOTAL EXPENSES (items 21 and 27)
29. Income (LOSS) (item 21 and 27
30. Cumulative Effect of [ILLEGIBLE] Change
31. Provision for Federal Income Taxes
32. NET INCOME (item 29,  less items 30 and 31)

DETAILS OF WRITE-INS AGGREGATED AT ITEM 6 FOR OTHER REVENUES
601 Other Income
602
603
604
605
698
699 Summary of remaining write-ins for item 6 from overflow [ILLEGIBLE]
699 TOTALS (items 601 through 605 plus 698) (page 4, item 6)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
MEMBER MONTHS                                                                   CURRENT YEAR   PREVIOUS YEAR
-------------                                                                   ------------   -------------
<S>                                                                             <C>            <C>
DETAILS OF WRITE-INS AGGREGATED AT ITEM [ILLEGIBLE] FOR OTHER REVENUES
1501 Drugs
1502 Outpatient
1503
1504
1505
1598 Summary if remaining write-ins for item 15  from overflow page

DETAILS OF WRITE-INS AGGREGATED AT ITEM 26 FOR OTHER ADMINISTRATION EXPENSES
2601 MGMT Fee Income - SWWA
2602 MGMT Fee Expense GOHS
2603 Other Admin. Expense
2604 MGMT Fee Expense Corp.
2605 Accrued Audit & Actuarial Expense
2698 Summary of remaining, write-ins for item 26 from overflow page
[ILLEGIBLE] TOTALS (items 2601 thru 2505 plus 2598) (Page 4, item 26)
</TABLE>

<PAGE>

           QUARTERLY CLAIMS AGING INVENTORY REPORT AS OF _______ (DOLLARS)

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
CLAIMS IN-PROCESS (1)                   DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------       -----     -----   -----   -----  --------  ------------   -----------
<S>                                    <C>       <C>     <C>     <C>    <C>       <C>            <C>
Institutional (UB92)                   1,050       750                                              1,800

Non - Institutional (HCFA 1500)        1,000     2,000                                              3,000
                                       -----     -----    ----    ----    -----     ----------      -----
SUBTOTAL - CLAIMS IN PROCESS           2,050     2,750       -       -        -              -      4,800
                                       =====     =====    ====    ====    =====     ==========      =====
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120   GREATER THAN      TOTAL
UNPAID ADJUDICATED CLAIMS (2)           DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------       -----     -----   -----   -----  --------  ------------   -----------
<S>                                    <C>       <C>     <C>     <C>    <C>       <C>            <C>
Institutional (UB92)                     500       250                                                750

Non - Institutional (HCFA 1500)        1,000     2,000                                              3,000
                                       -----     -----    ----    ----    -----     ----------      -----
SUBTOTAL - UNPAID ADJUDICATED CLAIMS   1,500     2,250       -       -        -              -      3,750
                                       =====     =====    ====    ====    =====     ==========      =====
</TABLE>

      TICK MARK LEGEND

  (1) Claims in-process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (2) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

NOTE: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together as long in addition, all source
      documentation used to complete this schedule should be available for
      review at the DEPARTMENT's request.

<PAGE>

 QUARTERLY CLAIMS AGING INVENTORY REPORT AS OF _____________ (NUMBER OF CLAIMS)

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
INSTITUTIONAL CLAIMS (UB92)             DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
---------------------------             ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not
  in the system (1)                       55                                                            55
Claims in-process (2)                    350                                                           350
Unpaid Adjudicated Claims (3)            125       125                                                 250
                                         ---       ---   -----   -----   ------   ------------    --------
                              SUBTOTAL   530       125       -       -        -              -         655
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
NON - INSTITUTIONAL CLAIMS (HCFA 1500)  DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
--------------------------------------  ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not in
  the system (1)                          20        20                                                  40
Claims in-process (2)                     15        15                                                  30
Unpaid Adjudicated Claims (3)              5         5                                                  10
                                         ---       ---   -----   -----   ------   ------------    --------
                              SUBTOTAL    40        40       -       -        -              -          80
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

<TABLE>
<CAPTION>
                                        0-30     31-45   46-60   61-90  91 - 120  GREATER THAN      TOTAL
TOTAL CLAIMS                            DAYS      DAYS    DAYS    DAYS    DAYS      120 DAYS     OUTSTANDING
------------------------------------    ----     -----   -----   -----  ------    ------------   -----------
<S>                                     <C>      <C>     <C>     <C>    <C>       <C>            <C>
Estimated Claims received but not in
  the system (1)                          75        20                                                  95
Claims in-process (2)                    365        15                                                 380
Unpaid Adjudicated Claims (3)            130       130       -       -        -              -         260
                                         ---       ---   -----   -----   ------   ------------    --------
                          TOTAL CLAIMS   570       165       -       -        -              -         735
                                         ===       ===   =====   =====   ======   ============    ========
</TABLE>

      TICK MARK LEGEND

  (1) This category would include any claim that has been received and not input
      in the system (I.e. claims in the mailroom).

  (2) Claims in process represents those claims which have been received by the
      MCO, recorded in the system but have not been adjudicated. Since these
      claims have not been adjudicated, and the final pay amount is unknown,
      these amounts should be recorded at the billed amount.

  (3) Claims which have been adjudicated and have a known pay amount, however, a
      check has not been issued for these claims.

NOTE: The titles above have been identified as Medicaid, the MCO can elect to
      report HUSKY A & B separately or together.

<PAGE>

[ILLEGIBLE]

<TABLE>
<CAPTION>
                                                                                                     GREATER THAN
                                                             0-30   31-40   46-60   61-90  91 - 120    120 DAYS     TOTAL PAID
                                                             ----   -----   -----   -----  --------  ------------   ----------
<S>                                                          <C>    <C>     <C>     <C>     <C>      <C>            <C>
Paper Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                       SUBTOTAL PAPER CLAIMS
Electronic Claims
Husky Institution - UB92
Husky Non-Institution - HCFA 1500
                         SUBTOTAL ELECTRONIC
                                                             ----   -----   -----   -----  --------  ------------   ----------
                           TOTAL CLAIMS PAID
                                                             ====   =====   =====   =====  ========  ============   ==========
</TABLE>

      PLEASE FILE A CLAIMS INCURRED TO PAID TRIANGLE WHICH WOULD SHOW THE ENTIRE
      POPULATION OF CLAIMS PAID BY HUSKY A & B LINES OF BUSINESS.

      IN ADDITION, FOR THOSE CLAIMS PROCESSED IN EXCESS OF 45 DAYS, INCLUDE A
      LIST OF THE CLAIMS, DATE OF SERVICE, DATE RECEIVED, DATE PAID, THE AMOUNT
      PAID ON THE CLAIM, THE AGE OF THE CLAIM WHEN PAID AND THE AMOUNT OF
      INTEREST PAID.

NOTE: THE TITLES ABOVE HAVE BEEN IDENTIFIED AS MEDICAID, THE MCO CAN ELECT TO
      REPORT HUSKY A & B SEPARATELY OR TOGETHER.

REVISED 7/6/01

<PAGE>

                                   APPENDIX G
                  MEDICAID MANAGED CARE ELIGIBILITY CATEGORIES

<PAGE>

HUSKY A MEDICAID COVERAGE GROUPS

<TABLE>
<CAPTION>
Eligibility
   Code                         Description
-----------                     -----------
<S>             <C>
    F01         Temporary Assistance to Needy Families (TANF)
    F03         Transitional Work Extension
    F04         Child Support Extension
    F05         Work Supplementation
    F07         Family Coverage (150 % FPL)
    F08         Special Child Care Deduction
    F09         Eligible for TANF except for Non-Medicaid Requirements
    F10         Newborn Coverage
    F11         Newborn Children
    F12         CN Ribicoff Children
    F13*        Children < 1, under 1859 of the Federal Poverty Level (FPL)
    F20*        Children 1-6, under 185 % of the Federal Poverty Level (FPL)
    F25         Children under 185 % of the Federal Poverty Level (FPL)
    F26         Continuous and Guaranteed Eligibility
    F95         Children under 18, 18-21, and caretaker Relatives
    P01         Pregnant Women who meet TANF Financial Requirements
    P02         Pregnant Women under 185 % of the Federal Poverty Level (FPL)
    P95         Pregnant Women Coverage
  MO1\M02       Pregnant Women Extension (Post-Partum)
  D01\D02       DCF Children
</TABLE>

* 1) The F13 and F20 coverage groups have been collapsed into the F25 coverage
group.

2) All newly granted children under 185 % of the FPL are being granted
eligibility under the F25 coverage group.

3) Already eligible children in the F13 and F20 coverage group will be
transferred to

<PAGE>

                                   APPENDIX H

                        MANAGED CARE POLICY TRANSMITTALS
<PAGE>

                                   APPENDIX H
                        MANAGED CARE POLICY TRANSMITTALS

<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                          DEPARTMENT OF SOCIAL SERVICES

                                                                 TELEPHONE
MICHAEL P. STARKOWSKI                                            (860) 424-5053
DEPUTY COMMISSIONER
                                                                 TDD/TTY
                                                                 1-800-842-4524

                         HEALTH CARE FINANCING DIVISION          FAX
                                                                 (860) 424-5057
                           MANAGED CARE ORGANIZATIONS

                                                              PB-98-35

/s/ Michael P. Starkowski                             MAY 1, 1998
-------------------------                             --------------
MICHAEL P. STARKOWSKI                                 EFFECTIVE DATE
DEPUTY COMMISSIONER

POLICY TRANSMITTAL: MS 98-02

SUBJECT: TRANSPORTATION

This policy transmittal is issued to Managed Care Organizations to establish
uniform policy regarding transportation of unescorted children to medically
necessary and medically appropriate appointments.

Effective May 1, 1998:

      1)    Children under 12 years of age shall be escorted to medically
            necessary and medically appropriate appointments. Either the child's
            parent, foster parent, caretaker, legal guardian, or the Department
            of Children and Families (DCF), as appropriate, shall be responsible
            for providing the escort.

      2)    For children between the ages of 12 to 15 years, a consent form
            signed by a parent, caretaker, or guardian shall be required in
            order for a child to be transported without an escort, unless access
            to the service without parental consent is specified by state
            statute (i.e. for family planning and mental health treatment).

      3)    For children 16 years of age and older, no consent form shall be
            required.

NOTE: THE DEPARTMENT OF SOCIAL SERVICES AND THE DEPARTMENT OF CHILDREN AND
FAMILIES, WITHIN 30 DAYS OF ISSUANCE OF THIS TRANSMITTAL, INTEND TO WORK WITH
MANAGED CARE ORGANIZATIONS TO DEVELOP A STANDARDIZED CONSENT FORM.

DISTRIBUTION: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List by the Department of Social Services. Managed Care Organizations
are requested to send this information to their network providers and
subcontractors.

RESPONSIBLE UNIT: Medical Administration Policy, Zantia McKinney, Lead Planning
Analyst, (860) 424-5135.

             25 SIGOURNEY STREET - HARTFORD, CONNECTICUT 06106-5033
                AN EQUAL OPPORTUNITY AFFIRMATIVE ACTION EMPLOYER
                     PRINTED ON RECYCLED OR RECOVERED PAPER

<PAGE>

     [CONNECTICUT DEPARTMENT
     OF SOCIAL SERVICES LOGO]       JOHN G. ROWLAND [LOGO] MICHAEL P. STARKOWSKI
                                           GOVERNOR        DEPUTY COMMISSIONER

                        (860) 424-5053 1-800-842-4524 TDD/TYY FAX (860) 424-5057

                         HEALTH CARE FINANCING DIVISION

                                                               PB-00-57

                             All Providers and MCO's

/s/ Michael P. Starkowski                             JULY 1, 2000
-------------------------                             ---------------
MICHAEL P. STARKOWSKI                                 EFFECTIVE DATE:
DEPUTY COMMISSIONER

Policy Transmittal: MS 00-08          CONTACT: MARTHA OKAFOR AT: 860 424-5032

Subject: Clarification Regarding Notices of Action and Partial Denials

This Policy Transmittal further clarifies requirements in Sections 6.1 and 6.2
of the HUSKY A contract in effect as of February 1, 1999 (the "HUSKY A
Contract"). This Policy Transmittal is based upon the guidance set forth in
David Parrella's April 18, 2000 letter to the managed care organizations
("MCOs") and replaces and supersedes the guidance in that letter.

Partial Denials

      Section 6.1 of the HUSKY A contract requires the MCO or its subcontractor
to send a notice of action whenever the MCO denies coverage of goods or
services, or reduces, suspends or terminates ongoing goods or services. A notice
of action is required whenever the MCO denies a request for goods or services -
whether the request is submitted in oral, written or electronic form, so long as
it is in a form in which the MCO accepts prior authorization requests. This
contractual requirement reflects federal Medicaid regulations and constitutional
due process obligations that require the issuance of notice in these
circumstances. A number of questions have arisen concerning what constitutes a
"denial" for purposes of the notice of action requirements. The Department
recognizes that the MCO may not be prepared to approve a request for prior
authorization as submitted because the patient and the requesting provider may
not have demonstrated that all of the requested services are medically
necessary. The MCO may not be prepared to approve the request as submitted,
notwithstanding that it may acknowledge that it has been demonstrated by the
information submitted that the patient needs some, but perhaps not all, of the
services requested by the provider.

      For example, if a provider requests 30 outpatient mental health sessions
for a member, but it has not been demonstrated to the satisfaction of the MCO
that the member

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<PAGE>

will require 30 sessions, the MCO may respond to such a request for services in
one of the following ways:

      1) If the MCO determines that the goods or services requested are not
medically necessary, the MCO may issue a denial notice to the member. The 10 day
advance notice requirement does not apply in these circumstances. The notice may
be sent at the time of the MCO's decision. Continuation of care requirements do
not apply in these circumstances. In the example described above, the MCO is
required to send a notice of action to the member denying the 30 sessions. This
option may not be used if the MCO believes that some goods or services are
medically necessary. In such situations, options 2 and 3 described below are
appropriate. This option may be appropriately used when the prior authorization
request relates to a discrete or single good or service that permits a "yes" or
"no" authorization decision or when the MCO determines that none of the
requested services are medically necessary.

      2) If the MCO determines that the requested goods or services are
medically necessary to some extent, but not for the type of services or the
scope, duration and intensity requested, the MCO may alternatively issue a
denial notice, that is, the MCO may partially approve and partially deny the
request for services. If the MCO does not approve the request as submitted, the
MCO must send a denial notice to the member at the time of the partial denial.
In the example above, the MCO could determine that the provider demonstrated
that the member needs 15 sessions, but not all 30 sessions requested. The MCO
could send a notice granting a request for 15 sessions and denying a request for
15 sessions. The member could receive the 15 undisputed sessions and could
request a grievance/fair hearing or the remaining 15 sessions. If the member
requests a hearing on the disputed 15 sessions, continuation of care
requirements would not apply.

      3) If the MCO determines that the goods or services are necessary, but
lacks sufficient information to make a final determination as to the full scope
of the request, the MCO alternatively may approve the authorization request as
submitted with notice to the provider that the MCO will review the medical
necessity for the full request at periodic intervals. In the example above, the
MCO may approve the requested 30 sessions. The notice or communication to the
provider, however, could note that approval is contingent upon demonstration of
the continuing need for the services. The MCO may inform the provider that
provision of the services is contingent upon such a demonstration at "check-in"
points - visits 10 and 20 - for example. If, prior to the 30th session, the MCO
determines that the remaining sessions are not necessary and elects to
discontinue coverage of the remaining previously approved sessions, this will
constitute a termination of services. The MCO would be required to send a 10 day
advance notice of termination and continue benefits pending a hearing decision,
up to the 30 sessions that were previously approved, if the patient requests a
hearing within the 10 day period.

      The MCOs may use the existing notice of action forms to issue notices of
partial denial. The Department is in the process of revising the model form
currently in use and will distribute the forms to the MCOs.

                                                                               2
<PAGE>

      The Department will monitor the use of these three notice options. The
Department believes that these options afford the MCOs sufficient flexibility to
respond to a request for goods or services while still allowing the MCO to
manage the care provided. The failure to issue notices of action as required by
the HUSKY A contract and in accordance with the partial denial requirements
above, may result in the imposition of Class B or Class C Sanctions.

         The HUSKY A organizations are bound by the formal and complex due
process requirements of federal Medicaid regulations. The Department recognizes
that these notice requirements may differ significantly from notice requirements
in the private sector. Nonetheless, the Department believes that the MCOs can
and must review the medical necessity of services and manage the care provided
to their Medicaid members, while at the same time, affording notice and hearing
rights that comply with federal and state law and the terms of the HUSKY A
contract.

Reasons for Denials

         The notice of action must cite to the legal authority for the MCO's
decision. If an adverse action is based upon a medical necessity determination,
the notice should cite to the medical necessity definition from the Department's
regulations. For example, a denial of physician's services on the basis of lack
of medical necessity shall cite to Regulations, Conn. Stat. Ag. Section
17b-262-338(31). The MCO should not cite internal MCO policy as a basis for a
denial, termination, suspension or reduction of services. If a good or service
is denied because it is not a covered benefit, the notice should cite to the
particular exclusion from the Department's Medical Services Policy manual, as
listed in Appendix A of the HUSKY A contract.

         If a MCO or one of its subcontractors fails to cite to the appropriate
legal basis for an authorization decision, the Department may impose Class B or
C sanctions on the MCO.

Utilization Review and Medical Necessity

         Utilization review decisions must be based upon an individual
assessment of the member and the member's medical condition. Arbitrary time
periods or arbitrary limitations on number of service visits are inconsistent
with an individualized determination of medical necessity. The MCO coverage and
utilization decisions must be consistent with the scope of covered services as
set forth in Appendix A of the HUSKY A contract. Medical necessity
determinations by the MCO must be made in accordance with the definition in the
HUSKY A contract. MCOs must employ the definition of "medical necessity" set
forth in Section EE of the definitions section of the HUSKY A contract.
Children's medical necessity decisions will be governed by the EPSDT coverage
rules (42 U.S.C. Section 1396d(r) and 42 U.S.C. Section 1396a(a)(43), as
described

                                                                               3
<PAGE>

in Section 3.17 of the HUSKY A Contract. MCOs are also responsible for ensuring
subcontractor compliance with these requirements.

Coverage for Chronic Conditions

      There is no distinction in the HUSKY A contract between acute and
long-term services. MCOs may not deny services on the basis that the goods or
services requested are for a chronic condition, rather than a service that is
short-term or acute in nature. In addition, MCOs may not adopt practices that
have the effect of denying or limiting access to medically necessary services
for chronic or long term conditions. These principles apply with equal force to
MCO subcontractors and MCOs are responsible for ensuring subcontractor
compliance.

      If a MCO or one of its subcontractors fails to issue a proper notice of
action or fails to use the medical necessity criteria a set forth in the HUSKY A
contract, the Department may impose Class B or Class C Sanctions on the MCO. If
a MCO or one of its subcontractors uses arbitrary limits in the utilization
review process, this may also result in the imposition of Class B or C
sanctions.

      Distribution: This policy transmittal is being distributed by Electronic
Data Systems to holders of the Medical Services Policy Manual and to the
Medicaid Mailing List, by the Department of Social Services. HUSKY A managed
care organizations are requested to send this information to their network
providers and subcontractors.

      Responsible Unit Medicaid Managed Care, Martha Okafor, Manager/Compliance,
at (860) 424-5032.

DATE ISSUED: JUNE 29, 2000

                                       4
<PAGE>

[CONNECTICUT DEPARTMENT OF SOCIAL SERVICES LOGO]

                        (860) 424-5053 1-800-842-4524 TDD/TTY FAX (860) 424-5057

                         HEALTH CARE FINANCING DIVISION
                                    July 1997

                                 All Providers

/s/ Michael Starkowski                                        ONGOING
----------------------                                        --------------
MICHAEL STARKOWSKI                                            EFFECTIVE DATE
DEPUTY COMMISSIONER

POLICY TRANSMITTAL: MS 97-05                                          PB-97-44

SUBJECT: Coordination and Continuation of Goods and Services

This Policy Transmittal clarifies the requirement for providing coordination and
continuation of care relative to the covered goods and services referred to in
Section 3.1 of the Health Plan Purchase of Service Contract. Those health plans
licensed by the State of Connecticut Insurance Department under Chapter 698,
698a or 670 of the Connecticut General Statutes are also bound by Public Act 97-
99, An Act Concerning Managed Care, as the provisions of the Act, upon the date
they are effective, may apply to the requirements of coordination and
continuation of goods and services addressed in this transmittal.

Specifically addressed in this transmittal is the coordination and continuity of
goods and services provided to: (1) a Medical Assistance Program client who is
in the process of transitioning into a health plan; or (2) a client who is an
established member of a health plan.

The Department of Social Services defines goods and services as medical care or
items which are furnished to a client to meet a medical necessity in accordance
with applicable statutes, regulations, or policy governing the Medical
Assistance Program.

(a)   COORDINATION AND CONTINUATION OF GOODS AND SERVICES FOR HEALTH PLAN
      MEMBERS

      Section 3.2 of the Health Plan Purchase of Service Contract requires that
      a Connecticut Access Health Plan shall have a system in place to provide
      well-managed patient care. Section 3.2 focuses on the coordination and
      continuation of care provided by a health plan for its members. For the
      purposes of this transmittal, coordination and continuation of goods and
      services includes:

      -     a health plan member who is receiving ongoing goods and services
            from a fee-for-service system (FFS) provider at the time of
            transitioning into the health plan;

      -     a health plan member who is receiving ongoing goods and services
            under one health plan at the time of transitioning into another
            health plan; and

                                       1
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<PAGE>

                  available in the health plan's provider network, the health
                  plan shall continue to provide the care through the member's
                  FFS or outgoing health plan provider until such time an
                  appropriate specialist is available in the plan's provider
                  network.

                  In other words, until the health plan can make arrangements to
                  effect the smooth transition of the care to an appropriate
                  network provider, care shall continue to be provided by the
                  out-of-network provider beyond the member's effective date of
                  enrollment into the new health plan.

      (2)   Maintaining Continuity of Care for Established (Non-Transitioning)
            Health Plan Members Currently Receiving Ongoing Goods and Services

            Health plans shall not reduce, suspend, or eliminate the ongoing
            goods and services an established member (non-transitioning) is
            currently receiving from the member's health plan until the plan has
            completed a review of medical necessity and met the requirements of
            Section (d) below.

(d)   REQUIREMENTS FOR THE NOTICE OF ACTION AND NOTIFICATION OF THE GRIEVANCE
      PROCESS TO TRANSITIONING AND ESTABLISHED HEALTH PLAN MEMBERS

      In order for the health plans to be in compliance with Section 6.1 of the
      Health Plan Purchase of Service Contract concerning grievance procedures
      and Section (c) above, the following requirements shall be met by the
      health plans with regard to the right of transitioning and established
      health plan members to appeal an adverse decision by the health plan
      concerning the goods and services they are receiving.

      (1)   Notice of Action

            The health plan, or its subcontractor (as duly authorized by the
            health plan), shall mail an initial notice of action to the member
            regarding the results of the initial review of medical necessity,
            provided for in Section (c)(1) and (c)(2) above, at least 10
            calendar days before the date of any action to reduce, suspend, or
            terminate the goods and services. The health plan shall allow an
            additional 2 days for mail delivery time beyond the 10 days to allow
            for receipt of the notice by the member. The health plan shall
            identify if the member is Spanish speaking only. In this case, the
            notice of action shall be in Spanish.

            The initial notice of action shall clearly explain the member's
            right to:

            (A)   file a grievance with the health plan using the grievance
                  process established by the health plan in accordance with
                  Section 6.1 of the Health Plan Purchase of Service Contract;

            (B)   request a fair hearing in writing to the Department as
                  provided for under Section 6.2 of the contract, and that the
                  request must be made within 60 days from the date the health
                  plan initial Notice of Action is mailed to the member;

            (C)   continuation of ongoing goods and services if the appeal to
                  the plan or the Department is made on or before 10 calendar
                  days from the date the notice is received by the member. (See
                  subsection (c)(2) and (d)(5) below).

                                        3

<PAGE>

                  Division renders a decision in the matter. (See (d)(5) below
                  concerning documentation and tracking of the ten day
                  requirement.)

      (3)   In accordance with Section 6.1 of the Health Plan Purchase of
            Service Contract, the grievance process within the health plan shall
            be concluded within 30 days of receipt.

      (4)   Decisions by the Department's Administrative Hearing and Appeals
            Division concerning fair hearings shall be made within 90 days of
            receipt of a fair hearings request. It is the responsibility of the
            health plan to assign a staff person to attend the fair hearing to
            present their views. Failure on the part of the health plan to
            attend the hearing would cause the hearing to be decided in favor of
            the member.

      (5)   Documentation Requirements

            (A)   It shall be the responsibility of the health plan to document
                  in its grievance recordkeeping system required by Section 6.1
                  of the Health Plan Purchase of Service Contract: (i) the date
                  the initial notice of action is mailed to the member; (ii) the
                  date the member files a grievance resulting from the notice of
                  action; and (iii) the date the Department receives the
                  member's request for a fair hearing resulting from the notice
                  of action.

            (B)   It shall be the responsibility of the health plan to track the
                  time period for determination of continuation of services.

            (C)   In case of a dispute involving a request for continuation of
                  services or a fair hearing request, the health plan shall have
                  a system in place to verify the actual date the initial Notice
                  of Action is mailed to the member.

(e)   MAINTAINING CONTINUITY OF CARE FOR A TRANSITIONING HEALTH PLAN MEMBER
      RECEIVING GOODS NOT SUBJECT TO SECTION (c) ABOVE

      (1)   The following goods, which are not deemed ongoing goods as defined
            in section (c) above, are included in this section: durable medical
            equipment; prosthetic or orthotic devices; hearing aids; dentures;
            orthodontics; and eyeglasses. The goods covered in this section may
            involve the purchase, repair, or modification of such goods.

      (2)   Goods requiring prior authorization under the FFS system or the
            outgoing health plan

            (A)   The new health plan shall be responsible for payment of goods
                  covered in this section for a member who is transitioning into
                  the health plan from either the FFS system or another health
                  plan and who has a written authorization for such goods
                  subject to paragraph (C) of this section.

            (B)   The new health plan shall not deny, reduce, terminate, or
                  suspend such goods. The goods shall be provided by the new
                  health plan according to the terms of the authorization, i.e.,
                  the amount or duration of goods.

            (C)   Payment shall be the responsibility of the new health plan
                  when the goods were approved under the terms of a written
                  prior authorization either given by the Department to a
                  fee-for-service provider (see subsection (4) below) or by the
                  outgoing health plan to one of its providers, and:

                                        5

<PAGE>

            only.

            Therefore, when a client joins a health plan, the prior
            authorization by the Department for goods and services provided
            after the effective date of enrollment into a health plan is no
            longer valid, except when such goods meet the requirements of
            Section (d)(2) above. The Department also extends this rationale to
            the goods authorized by an outgoing health plan.

(f)   MAINTAINING CONTINUITY OF CARE FOR TRANSITIONING HEALTH PLAN MEMBERS WHO
      ARE HOSPITALIZED

      The following continuity of care requirements shall be followed for health
      plan members who are hospitalized.

      (1)   The admitting health plan shall be responsible for payment of a
            hospital stay for a member who transitions into another health plan
            or returns to the FFS system while hospitalized. Payment shall be
            the responsibility of the admitting health plan when the effective
            date of disenrollment from the admitting health plan occurs during
            the period of hospitalization. The admitting health plan shall be
            responsible for covering the hospital stay until the member is
            discharged. This applies to fully capitated health plans only. The
            hospital stay refers to the financial arrangement made between the
            admitting health plan and the hospital to cover certain inpatient
            services.

            The services related to the Inpatient stay but performed and billed
            separately from the hospital's charges, as for example, the services
            of the attending physician or a specialist, would be the
            responsibility of the new health plan or FFS system, whichever
            applies, beginning with the effective date of enrollment of the
            member into the new health plan It is important for the outgoing
            health plan and the member's new health plan to coordinate the
            inpatient related services received by the hospitalized member.

            It is equally necessary, in situations involving the discharge of a
            member who is transitioned into a new health plan while
            hospitalized, for the discharge planning to be coordinated with the
            member's new health plan This means that the admitting health plan
            and the hospital should Involve the member's new health plan in the
            planning process, especially in situations involving planned
            transfers to another inpatient facility, e.g., transfer to a
            psychiatric hospital, or transfer to a stepdown ambulatory program,
            such as a partial hospital program. Health plans should refer to
            Appendix K of the Request For Application (RFA) for current
            requirements concerning the discharge planning process for children
            who are hospitalized with significant mental health or substance
            abuse needs.

      (2)   A health plan member who was admitted to an inpatient facility under
            the FFS system, and whose effective date of enrollment in a health
            plan for the first time occurs during the period of hospitalization,
            is exempted from such enrollment until the 1st of the month
            following discharge from inpatient care.

Distribution: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List by the Department of Social Services. Health Plans are requested to
send this information to their network providers and subcontractors.

Responsible Unit: Medical Administration Policy Ray MacDonald, Medicaid Policy
Consultant, (860) 424-5134, or Martha Okafor, Lead Planning Analyst,
860-424-5229

                                                            ISSUED: JULY 9, 1997

                                        7
<PAGE>

[LOGO]                             [ILLEGIBLE]
                          DEPARTMENT OF SOCIAL SERVICES

                                                                 TELEPHONE
MICHAEL P. STARKOWSKI                                            (860) 424-5053
DEPUTY COMMISSIONER
                                                                 TDD/TTY
                                                                 1-800-842-4524

                         HEALTH CARE FINANCING DIVISION          FAX
                                                                 (860) 424-5057

                                  February 1998

                                  All Providers

/s/ Michael P. Starkowski                             Immediately
-------------------------                             -----------
Michael P. Starkowski                                 Effective Date
Deputy Commissioner

Policy Transmittal:       MS 98-01                            PB 98-29

Subject:       Clarification Regarding Notices of Action and Coordination and
               Continuation of Goods and Services

This Policy Transmittal further clarifies the requirements of Section 6.1 and
6.2 of the Health Plan Purchase of Service Contract regarding requirements for
the notice of action and notification of the grievance process to transitioning
and established health plan members previously addressed in Policy Transmittal
MS 97-05(d) and addresses questions regarding payment for goods not subject to
Section (c) of Policy Transmittal MS 97-05.

(a)   Notice of Action

      (1)   The health plan, or its subcontractor (as duly authorized by the
            health plan) shall mail an initial notice of action to the member
            regarding the results of the initial review of medical necessity,
            provided for in Section (c)(1) and (c)(2) of Policy Transmittal MS
            97-05, at least 10 calendar days before the date of any action to
            reduce, suspend, or terminate the goods or services. The health plan
            shall identify if the member is Spanish speaking only. In this case,
            the notice of action shall be in Spanish.

            The health plan is not required to allow an additional 2 days for
            mail delivery beyond the 10 days specified above.

      (2)   In addition to providing a notice of action to the member when
            ongoing goods or services are reduced, suspended, or terminated, the
            health plan must also provide a notice of action promptly whenever
            the plan denies coverage of goods or services prescribed by the
            treating physician or primary care provider.

              25 SIGOURNEY STREET-HARTFORD, CONNECTICUT 06106-5033
               AN EQUAL OPPORTUNITY / AFFIRMATIVE ACTION EMPLOYER
                     PRINTED ON RECYCLED OR RECOVERED PAPER

<PAGE>
      (3)   All notices of action shall clearly state or explain:

            (A)   what action the health plan intends to take;

            (B)   the reasons for the intended action;

            (C)   a citation to the statute, regulation, policy section, or
                  managed care contract provision which supports the intended
                  action;

            (D)   the member's right to file a grievance with the health plan
                  using the grievance process established by the health plan in
                  accordance with Section 6.1 of the Health Plan Purchase of
                  Service Contract;

            (E)   (i)   the member's right to request, in writing, a fair
                        hearing from the Department;

                  (ii)  that a written request for a fair hearing must be made
                        to the Department within 60 days from the date the
                        health plan mailed the initial notice of action to the
                        member;

                  (iii) that, at a fair hearing, the member may represent
                        himself or herself or use legal counsel, a relative, a
                        friend, or other spokesperson;

                  (iv)  that filing a grievance with the health plan does not
                        preclude the member from requesting a fair hearing from
                        the Department;

                  (v)   that filing a grievance with the health plan does not
                        automatically preserve the member's right to request a
                        fair hearing; and

            (F)   the member's right to continuation of ongoing goods or
                  services:

                  (i)   provided the reduction, suspension, or termination of
                        goods or services was not ordered by the member's
                        treating physician or primary care provider, functioning
                        within his or her respective scope of practice, as
                        defined under state law, and

                  (ii)  provided the member files a formal grievance with the
                        health plan or files a written request for a fair
                        hearing with the Department within 10 calendar days of
                        the date the notice is mailed to the member.

      (4)   In the case of a child under the care of the Department of Children
            and Families (DCF) the health plan is required to send the notice of
            action to the child's DCF social worker and a copy to the child's
            foster parent.

(b)   Exception From Advance Notice

      (1)   Notice of action may be mailed to a member no later than the date of
            action if a reduction, suspension, or termination of goods or
            services is prescribed by

<PAGE>

            the member's treating physician or primary care provider,
            functioning within his or her scope of practice, as defined under
            state law.

      (2)   In the foregoing situation, although notice of action is required,
            goods or services may be reduced, suspended, or terminated, in
            accordance with the order of the treating physician or primary care
            provider, functioning within his or her respective scope of
            practice, as defined under state law, as of the date of action.

(c)   Payment for Goods Received by Members not Subject to Policy Transmittal MS
      97-05(c)

      (1)   For goods which are not deemed ongoing goods as defined in Policy
            Transmittal MS 97-05(e), the health plan which authorizes the goods
            shall pay for the goods, even if the member has transitioned into
            another health plan or fee-for-service Medicaid by the time the
            goods are delivered.

      (2)   In situations where prior authorization has been given by the
            Department to a fee-for-service provider prior to a member
            transitioning into a health plan, and the goods are delivered after
            the member has transitioned into a health plan, the new health plan
            shall pay the provider whom the Department authorized to supply the
            goods.

(d)   Delegation of Responsibility to Issue Notice of Action

      The Connecticut Access managed care contracts permit health plans to
      delegate to subcontractors the responsibility for providing notices of
      action to members. Please note, however, that it remains the health plan's
      responsibility to ensure that all notice requirements are met.

(e)   Standardized Notice of Action

      Following issuance of this policy transmittal, it is the Department's
      intent to work with health plans to develop a standardized notice of
      action. However, plans are not relieved of their obligation to comply with
      each of the terms of this policy transmittal in the interim while this
      standard notice is being developed.

DISTRIBUTION: This policy transmittal is being distributed by Electronic Data
Systems to holders of the Medical Services Policy Manual and to the Medicaid
Mailing List, by the Department of Social Services. Health Plans are requested
to sent this information to their network providers and subcontractors.

RESPONSIBLE UNIT: Medical Administration policy, J. Michelle Fitzpatrick, Ph.D.,
Supervisor, (860) 424-5126.

<PAGE>

                                   APPENDIX I

                           CAPITATION PAYMENT AMOUNTS

<PAGE>

                         SUMMARY DESCRIPTION OF BENEFITS

A.    COVERED SERVICES INCLUDED IN THE CAPITATION PAYMENT

1.    Hospital Inpatient Care (acute care hospitals) - Medically necessary and
      medically appropriate hospital inpatient acute care, procedures, and
      services, as authorized by the responsible physician(s) or dentist, and
      covered under Department of Social Services (DSS) policies and
      regulations.

      a.    Administratively Necessary Days (ANDs) are covered when a nursing
            home placement delay is due to unavailability of beds. However, a
            patient is required to accept the first available, medically
            appropriate bed.

      b.    Organ transplants are covered if they are of demonstrated
            therapeutic value, medically necessary and medically appropriate,
            and likely to result in the prolongation and the improvement in the
            quality of life of the applicant. The DSS Transplant Advisory
            Committee has developed, and continues to develop, medical criteria
            relating to particular organ transplant procedures. These criteria
            are available for use by health plans. The criteria are guidelines.
            However, a final decision to deny a transplant request is not to be
            rendered without considering the medical opinion of a qualified
            organ transplantation expert(s) in the community.

      c.    Mental health and substance abuse services in a general hospital
            psychiatric unit are covered--regardless of the age of the
            individual.

2.    Psychiatric (mental health/substance abuse) Facility Inpatient Care

      a.    Medically necessary psychiatric hospital care, procedures, and
            services as covered under DSS policy and regulation.

      b.    Some psychiatric hospitals may qualify as an Institution for Mental
            Diseases (IMD). An IMD is defined as a facility of more than sixteen
            (16) beds that is primarily engaged in providing diagnosis,
            treatment, or care of persons with mental diseases. Medically IMD
            necessary care is only covered for individuals under age 21 and 65
            years of age or older. IMD services for individuals aged 21 through
            64 are noncovered services (see Section C.1 of this summary
            overview).

3.    Freestanding Alcohol Treatment Center Inpatient Care

      a.    Services must be provided by a program holding a current and active
            license to operate a Private Freestanding Facility for the Care and
            Treatment of Substance Abusive or Dependent Persons.

      b.    Services under the Medicaid program shall be for alcohol
            detoxification and shall be limited to: a) the acute and evaluation
            phase of the treatment program and b) a ten (10) day period for each
            occurrence. Acute treatment and evaluation provides medical
            management of detoxification and assessment of the individual's
            total situation in an inpatient milieu for

                                        4

<PAGE>

            the purpose of formulating and implementing a plan of care in
            addition to detoxification.

      c.    Services must predominately focus on the medical and/or
            psychological management of alcohol abuse and other medical or
            psychological conditions which impact upon or are related to alcohol
            abuse. Treatment and care shall be provided under the direction of a
            physician within the scope of accepted medical practice.

4.    Chronic Disease Hospital Inpatient Care - Such medically necessary care,
      procedures, and services as covered under DSS policy and regulation.

5.    Nursing Facility (Skilled Nursing and Intermediate Care) Inpatient Care -
      Such medically necessary care is covered while the patient remains in a
      managed care coverage group. For coverage in nursing homes which are
      characterized as, institutions for mental disease' see Section CA of this
      summary overview.

6.    Intermediate Care Facility (Mentally Retarded) Inpatient Care - Such
      medically necessary care is covered while the patient remains in a managed
      care coverage group.

7.    Christian Science Sanitoria Service - Such medically necessary care is
      covered while the patient remains in a managed care coverage group.

8.    Hospital Outpatient Care (General Hospital, Psychiatric Hospital, and
      Chronic Disease Hospital) - Preventive, diagnostic, therapeutic,
      rehabilitative, or palliative medical services provided to an outpatient
      by or under the direction of a physician or dentist in a licensed
      hospital facility.

9.    Physician Services - Primary and Specialty services provided by a licensed
      physician or doctor of osteopathy and performed within the scope of
      practice of medicine or osteopathy as defined by State law.

10.   Psychologist Services - Clinical, diagnostic, and remedial services
      personally performed by a psychologist. Services include: a) counseling
      and psychotherapy to individuals who are experiencing problems of a mental
      or behavioral nature and b) measuring and testing of personality,
      aptitudes, emotions, and attitudes.

11.   Nurse-Midwifery Services - Services provided by a licensed, certified
      nurse--midwife which are related to the care, and to the management of the
      care, of essentially normal mothers and newborns (only throughout the
      maternity cycle) and well woman gynecological care, including family
      planning services.

12.   Nurse Practitioner Services - Services which are provided by a licensed
      Advanced Practice Registered Nurse (APRN) and which are within his or her
      scope of practice as defined by State law.

13.   Chiropractor Services - Manual manipulation of the spine performed by a
      licensed chiropractor within the scope of chiropractic practice.
      Noncovered services:

                                       5
<PAGE>

      a.    Prescription or administration of any medicine or drug or the
            performance of any surgery;

      b.    X-rays furnished by a chiropractor.

      c.    Manipulation of other parts of the body (e.g., shoulder, arm, knee,
            etc.) even when for subluxation of the spine; and

      d.    Lab work ordered by a chiropractor.

14.   Naturopathic Services - Services provided by a licensed naturopath which
      conform to accepted methods of diagnosis and treatment and which are
      within the scope of naturopathic practice.

15.   Podiatrist Services - Services provided by a licensed podiatrist which
      conform to accepted methods of diagnosis and treatment and which are
      within the scope of podiatric practice.

      a.    Limitations of Coverage

            i.    Orthotic and/or corrective arch supports for recipients under
                  five years of age; and

            ii.   Orthotic and/or corrective arch supports only once every two
                  (2) years.

      b.    Noncovered Services

            i.    Services of assistants at surgery;

            ii.   Simplified tests requiring minimal time or equipment and
                  employing materials nominal in cost such as Clinitest,
                  testape, Hematest, Bumintest, Dextrostix, nonphotolitric
                  hemogloblin, etc.;

            iii.  Simple foot hygiene; and

            iv.   Repairs to devices judged to be necessitated by willful or
                  malicious abuse on the part of the patient.

16.   Laboratory Services - Laboratory services: a) ordered by a duly licensed
      physician or other licensed practitioner of the healing arts; and b)
      performed in a laboratory which is certified according to the applicable
      provisions of the Clinical Laboratory Improvement Amendments of 1988
      (CLIA) and meets all applicable licensing, accreditation and certification
      requirements for the specific services and procedures it provides.

17.   Outpatient Medical Rehabilitation Services - Medically necessary and
      medically appropriate outpatient rehabilitation services provided by a
      licensed or certified practitioner. Such services include: physical
      therapy, occupational therapy, speech therapy, audiology, inhalation
      therapy, social services, psychological services, traumatic brain injury
      (T.B.I.) day treatment, neuropsychological evaluation,
      electonystagmography, and early childhood intervention services.

      a.    Limitations include:

                                        6
<PAGE>

            i.    Sheltered workshop services for individuals who are primarily
                  developmentally disabled are covered only if their need for
                  this type of program stems from an etiology readily
                  identifiable as medical or psychological in origin;

            ii.   T.B.I. treatment programs are limited to individuals who have
                  sustained injury from interaction of any external forces
                  resulting in the central nervous system (brain) dysfunctions.
                  Developmental impairment primarily contributing to brain
                  dysfunction is not included. The impairment must be readily
                  identifiable as having been sustained through injury;

            iii.  The T.B.I. program is primarily a medical rehabilitation
                  program, however, vocational, social, and educational services
                  may be covered only when these services are: a) related to the
                  individual's injury, b) are reasonable and necessary for the
                  diagnosis or treatment of the injury, and c) are a part of the
                  recipient's written individual plan of care; and

            iv.   Programs relating to the learning of basic living skills, or
                  other activities of daily living, are limited to individuals
                  who have lost or had impaired functions of daily living and
                  require retraining to maximize restoration of these skills.

      b.    Noncovered Services include:

            i.    Services which are related solely to specific employment
                  opportunities, work skills, work settings, and/or academic
                  skills and are not reasonable or necessary for the diagnosis
                  or treatment of an illness or injury;

            ii.   Speech services involving nondiagnostic, nontherapeutic,
                  routine, repetitive, and reinforced procedures or services for
                  the patient's general good and welfare; and

            iii.  Services ordinarily covered are not covered if an individual's
                  expected restoration potential would be insignificant in
                  relation to the extent and duration of rehabilitation services
                  required to achieve such potential.

18.   Vision Care - Services performed by a licensed ophthalmologist,
      optometrist, or optician which conform to accepted methods of diagnosis
      and treatment.

      Limitations of Coverage

            i.    Contact lenses are covered when such lenses provide better
                  management of a visual or ocular condition than can be
                  achieved with spectacle lenses, including, but not limited to
                  the diagnosis of Unilateral Aphakia, Keratoconus, Coeal
                  Transplant, and High Anisometropia;

            ii.   Prescription sunglasses are covered when light sensitivity
                  which will hinder driving or seriously handicap the outdoor
                  activity of a patient is evident;

            iii.  Trifocals are covered when the patient has a special need due
                  to job training program or extenuating circumstances;

            iv.   Extended wear contact lenses are covered for aphakia and for
                  members whose coordination or physical condition make daily
                  usage of contact lenses impossible;

            v.    Oversize lens are covered only when needed for physiological
                  reasons, and not for cosmetic reasons; and

                                        7

<PAGE>

      vi.   A spare pair of eyeglasses is not covered.

19.   Dental Care - Services performed by a licensed dentist or dental hygienist
which conform to accepted methods of diagnosis and treatment.

The categories of covered services are as follows:

      a.    Diagnostic Services

            i.    Home visits;

            ii.   Radiographs: a) intraoral, complete series; b) bitewing films;
                  and c) periapical films; and

            iii.  Oral examinations: a) initial oral exam; b) periodic oral
                  exam; and c) emergency oral exam.

      b.    Preventive Services

            i.    Prophylaxis;

            ii.   Fluoride treatment for children under 21;

            iii.  Space maintainers;

            iv.   Night guards; and

            v.    Pit and fissure sealants for children ages 5 through 16. Prior
                  authorization is required for children under 5 and persons
                  over 16.

      c.    Restorative Services - limited to the restoration of carious
            permanent, and primary teeth.

            i.    Fillings; and

            ii.   Crowns.

      d.    Endodontics

            i.    Root canal therapy and/or abicoectomy; and

            ii.   Apexification.

      e.    Prosthodontics - removable, complete, and partial prostheses;

      f.    Dental Surgery;

      g.    Edodontia (extractions);

      h.    Orthodontics under the Early Periodic Screening, Diagnosis and
            Treatment (EPSDT) program;

      i.    Alveolectomy (alveoplasty);

      j.    Patient Management - in connection with dental services to
            individuals with cognitive disabilities;

      k.    General Surgical Anesthesia;

      l.    Prosthodontics with use on a regular basis;

      m.    Removable, complete and partial denture prostheses only; and

      n.    Replacement of existing dentures, only once in any five (5) years.

                                        8

<PAGE>

      o.    Relining or rebasing existing dentures - Two (2) year period.

      p.    Denture labeling, for patients in long-term care facilities only.

The categories of noncovered services are as follows:

      a.    Fixed Bridges

      b.    Periodontia

      c.    Implants

      d.    Transplants

      e.    Cosmetic Dentistry

      f.    Vestibuloplasty

      g.    Unilateral Removable Appliances

      h.    Partial dentures where there are at least eight (8) posterior teeth
            in occlusion and no missing anterior teeth.

      i.    Restorative procedures to deciduous teeth nearing exfoliation.

20.   Durable Medical Equipment - equipment which: a) can stand repeated use; b)
      is primarily and customarily used to serve a medical purpose; c) is
      generally not useful to a person in the absence of an illness or injury;
      and d) excludes items that are disposable.

      Equipment covered includes: wheelchairs and accessories, walking aids,
            bathroom equipment (e.g., commode and safety equipment), hospital
            beds and accessories, inhalation therapy equipment (e.g., IPPR
            machines, suction machines, nebulizers, and related equipment),
            enteral/parenteral therapy equipment, and the repair and replacement
            of durable medical equipment (DME) and related equipment.

21.   Orthotic and Prosthetic Devices - Mechanical appliances and devices for
      the purpose of providing artificial replacement of missing parts, and/or
      prevention or correction of disorders in involving physical deformities
      and impairments.

      a.    Devices covered include: braces, corsets, collars, arch supports,
            footplates, orthopedic shoes, orthopedic prostheses, hearing aids
            (including batteries, earmolds, and cords).

      b.    Limitations: i) orthotic and/or corrective arch supports are not
            provided for recipients under five years of age; ii) Metatarsus
            Adductus Shoes are limited to a congenital metatarsus adductus
            condition and are limited to children through age four as medically
            necessary.

22.   Oxygen Therapy - oxygen, equipment, supplies, and services related to the
      delivery of oxygen.

                                       9
<PAGE>

23.   Respiratory Therapy - services include: intermittent positive pressure
      breathing, ultrasonography, aerosol, sputum induction, percussion and
      postural drainage, arterial puncture, and withdrawal of blood for
      diagnosis.

24.   Dialysis - hemodialysis and peritoneal dialysis services are covered,
      including the treatment of end stage renal disease.

25.   School-Based Clinics - services provided at a facility: a) located on the
      grounds of a public school; b) serving enrolled recipients on a scheduled
      basis or for an emergency situation; and c) licensed as an outpatient
      medical facility to provide comprehensive care.

      a.    Covered services include: health assessments; family planning
            services; diagnosis and/or treatment of illness or injuries;
            laboratory testing (performed by the School-Based Health Clinic);
            follow-up visits; EPSDT services; one-on-one health education,
            medical social work services, and nutritional counseling; and mental
            health and substance abuse services including diagnostic
            assessments, individual, group, and family therapy or counseling.

      b.    Noncovered services include: mandated school health screenings,
            simple intervention of a health problem such as nonmedical personnel
            could render, visits where the presenting health problem does not
            require a health or mental health assessment/evaluation, visits for
            the sole purpose of administering or monitoring medications,
            services which are not part of the written individual plan of care,
            and visits for mental health or substance abuse determined by the
            clinic to be beyond the scope of the clinic.

26.   Family Planning and Abortion - medically approved diagnostic procedures,
      treatment, counseling, drugs, supplies, or devices which are prescribed or
      furnished by a provider to individuals of child bearing age for the
      purpose of enabling such individuals to freely determine the number and
      spacing of their children.

      Noncovered services include: a) sterilizations for patients who are under
      age twenty-one (21), mentally incompetent, or institutionalized; and b)
      hysterectomies performed solely for the purpose of rendering an individual
      permanently incapable of reproducing.

27.   Ambulatory Surgery - Services include preoperative examinations, operating
      and recovery room services, and all required drugs and medicine.

28.   Early and Periodic Screening, Diagnostic and Treatment (EPSDT) Services
      (Health Track Services)- Comprehensive child health care services to
      recipients under twenty-one (21) years of age, including all medically
      necessary prevention, screening, diagnosis, and treatment services listed
      in Section 1905(r) of the Social Security Act.

      EPSDT Covered Services are described below:

      a.    Initial and Periodic Comprehensive Health Screenings - includes the
            following services provided at the intervals recommended in the
            Periodicity Schedule consistent with the standards of the American
            Academy of Pediatrics and Center for Disease Control:

            i.    a comprehensive health and developmental history, including
                  assessment of both physical and mental health development and
                  nutritional assessments;

            ii.   a comprehensive unclothed physical examination;

                                       10
<PAGE>

            iii.  appropriate immunizations according to age and health history,
                  unless medically contraindicated at the time;

            iv.   appropriate laboratory tests (including blood lead level
                  assessments appropriate for age and risk factors);

            v.    health education (including anticipatory guidance and risk
                  assessment);

            vi.   diagnosis and treatment of problems found during the
                  screening;

            vii.  vision screenings - an objective vision screening is indicated
                  beginning at three years of age as indicated in accordance
                  with the Periodicity Schedule;

            viii. hearing screenings - an objective hearing screening is
                  indicated beginning at four years of age according to the
                  Periodicity Schedule; and

            ix.   dental screenings are recommended in the Periodicity Schedule,
                  for example, an initial direct referral to a dentist beginning
                  at age two.

      b.    Dental Services - includes those dental services provided by or
            under the direction of a dentist, in addition to the dental
            screening, that are recommended in the Periodicity Schedule. Dental
            services also include relief of pain and infections, restoration of
            teeth, and maintenance of dental health.

      c.    Administration and Medical Interpretation of Developmental Tests -
            objective standardized tests, recognized by the Connecticut
            Birth-To-Three Council, for further diagnosis and treatment of
            problems found during a periodic comprehensive health screen or
            interperiodic encounter. Such tests include, but are not limited to,
            the Battelle, the Mullen, and the Bayley.

      d.    Case Management Services - The following services are determined to
            be necessary when a child evidences a need for such services as a
            result of a periodic comprehensive health screening or interperiodic
            encounter:

            i.    Initial case management assessment and periodic reassessment,
                  including development of the plan of services and revision as
                  necessary.

            ii.   Ongoing case management, including, at a minimum:

                  A)    assistance in implementing the plan of services, which
                        includes: facilitating referrals, providing assistance
                        in scheduling needed health or health-related services,
                        and helping to identify and link with the child's health
                        and social service providers. Particularly, the case
                        management provider shall identify the child's health
                        home or, if necessary, participate in linking the child
                        with a quality health home, and encourage continuity of
                        care;

                  B)    monitoring the delivery of and facilitating access to a
                        periodic comprehensive health screening at the intervals
                        recommended in the Periodicity Schedule, and other
                        screening, diagnosis, and treatment services. Such
                        activities also include follow-up on missed
                        appointments, and, if necessary, assistance with
                        arranging medical transportation, child care, and
                        interpreter services;

                  C)    coordinating and integrating the plan of services, as
                        necessary, through direct or collateral contacts with
                        the family and members of their team of direct service
                        providers, as appropriate;

                                       11
<PAGE>

                  D)    monitoring the quality and quantity of needed services
                        that are being provided, and evaluating outcomes and
                        assessing future needs which might support changes in
                        the plan of services, including completing a quarterly
                        progress note;

                  E)    providing health education, as needed, and in
                        coordinating with a direct service provider interpreting
                        and reinforcing the service provider's recommendations
                        for the health of the child; and

                  F)    providing client advocacy to ensure the smooth flow of
                        information between the child, the child's
                        representative, providers, and agencies, to minimize
                        conflict between service providers, and to mobilize
                        resources to obtain needed services.

      e.    Interperiodic Encounters

            i.    An encounter or visit to determine if there is a problem, or
                  to treat a problem that was not evident at the time of the
                  regularly scheduled periodic comprehensive screening but needs
                  to be addressed before the next periodic comprehensive
                  screening;

            ii.   Any screening, in addition to the screenings recommended in
                  the Periodicity Schedule, to determine the existence of
                  suspected physical, mental, or developmental conditions;

            iii.  An encounter or follow-up visit in the case of a child whose
                  physical, mental, or developmental illness or condition has
                  already been diagnosed prior to the child being Medicaid
                  eligible (e.g., a pre-existing condition), but needs to be
                  addressed before the next scheduled screening interval
                  recommended in the Periodicity Schedule, if there are
                  indications that the illness or condition may have become more
                  severe or changed sufficiently so that further examination is
                  medically necessary; and

            iv.   An encounter necessary to provide immunizations, vision,
                  and/or hearing screenings (e.g., which had been deemed
                  medically contraindicated at the time of the periodic
                  comprehensive health screening).

      f.    Personal Care Services - services for a child who has a diagnosed
            disability and is judged to be able to benefit from one (1) or more
            personal care service activities as the result of a periodic
            comprehensive health screen or interperiodic encounter performed by
            a primary care provider.

            i.    Covered personal care services include all tasks to assist a
                  child with major life activities of self-care and instrumental
                  activities as identified in the personal care services plan of
                  care:

                  A)    covered major life activities include, but are not
                        limited to, dressing, bathing, eating, and personal
                        health care maintenance; and

                  B)    covered instrumental activities include, but are not
                        limited to, cooking, cleaning, travel, and shopping.

            ii.   The following services are not covered:

                                       12
<PAGE>

                  A)    personal care services provided to an individual who
                        does not reside at home;

                  B)    personal care services provided by a family member;

                  C)    home health services which duplicate personal care
                        services (e.g., home health aide services are not
                        covered when personal care services are appropriate);

                  D)    transportation of the personal attendant to and from the
                        child's home to provide services;

                  E)    acute health care services which are covered under other
                        DSS regulations;

                  F)    personal care services when the child is eligible for or
                        receiving comparable services from another agency or
                        program; and

                  G)    personal care services for the care or assistance that
                        would routinely be given to a child in the absence of a
                        disability.

      g.    EPSDT Special Services - other medically necessary and medically
            appropriate health care, diagnostic services, treatment, or other
            measures necessary to correct or ameliorate disabilities and
            physical and mental illnesses and conditions discovered as a result
            of a periodic comprehensive health screening or interperiodic
            encounter, whether or not the good or service is included in the
            Connecticut Medicaid Program State Plan as a good or service
            available to all other Medicaid recipients. Such services include,
            but are not limited to, medically necessary and medically
            appropriate over-the-counter drugs and personal care services.

      h.    All medically necessary diagnosis and treatment services available
            to all Medicaid recipients under the Connecticut Medical Assistance
            Program.

29.   Diagnostic Services - Medical procedures (e.g., radiology, cardiology,
      EEG, and ultrasound procedures) or supplies recommended by a physician or
      other licensed practitioner of the healing arts, within the scope of
      his/her practice under State law, to enable the identification of the
      existence, nature, or extent of illness, injury, or other health
      deviation.

30.   Home Health Care - Medically necessary home health services ordered by the
      licensed practitioner and provided by a licensed home health agency on a
      part-time or intermittent basis to members who reside at home, as defined
      by Departmental policy, for the purpose of enabling the patient to remain
      at home or to provide a less costly alternative to institutional care.

31.   Mental Health/Substance Abuse Services - Medically necessary outpatient
      Mental Health and Substance Abuse services provided by a licensed
      psychiatrist (or under the supervision of a licensed psychiatrist) or
      other licensed or certified mental health practitioner. Such services must
      be provided within the scope of the practitioner's license/certification.

      a.    Covered services include:

            i.    Initial evaluation (diagnostic);

            ii.   Mental health and substance abuse treatment services:

                                       13
<PAGE>

                  A)    Individual psychotherapy;

                  B)    Group psychotherapy;

                  C)    Family therapy;

                  D)    Specialized treatment, such as methadone maintenance and
                        outpatient detoxification; and

                  E)    Partial hospitalization.

            iii.  Physical/neurological exams in connection with evaluation of
                  mental illness;

            iv.   Parent interview/group - Children's Mental Health Services;

            v.    Psychological testing - performed by licensed psychologists
                  only; and

            vi.   Neuropsychological evaluation performed by a qualified
                  neuropsychologist.

      b.    Noncovered services: Hypnosis or electroshock therapy, unless
      personally performed by a licensed practicing physician (M.D.).

32.   Medical Transportation Services

      a.    Emergency and Nonemergency Ambulance Service is covered when: Q the
            patient's condition requires medical attention during transit; or
            ii) the patient's diagnosis indicates that the patient's condition
            might deteriorate in transit to the point where medical attention
            would be needed; or iii) the patient's condition requires hand
            and/or feet restraints; or iv) the ambulance is responding to an
            emergency; or v) no alternative less expensive means of
            transportation is available. Ambulance trips to an emergency room,
            regardless of the outcome, nor ambulance trips in response to a 911
            call, cannot be subject to prior authorization.

      b.    Air Transportation - when a medical condition or time constraint
            dictates its use.

      c.    Critical Care Helicopter - when a medical condition or time
            constraint dictates its use.

      d.    Other Nonambulance Transportation [Livery, Invalid Coach, Commercial
            Carrier, Taxi, Private Transportation, Service bus ('Dial-a-Ride"
            type service), etc.] - when needed to obtain necessary medical
            services covered by Medicaid, and when it is not available from
            volunteer organizations, other agencies, personal resources, etc. To
            administer this benefit, DSS currently employs the following
            limitations on services:

            i.    requirement of prior authorization;

            ii.   requirement of the use of the nearest appropriate provider of
                  medical services when a determination has been made that
                  traveling further distances provides no medical benefit to the
                  patient; and

            iii.  requirement of the use of the least expensive appropriate
                  method of transportation, depending on the availability of the
                  service and the physical and medical circumstances of the
                  patient.

                                       14
<PAGE>

      e.    Transportation for relatives or foster parents of a Medicaid
            recipient - only under the following circumstances:

i. the person needs to be present at and during the medical service being
provided to the patient (for example, in parent/child situations); and

ii. the person needs to be trained by hospital staff to provide unpaid health
care in the home to the patient, and without this health care being provided
the patient would not be able to return home.

vii.  Children under twelve (12) years of age shall be escorted to medical
      appointments. Either the child's parent, foster parent, caretaker, legal
      guardian or the Department of Children and Families (DCF), as
      appropriate, shall be responsible for providing the escort.

viii. For children between the ages of twelve (12) to fifteen (15) years, a
      consent form signed by a parent, caretaker or guardian shall be required
      in order for a child to be transported without parental consent as
      specified by state statute (i.e., for family planning and mental health
      treatment).

ix.   For children sixteen (16) years or older, no consent form shall be
      required.

      f.    Out-of-State Transportation Services - when out-of-state- medical
            services are needed because of the following:

            i.    a medical emergency;

            ii.   the patient's health would be endangered ff. required to
                  travel to Connecticut; and

            iii.  needed medical services are not available in Connecticut.

33.   Medical Surgical Supplies - those items which are prescribed by a
      physician to meet the needs or requirements of a specific medical and/or
      surgical treatment. They are generally disposable and not reusable.

      a.    Covered services include: gauze pads, surgical dressing material,
            splints, tracheotomy tube, diabetic supplies, elastic hosiery,
            sterile gloves, incontinence supplies, thermometers, blood pressure
            kit (aneroid type including stethoscope, but limited to use in the
            home for patient's diagnosed to have complicated cardiac conditions
            and labile hypertension), enteral/parenteral feeding therapy
            supplies including solutions and manufacturing materials,

      b.    Items considered first aid supplies such as, bandages, solutions,
            vaseline, etc., are not covered services.

34.   Pharmacy Services

      a.    Covered services

      i. Drugs prescribed by a licensed authorized practitioner. The MCO may use
      a prescription drug formulary which is described in Section 3.15, Pharmacy
      Access of the contract.

                                       15

<PAGE>

 ii.  Over-The-Counter (OTC) Drugs on the State of Connecticut's OTC Formulary,
      including liquid generic antacids, birth control products, calcium
      preparations, diabetic- related products, electrolyte replacement
      products, heratinics, nutritional supplements and vitamins (prenatal,
      pediatric, high potency).

iii.  b.    Noncovered Services

i. Drugs included in the Food and Drug Administration's Drug Efficacy Study
Implementation Program;

ii.   Alcoholic liquors;

iii.  Items used for personal care and hygiene or cosmetic purposes;

iv.   Drugs solely used to promote fertility;

x.    Drugs not directly related to the patient's diagnosis, when diagnosis is
      required by the DEPARTMENT to be written on the prescription;

xi.   Any vaccines and/or biologicals which can be obtained free of charge from
      the CT. State Department of Health Services. The DEPARTMENT will notify
      pharmacists of such vaccines or biologicals;

xii.  Any drugs used in the treatment of obesity unless caused by a medical
      condition;

xiii. Controlled substances dispensed to HUSKY members which are in excess of
      the product manufacturer's recommendation for safe and effective use for
      which there is no documentation of medical justification in the pharmacy's
      file; and,

xiv.  drugs used to promote smoking cessation.

35. Emergency Services - such inpatient and outpatient services in and out of
    the health plan's service area are covered services.

36. Dental Hygienist Services - Services which are provided by a licensed
    dental hygienist and which are within his or her scope of practice as
    defined by State Law.

B. COVERED SERVICES NOT INCLUDED IN THE CAPITATION PAYMENT

1. School-Based Child Health Services - Medically necessary special education
   related diagnostic and treatment services provided to children by or on
   behalf of school districts pursuant to the Individuals with Disabilities
   Education Act (IDEA) and Connecticut General Statutes (CGS). Diagnostic
   services must be ordered by a Planning and Placement Team and treatment
   services must be prescribed in a child's Individualized Education Program
   (IEP)--and verified by a physician's signature.

2. Connecticut Birth to Three Program Services - The Connecticut Birth to
   Three Program, pursuant to the Individuals with Disabilities Education Act
   (IDEA) and Connecticut General Statutes (CGS), provides a range of early
   intervention services for eligible children from birth to three years of age
   with

                                       16

<PAGE>

      developmental delays and disabilities. Eligibility of children is
      determined by Department of Mental Retardation (DMR) staff or entities
      with which DMR contracts. Services are authorized in an Individualized
      Family Service Plan (IFSP) and verified by a physician's signature.

3.    Inpatient Department of Children and Families (DCF). Operated Psychiatric
      Facilities - The discharge planning and reinsurance provisions described
      in Section 3.18 (Special Services for children) shall apply to all new
      medically necessary and administratively necessary admissions at DCF
      operated facilities effective October 1, 1998. When a child is admitted to
      a DCF facility, the child will remain enrolled in the MCO and the MCO must
      reimburse the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admission and stays at the facility.

C. NONCOVERED SERVICES

1.    Institutions for Mental Disease (IMD) - The federal definition of an IMD
      is a hospital, nursing facility, freestanding alcohol treatment center, or
      other institution of more than sixteen (16) beds that is primarily engaged
      in providing diagnosis, treatment, or care of persons with mental
      diseases.

      a.    IMD Exclusion - Medicaid does not cover IMD services (i.e., these
            services are excluded). States, rather than the Federal Government,
            have principle responsibility for funding inpatient psychiatric
            services; therefore, State funding of IMI)s is not through the
            Medicaid program.

      b.    Exceptions - certain individuals are not part of the IMD exclusion
            (i.e., they are covered by Medicaid for services in IMDs):

            i.    inpatient psychiatric services for individuals under age 21;

            ii.   individuals 65 years of age or older who are in hospitals or
                  nursing facilities that are IMDs.

2.    Services and/or procedures considered to be of an unproven, experimental,
      or research nature or cosmetic, social, habilitative, vocational,
      recreational, or educational.

3.    Services in excess of those deemed medically necessary to treat the
      patient's condition.

4.    Services not directly related to the patient's diagnosis, symptoms, or
      medical history.

5.    Any services or items furnished for which the provider does not usually
      charge.

6.    Medical services or procedures in the treatment of obesity, including
      gastric stapling. When obesity is caused by an illness (hypothyroidism,
      Cushing's disease, hypothalamic lesions) or aggravates an illness (cardiac
      and respiratory diseases, diabetes, hypertension) services in connection
      with the treatment of obesity could be covered services.

                                       17
<PAGE>

7.    Services related to transsexual surgery or for a procedure which is
      performed as part of the process of preparing an individual for
      transsexual surgery, such as hormone therapy and electrolysis.

8.    Services for a condition that is not medical in nature.

9.    Routine physical examinations requested by third parties, such as
      employers or insurance companies.

10.   Drugs that the Food and Drug Administration (FDA) has proposed to withdraw
      from the market in a notice of opportunity for hearing.

11.   Tattooing or tattoo removal.

12.   Punch graft hair transplants.

13.   Tuboplasty and sterilization reversal.

14.   Implantation of nuclear-powered pacemaker.

15.   Nuclear powered pacemakers.

16.   Inpatient charges related to autopsy.

17.   All services or procedures of a plastic or cosmetic nature performed for
      reconstructive purposes, including but not limited to lipectomy, hair
      transplant, rhinoplasty, dermabrasion, and chernabrasion.

18.   Drugs solely used to promote fertility.

19.   Drugs used to promote smoking cessation.

20.   Services which are not within the scope of a practitioner's practice under
      state law.

                                       18

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                                   APPENDIX J
                          PHYSICIAN INCENTIVE PAYMENTS

<PAGE>

                                                                     Page 1 of 1

Physician Incentive Plan Disclosure Guidance

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                         PHYSICIAN INCENTIVE PLAN (PIP)
                               REGULATION GUIDANCE

OVERVIEW AND GENERAL INFORMATION

      -     Overview of Physician Incentive Regulation, revised 10/2000

      -     August 5, 1999 Memo: Survey Update

      -     Guidance on Disclosure of Physician Incentive Plan Information to
            Beneficiaries revised 10/2000

      -     Compilation of PIP Questions and Answers revised 10/2000

      -     Glossary of Terms revised 10/2000

COMPLIANCE FORMS AND INSTRUCTIONS

      -     December 22, 2000 memo: Physician Incentive Plan Regulation
            Requirements for 2001

      -     Managed Care Organization (MCO) Disclosure Compliance Package (1)
            for Medicare+Choice Applicants, revised 10/2000; and (2) Data
            Summary Form, Worksheet and Instructions for providers who contract
            with Managed Care Organizations, revised 10/2000

[LOGO] Return to Medicare Managed Care Homepage

Last Updated January 30, 2001

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            [HCFA LOGO] [DEPARTMENT OF HEALTH & HUMAN SERVICES LOGO]

http:/www.hcfa.gov/medicare/physincp/pip-info.htm

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Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 5

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               OVERVIEW OF THE PHYSICIAN INCENTIVE PLAN REGULATION

                     FOR MEDICARE MANAGED CARE ORGANIZATIONS

LEGAL BACKGROUND

Legislative action to regulate physician incentive plans (PIP) was first enacted
in the Omnibus Budget Reconciliation Acts (OBRA) of 1986 and 1987. In 1990,
these laws were superseded by a new OBRA. Statutory authority for this
regulation can be found in sections 1876(I)(8) of the Social Security Act (the
Act). These portions of the statute are elaborated by regulation in 42 CFR Parts
417.

Legislation at Section 1852 of the Act created a new Medicare + Choice Program.
Medicare regulations, Part 422, of June 26, 1998, with the final rule in July
2000, include requirements for PIP disclosure at sections 42 CFR 422.208/210.

1.    DISCLOSURE REQUIREMENTS

      Disclosure to the Health Care Financing Administration

      A PIP is defined as "any compensation to pay a physician or physician
      group that may directly or indirectly have the effect of reducing or
      limiting services furnished to any plan enrollee.@ The compensation
      arrangements negotiated between subcontractors of an MCO (e.g.,
      physician-hospital organizations, IPAs) and a physician or group are of
      particular importance, given that the compensation arrangements with which
      a physician is most familiar will have the greatest potential to affect
      the physician=s referral behavior. For this reason, all subcontracting
      tiers of the MCO=s arrangements are subject to the regulation and must be
      disclosed to HCFA. Documents are available on HCFA's web site for an MCO's
      use in obtaining data from subcontracting providers.

      Note that PIP rules differentiate between physician groups and
      intermediate entities.@ Examples of intermediate entities include
      individual practice associations (IPAs) that contract with one or more
      physician groups, as well as physician-hospital organizations. IPAs that
      contract only with individual physicians and not with physician groups are
      considered physician groups under this rule.

      In order to determine compliance with the law, the information requested
      includes the following for each medical group and physician providing
      health services to the MCO=s Medicare enrollees:

      whether any risk is transferred to the provider

      whether risk is transferred to the provide for referral services

      what method is used to transfer risk

      what percent of the total potential payment to the provider is at risk for
      referrals

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Physician Incentive Plan Regulation Disclosure Requirements          Page 2 of 5

      what is the number of patients included in the same risk arrangement

      if the number of patients is 25,000 or fewer, what is the type and amount
      of stop-loss insurance

      At the time of application, each organization must report physician
      incentive arrangements using the HCFA PIP Disclosure Form (OMB No.
      0938-0700). The disclosure form and instructions are available at HCFA=s
      web site. The hard copy disclosure form is required to be in the
      application.

      After approval of a Medicare contract, electronic disclosure is required
      for organizations with a Medicare managed care contract as of January 1 of
      any year. Organizations should refer to HCFA=s web site for the most
      recent information on disclosure requirements, including annual disclosure
      dates, method of electronic disclosure, instructions for aggregating and
      entering disclosure data and a PIP Questions & Answers document. The
      Questions and Answers is an extensive document that provides operational
      guidance on preparing PIP disclosures. There are also forms that the MCO
      may use to obtain information about incentive arrangements from their
      medical contractors.

      HCFA's web site is: WWW.hcfa.gov/medicare/physincp/pip-info.html

      Disclosure to Beneficiaries

      At Medicare beneficiaries= request, MCOs must provide information
      indicating whether the MCO or any of its contractors or subcontractors use
      a PIP that may affect the use of referral services, the type of incentive
      arrangement(s) used, and whether stop-loss protection is provided. If the
      MCO is required to conduct a survey, it must also provide beneficiary
      requestors with a summary of survey results. (See Guidance on Disclosure
      of Physician Incentive Regulation Information to Beneficiaries on HCFA's
      web site.)

2.    SUBSTANTIAL FINANCIAL RISK (SFR):

Determination of SFR:

The amount of referral risk can be determined by using the following formula:

Amount at risk for referral services

I Referral Risk = Maximum potential payments

The amount at risk for referral services is the difference between the maximum
potential referral payments and the minimum potential referral payments. Bonuses
unrelated to utilization (e.g., quality bonuses such as those related to member
satisfaction or open physician panels) should not be counted towards referral
payments. Maximum potential payments is defined as the maximum anticipated total
payments that the physician/group could receive. If there is no specific dollar
or percentage amount noted in the incentive arrangement, then the PIP should be
considered as potentially putting 100% of the potential payments at risk for
referral services.

The SFR threshold is set at 25% of "potential payments" for covered services,
regardless of the frequency of assessment (i.e. collection) or distribution of
payments. SFR is present when the 25% threshold is exceeded. However, if the
pool of patients that are included in the risk arrangement exceeds 25,000, the
arrangement is not considered to be at SFR because the risk is spread over so
many lives. See pooling rules below.

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Physician Incentive Plan Regulation Disclosure Requirements          Page 3 of 5

The following incentive arrangements should be considered as SFR:

            (a) Withholds greater than 25 percent of potential payments.

            (b) Withholds less than 25 percent of potential payments if the
            physician or physician group is potentially liable for amounts
            exceeding 25 percent of potential payments.

            (c) Bonuses that are greater than 33 percent of potential payments
            minus the bonus.

            (d) Withholds plus bonuses if the withholds plus bonuses equal more
            than 25 percent of potential payments. The threshold bonus
            percentage for a particular withhold percentage may be calculated
            using the formula -- Withhold %=0.75 (Bonus %)+25%.

            (e) Capitation, arrangements, if the difference between the maximum
            potential payments and the minimum potential payments is more than
            25 percent of the maximum potential payments; or the maximum and
            minimum potential payments are not clearly explained in the
            physician's or physician group's contract.

            (f) Any other incentive arrangements that have the potential to hold
            a physician or physician group liable for more than 25 percent of
            potential payments.

Requirements if SFR is determined:

            A. Stop Loss Protection

Stop-loss protection must be in place to protect physicians and/or physician
groups to whom substantial financial risk has been transferred. Either aggregate
or per patient stop-loss may be acquired. Aggregate insurance is excess loss
coverage that accumulates based on total costs of the entire population for
which they are at risk and which provides reimbursement after the expected total
cost exceeds a pre-determined level. Individual insurance is where a specific
provider excess loss accumulates based on per member per year claims.

The rule specifies that if aggregate stop loss is provided, it must cover 90% of
the cost of referral services that exceed 25% of potential payments. Physicians
and groups can be liable for only 10%. If per patient stop-loss is acquired, it
must be determined based on the physician or physician group=s patient panel
size and cover 90% of the referral costs which exceed the following per patient
limits:

<TABLE>
<CAPTION>
                     Combined
                  Institutional &
                   Professional      Institutional     Professional
   Panel Size       Deductible        Deductible        Deductible
   ----------       ----------        ----------        ----------
<S>               <C>                <C>               <C>
1-1000                $  6,000*        $ 10,000*          $ 3,000*
1,001 - 5000          $ 30,000         $ 40,000           $10,000
5,001 - 8,000         $ 40,000         $ 60,000           $15,000
8,001 - 10,000        $ 75,000         $100,000           $20,000
10,001 - 25,000       $150,000         $200,000           $25,000
> 25,000                 none              none              none
</TABLE>

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Physician Incentive Plan Regulation Disclosure Requirements          Page 4 of 5

* The asterisks in this table indicate that, in these situations, stop-loss
insurance would be impractical. Not only would the premiums be Prohibitively
expensive, but the protections for patients would likely not be adequate for
panels of fewer than 500 patients. MCOs and physician groups clearly should not
be putting physicians at financial risk for panel sizes this small. It is our
understanding that doing so is not common. For completeness, however, we do show
what the limits would be in these circumstances.

The institutional and professional stop loss limits above represent the
actuarial equivalents of the combined institutional and professional deductible.
The physician group or MCO may choose to purchase whatever type is best suited
to cover the referral risk in the incentive arrangement.

B. Pooling Criteria

To determine the Patient Panel Size in the above chart, you may pool according
to the specific criteria below. Any entity that meets all five criteria required
for the pooling of risk is allowed to pool that risk in order to determine the
amount of stop loss required by the regulation:

            (i) Pooling of patients is otherwise consistent with the relevant
            contracts governing the compensation arrangements for the physician
            or group;

            (ii) The physician or group is at risk or referral services with
            respect to each of the categories of patients being pooled;

            (iii) The terms of the compensation arrangements permit the
            physician or group to spread the risk across the categories of
            patients being pooled (i.e., payments must be held in a common risk
            pool);

            (iv) The distribution of payments to physicians from the risk pool
            is not calculated separately by patient category (either by MCO or
            by Medicaid, Medicare, or commercial); and

            (v) The terms of the risk borne by the physician or group are
            comparable for all categories of patients being pooled.

            C. Surveys

When substantial financial risk exists for providers or provider groups under
contract with an M+C organization, the organization must conduct periodic
surveys of current and former enrollees.

HCFA=s national administration of the Consumer Assessments of Health Plans Study
(CAHPS) is well established for enrollees and disenrollees. Therefore, HCFA has
determined that Medicare MCOs who are or will be included in CAHPS no longer
need to conduct independent surveys for meeting PIP requirements. HCFA will
consider such MCOs with medical groups or physicians at substantial financial
risk to be in compliance with the survey mandate. Organizations now meet the
survey disclosure requirement of the regulations by giving Medicare enrollees a
copy of the CAHPS enrollment survey results available on the Internet. Further,
these MCOs no longer need to submit survey summaries to HCFA.

      3. ENFORCEMENT

As described in 42 CFR section 417.500 and 422.208(i), HCFA may apply
intermediate sanctions or the Office of Inspector General may apply civil money
penalties if HCFA determines that a Medicare plan fails to comply with the
requirements of this rule.

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

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       GUIDANCE ON SURVEYS REQUIRED BY THE PHYSICIAN INCENTIVE REGULATION

The Physician Incentive Regulation requires that MCOs conduct a customer
satisfaction survey of both enrollees and disenrollees (1) if any physicians or
physician groups in the MCO's network are placed at substantial financial risk
for referral services, as defined by the regulation. If a survey is required, it
must be conducted within one year of the MCO's compliance date for disclosure.
That date is the date on or after 1/1/97 on which the MCO contract either renews
or is made effective as a new contract. As long as physicians or physician
groups are placed at substantial financial risk for referral services, surveys
must be conducted annually thereafter.

      (1) - There are two separate populations which will require both different
      survey instruments and separate sampling strategies.

The survey must include either all current Medicare/Medicaid enrollees in the
MCO and those who have disenrolled in the past twelve months, or a sample of
these same enrollees/disenrollees. It must be designed in accordance with
commonly accepted principles of survey design, implementation, and analysis. The
survey must address enrollees/disenrollees satisfaction with the quality of
services provided and their degree of access to the services. This document is
intended to provide you with some guidance regarding the selection and
administration of surveys that will satisfy the requirement.

BACKGROUND -- CUSTOMER SATISFACTION SURVEYS -- THEIR CURRENT STATE

There are numerous consumer satisfaction instruments currently in use by MCOs,
states, business coalitions, and other organizations. Industry, the government,
and consumer groups are in agreement that it would be highly desirable to
consolidate support behind one instrument that everyone could use to survey
their customers, so that the results obtained could be compared and the need for
MCOs and other entities to field separate surveys in response to different
demands could be eliminated. However, while much progress has been made towards
the achievement of that goal, it will probably not be realized for at least
another year or two Therefore, until such agreement is reached, it will be
necessary for you to choose your own survey(s). This letter is intended to
assist you in the selection process.

SELECTING A SURVEY - GETTING STARTED

When considering the selection of an instrument, it is also important to
evaluate the resources you have to actually conduct a survey. If you do not have
sufficient skilled personnel, computer capacity, and other resources needed to
conduct a mail, telephone, or in person survey and analyze and report the
results, you will have to hire an outside contractor to perform these tasks.
Consultation with some of the contact persons listed on the attached reference
guide and learning about their experiences may assist you in making a decision
about the most appropriate method of implementation.

THE "CAHPS" SURVEYS. In addition to perusing the reference guide, it is
important for you to be aware of a major national initiative already well
underway to develop a set of standardized consumer satisfaction instruments,
user manuals, and recommended report formats. This effort is sponsored by the
Agency for Health Care Policy and Research (AHCPR) through their Consumer
Assessments of Health Plans Study (CAHPS) process. CAHPS is a five year project,
funding three grantees, RAND, Research Triangle Institute and Harvard, in a
cooperative arrangement designed to produce a set of

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

      consumer satisfaction instruments that will be capable of yielding
      comparable data for the commercial, Medicare, Medicaid, chronically
      ill/disabled, and child populations. The surveys, accompanying manuals,
      and report formats will be available to the public in early spring of
      1997.

      The CAHPS instrument will satisfy the requirement for a customer
      satisfaction survey of enrollees. Unfortunately, a planned CAHPS
      disenrollment module will not be available until 1999. Until then, each
      MCO is responsible for developing its own disenrollee survey. While this
      survey does not require HCFA approval, routine HCFA monitoring will
      include validating the questions and sampling methodology before the
      findings can be marketed to enrollees.

      As of the 1997 contract year, all MEDICARE contracting MCOs whose
      contracts were in effect on or before 1/1/96 will be required to
      participate in an independent administration of the Medicare version of
      the CAHPS survey sponsored by HCFA. HCFA will not make the same
      requirement of Medicaid MCOs with respect to the use of the Medicaid
      version of CAHPS, but individual States have the authority to do so. You
      may obtain a set of the draft instruments (which are currently being field
      tested) from AHCPR by calling 1-800-358-9295. Request document number
      96R114.

      SURVEYING ENROLLEES AND DISENROLLEES

      As mentioned earlier, the regulation requires that both enrollees and
      disenrollees be surveyed. Because they are two separate populations,
      different instruments and sampling strategies must be employed. Just as
      there is no current national standard for enrollee satisfaction surveys,
      neither is there one for disenrollees, although individual MCOs have
      frequently surveyed their disenrollees. It is important to recognize that
      different questions are asked of the two groups, and that therefore, the
      same survey cannot be used for both populations. Most surveys of enrollees
      ask for ratings or reports of their recent experiences in the MCO, while
      surveys of disenrollees focus on what circumstances contributed to their
      decision to leave the MCO.

      In addition, the sampling strategies for the two populations differ.
      Enrollees are those who are still getting their care from the MCO and are
      often defined as those who have been continuously enrolled in a MCO for
      six months or longer. By contrast, disenrollees are those who have left
      the MCO and are defined by both the length of time that has elapsed since
      they left and the length of time they were enrolled in the MCO. Different
      reasons for disenrollment are associated with these factors: how soon
      disenrollees are surveyed after they have left a MCO (e.g., several weeks,
      several months, or a year or more) will affect the quality of their recall
      and influence their answers; those who spent only a brief period of time
      in the MCO before leaving ("rapid" disenrollers) often have different
      reasons for leaving than do those who were enrolled for a year or more
      before leaving. The Physician Incentive Regulation specifies that
      disenrollees must be surveyed within one year of leaving the MCO.
      Beneficiaries who were disenrolled due to loss of Medicaid eligibility or
      relocation out of the MCO's service area do not need to be surveyed.

      DISSEMINATION OF SATISFACTION RESULTS TO CONSUMERS

      The regulation says that MCOs that are required to conduct a survey must
      provide a summary of the survey results to any beneficiary who requests
      the information. Distribution of satisfaction information to consumers is
      a relatively recent development, and both experience and research on how
      best to present such information is limited. Employers and other
      purchasers, who have been in the forefront of such information efforts and
      have the most experience, only began in the last three to five years.
      Frequently, satisfaction information has been presented in a "report card"
      format and disseminated through the workplace, sent by direct mail to the
      consumer, or displayed in newspapers (Minnesota presented their results in
      the Minneapolis-Star Tribune) or magazines (Health Pages). The state of
      Massachusetts has conducted cutting-edge research to determine how best to
      present the results of comparative performance measures, including
      satisfaction surveys, to their Medicaid population, and is in the midst of
      an initiative to provide that information in a consumer friendly format.
      Again, one of the best ways to determine how to successfully present the
      results of these

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Guidance on Surveys Required by the Physician Incentive Plan Regulation

      surveys is to consult with state, private employer, or MCO counterparts
      who have already attempted to distribute the results of satisfaction
      surveys to their customers.

      MCOs will be expected to compile, analyze and summarize survey data within
      a reasonable period of time after conducting the survey. Generally, this
      would mean summary survey results should be available to beneficiaries and
      provided to regulators within four months of conducting the survey.

      FUTURE STRATEGIES -- A FINAL NOTE

      At present, most consumer satisfaction surveys require a random sample of
      enrollees within a MCO, so that at best, MCO to MCO comparisons can be
      made. MCO participation in the administration of customer satisfaction
      surveys at the MCO level appears to meet the letter of the regulation's
      requirement for MCOs to perform satisfaction surveys when physicians or
      physician groups are placed at substantial financial risk for referrals.
      However, in order to determine whether access and quality of care are
      truly affected by differing risk arrangements, it is necessary to obtain a
      statistically valid sample of beneficiaries in those physician groups
      whose incentive arrangements put them at substantial financial risk and
      compare them to beneficiaries served by groups that are not at substantial
      financial risk. Because the current sampling strategy for most consumer
      satisfaction surveys is at the MCO level, they cannot provide this needed
      level of specificity. Thus, HCFA is considering both methods to accurately
      identify those physician groups at substantial financial risk and the
      development of sampling strategies that will permit the needed data to be
      collected so that the relevant comparisons can be made. HCFA is
      considering whether MCOs should be required, in future years, to sample at
      the physician group level in order to properly deal with the concerns this
      regulation addresses. For now, MCOs are required to sample at the market
      level, rather than sample from a nationwide or regional base of
      enrollees/disenrollees.

      In conjunction with the CAHPS survey effort, HCFA will assess each
      Medicare MCO's contract service area to determine whether sampling,
      collecting, and reporting of data should be conducted on the basis of the
      MCO's contract service area, or by Metropolitan Statistical Area (MSA).
      The MSA approach will apply in cases where an MCO's service area includes
      more than one "market area" (i.e., covers more than one major community or
      city) or covers multiple states. HCFA expects to notify Medicare MCOs as
      to whether the MSA approach is warranted by the end of 1997. Medicare MCOs
      should conduct the disenrollee survey needed for the physician incentive
      regulation according to the same method (contract service area or MSA)
      determined necessary for the purposes of the CAHPS survey. Medicaid MCOs
      are encouraged to contact their State Medicaid Agency contacts if they are
      unsure as to whether the MSA approach is needed for their conduct of the
      physician incentive enrollee and disenrollee surveys.

      [LOGO] Return to Physician Incentive Plan Information Page

      [LOGO] Return to Medicare Managed Care Homepage

Last Updated December 14, 1998
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GUIDANCE ON DISCLOSURE OF PHYSICIAN INCENTIVE PLAN INFORMATION TO MEDICARE
BENEFICIARIES

Managed Care Organizations (MCOs) are required to provide information on the
incentive arrangements affecting the MCO's physicians to any person receiving
Medicare (i.e., a "beneficiary") who requests the information. Therefore, MCOs
must make the following pieces of information available, upon request, to
current, previous, and prospective enrollees:

      1.    Whether the MCO's contracts or subcontracts include physician
            incentive plans that affect the use of referral services.

      2.    Information on the type of incentive arrangements used.

      3.    Whether stop-loss protection is provide for physicians or physician
            groups.

      4.    If the MCO is required by the regulation to conduct a customer
            satisfaction survey, a summary of the survey results.

HCFA's Regional Offices (ROs) will review Medicare MCO materials related to this
regulation as part of their usual responsibilities for pre-approving beneficiary
materials. The ROs have received initial guidance regarding the review of
materials related to this regulation and will continue to receive technical
assistance in this area from core Central Office staff assigned to the
implementation of this regulation. These efforts are being undertaken so as to
balance MCOs' desire for flexibility in the crafting of beneficiary information,
while still assuring that materials are compliant with the regulation and
consistent nationwide.

HCFA's national administration of the Consumer Assessments of Health Plans Study
(CAHPS) is well established and includes both enrollees and disenrollees.
Therefore, HCFA has determined that the Medicare MCOs who will be included in
CAHPS no longer need to conduct independent surveys for meeting PIP
requirements. HCFA will consider all such Medicare MCOs with medical groups or
physicians at substantial financial risk to be in compliance with the survey
mandate in 42 CFR 422.208/210.

Medicare MCOs can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results
available on the Internet.

The remainder of this document offers guidance on how your MCO may best provide
information required by this regulation to beneficiaries who request it.

                    ***************************************

SUGGESTED LANGUAGE FOR THE ANNUAL NOTICE AND FOR PRE-ENROLLMENT MATERIALS SUCH
AS THE MEMBER HANDBOOK: If you are considering enrolling in our plan, you are
entitled to ask if the plan has special financial arrangements with our
physicians that can affect the use of referrals and other services that you
might need. To get this information, call our Member Services Department at
(telephone number) and request information about our physician payment
arrangements. [Note to MCOs: MCOs may note in any materials that the information
required to be available for beneficiaries and provided to regulators may not
yet be collected by the MCO due to the fact that Federal guidance as to how
MCOs' should comply with the regulation was only recently received.]

SUGGESTED LANGUAGE FOR THE EVIDENCE OF COVERAGE: You are entitled to ask if we
have special financial arrangements with our physicians that can affect the use
of referrals and other services that

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                                                                     Page 2 of 3

Physician Incentive Plan Regulation Disclosure Requirements

 you might need. To get this information, call our Member Services Department at
 (telephone number) and request information about our physician payment
 arrangements.

 SUGGESTED RESPONSE TO REQUEST FROM BENEFICIARY: HCFA requires us to give our
 members important information about the contractual relationships we have with
 our physicians. These contractual relationships include the way we pay
 physicians and could affect your use of referrals and other services that you
 might need. To understand these arrangements, we need to define several words.
 [Note to MCOs: You do not need to include any terms that are not used in the
 incentive plans of your physicians.]

      1.    DISCOUNTED FEE FOR SERVICE Physicians are paid a pre-determined
            amount for each service they provide. Both the physicians and the
            HMO agree on this amount each year. This amount may be different
            than the amount the physician usually receives from other payers.

      2.    CAPITATION. Physicians are paid a fixed amount of money each
            month to provide specific services to the members they see. This
            capitation payment may be divided into separate amounts for the
            services they provide directly to their patients, services provided
            by referral physicians, and for hospital and other types of
            services.

      3.    BONUS. At the beginning of each year, both physicians and the HMO
            agree on a goal for the amount of services or cost of services
            patients will use. At the end of the year, the HMO pays physicians
            an extra amount of money if patient care cost less money or patients
            used fewer services than the budgeted goal agreed to at the
            beginning of the year.

      4.    WITHHOLD. At the beginning of each year, both physicians and the HMO
            agree on a goal for the amount of services or the cost of services
            their patients will use. However, the HMO keeps a portion of this
            payment. At the end of the year, if physicians overspend or exceed
            this budgeted goal, the HMO keeps the amount of money it withheld.
            If physicians underspend or use fewer services than budgeted, the
            HMO gives the withheld amount of money back to the physicians.

      5.    STOP-LOSS INSURANCE. Special insurance for physicians that protects
            them from very large financial losses. HCFA requires physicians to
            have this insurance if more than 25 percent of their pay could be
            lost if they refer patients for more than the HMO budgeted goal.
            [Note to MCOs: MCO should note here or elsewhere in the notice
            whether or not stop-loss protection is provided to your physicians
            and physician groups if required by the regulation.]

 We have several different types of contractual an arrangements with our
 physicians. Your physician is paid according to one or more of the following
 types of arrangements. [Note to MCOs: The following are some examples of
 arrangements frequently used in the contracts or subcontracts of MCOs. You
 should provide general descriptions on a representative sample of arrangements
 used in your contracts and subcontracts. This set of descriptions can then be
 used for all beneficiaries requesting physician incentive plan information. You
 are not expected to provide specific information on the incentives faced by a
 given beneficiary's physician.]

      -     ARRANGEMENT A. We pay our physicians a salary. At the end of the
            year, physicians can get a bonus if their patients used fewer
            referral services than the budgeted goal.

      -     ARRANGEMENT B. We pay our physicians a capitation for primary care.
            We withhold separate amounts for referral and for hospital services.
            At the end of the year, physicians can get these amounts paid to
            them if their patients used fewer referral services and spent fewer
            days in the hospital than the budgeted goals.

      -     ARRANGEMENT C. We pay our physicians discounted fee-for service. We
            withhold a separate amount for referral services. At the end of the
            year, physicians can get this amount paid to them if their patients
            used fewer referral services than the budgeted goal. We also pay
            physicians a bonus if their patients spent fewer days in the
            hospital than the budgeted goal.

 [IF AN ARRANGEMENT WITH A PHYSICIAN GROUP OR PHYSICIAN IS AT SUBSTANTIAL RISK,
 INCLUDE A STATEMENT ABOUT SURVEYS]

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                                                                     Page 3 of 3

Physician Incentive Plan Regulation Disclosure Requirements

 The Health Care Financing Administration conducts an annual study of Medicare
 members called the Consumer Assessments of Health Plans Study (CAHPS) of both
 enrollees and disenrollees of (Your MCO's name). You can request information
 about the results of this survey by contacting our Member Services Department
 at (telephone number). We will send you the results of the survey as soon as we
 receive it from HCFA.

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 15, 2000

<TABLE>
<S>        <C>             <C>                 <C>                <C>           <C>
HCFA       BENEFICIARIES   PLANS & PROVIDERS       STATES         RESEARCHERS   STUDENTS
----------------------------------------------------------------------------------------
MEDICARE      MEDICAID          CHIP           CUSTOMER SERVICE      FAQs        SEARCH
</TABLE>

                 [HCFA LOGO]                            [DEPARTMENT OF
                                                         HEALTH & HUMAN
                                                         SERVICES LOGO]

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Health Care Financing Administration                                Page 1 of 12

<TABLE>
<S>        <C>             <C>                 <C>                <C>           <C>
HCFA       BENEFICIARIES   PLANS & PROVIDERS       STATES         RESEARCHERS   STUDENTS
----------------------------------------------------------------------------------------
MEDICARE      MEDICAID          CHIP           CUSTOMER SERVICE      FAQs        SEARCH
</TABLE>

                      HEALTH CARE FINANCING ADMINISTRATION

                       PHYSICIAN INCENTIVE PLAN REGULATION

                     FOR MEDICARE MANAGED CARE ORGANIZATIONS

                              QUESTIONS AND ANSWERS

                       COMPILATION OF 1996, 1997 AND 1998

                              UPDATED OCTOBER 2000

                                Table of Contents

      You may link directly to any of the following question topics or scroll
      down through the complete listing.

            -     Substantial Financial Risk

            -     Stop Loss Protection

            -     Disclosure

            -     Survey

            -     Miscellaneous

                    ****************************************

               PHYSICIAN INCENTIVE PLAN REQUIREMENTS FOR MEDICARE

     COMPILATION OF 1996 AND 1997 QUESTIONS AND ANSWERS, UPDATED AUGUST 2000

The PIP requirements apply to the M+C Organizations, Section 1876 Cost and
Closed Cost Healthplans, Social HMOs, Medicare Choices, Evercare and other
demonstrations where the PIP requirement is not waived.

SUBSTANTIAL FINANCIAL RISK

DEFINITION:

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Health Care Financing Administration                                Page 2 of 12

Substantial financial risk is set at greater than 25% of potential payments for
covered services. The term "potential payments" means the maximum anticipated
total payments that the physician or physician group could receive if the use or
cost of referral services were low enough. If the cost of referrals exceeds the
25% level, the financial arrangement is considered to put the physician or group
at substantial financial risk.

For example, a doctor contracts with an MCO and that MCO holds back a certain
amount of the doctor's pay (e.g., $6 per member per month). The MCO will give
the doctor the $6 per member per month only if the cost of referral services
falls below a targeted level. Those six dollars are considered to be "at risk"
for referral services. The amount is equal to the difference between the maximum
potential referral payment and the minimum potential referral payment (but does
not include any bonus payment unrelated to referral services). The six dollars
is put into the numerator of the risk equation.

The denominator of the risk equation is equal to the maximum potential payment
that the doctor could receive which is the sum of the MCO payment for directly
provided services, referral services and administration. Therefore, if the same
doctor receives $24 per member per month for the primary care services he
provides, and is subject to the $6 withhold, the risk equation is as follows:

Risk level: 6/24 = 25% Not at substantial financial risk.

If risk is substantial (>25%), in addition to stop-loss insurance the MCO must
conduct a survey of patient satisfaction that includes information from current
enrollees and recent disenrollees.

Note: If a physician group's patient panel is more than 25,000 patients, then
that physician group and the group's physicians are not considered to be at
substantial financial risk. The group's arrangements do not trigger the need for
a beneficiary survey, and the group and the group's physicians are not required
by the regulation to have stop-loss protection. For the purpose of making this
determination, the patients of the group can be pooled across MCOs and across
Medicare, Medicaid, and commercial enrollees if specific criteria are met. See
Stop-loss Protection (SLP) Questions 6-17 below for additional clarification on
pooling issues.

QUESTIONS AND ANSWERS:

SFR QUESTION 1: For purposes of calculating substantial financial risk, are
ancillary services considered referral services?

            ANSWER: If the physician group performs the ancillary services, then
            the services are not referral services. If the physician group
            refers patients to other providers (including independent
            contractors to the group) to perform the ancillary services, then
            the services are referral services.

SFR QUESTION 2: How does the regulation affect provider groups that are licensed
in a state and are allowed to accept full risk?

            ANSWER. The regulation does not prohibit groups from accepting full
            risk for all health services. It requires appropriate parties to
            ensure that adequate stop-loss is in place and that beneficiary
            surveys be conducted when the 25 percent threshold is exceeded.

SFR QUESTION 3: If a physician is paid straight capitation (i.e., the
compensation arrangement calls for no withholds or bonuses), and that capitation
covers services that the physician does not provide, would the physician be at
substantial financial risk?

            ANSWER: Yes, this compensation arrangement would require a finding
            of substantial financial risk, because the risk is not limited. If a
            capitation arrangement places no limit on the referral risk, it
            essentially requires a finding of 100% risk (with potentially
            greater risk).

SFR QUESTION 4: Does the determination of risk apply only to Medicare covered
benefits, or if the MCO provides additional benefits at its own expense, should
these be included in the determination?

            ANSWER. All payments related to referral services furnished to
            enrolled Medicare beneficiaries are to be included in the risk
            determination, even if those services are not Medicare covered
            services.

SFR QUESTION 5: Will HCFA include quality bonuses in the denominator of the
equation for substantial financial risk?

            ANSWER. No. The regulation does not include quality bonuses as a
            factor in the substantial financial risk

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Health Care Financing Administration                                Page 3 of 12

            calculation. A bonus based upon quality and/or access should not be
            counted in either the numerator (amount at risk) or the denominator
            (maximum potential payments).

SFR QUESTION 6: Would a physician be at substantial financial risk if his/her
MCO's annual payment to him/her for services and administration total $100,000
and the organization withholds 25 percent (or $25,000) to cover deficits in the
referral or inpatient hospital pool? Assume the MCO does not hold the physician
liable for referral costs that exceed the withhold.

            ANSWER: No. The physician is not at substantial financial risk
            because s/he is not at risk for more than 25 percent of payments.

SFR QUESTION 7: Please clarify how substantial financial risk is determined when
various risk arrangements are used. a. Say an MCO pays its doctors $100 per
member per month and puts $24 at risk through a withhold, then the same doctors
are part of a physician-hospital risk pool where they can get $50 if utilization
goals are met. Is the risk seen as 24/100, 50/50, 74/150, or something else?

b. Assume that an MCO pays its physicians based on a fee schedule with
risk-sharing arrangements that do not trigger SFR. Also assume that the MCO
subcontracts with a disease management company to manage cases of patients with
a certain disease. The disease management company pays the physicians in a
variety of different ways, some of which put the physicians at risk for referral
services. For purposes of SFR analysis, should each source of payment (MCO and
disease management company) be analyzed separately?

            ANSWERS:

            a. The risk is 74/150 and therefore the doctors are at substantial
            financial risk. The ratio is arrived at by adding the amount at risk
            for referral services (the sum of the withhold and hospital pool
            bonuses [24 + 50]) then dividing by the sum of the maximum potential
            payment [100 + 50].

            b. No. The payments from both the MCO and the disease management
            company must be analyzed together to arrive at a single analysis of
            SFR for these patients of the MCO.

SFR QUESTION 8: If a contractor capitates a physician group comprised of
physicians (e.g., psychiatrists) and non-physicians (e.g., other mental health
providers), would the calculation to determine substantial financial risk
assumed by the group change if the group is comprised exclusively of physicians?

            ANSWER: No. As long as physicians are part of the group and the
            contracted services include physician services, the calculation of
            the amount of risk transferred to the physicians remains the same.
            However, non-physician services can be calculated as part of the
            costs analyzed in the substantial financial risk equation.

SFR QUESTION 9: Would a physician be at substantial financial risk in the
following example? An MCO's annual payments to this physician total $100,000 and
the MCO imposes a 20 percent withhold ($20,000) for referrals. In addition, the
MCO holds the physician liable for up to $5,000 of any referral costs not
covered by the withhold. The physician's referrals total $35,000, exceeding the
withhold by $15,000; however, the MCO does not hold its physicians liable for
amounts over 25 percent of payments (or $25,000).

            ANSWER: No, the physician is not at substantial financial risk
            because the risk is limited to $25,000, which is the maximum
            liability imposed by the MCO based on written contractual
            provisions.

SFR QUESTION 10: Is a physician at substantial financial risk if his/her
payments from the MCO total $75,000, s/he does not exceed utilization targets
for referral and inpatient hospital services, but s/he is eligible for a $25,000
bonus (33 percent of $75,000).

            ANSWER: No, because this physician's bonus did not exceed the limit
            of 33 percent of potential payments, not counting the bonus itself
            (in other words, 25 percent of the potential payments if you
            included the bonus as part of the potential payments).

SFR QUESTION 11: What if an MCO has the following arrangement: A physician is
not permitted to keep any savings from the referral account. Then if referrals
cost less than $100,000, the physician must return the remainder of the referral
account to the MCO. If referral costs are more than $100,000, s/he may be liable
for up to 25 percent of the capitation for his/her own services. The contract
clearly states the following:

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Health Care Financing Administration                                Page 4 of 12

            If referrals exceed $125,000, the physician will receive no less
            than $75,000. If referrals are less than $100,000, the physician
            will receive no more than $100,000.

Question: Is this physician at substantial financial risk?

            ANSWER: No. The difference between the maximum potential payments
            ($100,000) and the minimum potential payments ($75,000) is no more
            than 25 percent of the maximum potential payments (the difference is
            $25,000). Therefore the physician is not at substantial financial
            risk.

SFR QUESTION 12: Must a plan that places its physicians at SFR disclose to HCFA
the exact percentage for which the physicians are at risk? Is it sufficient for
the MCO to simply check the box that acknowledges that SFR has been triggered,
but not specify the exact percentage over the threshold?

            ANSWER: MCOs and their subcontracting providers are expected to
            disclose a reasonable estimate of the percentage for which the
            physician, physician group, or intermediate entity in question is at
            risk for referrals. If a reasonable percentage estimate cannot be
            determined, the disclosure should specify "100%."

SFR QUESTION 13: What if the MCO has a performance history of three or five
years and can show that its physicians have not lost more than 25% of the
capitated amount?

            ANSWER: Regarding the use of past history as a means of predicting
            future behavior, such experience is no guarantee of future referral
            behavior or the future health care needs and costs of the current
            enrollees served. If historical performance shows that physicians
            have never lost more than 25% of the capitated amount, the MCO can
            modify its physician contracts to contractually limit risk to that
            historical amount (25%) and hence avoid a determination of SFR and
            the need for stop-loss insurance and surveys.

SFR QUESTION 14: Consider the following scenario: An MCO enters into a capitated
contract with a physician group for all professional services. Under the
contract the physician group has the option to provide the professional services
or subcontract with qualified specialists for such services. The physician
group's patient panel is less than 25,000. Does the MCO contract place the
physician group at substantial financial risk?

            ANSWER: Yes. The option to subcontract for specialist services means
            that the physician group is potentially at risk for services not
            directly provided by the group.

SFR QUESTION 15: If the physician group in SFR Question 16 decides to
subcontract for certain services, are the physician specialist subcontractors
subject to regulation under the PIP rule?

            ANSWER: Yes.

SFR QUESTION 16: What should be considered a referral service when determining
substantial financial risk for referrals? Should such things as pharmaceuticals
and DME be considered referral services?

            ANSWER: Any service that a physician does not provide him or
            herself, or that is not provided by another member of the
            physician's group, should be considered a referral service. Whether
            or not such referrals contribute to the financial risk borne by the
            physician will depend on whether his or her compensation
            arrangements are such that referrals for those services or supplies
            could impact upon the physician's income.

SFR QUESTION 17: When calculating SFR, should MCOs use the theoretical potential
payment, or the probable potential payment?

            ANSWER: The theoretical payment should be used, based on the terms
            of the physician's contract.

STOP LOSS PROTECTION

DEFINITION:

Organizations whose contracts or subcontracts place physicians or physician
groups at substantial financial risk must ensure that those providers have
either aggregate or per-patient stop-loss protection as appropriate for their
patient panel

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Health Care Financing Administration                                Page 5 of 12

The aggregate stop-loss protection requires coverage of at least 90% of the
costs of referral services that exceed 25% of potential payments. The
per-patient stop-loss protection requires coverage of 90% of the costs of
referral services that exceed specified per-patient limits.

QUESTIONS AND ANSWERS:

SLP QUESTION 1: What does stop-loss protection mean?

            ANSWER: Stop-loss is a type of insurance coverage designed to limit
            the amount of financial loss experienced by a health care provider.
            An MCO or physician group normally buys this insurance so that, if
            the liabilities of the MCO or group exceed what is expected based on
            prior experience, the insurer will "stop" further losses by paying
            the liabilities which exceed either a total dollar (aggregate)
            amount, or a per patient amount.

SLP QUESTION 2: Is the MCO required to provide stop-loss protection to
physicians or physicians groups at substantial financial risk?

            ANSWER:

            The MCO does not itself need to provide the stop-loss protection.
            However, the MCO must assure that stop-loss is in effect and
            disclose the stop-loss type and amounts for any contractor or
            subcontractor that exceeds the 25% risk threshold and is required to
            have stop-loss protection.

SLP QUESTION 3: Does stop-loss protection apply only to referral services?

            ANSWER: Generally, stop-loss protection applies to the costs of all
            services furnished by a physician or physician group. For the
            purposes of this regulation, however, stop-loss coverage must cover
            at least 90% of the costs of referral services above the substantial
            financial risk threshold. The physician or physician group is liable
            for no more than 10% of the remaining referral costs above the
            threshold.

SLP QUESTION 4: If a MCO or physician group chooses to obtain per-patient
stop-loss protection for the purposes of this regulation, what are the
appropriate per-patient stop-loss deductibles, or attachment points, that are
required?

            ANSWER: HCFA allows the provision of either a combined deductible
            that includes inpatient and professional services or separate limits
            for professional and institutional services. Based on actuarial
            analyses and consultation with experts knowledgeable about t
            stop-loss insurance practices, these limits are indicated in the
            following table:

<TABLE>
<CAPTION>
                   Combined Institutional
                       & Professional        Institutional    Professional
   Panel Size            Deductible            Deductible      Deductible
   ----------            ----------            ----------      ----------
<S>                <C>                       <C>              <C>
1-1000                    $   6,000*            $ 10,000*       $ 3,000*
1,001 - 5000              $  30,000             $ 40,000        $10,000
5,001 - 8,000             $  40,000             $ 60,000        $15,000
8,001 - 10,000            $  75,000             $100,000        $20,000
10,001 - 25,000           $ 150,000             $200,000        $25,000
> 25,000                     none                 none            none
</TABLE>

* NOTE REGARDING SMALL PATIENT PANELS: THE ASTERISKS IN THIS TABLE INDICATE
THAT, IN THESE SITUATIONS, STOP-LOSS INSURANCE WOULD BE IMPRACTICAL. NOT ONLY
WOULD THE PREMIUMS BE PROHIBITIVELY EXPENSIVE, BUT THE PROTECTION FOR PATIENTS
WOULD LIKELY NOT BE ADEQUATE FOR PANELS OF FEWER THAN 500 PATIENTS. MCOS AND
PHYSICIAN GROUPS CLEARLY SHOULD NOT BE PUTTING PHYSICIANS AT FINANCIAL RISK FOR
PANEL SIZES THIS SMALL. IT IS OUR UNDERSTANDING THAT DOING SO IS NOT COMMON. FOR
COMPLETENESS, HOWEVER, WE DO SHOW WHAT THE LIMITS WOULD BE IN THESE
CIRCUMSTANCES.

SLP QUESTION 5: Does aggregate stop loss take panel size into account?

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Health Care Financing Administration                                Page 6 of 12

            ANSWER: Yes. To the extent that aggregate stop-loss limits require
            coverage of 90% of the costs of referral services that exceed 25% of
            potential payments, those limits reflect payments based on panel
            size.

SLP QUESTION 6: Under what circumstances is pooling permissible for purposes of
determining the appropriate stop loss limit?

            ANSWER: The Medicare, Medicaid and commercial enrollees of one or
            more MCOs served by a physician group may be pooled as long as
            certain criteria are met. The pooling of patients calculation may be
            applicable as following examples show. The calculation may show that
            the physician group serves more than 25,000 patients and, therefore,
            stop-loss protection is not needed. Or the calculation may show that
            the physician group serves 25,000 or fewer patients, in which case
            stop-loss is required if the incentive arrangements put the group at
            substantial financial risk. If per patient (as opposed to aggregate)
            protection is obtained, it must be for the single combined or
            separate professional and institutional limits shown above. The
            group's pooled patient panel size would determine the required level
            of stop-loss.

            Pooling of patients is allowed only if all of the following five
            criteria are met:

      -     Pooling is otherwise consistent with the relevant contracts
            governing the compensation arrangements for the physician or
            physician group.

      -     The physician or physician group is at risk for referral services
            with respect to each of the categories of patients being pooled.

      -     The terms of the compensation arrangements permit the physician or
            physician group to spread the risk across the categories of patients
            being pooled.

      -     The distribution of payments to the physicians from the risk pool is
            not calculated separately by patient category.

      -     The terms of the risk borne by the physician or physician group are
            comparable for all categories of patients being pooled.

SLP QUESTION 7: If the capitation rate or fee-for-service schedule is different
among three lines of business due to the expected differences in health care
needs and resultant costs for the Medicare, Medicaid and commercial populations,
does this mean these patients cannot be pooled?

            ANSWER: Specific criteria must be met in order to pool patients
            across product lines and/or across MCOs. See SLP Question 6 above.

SLP QUESTION 8: Stop Loss Requirements By Contracting Level -- HCFA has said
that arrangements between HMOs and PHOs are not subject to the stop-loss
arrangements because the PHO is not a physician group. Is the answer still the
same if we look at a contract between an HMO and an IPA where the IPA is not a
"physician group" because some (but not all) of its contracts are with physician
groups and not individual physicians? Our principle interest is the stop-loss
arrangement requirements.

            ANSWER: In this case, the IPA, like the PHO, is defined as an
            Intermediate Entity. The Intermediate Entity itself is not subject
            to stop-loss, however those physicians who are individually
            contracted with the IPA would need to be protected by stop-loss, if
            they are put at SFR by incentive arrangements. Stop-loss coverage is
            required for physician groups at SFR, physicians at SFR, and for
            physicians in groups that are at SFR.

SLP QUESTION 9: Pooling by Entities Other than Physician Groups -- Can a managed
care organization pool the patient lives served by some or all of its
subcontracted physicians for the purposes of determining the level of stop loss
protection necessary? If so, can an IPA, PHO, or other "intermediate entity"
under the regulation pool the patient lives served by their physicians?

            ANSWER: Any entity that meets all five criteria required for the
            pooling of risk is allowed to pool that risk in order to determine
            the amount of stop-loss required by the regulation. We would point
            out, however, that unrelated entities or physicians being pooled are
            typically covered by the same reinsurance arrangement.

SLP QUESTION 10: Consider the following example: Otherwise unaffiliated primary
care physicians are organized into pools of doctors or "PODs" and risk pool
withholds and bonuses are distributed based on the overall performance of the
POD. PCPs will be paid on a fee-for-service basis with a withhold of 20 percent.
PCPs would have no further downside financial risk beyond the 20 percent
withhold. A budget is established for each POD based on all expected medical

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expenses. If the POD's expenses are less than budgeted expenses, the withholds
are returned and any additional surpluses are distributed to the PCPs in that
POD based on a formula. The formula for distributions of withholds and bonuses
to PCPs in the POD would be based on the same methodology for all PCPs within
their respective PODs. In this example, would HCFA agree that any individual POD
meets the criteria for pooling and, therefore, the level of stop loss protection
that must be provided may be determined based on the size of the POD's patient
panel?

            ANSWER: As long as all five conditions in the regulation related to
            pooling are met (see SLP Question 6 above), then the patients in the
            POD meeting those pooling conditions can be pooled. Thus, a POD
            could be considered for pooling purposes, even if that POD is not a
            legal entity unto itself.

SLP QUESTION 11: Consider this scenario: A PHO contracts with many physician
groups. The groups get a percent of premium revenue from the PHO. Each group
shares risk separately. However, the PHO purchases stop loss for all of the
groups. The stop-loss reinsurance payments (recoveries) are credited to the
group where the patient is assigned. Can the PHO pool patients covered under all
the groups in determining the amount of stop loss to purchase?

            ANSWER: No. The stop loss amounts need to be based on each group's
            patient panel size because the groups are managing the risk within
            each group, rather than sharing it across all the groups. In this
            example, the referral risk is not commonly pooled across the groups,
            even though it is reinsured across all groups. Each group will
            retain the revenue from the percent of premium it received dependent
            upon the experience and reinsurance recoveries attributable to that
            particular group.

SLP QUESTION 12: What if separate risk pools are combined at the end of the year
for distribution purposes? If the surplus in one offsets the deficit in another,
could we say that the risk is commonly pooled?

            ANSWER: If the surplus in one pool, or part of the pool, offsets the
            deficit in another pool, or part of the same pool, then the risk
            would not be considered truly pooled according to the regulation.
            Basically, the lives can be pooled if the physician is not going to
            get separate checks based on different patient categories, or if
            there is not a separate accounting by patient category showing how
            the experience of the different patients contributed to the outcome
            of the single check.

SLP QUESTION 13: What is meant by the pooling condition that incentive
arrangements be "comparable for all categories of patients being pooled"? For
example, can patients be pooled by the group when the extent of risk borne by
the group is greater with one MCO than with another? Say the same physician
group contracts with two MCOs where both arrangements are fee-for-service with a
withhold. Based on SFR calculations, 28% of the total maximum payment from MCO A
is at risk for referrals, while 33% of the same group's maximum payment from MCO
B is at risk for referrals. Can the group pool the patients of MCOs A and B for
the purpose of determining the appropriate amount of stop-loss to acquire?

            ANSWER: Yes, the extent of risk in these two MCO contracts with the
            physician group would be considered comparable. However, HCFA
            prefers not to set a hard and fast definition of what is comparable
            given the rapid and complex development of payment arrangements
            under managed care. MCOs are expected to use their best judgment in
            determining whether arrangements are to be considered comparable.

SLP QUESTION 14: If a physician is at SFR, is stop loss protection needed to
cover all the physician's patients (including commercial enrollees), or only for
Medicare beneficiaries.

            ANSWER: Stop-loss must cover 90% of the risk the physician
            experiences for referral costs for Medicare patients that exceed the
            risk threshold. Commercial and Medicaid patients may be "pooled"
            with Medicare patients in order to determine the amount of stop-loss
            required for the latter patients without necessitating that the
            commercial patients be covered by the same level of stop-loss
            coverage. This is because the referral risk attributable to the
            Medicare patients is lessened by the fact that the physicians are
            also serving Medicaid and commercial patients under similar risk
            arrangements.

SLP QUESTION 15: If separate policies are in place for institutional and
professional stop loss coverage by the same group, do the "combined" or
"individual" stop-loss limits apply?

            ANSWER: If a group has separate policies for institutional and
            professional, then the stop loss needs to be in compliance with
            those separate limits for each part of the policy. (E.g., if patient
            panel is 1500, the group would need a $40,000 institutional
            deductible and a $10,000 professional services deductible.)

SLP QUESTION 16: Can a group that contracts with both an MCO with a Medicare
contract and another MCO without a Medicare contract pool patients from both
MCOs in order to meet stop-loss requirements?

http://www.hcfa.gov/medicare/physincp/question.htm
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Health Care Financing Administration                                Page 8 of 12

            ANSWER: Yes, as long as the five pooling conditions cited in the
            regulation are met. See SLP Question 6 above.

SLP QUESTION 17: For subcontractors with PIPs where substantial financial risk
exists and stop-loss coverage is required, what responsibility does the MCO have
for validating that stop-loss coverage is in place, outside of completion of the
summary charts based on information provided by the subcontractor?

            ANSWER: Since the MCO contracting with HCFA may face intermediate
            sanctions and civil money penalties for non-compliance by any
            contracting provider within its network, the MCO would be wise to
            validate information submitted to it by a subcontractor regarding
            which the MCO has any question. As part of monitoring related to
            this regulation, HCFA expects to sample for validity information
            submitted by MCOs and their subcontractors.

SLP QUESTION 18: When is an IPA required to have stop-loss coverage for itself?

            Answer: The regulation specifies that the MCO must provide proof
            that the physician or physician group has adequate stop-loss, if the
            group and/or the physicians are at SFR. The regulation further
            specifies that an IPA is a physician group only if it is composed of
            individual physicians. If an IPA contracts with one or more
            physician groups then it is an intermediate entity. The IPA is
            exempt from a stop-loss requirement if it contracts with at least
            one physician group. As a practical matter, most IPAs purchase
            stop-loss for themselves as an organization as well as for their
            physicians. The regulation only requires that the physician groups
            and the individual physicians are covered by stop-loss if at SFR.

SLP QUESTION 19: Does stop-loss that is purchased for a physician group also
cover the individual physicians if they are also at SFR.

            ANSWER: Not necessarily. The regulation specifies that both the
            physician group and individual physicians in that group must be
            covered by stop-loss, if they are both at SFR. However, it is
            possible that the policy that the group purchases covers only the
            group's financial risk.

SLP QUESTION 20: What if a multi-specialty group is not placed at SFR, but the
primary care physicians within that group are at SFR.

            ANSWER: In that case only the primary care physicians would need to
            be covered by stop-loss.

SLP QUESTION 21: If a physician group contracts with one or more other physician
groups, does the stop-loss requirement of the primary physician group apply to
the subcontracting groups?

            ANSWER: No, stop-loss requirements of one group cannot be extended
            to a subcontracting level. For example:

      -     A physician group has greater than 25,000 patients that meet pooling
            criteria and therefore has no stop-loss requirement.

      -     This group contracts with another physician group, which has 25,000
            or fewer patients and bears risk for referrals above 25%.

            In this case, the first group is exempt from stop-loss requirements;
            however, the second group must comply with stop-loss requirements
            and the MCO must comply with survey requirements.

DISCLOSURE '

DISCLOSURE QUESTION 1: If no provider is placed at risk or at risk for
referrals, or if an MCO agrees to provide stop-loss and to conduct surveys, must
the MCO still disclose the information to HCFA as required by the regulation?

            ANSWER: Yes, pursuant to the regulation, MCOs must still disclose
            the information. This information serves many purposes. It will be
            used to monitor compliance, evaluate the impact of the regulation
            and to ensure the delivery of high quality health care. In enacting
            this legislation Congress clearly intended MCOs to disclose at least
            some information about the nature of the MCO's physician incentive
            compensation arrangements and the extent to which physicians are
            being placed at substantial risk by the arrangements.

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Health Care Financing Administration                                Page 9 of 12

DISCLOSURE QUESTION 2: It seems that the information disclosed pursuant to the
regulation is proprietary and should be protected under the Freedom of
Information Act (FOIA). What information is proprietary?

            ANSWER: For information submitted to HCFA, a precise determination
            of what is proprietary information cannot be made until we have
            reviewed specific FOIA requests. At that time, the FOIA office will
            request that the plan involved specify what it feels is proprietary
            and the office will then determine what is proprietary. An MCO may,
            if it so desires, designate the information as proprietary at the
            time of submission. Requests will be evaluated on a case-by-case
            basis, balancing the needs of the party to protect proprietary
            information against the public interest in disclosing information
            that will serve the goals of the regulation.

DISCLOSURE QUESTION 3: Will disclosure to beneficiaries of financial incentives
information be required at the time of their enrollment? Also, will MCOs be
allowed broad discretion to decide how the information is presented?

            ANSWER: MCOs will be required to publish in the evidence of coverage
            (EOC) notices, or such other notice as approved by the applicable
            HCFA Regional Office, that beneficiaries can request summary
            information on the MCO's physician incentive plans. These EOC
            notices are available upon enrollment. The nature of the disclosure
            to beneficiaries will be general, as opposed to providing
            physician-specific financial incentives information. Materials must
            convey information about the types of incentives used in contracts
            affecting physicians in the MCO's network. MCOs will not be required
            to disclose the details of the particular incentive arrangement for
            a specific physician. MCOs will be allowed some discretion in
            crafting language to convey the required information to
            beneficiaries. A separate document of recommended language for
            beneficiary materials is available from HCFA.

DISCLOSURE QUESTION 4: For purposes of the disclosure requirement (42CFR
422.210(b), 42 CFR 417.479(h)(3)) who does the term "beneficiaries" include?

            ANSWER: The term refers to persons receiving Medicare benefits. It
            includes potential enrollees, current enrollees, and disenrollees of
            MCOs contracting with the Medicare.

DISCLOSURE QUESTION 5: What about Pools of Doctors (PODs) (i.e., groups of
independent physicians who are aggregated into a single risk pool by an MCO or
PHO) that aren't actually private corporations like a physician group or an IPA?
Example 1: Would they need to report if the POD includes PCPs only sharing risk
for their own services? Example 2: What about if the POD includes PCPs and
specialists sharing risk for their services as a POD?

Example 3: Finally, would PODs need to report if comprised of PCPs, specialists,
hospital and ancillary services?

            ANSWER: In all three instances, some reporting would need to occur,
            but the extent of the disclosure would vary. In the first two
            examples, the MCO would simply report that the POD was not at risk
            for services it did not provide. In the third example, disclosure
            would need to detail the types of risk arrangements used (e.g.,
            capitation, withhold, bonus), the percent of total potential income
            at risk for referrals, and if that percentage exceeded 25%,
            information about stop-loss protection.

DISCLOSURE QUESTION 6: If a subcontractor refuses to provide data on individual
physician incentive arrangements, what action is the MCO expected to take? What
action will HCFA or the State take?

            ANSWER: The MCO should try with due diligence to collect the
            required data from subcontractors. Some MCOs may need to enforce the
            terms of their contracts which require subcontractor compliance with
            all Federal and State laws. MCOs not in compliance with this
            regulation may face intermediate sanctions (e.g., freezing of
            enrollment, suspension of marketing) and civil monetary penalties.
            It is HCFA's expectation that providers will recognize the steps
            that have been taken to address proprietary concerns and will submit
            the required information to the MCOs with whom they contract.

DISCLOSURE QUESTION 7: One can expect that the patient panel size of any given
provider group will likely change over the course of a contract. Should
providers or the MCO report such changes to HCFA and should stop-loss protection
be altered to reflect such changes? What about multi-year contracts?

            ANSWER: We expect PIP disclosure to be accurate on a "snap-shot"
            basis, i.e., it should accurately reflect physician incentive
            arrangements as of January 1 of each disclosure year. An average
            panel size should be projected for the year starting January 1. If
            there are phased-in incentive arrangements or other changes during
            the year, stop-loss protections should be adjusted so that the MCO
            remains in compliance with PIP rules at all times, even though HCFA
            does not request interim disclosures. Regarding multi-year
            contracts,

http://www.hcfa.gov/medicare/physincp/question.htm
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Health Care Financing Administration                               Page 10 of 12

            we would expect the annual disclosures for ensuing years to reflect
            significant changes, if any, in the arrangements.

DISCLOSURE QUESTION 8: How will Medicare beneficiaries learn that they can
request information from the MCO regarding PIPs, etc.? Also, who should accept
beneficiary complaints regarding this disclosure?

            ANSWER: It is the responsibility of MCOs to notify current and
            prospective enrollees of their right to certain information related
            to physician compensation arrangements. The MCO's Evidence of
            Coverage, Annual Notice to Medicare members, marketing materials,
            and/or other formal means of communication should be used to
            communicate that the following pieces of information are available
            to beneficiaries upon request: (1) if the MCO has a PIP that covers
            referral services; (2) the type of incentive arrangement; (3)
            whether stop-loss protection is provided; and (4) a summary of
            survey results, if conduct of a survey is required of the MCO.

            Should a beneficiary have a complaint regarding disclosure, the
            beneficiary should first attempt to resolve the problem through
            contact with the MCO's membership services department. If that is
            unsuccessful, the beneficiary can pursue the complaint through the
            MCO's internal grievance process. Additionally, the beneficiary can
            contact the HCFA Medicare Regional Office.

DISCLOSURE QUESTION 9: If a beneficiary wants to know the incentive arrangement
of an individual physician, is the MCO required to disclose it?

            ANSWER: The MCO is only required to provide a summary statement or
            letter outlining all of the incentive arrangements in place
            throughout the MCO. However, there is nothing in federal statute or
            regulation to prevent a MCO or individual physician from providing
            physician-specific information to a beneficiary who requests it.

DISCLOSURE QUESTION 10: The HCFA guidance package on the regulation, dated
December 27, 1996, says that marketing material must be reviewed by ROs. If an
MCO uses the exact language in HCFA's guidance paper on beneficiary disclosure,
must it still be reviewed by the RO?

            ANSWER: Yes. The RO is still responsible or ensuring that the MCO is
            providing accurate information to its enrollees. Use of the HCFA
            model language cannot address the MCO-specific incentive information
            which each RO must review, but it will expedite the RO's review of
            how that information is phrased for optimal beneficiary
            understanding.

DISCLOSURE QUESTION 11: Will disclosure need to be repeated annually, even if
there is no change?

            ANSWER: Yes, annual disclosure is required. However, if arrangements
            with providers are substantially the same as the previous disclosure
            year, new Worksheets need not be completed so long as the previous
            documents will be available to regulators and the MCO has assurances
            from its providers that the arrangements are substantially the same.

DISCLOSURE QUESTION 12: Is PIP disclosure required for applicants for
Medicare+Choice contracts?

            ANSWER: Yes, compliance with PIP is required before HCFA contracts
            with an MCO. The M+C application should include completed PIP
            disclosure forms in hard copy in the documents part. This is the
            only time that hard copy is acceptable. All contractors who have had
            a HCFA Medicare contract as of January 1 of any year must disclose
            electronically and will receive instructions from HCFA. MCOs who
            contract after January 1 will not disclose until the following year,
            but must be in compliance with PIP at all times. PIP forms,
            instructions, worksheets and any updates are in HCFA's web site at:
            www.hcfa.gov/medicare/physincp/pip-info.htm.

DISCLOSURE QUESTION 13: When an MCO makes its disclosure electronically, should
it send a hard copy of a signature page to HCFA?

            ANSWER: No, a signature page is not required.

SURVEY

SURVEY QUESTION 1: Will HCFA facilitate the survey requirement by using such
items as a standard survey questionnaire,

http://www.hcfa.gov/medicare/physincp/question.htm
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Health Care Financing Administration                               Page 11 of 12

detailed instructions on survey design and/or a comparative report card?

            ANSWER. Yes, HCFA issued a memo in August 1999 that stated the
            following:

            HCFA's national administration of the Consumer Assessments of Health
            Plans Study (CAHPS) is well established and will include both
            enrollees and disenrollees, starting in 2000. Therefore, HCFA has
            determined that these Medicare Managed Care Organizations (MCOs) no
            longer need to conduct independent surveys for meeting PIP
            requirements. HCFA will consider all such Medicare MCOs with
            physician groups or physicians at substantial financial risk to be
            in compliance with the survey mandate in 42 CFR 422.208(h) and 42
            CFR 417.179(g)(1).

            Organizations can now meet the survey disclosure requirement of the
            regulations by giving Medicare enrollees a copy of the CAHPS
            enrollment and disenrollment survey results when they are available
            on the Internet. Further, these MCOs will no longer need to submit
            survey summaries to HCFA.

MISCELLANEOUS

MISC. QUESTION 1: Why was Congress concerned about physician incentive plans?

            ANSWER: Congress was concerned about under-use of referral for
            medically necessary services due to physician incentive arrangements
            to control costs. The regulations implement the Federal law and
            provide protection to Medicare beneficiaries so that they have
            access to necessary and appropriate care.

MISC. QUESTION 2: How is a withhold different from capitation?

            ANSWER: Capitation means a set dollar payment per patient per unit
            of time (usually per month) that is paid to a physician or physician
            group to cover a specified set of services and administrative costs
            without regard to the actual number of services provided. The
            services covered may include the physician's own services, referral
            services, or all medical services. A withhold is the percentage of
            payments or set dollar amounts that is held back from a physician or
            physician group's capitation or fee-for-service payments. This
            amount may or may not be returned to the physician/group, depending
            on specific predetermined factors.

MISC. QUESTION 3: Do the PIP regulations apply to ancillary providers who
contract with both physicians and non-physicians? (e.g., mental health plans) If
yes, would the PIP regulations apply to all providers employed by the ancillary
provider, or just physicians?

            ANSWER: The PIP regulation applies only to physicians. If an
            ancillary provider employs 100 health professionals, for instance,
            but only 20 of them are physicians, then the PIP regulation applies
            only to those 20 physicians.

MISC. QUESTION 4: Are dentists or groups of dentists considered physicians for
purposes of the PIP regulation? What is the definition of "physician" for
purposes of the physician incentive regulation?

            ANSWER: Dentists may be considered physicians for purposes of the
            PIP regulation. The term "physician" is defined for purposes of
            Title XVIII (Medicare) at 1861(r). "Physicians" include doctors of
            medicine, doctors of osteopathy, doctors of dental surgery or dental
            medicine, doctors of podiatric medicine, doctors of optometry and
            chiropractors. For purposes of the Social Security Act, the
            definition of "physician" is limited to instances when "limited
            practice" providers actually provide services covered under the Act
            based on State authority to perform such services. For instance,
            under the Act, chiropractors are defined as "physicians" only in so
            far as they provide manual manipulation of the spine to correct a
            subluxation demonstrated by X-ray. For purposes of the PIP
            regulation, "physician" is similarly defined. In so far as "limited
            practice" providers such as dentists are providing services covered
            under an MCO's ACR (Medicare risk plans), or under an MCO's cost
            report (Medicare cost plans), the "limited practice" provider is a
            "physician" for purposes of the PIP regulation.

[LOGO] Return to Physician Incentive Plan Information Page

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Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 2

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                            PHYSICIAN INCENTIVE PLAN

                                GLOSSARY OF TERMS

Bonus means a payment a physician or entity receives beyond any salary,
fee-for-service payments, capitation or returned withhold. Bonuses and other
compensation that are not based on referral or utilization levels (such as
bonuses based solely on quality of care, patient satisfaction or physician
participation on a committee) are not considered in the calculation of
substantial financial risk.

Capitation means a set dollar payment per patient per unit of time (usually per
month) that is paid to cover a specified set of services and administrative
costs without regard to the actual number of services provided. The services
covered may include a physician's own services, referral services or all medical
services. The set dollar payment may be a percent of the premium that the
managed care organization collects for a beneficiary; the capitation received
from HCFA would be considered a premium for this purpose.

Panel size means the number of patients served by a physician or physician
group.

Physician group means a partnership, association, corporation, individual
practice association (IPA), or other group that distributes income from the
practice among members. An IPA is considered to be a physician group only if it
is composed of individual physicians and has no subcontracts with other
physician groups.

Intermediate entities are entities that contract with one or more physician
groups or other affiliations of physician groups and physicians. An IPA is
considered to be an intermediate entity if it contracts with one or more
physician groups in addition to contracting with individual physicians.

Physician incentive plan means any compensation arrangement at any contracting
level between an MCO and a physician or physician group that may directly or
indirectly have the effect of reducing or limiting services furnished to
Medicare or Medicaid enrollees in the MCO. MCOs must disclose physician
incentive plans between the MCO itself and individual physicians and groups and,
also, between groups or intermediate entities (e.g., certain IPAs,
Physician-Hospital Organizations) and individual physicians and groups.

Potential payments means the maximum payments possible to physicians or
physician groups including payments for services they furnish directly and
additional payments based on use and costs of referral services, such as
withholds, bonuses capitation, or any other compensation to the physician or
physician group. Payments based on committee participation, patient satisfaction
or other quality of care factors should not be included in the potential payment
calculations.

Referral services means any specialty, inpatient, outpatient or laboratory
services that are ordered or arranged, but not furnished directly.

Certain situations may exist that should be considered referral services for
purposes of determining if a physician/group is at substantial financial risk.
For example, an MCO may require a physician group/physician to authorize
"retroactive" referrals for emergency care received outside the MCO's network.
If the physician group/physician's payment from the MCO can be affected by the
utilization of emergency care, such as a bonus if emergence referrals are low,
then these emergency services are considered referral services and need to be
included in the calculation of substantial financial risk.

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Physician Incentive Plan Regulation Disclosure Requirements          Page 2 of 2

Also, if a physician group contracts with an individual physician or another
group to provide services that the initial group cannot provide itself, any
services referred to the contracted physician group/physician should be
considered referral services.

Substantial financial risk means an incentive arrangement that places the
physician or physician group at risk for amounts beyond the risk threshold, if
the risk is based on the use or costs of referral services. The risk threshold
is 25%.

However, if the patient panel is greater than 25,000 patients, then the
physician group is not considered to be at substantial financial risk because
the risk is spread over the large number of patients. Stop loss and beneficiary
surveys would not be required.

Withhold means a percentage of payment or set dollar amounts that are deducted
from the payment to the physician group/physician that may or may not be
returned depending on specific predetermined factors.

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 15, 2000

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                [HCFA LOGO] [DEPARTMENT OF HEALTH & HUMAN SERVICES LOGO]

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Physician Incentive Plan Survey Requirements                         Page 1 of 2

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DATE:      August 5, 1999

NOTE TO:   Medicare Contracting Managed Care Organizations Who are Subject to
           Physician Incentive Plan Disclosure Requirements

FROM:      Director, Health Plan Purchasing & Administration, CHPP
           Health Care Financing Administration

SUBJECT:   Physician Incentive Plan Survey Requirements

We are pleased to inform you of a new determination regarding your survey
requirements under the Physician Incentive Plan (PIP) regulation.

FOR '1876 COST AND CLOSED COST HEALTHPLAN, M+C ORGANIZATIONS, SOCIAL HMOS AND
MEDICARE CHOICES*: HCFA=s national administration of the Consumer Assessments of
Health Plans Study (CAHPS) is well established and will include both enrollees
and disenrollees, starting in 1999. Therefore, HCFA has determined that these
Medicare Managed Care Organizations (MCOs) no longer need to conduct independent
surveys for meeting PIP requirements. HCFA will consider all such Medicare MCOs
with medical groups or physicians at substantial financial risk to be in
compliance with the survey mandate in 42 CFR 422.208/210.

Organizations can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results
available on the Internet. HCFA anticipates that the disenrollment survey
results will be available Spring 2000. Further, these MCOs will no longer need
to submit survey summaries to HCFA.

FOR EVERCARE, PACE OR OTHER DEMONSTRATIONS*: These MCOs are required to disclose
under PIP but are not included in CAHPS. Therefore, they must conduct customer
satisfaction surveys of both enrollees and disenrollees if any physician or
physician group in an MCO=s network is placed at substantial risk for referral
services, as defined by regulation. MCOs who had a contract with HCFA on or
before January 1, 1999 will be required to submit a summary of each survey to
HCFA by March 31, 2000 and provide beneficiaries a summary upon their request.
We will provide further guidance at a later date.

If you have questions about the PIP survey requirements, you may call Sylvia
Hendel at 410-786-1126, Eric Nevins at 410-786-1162, or Frank Szeflinski at
303-844-5738.

                                      /s/

                                 Gary A. Bailey

------------------

*     For CAHPS requirements, see HCFA Operational Policy Letter 99.078,
      Reporting Requirements for Medicare Managed Care Organizations in 1999:
      HEDIS, HOS, CAHPS.

[LOGO] Return to Physician Incentive Plan Homepage

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MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 1 of 5

                           MEDICARE + CHOICE APPLICANT

                PHYSICIAN INCENTIVE PLAN DISCLOSURE INSTRUCTIONS

GENERAL INSTRUCTIONS FOR SUBMISSION: Hard copy Physician Incentive Plan (PIP)
Disclosure is required only for new applicants for Medicare+Choice Contracts,
except for Private Fee For Service Plans or non-network Medicare Savings Account
Plans. Organizations that already hold a Medicare contract with HCFA must
disclose electronically PIP guidance, an extensive QS & AS, and all forms are
available at HCFA's web site:

                   www.hcfa.gov/medicare/physincp/pip-info.htm

A hard copy disclosure must be included in the completed application, as
directed within the application form. The disclosure should represent physician
incentive arrangements for providers within the Managed Care Organization's
(MCO) network at the time the application is submitted. A Medicare PIP
disclosure includes:

            The disclosure COVER SHEET - This sheet should be the first page of
            the PIP submission.

            PIP DISCLOSURE FORM - This form may be duplicated as necessary to
            capture all of the arrangements in effect amongst the applicant's
            provider contractors and subcontractors down to the level of
            physicians.

USING THE HCFA PIP PROVIDER WORKSHEET: The PIP Worksheet may be used as a guide
in determining if there is substantial financial risk in any provider
arrangement and to assist the MCO in entering data on the disclosure form. MCOs
may modify the Worksheet for their internal use as long as the necessary
information is captured that will document the data upon audit by regulators.
Generally, a separate Worksheet should be used or each type of contractual
relationship. Reproduce as many of these forms as needed. Do not submit the
Worksheets, but retain them and any other supporting information for review by
regulators.

The MCOs should analyze the data from different providers to determine whether
information from the same type of contracting entity can be aggregated for
disclosure to regulators.

MCOs need to determine if they have received all information from their
contractors down to the level of physicians, even if the providers bear no risk
or there is no substantial financial risk.

      -     An intermediate entity should report its direct contracts with
            physicians as well as arrangements with its physician groups and
            the physician groups' physicians. Even if there is no substantial
            financial risk in any contractual arrangement, the lower levels must
            be disclosed.

      -     A physician group should report arrangements with its physicians,
            even if there is no substantial financial risk between the MCO and
            the physician group.

Enter the information from the Worksheet on the appropriate lines on the
Disclosure Form after indicating the specific contractual relationship being
disclosed.

USING THE PIP DISCLOSURE FORM FOR M+C APPLICANTS: At the top of the Disclosure
Form, print the name of the MCO, give the Medicare contract number, and the
reporting year.

Nine contractual relationships are listed. Disclose one type of relationship on
each Form you complete. Submit as many Forms as you need to represent all of the
arrangements that serve the MCO's Medicare enrollees.

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MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 2 of 5

            (1) MCO to physician group

            (2) MCO to intermediate entity

            (3) MCO to individual physician

            (4) Intermediate entity to physician group

            (5) Intermediate entity to physician

            (6) Physician group to physician group

            (7) Physician group to physician

            (8) Physician to physician

            (9) Intermediate entity to intermediate entity

Each submission from an MCO must include contractual relationships (1), (2) or
(3), but MCOs may have multiple arrangements and need all three. Then the MCO
must disclose the subcontracting arrangements to the level of the physician. All
disclosures relating to one hierarchy of contracts should be stapled together.
The hierarchies are:

SELECTION OF: (1) MCO TO PHYSICIAN GROUP REQUIRES A DISCLOSURE OF:

                  (7) Physician group to physician OR (6) Physician group to
                  physician group

                  If (6) is selected, you MUST have (7) to disclose incentives
                  to physicians

                  There can be selection of: (8) Physician to physician [this is
                  not required]

SELECTION OF: (2) MCO TO INTERMEDIATE ENTITY REQUIRES DISCLOSURE OF:

                  (4) Intermediate entity to physician group OR

                  (5) Intermediate entity to physician OR

                  (9) Intermediate entity to intermediate entity

                  The intermediate entity can have multiple contracting
                  arrangements.

                  If (4) is selected, you MUST have (7) to disclose incentives
                  to physicians

                  If (9) is selected, you MUST have (4) or (5) to disclose
                  incentives to subcontractors

                  There can be selection of: (8) Physician to physician [this is
                  not required]

SELECTION OF: (3) MCO TO INDIVIDUAL PHYSICIAN DOES NOT REQUIRE ANY SUBCONTRACT.

                  There can be selection of: (8) Physician to physician [this is
                  not required]

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 3 of 5

Single or aggregate disclosure: The Disclosure Form may reflect a single
incentive arrangement if that is a unique arrangement. However, MCOs should
aggregate information on one Form for contractual arrangements that are
substantially the same and the stop-loss requirements are the same.

            For example, if an MCO contracts with 100 physician groups under a
            very similar capitation payment that does not pass referral risk to
            the groups, the MCO should check category one on the Disclosure Form
            and disclose all 100 on one Form. If 55 physician groups do not pass
            risk to their doctors and these 55 groups have a total of 450
            physicians under this no risk compensation, then the MCO should
            check category 7 on a new Disclosure Form and disclose all 450 on
            the Form. Similarly, the MCO should disclose the physician
            group-physician incentive arrangements for the other 45 groups,
            aggregating those physicians who are placed at substantially the
            same risk and who have the same stop loss requirements, if the risk
            exceeds the SFR cutoff. Staple together all the forms that relate to
            the 100 physician groups.

Entering the information: After checking the relationship you are disclosing,
follow the directions below.

  1.  ON LINE 1.A., give the name or identifier of a single provider (e.g., the
      intermediate entity, physician group, or individual physician) or the
      providers who are aggregated for the disclosure. The provider named or
      identified is the party who receives payment under the provider contract
      to which the Disclosure Form applies. The purpose here is to allow the
      user to be able to identify the provider(s) after entering the data.

      ON LINE 1.B., give the number of aggregated providers whose arrangements
      are being disclosed. (See the discussion above.) Do not send lists of
      provider names. For example, if #1 is selected, then give the number of
      physician groups.

      LINE 1.C. asks for disclosure of Federally Qualified Health Centers and
      Rural Health Clinics (FQHC/RHCs). Please distinguish FQHC/RHCs by using a
      separate Disclosure Form to report each FQHC/RHC, however you may
      aggregate those with substantially the same incentive arrangements. If the
      MCO is owned or controlled by a consortium of FQHC/RHCs or has FQHC/RHCs
      in its network, be sure to indicate this on the cover sheet.

      LINE 1.D. applies only to physicians of physician groups (selection of #7
      contracting type) and asks for a breakout of the number of physicians who
      are members of the group and those who independently contract with the
      group. Members are typically owners, partners, or employees of the
      physician group.

      If either arrangement with providers that are intermediate entities (IE)
      is selected on the Disclosure Form (either #2 or #9), complete items 1.A -
      1.C only since stop loss requirements do not apply to intermediate
      entities (IE). However, fully complete disclosures for IE's relationships
      with provider groups and their physicians (#4 and #7) and IE with
      individual physicians (#5) because stop loss requirements apply to these
      levels.

  2.  QUESTION 2 identifies whether the incentive arrangement transfers any
      risk. A capitation payment is considered a transfer of risk for his
      question, even if the capitation is for services provided only by the
      contracting physician or physician group. [This information is found in
      the Worksheet.]

      Check "yes" or "no" as applicable. If "no" is checked, then this
      disclosure is complete. If "yes" is checked, identify the type of risk
      transfer then go to Question 3.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm
<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 4 of 5

      Risk transfer choices are: "capitation, bonus, withhold, percent of
      premium or other." Check the appropriate choice or choices; more than one
      choice should be checked if the arrangement has features of each type of
      risk-sharing.

      A choice of "Other" is provided if a combination of the four types of risk
      arrangement does not define the arrangement. For the purpose of this
      Disclosure Form, the obligation for the provider to fund deficits is
      considered as a "withhold." A bonus for low utilization of referral
      services is considered to be risk transference.

3.    QUESTION 3 identifies whether risk is transferred for referrals. [This
      information is in the Worksheet.] Check "yes" or "no" as applicable. A
      bonus for low utilization of hospital, specialist or other services is
      considered to be a risk for referral services. If "no" is checked, then
      this disclosure is complete. If "yes" is checked, go to Question 4 to
      identify the type of risk transfer.

4.    QUESTION 4 identifies the type of risk-sharing arrangement. [This
      information is found in the Worksheet.] See #2 above for instructions on
      identifying risk arrangements.

      The risk-sharing arrangement may be described briefly on the Disclosure
      Form, particularly if 'other' is selected. [This information should be
      available in the Worksheet from the contractors.]

5.    The percentage of risk ATTRIBUTABLE TO REFERRALS ONLY should be stated in
      QUESTION 5. This percentage corresponds to the "% Of Total Compensation At
      Risk For Referrals" from the Worksheet. If the percentage is equal to or
      below 25 %, the arrangement is not considered to be at substantial
      financial risk and this disclosure is complete. Percent of premium is
      treated as capitation for this calculation. If above 25 percent, proceed
      to Question 6.

6.    Information for QUESTION 6, about the number of patients, is found in the
      Worksheet. Specific criteria must be met before pooling is allowed, as
      stated in regulations. Any entity that meets all five criteria (below)
      required for the pooling of risk will be allowed to pool that risk in
      order to determine the amount of stop-loss required by the regulation. If
      the number of patients is 25,000 or fewer, then go to Question 7. If
      greater than 25,000, the disclosure is complete.

      (1) Pooling of patients is otherwise consistent with the relevant
      contracts governing the compensation arrangements for the physician or
      group (i.e., no contracts can require risk be segmented by MCO or patient
      category);

      (2) The physician or group is at risk for referral services with respect
      to each of the categories of patients being pooled;

      (3) The terms of the compensation arrangements permit the physician or
      group to spread the risk across the categories of patients being pooled
      (i.e., payments must be held in a common risk pool);

      (4) The distribution of payments to physicians from the risk pool is not
      calculated separately by patient category (either by MCO or by Medicaid,
      Medicare, or commercial); and

      (5) The terms of the risk borne by the physician or group are comparable
      for all categories of patients being pooled.

      Note that pooling and stop-loss requirements applicable to a group cannot
      be extended to a subcontracting level. For example:

            -     A physician group has greater than 25,000 patients that meet
                  pooling criteria.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm

<PAGE>

MEDICARE MANAGED CARE ORGANIZATIONS                                  Page 5 of 5

            -     This group contracts with another physician group, which has
                  25,000 or fewer patients and bears risk for referrals above
                  25%.

                              The first group is exempt from stop-loss
                              requirements; the second group must comply with
                              stop-loss requirements and the MCO must comply
                              with survey requirements.

            1.    For QUESTION 7, note the type and the levels or thresholds of
                  the stop-loss insurance if stop-loss coverage for the
                  physician group or physician is required.

                        Check the type of stop-loss, aggregate, individual per
                        patient, or other coverage. * If individual, give the
                        threshold (deductible) as a dollar amount. If aggregate
                        or other briefly describe the stop-loss coverage. If
                        there are arrangements that merit explanation, describe
                        the coverage (if needed, attach a sheet for additional
                        space).

                        A description should include whether the coverage is:

                        (1) Combined (professional and institutional);

                        (2) Broken down into institutional, professional and
                        other components;

                        (3) The deductible, co-insurance percentage, maximum
                        liability/pay-out by the policy;

                        (4) Whether the stop-loss coverage applies to all costs
                        or only the cost of referral services; and

                        (5) Any other key features of the coverage.

                        This information is found in the Worksheet.

                        If providers can be aggregated because of the similarity
                        of risk arrangements, the MCO should sort the providers
                        by stop loss requirements and then use a separate
                        Disclosure Form for each requirement. For example: 100
                        groups exceed the 25% risk threshold; 50 have a patient
                        pool exceeding 25,000 (under a very similar risk
                        arrangement); 25 have a patient pool of between 1,001
                        and 5,000 (under a very similar risk arrangement); and
                        another 25 of these groups have a patient pool of
                        between 8,001 and 10,000. The MCO should use three
                        Disclosure Forms to represent the groups that aggregate
                        into three stop loss requirements.

http://www.hcfa.gov/medicare/physincp/01dfin~1.htm

<PAGE>

                                   COVER SHEET

          MANAGED CARE ORGANIZATION (MCO) DISCLOSURE COMPLIANCE PACKAGE
                    UNDER THE PHYSICIAN INCENTIVE REGULATION
            SUBMITTED TO HEALTH CARE FINANCING ADMINISTRATION (HCFA)

                       FOR THE MEDICARE + CHOICE APPLICANT

NAME OF MCO _________________________________________________________________

MEDICARE CONTRACT #H ____________     PIP applies to Medicare+Choice applicants
                                      (except for PFFS and non-network MSA)

MCO IS OWNED/CONTROLLED BY A FEDERALLY QUALIFIED HEALTH CENTER OR RURAL HEALTH
CLINIC (FQHC/RHC) OR CONSORTIUM OF FQHC/RHCS OR INCLUDES FQHC/RHCS IN ITS
NETWORK:

                           YES___________; NO _______

PRINTED NAME OF MCO CONTACT PERSON __________________________________________

PHONE # ______________________

THIS REPRESENTS OUR ORGANIZATION'S DISCLOSURE COMPLIANCE PACKAGE SUBMITTED TO
HCFA OR SMA. I CERTIFY THAT THE INFORMATION MADE IN THIS DISCLOSURE IS TRUE,
COMPLETE AND CURRENT TO THE BEST OF MY KNOWLEDGE, INFORMATION AND BELIEF AND IS
MADE IN GOOD FAITH.

PRINTED NAME OF CEO _________________________________________________________

SIGNATURE OF CEO __________________________________ DATE: ___________________

NOTE: PLEASE INCLUDE THIS COVER SHEET AS THE FIRST PAGE OF THE MCO DISCLOSURE
      COMPLIANCE PACKAGE.

HCFA PIP Disclosure Form for M+C Applicants -revised 10/2000             Page 1

<PAGE>

                                                               OMB No. 0938-0700
          PHYSICIAN INCENTIVE PLAN DISCLOSURE FORM FOR M+C APPLICANTS

Managed Care Organization (MCO) Name: ______________________________________
Medicare Contract Number: H_________       Reporting year: __________

Note: Disclosure is required even if risk or substantial risk is not being
transferred or panel exceeds 25,000.

CHECK ONE - Use this Disclosure Form to disclose the incentive arrangement
between the first party (in the list below) that contracts with a second party
(underlined on list below) for services to the MCO's Medicare (or Medicaid)
enrollees. BE SURE TO DISCLOSE SUBCONTRACTING ARRANGEMENTS DOWN TO PHYSICIAN
LEVELS.

- Repeat forms as many times as needed to capture the various levels of
contractual relationships.(1)

- For simplicity, "provider" is used here to refer to the second party. See
instructions for completing this Form under "Single or aggregate disclosure" for
aggregating either the first or SECOND PARTY.(2)

- The HCFA Provider Data Worksheet can be the basis for this summary form. ALL
FORMS and instructions are available at:
www.hcfa.gov/medicare/physincp/pip-info.htm

(1) ____ MCO to physician group       (2) ____ MCO to intermediate entity

(3) ____ MCO to individual physician  (4) ____ Intermediate entity to physician
                                               group

(5) ____ Intermediate entity to       (6) ____ Physician group to physician
         physician                             group

(7) ____ Physician group to physician (8) ____ Physician to physician

(9) ____ Intermediate entity to intermediate entity

1.    PROVIDER(S) NAMED OR COUNTED SHOULD BE THE UNDERLINED PROVIDER IN THE LINE
      CHECKED ABOVE.

      A.    Name or Identifier of Provider:_____________________________

            Use the actual name or any identifier for the entity or aggregated
            entities disclosed on this chart.

      B.    Number of Providers in the category selected:_____________
            Give # of providers who are aggregated on this form; e.g., if this
            form is for physician groups, category #1, then give the # of
            physician groups; groups can be aggregated if risk arrangements are
            substantially the same and stop loss requirements are the same.

1.C.        Is provider an FQHC/RHC? Yes______; No______

            If providers are aggregated, see instructions for disclosing FQHCs.

1.D.        If #7 above is selected, give number of physicians who are:

            Members (e.g. owners, employees) of the group #_____; Contracted
            with the group # _______ These numbers must equal the number of
            physicians given in I.B.

NOTE: If either #2 or #9 is checked above, this form is complete since stop loss
requirements do not apply to intermediate entities (IE). However, be sure to
complete disclosures for the IE's relationships with provider groups and their
physicians (#4 and #7) and with individual physicians (#5) because stop loss
requirements apply to these levels.

2.    Is risk transferred to the provider? Yes_____; No_____

      Note: A bonus for low utilization of referral services is considered to be
      risk transference.

      If YES, check all the risk transfer methods with the provider and go to
      question 3.

      Capitation______; Bonus______; Withhold ______; Percent of Premium______;
      Other_______

      Note: Consider the obligation for the provider to fund deficits as a
      "withhold". Describe briefly:

HCFA PIP Disclosure Form for M+C Applicants -revised 10/2000             Page 2

<PAGE>

PIP disclosure: MCO Name_______________________________

3.   Is risk transferred for referrals? Yes _______; No ______

      Note: A bonus for low utilization of hospital, specialist or other
      services is considered to be at risk for referral services.

      If NO, this chart is finished. If YES, proceed to next question.

4.    Check all the referral risk transfer methods with the provider and go to
      question 5.

      Capitation_____; Bonus______; Withhold _____; Percent of Premium____;
      Other______

      Note: Consider the obligation for the provider to fund deficits as a
      "withhold". If needed, describe briefly:

5.    What percent of the total potential payment is at risk for referrals:
      _________%

      If above 25% proceed to question 6; if 25% or below you have completed
      this disclosure.

6.    Number of MCO patients served by the provider or the number of pooled
      patients, if patients can be pooled (see criteria for pooling in the
      instructions). Check one category:

      A __ 1-1,000; B __ 1,001-5,000; C __ 5,001-8,000; D __ 8,001-10,000;
      E __ 10,001-25,000; F __ 25,000+

      If number is 25,000 or below, answer #7. If the number exceeds 25,000, you
      have completed this disclosure.

7.    State the type and amount of stop loss insuring the physician group and/or
      physician:

      Aggregate Insurance is excess loss coverage that accumulates based on
      total costs of the entire population for which they are at risk and which
      reimburses after the expected total cost exceeds a pre-determined level.
      Individual insurance is where a specific provider excess loss accumulates
      based on per member per year claims.

      Type: Aggregate______; Individual ____; Other______[describe below if
      aggregate or other]

      If individual [based on costs per patient], enter threshold/deductible
      amount: [enter only one amount] Threshold: Professional $___________;
      Institutional $________; Combined $_____________

      Describe if needed:

      PUBLIC REPORTING BURDEN (FOR MANAGED CARE ORGANIZATIONS) "According to the
      Paperwork Reduction Act of 1995, no persons are required to respond to a
      collection of information unless it displays a valid OMB control number.
      The valid OMB control number for this information collection is 0938-0700.
      The time required to complete this information collection is estimated to
      average 100 hours per response, including the time to review instructions,
      search existing data resources, gather the data needed, and complete and
      review the information collection. If you have any comments concerning the
      accuracy of the time estimate(s) or suggestions for improving this form,
      please write to: HCFA, 7500 Security Boulevard, N2-14-26, Baltimore,
      Maryland 21244-1850 and to the Office of the Information and Regulatory
      Affairs, Office of Management and Budget, Washington, D.C. 20503."

-------------------------

            (1)For example, if #1 for the MCO to physician group is checked on
            one form, then use a separate form and check #7 to disclose the
            physician group's arrangement with its physicians.

            (2)You must correctly represent the hierarchy of contracting and
            subcontracting relationships. For example, if you select # 1, you
            should aggregate all physician groups you contract with that have
            substantially the same incentive arrangements and stop-loss
            requirements. Then, on a separate form, you should select #7 to
            enter the physician group-physician arrangements only for the
            physicians associated with those provider groups. These related
            disclosures should be stapled together.

10/2000HCFA PIP Disclosure Form -revised 10/2000                          Page 3

<PAGE>

 THE ENTITY COMPLETING THE WORKSHEET SHOULD RETAIN IT AND HAVE IT AVAILABLE FOR
 REGULATORS IN THE EVENT OF AN AUDIT.

                                  [ILLEGIBLE]

NOTE: EACH WORKSHEET SHOULD REFLECT A SINGLE INCENTIVE ARRANGEMENT OR AN
      AGGREGATE OF MULTIPLE ARRANGEMENTS THAT ARE THE SAME OR SIMILAR.

      THE WORKSHEET SHOULD BE COMPLETED FOR THE CONTRACTUAL ARRANGEMENTS THAT
      WILL BE IN EFFECT ON JANUARY 1 OF THE DISCLOSURE YEAR. ANNUAL DISCLOSURE
      IS REQUIRED EVEN IF RISK IS NOT TRANSFERRED TO PROVIDERS OR PATIENT POOL
      EXCEEDS 25,000.

                              General Information

Disclosure year:_________

 ______________________________________________________________________________
 (Print name of entity completing this Worksheet - the first entity in the line
 checked below)

 This Worksheet is being completed to describe the incentive arrangement between
 (check one below):

(1) NA Managed Care Organization (MCO) to physician group*

(2) NA MCO to intermediate entity*

(3) NA MCO to individual physician

(4) ___ Intermediate entity to physician group*

(5) ___ Intermediate entity to physician

(6) ___ Physician group to physician group*

(7) ___ Physician group to physician

(8) ___ Physician to physician

(9) ___ Intermediate entity to intermediate entity*

["NOTE: DISCLOSURE IS REQUIRED DOWN TO THE LEVEL OF ARRANGEMENTS WITH
PHYSICIANS. USE SEPARATE WORKSHEETS FOR EACH LEVEL.]

Specify parties to contract:____________________________________________________
                            (the first entity in the line checked above)

and_____________________________________________________________________________
        (the entity underlined in the line checked above)

[NOTE: IF WORKSHEET COVERS MULTIPLE CONTRACTS, NAME PARTIES ON A SEPARATE
ATTACHMENT.]

For the purposes of the regulation, the following definitions should be used:

INTERMEDIATE ENTITY -- a physician-hospital organization ("PHO"), integrated
delivery system, or individual practice association ["IPA"] that subcontracts
with physician groups or with another IPA.

PHYSICIAN CROUP -- a partnership, association, corporation, or other group that
distributes income from the practice among members, or an IPA that contracts
with individual physicians.

NOTE: IF #9 IS CHECKED ABOVE, STOP LOSS REQUIREMENTS DO NOT APPLY TO
INTERMEDIATE ENTITIES (IE). THEREFORE, SUCH ENTITIES MAY SKIP TO THE END OF THE
WORKSHEET AND COMPLETE THE SIGNATURE AND DATE INFORMATION. HOWEVER, BE SURE TO
COMPLETE DISCLOSURES FOR IE's RELATIONSHIPS WITH PROVIDER GROUPS AND THEIR
PHYSICIANS (#4 AND #7) AND WITH INDIVIDUAL PHYSICIANS (#5) BECAUSE STOP LOSS
REQUIREMENTS APPLY TO THESE LEVELS.

HCFA PIP Provider Worksheet - 10/2000                                     Page 1
<PAGE>
          [ILLEGIBLE] Physician Incentive Plan Information [ILLEGIBLE]

                                                          MEDICARE      MEDICAID

   2) Does the payment arrangement transfer risk?

                                                          YES______      _______
                                                          NO_______      _______

      If risk is transferred, what method is used:
      capitation___; bonus_____; withhold____; percent of premium___; other_____
      Fee-for-service arrangements without withholds or bonuses do not transfer
      risk.

   3) Does the physician incentive plan (e.g., capitation, % of premium,
      withholds, or bonuses) cover services not furnished by the physician or
      physician group? If YES, proceed to next question.

                                                          YES______      _______
                                                          NO_______      _______

   (Note: Bonuses or withhold arrangements based on utilization or cost factors
   are included in these compensation arrangements. Incentives based: solely on
   quality or access factors are not included.)

IF RESPONSE TO 2 OR 3 IS NO, GO TO LAST PAGE AND ENTER INFORMATION ABOUT PERSON
COMPLETING WORKSHEET.

   4) If risk is transferred for referrals, what method is used:
      capitation___; bonus_____; withhold____; percent of premium___; other_____
      Fee-for-service arrangements without withholds or bonuses do not transfer
      risk.

   Percent of premium is similar to capitation. If the payment based on % of
   premium covers referral services without any limit on the costs for referral
   services, then the entire payment or 100% is at risk for referrals. In the
   workboxes below, consider % of premium as capitation.

   5) If you answered Question 4, please fill in the percentage(s) where
   indicated and applicable. Note: If the contract does not limit the amount of
   risk for referral services to a set percentage, insert '100' as the
   percentage. Maximum compensation is defined as the maximum dollar amount
   that a physician or physician group might receive for either direct or
   referral services, or their administration. It does not include bonuses that
   are not related to referral levels.

   MAXIMUM COMPENSATION MEANS MAXIMUM POSSIBLE THEORETICAL COMPENSATION WITHOUT
   REGARD TO HISTORICAL EXPERIENCE.

   MEDICARE ARRANGEMENTS:        Maximum compensation = maximum $ amount
   that might be received.

   line 1___Withhold ___% Withhold [where percent of withhold =
                                             maximum possible withhold $$
                                             maximum compensation $$]
   line 2___Bonus    *____% Bonus [where percent of bonus =
                                             maximum   possible bonus $$
                                             maximum compensation $$]

   * Note: Do not include bonuses based on quality or access in either the
   calculation of maximum possible bonus or the maximum compensation.

   line 3___Capitation __% Capitation [when percent of capitation
                              = maximum capitation $ entity is
                                potentially liable for referral services
                                maximum compensation $$ ]

                       __% Of Total Compensation At Risk For Referrals (add
                           lines 1,2 & 3)

   THIS % IS TRANSFERRED TO QUESTION 5 ON THE PIP DISCLOSURE FORM; IF 25% OR
   LOSS. SKIP TO LAST PAGE AND COMPLETE INFORMATION ABOUT PERSON COMPLETING
   FORM.

   IF % OF TOTAL COMPENSATION AT RISK FOR REFERRALS EXCEEDS 25%, THIS IS
   SUBSTANTIAL FINANCIAL RISK AND YOU MOST PROCEED TO QUESTION 6.

HCFA PIP Provider Worksheet - 10/2000                                     Page 2

<PAGE>

Physician Group Member Panel Size: Estimated members for contract year being
disclosed.

(6)   State the total members served under the incentive arrangement(s) to which
      this Worksheet applies by patient type (e.g. Medicare, Medicaid, and
      commercial. Note: A physician group can pool to arrive at the total number
      of MCO members to which this Worksheet applies if the criteria described
      below are met. If pooling is used, attach an explanation of how it was
      done to the Worksheet.

      Total Commercial members      ___________________
      Total Medicare members        ___________________
      Total Medicaid members        ___________________
      TOTAL

IF THE TOTAL MEMBER PANEL SIZE FOR COMMERCIAL, MEDICARE AND/OR MEDICAID EXCEEDS
25.000. GO TO LAST PAGE AND ENTER INFORMATION ABOUT PERSON COMPLETING WORKSHEET.

Pooling Criteria:

(1) Pooling of patients is otherwise consistent with the relevant contracts
    governing the compensation arrangements for the physician or group (i.e., no
    contracts can require that risk be segmented by MCO or patient category);

(2) The physician or group is at risk for referral services with respect to each
    of the categories of patients being pooled;

(3) The terms of the compensation arrangements permit the physician or group to
    spread the risk across the categories of patients being pooled (i.e.,
    payments must be held in a common risk pool);

(4) The distribution of payments to physicians from the risk pool is not
    calculated separately by patient category (either by MCO or by Medicaid,
    Medicare, or commercial); and

(5) The terms of the risk borne by the physician or group are comparable for all
    categories of patients being pooled. Note that pooling and stop-loss
    requirements applicable to a group cannot be extended to a subcontracting
    level. For example:

      --A physician group has greater than 25,000 patents that meet pooling
      criteria.

      -- This group contracts with another physician group, which has 25,000 or
      fewer patients and bears risk for referrals above 25%.

      The first group is exempt from stop-loss requirements; the second group
      must comply with stop-loss requirements and the MCO must comply with
      survey requirements.

      STOP-LOSS INFORMATION: FILL TO IF % OF TOTAL COMPENSATION AT RISK FOR
      REFERRAL IS > 25%

If incentive arrangements place either a physician or physician group at
substantial financial risk, there must be aggregate or per patient stop-loss
protection.

Aggregate stop-loss protection must cover 90% of the costs of referral services
that exceed 25% of potential payments.

Individual per patient coverage may be either combined coverage or separate
coverage for institutional and professional services. Per patient stop-loss
protection must cover at least 90% of the referral costs that: exceed the
following threshold, or attachment point, amounts in the chart below:

<TABLE>
<CAPTION>
                   Combined Institutionals    Institutionals          Professional
Panel Size         Professional Deductible     Deductible               Deductible
----------------   -----------------------    -------------           ------------
<S>                <C>                        <C>                     <C>
1-1000                 $  6,000                  $ 10,000               $  3.000
1,001-5000             $ 30.000                  $ 40.000               $ 10.000
5,001 - 8.000          $ 40.000                  $ 60.000               $ 15,000
8,001 - 10.000         $ 75,000                  $100,000               $ 20,000
10,001 - 25.000        $150.000                  $200.000               $ 22,500
> 25,000                 NONE                      NONE                   NONE
</TABLE>

HCFA PIP Provider Worksheet - 10/2000                                     Page 3
<PAGE>

Name of carrier/entity(s) through which stop-loss is provided: Is this
carrier/entity:

________________________________________________   ____ stop-loss carrier
________________________________________________   ____ MCO
                                                   ___  intermediate entity
                                                   ____ physician

                                                   ____ stop-loss carrier
                                                   ____ MCO
                                                   ____ intermediate entity
                                                   ____ physician

7.) NOTE: This data is needed for ques. 7 of the PIP Disclosure Form if the
      group or physician is at substantial financial risk and the patient pool
      is 25,000 or less.

   Describe stop-loss coverage that covers the incentive arrangement(s) that is
   being reported on this Worksheet, for:

<TABLE>
<S>                                 <C>    <C>                   <C>
(A) PROFESSIONAL SERVICES:                 MEDICARE              MEDICAID
       Deductible                          ______________        _______________
       Co-insurance percent                ______________        _______________
       Maximum liability                   ______________        _______________

  DOES THIS COVER (CHECK ONE BELOW):

       Individual Physicians        YES    ______________        _______________
                                    NO     ______________        _______________
       Physician Group(s)           YES    ______________        _______________
                                    NO     ______________        _______________

  Is this slop-loss coverage:

       Individual per patient       YES    ______________        _______________
                                    NO     ______________        _______________
       Aggregate                    YES    ______________        _______________
                                    NO     ______________        _______________
</TABLE>

For professional services, describe the services or nature of costs covered
under the stop-loss, including any exclusions, variations in coverage amounts,
and whether the stop-loss coverage applies to all costs or only referral costs.
(If additional space is required for this response, attach additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

<TABLE>
<S>                                 <C>   <C>                   <C>
(B) HOSPITAL/INSTITUTIONAL SERVICES:      MEDICARE              MEDICAID
          Deductible                      ______________        _______________
          Co-insurance percent            ______________        _______________
          Maximum liability               ______________        _______________
    DOES THIS COVER (CHECK ONE BELOW):

          Individual Physicians     YES   ______________        _______________
                                    NO    ______________        _______________
          Physician Group(s)        YES   ______________        _______________
                                    NO    ______________        _______________

    Is this stop-loss coverage:

          Per patient               YES   ______________        _______________
                                    NO    ______________        _______________
          Aggregate                 YES   ______________        _______________
                                    NO    ______________        _______________
</TABLE>

HCFA PIP Provider Worksheet - 10/2000                                     Page 4
<PAGE>

For hospital/institutional services, describe the services or nature of costs
covered under the stop-loss, including any exclusions, variations in coverage
amounts, and whether the stop-loss coverage applies to all costs or only
referral costs. (If additional space is required for this response, attach
additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

(C) COMBINED (PROFESSIONAL AND INSTITUTIONAL):

<TABLE>
<S>                                <C>    <C>                   <C>
                                          MEDICARE              MEDICAID
      Deductible                          ______________        _______________
      Co-insurance percent                ______________        _______________
      Maximum liability                   ______________        _______________
DOES THIS COVER (CHECK ONE BELOW):

       Individual Physicians       YES    ______________        _______________
                                   NO     ______________        _______________
       Physician Group(s)          YES    ______________        _______________
                                   NO     ______________        _______________
Is this stop-loss coverage:

       Per patient                 YES    ______________        _______________
                                   NO     ______________        _______________
       Aggregate                   YES    ______________        _______________
                                   NO     ______________        _______________
</TABLE>

For combined forms of stop-loss, describe the services or nature of costs
covered under the stop-loss, to all costs or only referral costs. (If additional
space is required for this response, attach additional pages.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

                         DATE AND SIGNATURE INFORMATION

Printed name and title of person who completed the Worksheet:

Name of organization/employer of person listed above:___________________________

Telephone:_____________________________

I certify that the information made in this disclosure is true, complete and
current to the best of my knowledge and belief and is made in good faith.

________________________________________________________________________________
                Signature                                          Date

THE ENTITY COMPLETING THE WORKSHEET SHOULD RETAIN IT AND HAVE IT AVAILABLE FOR
REGULATORS IN THE EVENT OF AN AUDIT.

HCFA PIP Provider Worksheet - 10/2000                                     Page 5

<PAGE>
[ILLEGIBLE]

<TABLE>
<S>       <C>            <C>                 <C>               <C>         <C>
HCFA      BENEFICIARIES  PLANS & PROVIDERS       STATES        RESEARCHERS STUDENTS
-----------------------------------------------------------------------------------
MEDICARE     MEDICAID         CHIP           CUSTOMER SERVICE     FAQS      SEARCH
</TABLE>

                                           DEPARTMENT OF HEALTH & HUMAN SERVICES
                                            HEALTH CARE FINANCING ADMINISTRATION
                                           Center for Health Plans and Providers
                                                     Medicare Managed Care Group
                                               7500 Security Boulevard, C4-23-07
                                                        Baltimore, MD 21244-1850
                                                              Fax (410) 786-8933

<TABLE>
<S>         <C>
NOTE TO:    Medicare Contracting Managed Care Organizations Who are Subject to
            Physician Incentive Plan Disclosure Requirements

DATE:       December 22, 2000

FROM:       Acting Director, Medicare Managed Care Group, CHPP

SUBJECT:    Physician Incentive Plan Regulation Requirements for 2001
            Survey Requirements for 2000
</TABLE>

We are pleased to provide information on preparing your annual Physician
Incentive Plan (PIP)(1) disclosure for 2001. Most of the Medicare Managed Care
Organizations (MCOs) will be disclosing for the fifth year, so it is important
to note the changes in the 2001 disclosure.

The PIP database for 2000 includes disclosures from 299 MCOs who reported 8,092
arrangements. Using this information, we notified the MCOs who did not disclose,
whose disclosures were incomplete and those where the stop-loss did not meet
regulatory requirements. We appreciate the responses from the MCOs and trust
that compliance will be at a high level in the new disclosure year.

2001 DISCLOSURE REQUIREMENTS: Annual PIP disclosure is mandated for MCOs that
have Medicare contracts with the Health Care Financing Administration (HCFA) on
January 1, 2001. Most Medicare+Choice (M+C) organizations, demonstrations and
all Section 1876 Cost organizations are required to comply with the PIP
regulations. M+C organizations that are Private Fee For Service or Medical
Savings Account Plans and Section 1833 Health Care Prepayment Plans are not
subject to PIP.

Disclosure is required even if there are no incentive arrangements, the
arrangements carry low levels of risk, or the arrangements are the same as
previously reported to HCFA.

There are newly revised summary data forms for providers, worksheets and
instructions designed

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Requirements for 2001 Survey     Page 2 of 4
Requirements for 2000

specifically to assist your contractors in giving you information about the
incentive arrangements with subcontractors. These new forms and worksheets
are available at HCFA's web site, www.hcfa.gov/medicare/physincp/pip-info.htm.
You may elect to use them as you prepare your data for electronic disclosure to
HCFA. Be sure to maintain the documentation from your contractors so that it
will be available to regulators for verification of your data.

If arrangements with providers have not changed from the previous disclosure
year, you may request assurances from the providers that the arrangements are
substantially the same and enter the same information as last year. Again,
maintain the earlier documents and the assurances so they will be available to
regulators for verification.

MCOs must disclose the PIP arrangements that are effective January 1,2001. The
final date for submitting the completed disclosure to HCFA's contractor is APRIL
30, 2001. Medicare contractors who do not comply by this date are subject to
sanctions.

DISCLOSURE METHOD: The electronic submission is the same as last year, which
required the downloading of software and uploading of data via the Health Plan
Management System (HPMS). You will again access the HPMS through the Medicare
Data Communications Network (MDCN). Instructions for MDCN connectivity were
released in Operational Policy Letters 99.92 and 99.101. The PIP Data Entry
software will be available on the HPMS beginning January 16,2001. This site will
also include detailed instructions for entering PIP data on each screen and
submitting your disclosure electronically.

ENTERING DATA: Before you start entering data you should review the information
you receive from or about contracting and subcontracting providers who render
services to your Medicare enrollees to ensure that the information is complete
and accurate. We also suggest that you read the instructions for data entry to
become familiar with each data entry screen before you begin entering data.

An advantage of the electronic data entry is that it allows you to enter a
specific hierarchy of providers. For example, you should aggregate all medical
groups you contract with that have substantially the same incentive arrangements
and stop-loss requirements. Then you must enter the medical group-physician
arrangements only for the physicians associated with those provider groups, but
you should aggregate the physicians who have substantially the same arrangements
with the groups. The software will guide you to enter the various hierarchies of
contractual relationships within physician groups or intermediate entities.

Aggregation can save you much time in entering disclosure information. The large
number of disclosed arrangements for 1999 and 2000 included many arrangements
that could have been aggregated. We found many multiple entries by MCOs of their
direct contracts with physicians where they entered each physician separately
rather than using one entry that indicated the number of physicians who had
substantially the same arrangement.

The software is designed to inform you if an entry is incomplete and allows you
to add the additional information and edit your entries. Therefore, we urge you
to start your data entry early in 2001 so that you will have time to correct or
add data before the deadline for submission.

CHANGES IN DATA ENTRY FOR 2001: When you download and install the PIP software,
a screen will inform you of the changes. These changes are the result of
industry feedback as well as HCFA's experience with two years of electronic
disclosure. Two modifications are described below.

There is a change in the data entry related to aggregation - we now ask for the
name or 'identifier' of a provider or an aggregate of providers. This change
will allow you to name an aggregation of providers so that they can be
identified more easily. For example, if you have aggregated 12 physician groups
because they have substantially the same incentive arrangements and stop-loss
requirements, you may identify them as 'Group Red' (you can choose any
alpha/numeric identifier).

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Requirements for 2001            Page 3 of 4
[ILLEGIBLE]

You then enter "12" for the number of groups you are disclosing for that
arrangement. The advantage to this change is that if we need to contact you
about 'Group Red', you will know the group of providers to which we are
referring.

Another change is in the disclosing of stop-loss insurance amounts. You can now
enter only one amount for the individual stop-loss threshold. If the insurance
includes both professional and institutional, please select the threshold that
most closely applies to the type of risk being disclosed.

SURVEY REQUIREMENTS: The PIP Regulation requires that MCOs conduct customer
satisfaction surveys of both enrollees and disenrollees if any physician or
physician group in an MCO's network is placed at substantial risk for referral
services, as defined by regulation. Please follow the guidance below for
specific survey requirements that are dependent on an MCO's inclusion in HCFA's
national survey effort.

For [ILLEGIBLE] 876 Cost and Closed Cost Healthplans, M+C Organizations, Social
HMOs and Medicare Choices: HCFA's national administration of the Consumer
Assessments of Health Plans Study (CAHPS) is well established for enrollees and
how includes disenrollees. Therefore, HCFA has determined that these Medicare
MCOs no longer need to conduct independent surveys in order to satisfy PEP
requirements. HCFA will consider all MCOs participating in the nationally
administered CAHPS survey to be in compliance with the survey mandate in 42 CFR
422.208/210(2)

Organizations can now meet the survey disclosure requirement of the regulations
by giving Medicare enrollees a copy of the CAHPS enrollment survey results,
which are available on the Internet. Further, these MCOs will no longer need to
submit survey summaries to HCFA.

QUESTIONS: If you have questions about the PIP disclosure requirements, you may
call Sylvia Hendel at 410-786-1126, Eric Nevins at 410-786-1162 or Frank
Szeflinski at 303-844-5738. Questions about technical aspects of the disclosure
should be directed to Fu Associates at 800-220-2028. Questions about the MDCN
should be directed to Don Freeburger at 410-786-4586.

Thank you for your continued cooperation in complying with the PIP requirements.

                                   Sincerely,

                                       /s/

                                 Gary A. Bailey

                                 Acting Director

                           Medicare Managed Care Group

----------
   (1) See regulations at 42 CFR 417.479 dated March 27,1996 and December
   31, 1996. Also see 42 CFR

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Requirements for 2001 Survey     Page 4 of 4
Requirements for 2000

      422.208/210 final rule dated June 29, 2000.

      [2] For CAHPS requirements, see HCFA Operational Policy Letter 99.110,
      Reporting Requirements for Medicare Managed Care Organizations in 2000:
      HEDIS, HOS, and CAHPS, dated December 22, 1999. Also see any subsequent
      reporting requirements in Operational Policy Letters for 2001.

[LOGO] Return to Physician Incentive Plan Homepage

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 28, 2000

<TABLE>
<S>       <C>            <C>                <C>                <C>            <C>
HCFA      BENEFICIARIES  PLANS & PROVIDERS       STATES        RESEARCHERS    STUDENTS
--------------------------------------------------------------------------------------
MEDICARE     MEDICAID          CHIP         CUSTOMER SERVICE       FAQs        SEARCH
</TABLE>

                       [HCFA LOGO]                       [DEPARTMENT OF HEALTH
                                                          & HUMAN SERVICES LOGO]

http://www.hcfa.gov/medicare/physincp/00mempip.htm
<PAGE>

Physician Incentive Plan Regulation Disclosure Requirements          Page 1 of 2

<TABLE>
<S>       <C>             <C>                <C>                  <C>            <C>
HCFA      BENEFICIARIES   PLANS & PROVIDERS       STATES          RESEARCHERS    STUDENTS
-----------------------------------------------------------------------------------------
MEDICARE     MEDICAID           CHIP         CUSTOMER SERVICE         FAQs         SEARCH
</TABLE>

                         MANAGED CARE ORGANIZATION (MCO)
             PHYSICIAN INCENTIVE PLAN DISCLOSURE COMPLIANCE PACKAGE

THE FOLLOWING DOCUMENTS WILL ASSIST IN COMPLETING THE DISCLOSURE REQUIREMENTS:

                PIP DISCLOSURE FOR THE MEDICARE+CHOICE APPLICANT

              NOTE: THESE DOCUMENTS ARE REVISED AS OF OCTOBER 2000

      -     Physician Incentive Plan Disclosure Form for Medicare+Choice
            Applicants Instructions - for completing the disclosure form -
            downloadable only - Word (34,000 bytes) or PDF - revised 10/2000

      -     Disclosure Form for M+C Applicants : this form is required in the
            application for a M+C contract - downloadable only - Word (17,000
            bytes) or PDF - revised 10/2000

          REPORTING PACKAGE FOR PROVIDERS OF MANAGED CARE ORGANIZATIONS

                             WHO CONTRACT WITH HCFA

              NOTE: THESE DOCUMENTS ARE REVISED AS OF OCTOBER 2000

      -     HCFA PIP Summary Data Form for Providers: this form is for a
            provider to transmit incentive information to Managed Care
            Organizations, downloadable only - Word (17,000 bytes) or PDF -
            revised 10/2000

      -     Instructions for Providers for the HCFA PIP Summary Data Form: this
            document gives instructions for completing the Summary Data Form -
            downloadable only - Word (34,000 bytes) or PDF - revised 10/2000
            provinstructions.doc - Word - 53,000 bytes, revised 10/2000

      -     Physician Incentive Plan Worksheet for Providers: this form assists
            the provider in detailing data and calculating amount of risk that
            is needed on the Summary Data Form; it is designed to crosswalk
            with the Form - downloadable only - Word (32,000 bytes) or PDF -
            revised 10/2000

      -     Instructions for the PIP Worksheet for Providers: this gives
            instructions for completing the worksheet - downloadable only - Word
            (15,000 bytes) or PDF - revised 10/2000

[LOGO] Return to Physician Incentive Plan Information Page

[LOGO] Return to Medicare Managed Care Homepage

Last Updated December 18, 2000

<TABLE>
<S>       <C>             <C>                <C>                  <C>            <C>
HCFA      BENEFICIARIES   PLANS & PROVIDERS       STATES          RESEARCHERS    STUDENTS
-----------------------------------------------------------------------------------------
MEDICARE     MEDICAID           CHIP         CUSTOMER SERVICE         FAQs         SEARCH
</TABLE>

                       [HCFA LOGO]                       [DEPARTMENT OF HEALTH
                                                          & HUMAN SERVICES LOGO]

http://www.hcfa.gov/medicare/physincp/disclose.htm
<PAGE>

                                  APPENDIX - K
                             RECATEGORIZATION CHART

<PAGE>

                                   HUSKY A & B
                 Inpatient /Eligibility Recategorization Changes

<TABLE>
<CAPTION>
Description                                         Admitting MCO         New/Continued MCO      Responsible Entity     Reinsurance
-----------                                         -------------         -----------------      ------------------     -----------
<S>                                                 <C>                   <C>                    <C>                    <C>
HUSKY A, different MCO                                   A1                       A2                     A1                 Yes
HUSKY A to FFS                                           A1                      FFS                    FFS                 N.A.
HUSKY A to HUSKY B, same MCO                             A1                       B1                     A1                  No
HUSKY A to HUSKY B, different MCO                        A1                       B2                     A1                  No
HUSKY B, different MCO                                   B1                       B2                     B1                 N.A.
HUSKY A to disenrolled due to loss of
 eligibility                                             A1                   (infinity)                 A1                  NO
(out of Program)
HUSKY B to disenrolled due to loss of
eligibility
(Out of Program)                                         B1                   (infinity)                 B1                 N.A.
HUSKY B to A (same MCO, different coverage)              B1                       A1                     A1                 Yes
HUSKY B to A (different MCO, different coverage)         B1                       A2                     A2                 Yes
A1 = HUSKY A, MCO #1
A2 = HUSKY A, MCO #2
B1 = HUSKY B, MCO #1
B2 = HUSKY B, MCO #2
(infinity) = Disenrolled due to loss of elig.
</TABLE>

<PAGE>

                                   APPENDIX J

                             RECATEGORIZATION CHART

<PAGE>

                                   APPENDIX L

                               ABORTION REPORTING

<PAGE>

HYDE AMENDMENT CRITERIA

This report shall include all abortions, which do not meet the HYDE Amendment
criteria, which are paid by the MCO during the quarter (e.g. July 1 - September
30). These reports shall be submitted bye the 15th of the month following the
end of the quarter (e.g. October 15). The reports shall be submitted in hard
copy, signed by the COO or designee, as well as electronically to LEE VOGHEL,
Division of Fiscal Analysis.

PROCEDURE_CODE is one of the following:

<TABLE>
<S>     <C>      <C>      <C>      <C>     <C>      <C>      <C>      <C>      <C>     <C>      <C>
69.01   69.51    69.93    74.91     75.0   0940Y    3131Y    59100    59105    59106   59800    59801
29810   59811    59840    59841    59850   59851    59852    59855    59856    59857   59866
</TABLE>

AND

PRIMARY DIAGNOSIS in not one of the following:
'632    634*     636*     637*     638*

OR

PROCEDURE_CODE is one of the following:

<TABLE>
<S>     <C>      <C>      <C>      <C>     <C>    <C>     <C>      <C>      <C>
00940   03140    03150    59200    59812   59820   59821  59830    S0190    S0191
S0199   69.02    69.52    69.59     72.7   72.71  '72.79  96.49
</TABLE>

AND

PRIMARY DIAGNOSIS is between 635 And 635.99.

<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                          DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   2

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001 - 6/30/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendment 1 is
hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1 IS FURTHER AMENDED TO
      EXTEND THE CONTRACT END DATE FOR A PERIOD OF NINE (9) MONTHS THROUGH JUNE
      30, 2003.

2.    APPENDIX I WHICH SETS FORTH THE CAPITATION RATES TO BE PAID BY THE
      DEPARTMENT IN FULL CONSIDERATION OF THE CONTRACT SERVICES RENDERED BY THE
      MCO IS REPLACED WITH APPENDIX I - AMENDED ATTACHED HERETO AND INCORPORATED
      HEREIN.

3.    THE EFFECTIVE DATE OF APPENDIX I - AMENDED IS JULY 1, 2002. THE DEPARTMENT
      SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2002 TO REFLECT THE AMENDED CAPITATION RATES.

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

                            ACCEPTANCES AND APPROVALS

CONTRACTOR                                 DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT              DEPARTMENT OF SOCIAL SERVICES

/s/ Todd S. Farha                 9/30/02
------------------------------    -------  ------------------------------  ----
Signature (Authorized Official)   Date     Signature (Authorized Official) Date

<TABLE>
<S>                               <C>                 <C>                               <C>
Todd S. Farha                     CEO/President       MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
-------------------------------   -----------------   -------------------------------   -------------------
Typed Name (Authorized Official)  Title               Typed Name (Authorized Official)  Title
</TABLE>

OFFICE OF THE ATTORNEY GENERAL
--------------------------------------------------------------------------------
Attorney General (as to form)                                     Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:______________________

<PAGE>

                    CONNECTICUT DEPARTMENT OF SOCIAL SERVICES

                       AUTHORIZATION OF SIGNATURE DOCUMENT

I, Todd S. Farha, Chief Executive Officer/ President of First Choice Health
Plans of Connecticut, Inc., a corporation organized under the laws of the State
of Connecticut, hereby certify that the following is a full and true copy of a
resolution adopted at a meeting of the Board of Director of said company, duly
held on the 30th day of September, 2002:

      "RESOLVED that the Chief Executive Officer/President is hereby authorized
      to make, execute and approve on behalf of this company, any and all
      contracts and amendments and to execute and approve on behalf of this
      company, other instruments, a part of or incident to such contracts and
      amendments effective until otherwise ordered by the Board of Directors".

and I do further certify that the above resolution has not been in anyway
altered, amended or repealed, and is now in full force and effect. IN WITNESS
WHEREOF, I have hereunto set my hand and affixed the corporate seal of said
company this 30th day of September, 2002.

                                        /s/ Todd S.Farha
                                        ----------------------------
                                                Signature

                                        Chief Executive Officer/President
                                        -----------------------------------
                                                       Title

<PAGE>

[LOGO]                           STATE OF CONNECTICUT
                             DEPARTMENT OF SOCIAL SERVICES

                                  CONTRACT AMENDMENT

AMENDMENT NUMBER:   3

CONTRACT #:         093-MED-FCHP-1                    [[ILLEGIBLE] OF SOCIAL
                                                  SERVICES CONTRACTS/[ILLEGIBLE]
CONTRACT PERIOD:    08/11/2001-7/31/2003               JUN 30 [ILLEGIBLE]]

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for
the provision of services under the HUSKY A program as amended by Amendments 1
and 2 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1 AND 2 IS FURTHER AMENDED
      TO EXTEND THE CONTRACT END DATE FOR A PERIOD OF ONE (1) MONTH THROUGH JULY
      31, 2003.

2.    PART I AS AMENDED BY AMENDMENTS 1 AND 2 IS FURTHER AMENDED TO ADD A NEW
      SECTION 37 FOR COMPLIANCE PROVISIONS RELATED TO THE HEALTH INSURANCE
      PORTABILITY AND PRIVACY ACT OF 1996 ("HIPAA") AS SET FORTH ON PAGES 3
      THROUGH 8 OF THIS AMENDMENT.

3.    APPENDIX I AS AMENDED BY AMENDMENT 2 IS HEREBY FURTHER AMENDED TO EXTEND
      THE EFFECTIVE DATE OF THE CAPITATION RATES FOR A PERIOD OF ONE (1) MONTH
      FROM 6/30/03 TO 7/31/03. IF, THROUGH THE PASSAGE OF A BUDGET FOR STATE
      FISCAL YEAR ("SFY") 2004 THE CAPITATION RATES ARE TO BE REVISED EFFECTIVE
      JULY 1, 2003, THE DEPARTMENT SHALL, IN THE NEXT AMENDMENT TO THIS
      CONTRACT, AMEND THE CAPITATION RATES TO REFLECT SUCH REVISIONS AND SHALL
      MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED CAPITATION RATES.

                              HIPAA ACKNOWLEDGMENT

THE CONTRACTOR HEREIN IS A BUSINESS ASSOCIATE UNDER HIPAA:

CONTRACTOR                                   DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                DEPARTMENT OF SOCIAL SERVICES

<TABLE>
<S>                                <C>      <C>                                 <C>
/s/ Todd S. Farha                  6/26/03  /s/ Michael P. Starkowski           6/30/03
------------------------------     -------  ---------------------------------   -------
Signature (Authorized Official)    Date     Signature (Authorized Official)     Date
</TABLE>

<TABLE>
<S>                                <C>                          <C>                               <C>
Todd S. Farha                      Cheif Executive Officer      MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
--------------------------------   --------------------------   -------------------------------   --------------------
Typed Name (Authorized Official)   Title                        Typed Name (Authorized Official)  Title
</TABLE>

   [APPROVED
  JUN 25 2003
   WELLCARE
LEGAL SERVICES]
<PAGE>

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

CONTRACTOR                                     DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                  DEPARTMENT OF SOCIAL SERVICES

<TABLE>
<S>                                  <C>            <C>                                    <C>
/s/ Todd S. Farha                    6/26/03        /s/ Michael P. Starkowski              6/30/03
---------------------------------    ---------      ------------------------------         -------
 Signature (Authorized Official)     Date           Signature (Authorized Official)        Date
</TABLE>

<TABLE>
<S>                               <C>                       <C>                               <C>
/s/ Todd S. Farha                 Chief Executive officer   MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
--------------------------------  -----------------------   -------------------------------   ---------------------
Typed Name (Authorized Official)  Title                     Typed Name (Authorized Official)  Title
</TABLE>

   [APPROVED
  JUN 25 2003
   WELLCARE
LEGAL SERVICES]

OFFICE OF THE ATTORNEY GENERAL

________________________________________________________________________________
Attorney General (as to form)                               Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

<PAGE>

HIPAA Section for Purchase of Services Contracts. Part. 3/26/03

(insert Section # here for Part I) HIPAA PROVISIONS

(a.) IF THE CONTRACTOR IS A BUSINESS ASSOCIATE UNDER HIPAA, THE CONTRACTOR MUST
COMPLY WITH ALL TERMS AND CONDITIONS OF THIS SECTION OF THE CONTRACT. IF THE
CONTRACTOR IS NOT A BUSINESS ASSOCIATE UNDER HIPAA, THIS SECTION OF THE CONTRACT
DOES NOT APPLY TO THE CONTRACTOR FOR THIS CONTRACT.

(b.) The Contractor is required to safeguard the use, publication and disclosure
of information on all applicants for, and all clients who receive, services
under the contract in accordance "with all applicable federal and state law
regarding confidentiality, which includes but is not limited to the requirements
of the Health Insurance Portability and Privacy Act of 1996 ("HIPAA"), more
specifically with the Privacy Rule at 45 C.F.R. Part 160 and Part 164, subparts
A and E; and

(c.) The State of Connecticut Department named on page 1 of this Contract
(hereinafter "DEPARTMENT") is a "covered entity" as that term is defined in 45
C.F.R. Section 160.103; and

(d.) The Contractor, on behalf of the Department, performs functions that
involve the use or disclosure of "individually identifiable health information,"
as that term is defined in 45 C.F.R. Section 160.103 ; and

(e.) The Contractor is a "business associate" of the Department, as that term is
defined in 45 C.F.R. Section 160.103; and

(f.) The Contractor and the Department agree to the following in order to secure
compliance with the Health Insurance Portability and Privacy Act of 1996
("HIPAA"), more specifically with the Privacy Rule at 45 C.F.R. Part 160 and
Part 164, subparts A and E:

I.    DEFINITIONS

      A. BUSINESS ASSOCIATE. "Business Associate" shall mean the Contractor.

      B. COVERED ENTITY. "Covered Entity" shall mean the Department of the State
      of Connecticut named on page 1 of this Contract.

      C. DESIGNATED RECORD SET. "Designated Record Set" shall have the same
      meaning as the term "designated record set" in 45 C.F.R. Section 164.501.

      D. INDIVIDUAL. "Individual" shall have the same meaning as the term
      "individual"' in 45 C.F.R. 164.501 and shall include a person who
      qualifies as a personal representative as defined in 45 C.F.R. Section
      164.502(g).

<PAGE>

      E. PRIVACY RULE. "Privacy Rule" shall mean the Standards for Privacy of
      Individually Identifiable Health Information at 45 C.F.R. part 160 and
      parts 164, subparts A and E.

      F. PROTECTED HEALTH INFORMATION. "Protected Health Information" or "PHI"
      shall have the same meaning as the term "protected health information" in
      45 C.F.R. Section 164.501, limited to information created or received by
      the Business Associate from or on behalf of the Covered Entity.

      G. REQUIRED BY LAW. "Required by Law" shall have the same meaning as the
      term "required by law" in 45 C.F.R. Section 164.501.

      H. SECRETARY. "Secretary" shall mean the Secretary of the Department of
      Health and Human Services or his designee.

      I. MORE STRINGENT. "More stringent" shall have the same meaning as the
      term "more stringent" in 45 C.F.R. Section 160.103.

      J. SECTION OF CONTRACT. "(T)his Section of the Contract" refers to the
      HIPAA Provisions stated herein, in their entirety.

II.   OBLIGATIONS AND ACTIVITIES OF BUSINESS ASSOCIATE

      A. Business Associate agrees not to use or disclose PHI other than as
      permitted or required by this Section of the Contract or as Required by
      Law

      B. Business Associate agrees to use appropriate safeguards to prevent use
      or disclosure of PHI other than as provided for in this Section of the
      Contract.

      C. Business Associate agrees to mitigate, to the extent practicable, any
      harmful effect that is known to the Business Associate of a use or
      disclosure of PHI by Business Associate in violation of this Section of
      the Contract.

      D. Business Associate agrees to report to Covered Entity any use or
      disclosure of PHI not provided for by this Section of the Contract of
      which it becomes aware.

      E. Business Associate agrees to insure that any agent, including a
      subcontractor, to whom it provides PHI received from, or created or
      received by Business Associate, on behalf of the Covered Entity, agrees to
      the same restrictions and conditions that apply through this Section of
      the Contract to Business Associate with respect to such information.

      F. Business Associate agrees to provide access, at the request of the
      Covered Entity, and in the time and manner a agreed to by the parties, to
      PHI in a

                                       2
<PAGE>

      Designated Record Set, to Covered Entity or, as directed by Covered
      Entity, to an Individual in order to meet the requirements under 45 C.F.R.
      Section 164.524.

      G. Business Associate agrees to make any amendments to PHI in a Designated
      Record Set that the Covered Entity directs or agrees to pursuant to 45
      C.F.R. Section 164.526 at the request of the Covered Entity, and in the
      time and manner agreed to by the parties.

      H. Business Associate agrees to make internal practices, books, and
      records, including policies and procedures and PHI, relating to the use
      and disclosure of PHI received from, or created or received by, Business
      Associate on behalf of Covered Entity, available to Covered Entity or to
      the Secretary in a time and manner agreed to by the parties or designated
      by the Secretary, for purposes of the Secretary determining Covered
      Entity's compliance with the Privacy Rule.

      I. Business Associate agrees to document such disclosures of PHI and
      information related to such disclosures as would be required for Covered
      Entity to respond to a request by an Individual for an accounting of
      disclosures of PHI in accordance with 45 C.F.R. Section 164.528.

      J. Business Associate agrees to provide to Covered Entity, in a time and
      manner agreed to by the parties, information collected in accordance with
      paragraph I of this Section of the Contract, to permit Covered Entity to
      respond to a request by an Individual for an accounting of disclosures of
      PHI in accordance with 45 C.F.R. Section 164.528.

      K. Business Associate agrees to comply with any state law that is more
      stringent than the Privacy Rule.

III.  PERMITTED USES AND DISCLOSURES BY BUSINESS ASSOCIATE

      A. GENERAL USE AND DISCLOSURE PROVISIONS: Except as otherwise limited in
      this Addendum, Business Associate may use or disclose PHI to perform
      functions, activities, or services for, or on behalf of, Covered Entity as
      specified in this Contract, provided that such use or disclosure would not
      violate the Privacy Rule if done by Covered Entity or the minimum
      necessary policies and procedures of the Covered Entity.

      B. SPECIFIC USE AND DISCLOSURE PROVISIONS:

            1. Except as otherwise limited in this Section of the Contract,
         Business Associate may use PHI for the proper management and
         administration of Business Associate or to carry out the legal
         responsibilities of Business Associate.

                                       3
<PAGE>

            2. Except as otherwise limited in this Section of the Contract,
         Business Associate may disclose PHI for the proper management and
         administration of Business Associate, provided that disclosures are
         Required by Law, or Business Associate obtains reasonable assurances
         from the person to whom the information is disclosed that it will
         remain confidential and used or further disclosed only as Required by
         Law or for the purpose for which it was disclosed to the person, and
         the person notifies Business Associate of any instances of which it is
         aware in which the confidentiality of the information has been
         breached.

            3. Except as otherwise limited in this Section of the Contract,
         Business Associate may use PHI to provide Data Aggregation services to
         Covered Entity as permitted by 45 C.F.R. Section 154.514(e)(2)(i)(B).

IV.   OBLIGATIONS OF COVERED ENTITY

      A. Covered Entity shall notify Business Associate of any limitations in
      its notice of privacy practices of Covered Entity, in accordance with 45
      C.F.R. 164.520, or to the extent that such limitation may affect Business
      Associate's use or disclosure of PHI.

      B. Covered Entity shall notify Business Associate of any changes in, or
      revocation of, permission by Individual to use or disclose PHI, to the
      extent that such changes may affect Business Associate's use or disclosure
      of PHI.

      C. Covered Entity shall notify Business Associate of any restriction to
      the use or disclosure of PHI that Covered Entity has agreed to in
      accordance with 45 C.F.R. Section 164.522, to the extent that such
      restriction may affect Business Associate's use or disclosure of PHI.

V.    PERMISSIBLE REQUESTS BY COVERED ENTITY

      Covered Entity shall not request Business Associate to use or disclose PHI
      in any manner that would not be permissible under the Privacy Rule if done
      by the Covered Entity, except that Business Associate may use and disclose
      PHI for data aggregation, and management and administrative activities of
      Business Associate, as permitted under this Addendum.

VI.   TERM AND TERMINATION

      A. TERM. The Term of this Section of the Contract shall be effective as of
      the date the Contract is effective and shall terminate when all of the PHI
      provided by Covered Entity to Business Associate, or created or received
      by Business Associate on behalf of Covered Entity, is destroyed or
      returned to Covered Entity, or, if it is infeasible to return or destroy
      PHI, protections are extended to such information, in accordance with the
      termination provisions in this Section.

                                       4
<PAGE>

      B. TERMINATION FOR CAUSE. Upon Covered Entity's knowledge of a material
      breach by Business Associate, Covered Entity shall either:

         1. Provide an opportunity for Business Associate to cure the breach or
         end the violation and terminate the Contract if Business Associate does
         not cure the breach or end the violation within the time specified by
         the Covered Entity; or

         2. Immediately terminate the Contract if Business Associate has
         breached a material term of his Section of the Contract and cure is not
         possible; or

         3. If neither termination nor cure is feasible, Covered Entity shall
         report the violation to the Secretary.

      C. EFFECT OF TERMINATION.

         1. Except as provided in paragraph (2) of this subsection C, upon
         termination of this Contract, for any reason, Business Associate shall
         return or destroy all PHI received from Covered Entity, or created or
         received by Business Associate on behalf of Covered Entity. This
         provision shall apply to PHI that is in the possession of
         subcontractors or agents of Business Associate. Business Associate
         shall retain no copies of the PHI.

         2. In the event that Business Associate determines that returning or
         destroying the PHI is infeasible, Business Associate shall provide to
         Covered Entity notification of the conditions that make return or
         destruction infeasible. Upon documentation by Business Associate that
         return of destruction of PHI is infeasible, Business Associate shall
         extend the protections of this Section of the Contract to such PHI and
         limit further uses and disclosures of PHI to those purposes that make
         return or destruction infeasible, for as long as Business Associate
         maintains such PHI. Infeasibility of the return or destruction of PHI
         includes, but is not limited to, requirements under state or federal
         law that the Business Associate maintains or preserves the PHI or
         copies thereof.

VII.  MISCELLANEOUS PROVISIONS

      A. REGULATORY REFERENCES. A reference in this Section of the Contract to a
      section in the Privacy Rule means the section as in effect or as amended.

      B. AMENDMENT. The Parties agree to take such action as in necessary to
      amend this Section of the Contract from time to time as is necessary for
      Covered

                                       5
<PAGE>

      Entity to comply with requirements of the Privacy Rule and the Health
      Insurance Portability and Accountability Act of 1996, Pub. L. No. 104-191.

      C. SURVIVAL. The respective rights and obligations of Business Associate
      under Section VI, Subsection C of this Section of the Contract shall
      survive the termination of this Contract.

      D. EFFECT ON CONTRACT Except as specifically required to implement the
      purposes of this Section of the Contract, all other terms of the contract
      shall remain in force and effect.

      E. CONSTRUCTION. This Section of the Contract shall be construed as
      broadly as necessary to implement and comply with the Privacy Standard.
      Any ambiguity in this Section of the Contract shall be resolved in favor
      of a meaning that complies, and is consistent with, the Privacy Standard.

      F. DISCLAIMER. Covered Entity makes no warranty or representation that
      compliance with this Section of the Contract will be adequate or
      satisfactory for Business Associate's own purposes. Covered Entity shall
      not be liable to Business Associate for any claim, loss or damage related
      to or arising from the unauthorized use or disclosure of PHI by Business
      Associate or any of its officers, directors, employees, contractors or
      agents, or any third party to whom Business Associate has disclosed PHI
      pursuant to paragraph II D of this Addendum. Business Associate is solely
      responsible for all decisions made, and actions taken, by Business
      Associate regarding the safeguarding, use and disclosure of PHI within its
      possession, custody or control.

      G. INDEMNIFICATION. The Business Associate shall indemnify and hold the
      Covered Entity harmless from and against all claims, liabilities,
      judgments, fines, assessments, penalties, awards, or other expenses, of
      any kind or nature whatsoever, including, without limitation, attorney's
      fees, expert witness fees, and costs of investigation, litigation or
      dispute resolution, relating to or arising out of any violation by the
      Business Associate and its agents, including subcontractors, of any
      obligation of Business Associate and its agents, including subcontractors,
      under this Section of the Contract.

                                       6
<PAGE>

THIS MUST BE INSERTED INTO EACH PURCHASE OF SERVICES CONTRACT ON THE SIGNATURE
PAGE:

THE CONTRACTOR HEREIN IS / IS NOT A BUSINESS ASSOCIATE UNDER HIPAA*:
--------------------------------------------------------------------------------
                                 (circle one**)

/S/ Todd S. Farha
---------------------------------------        ---------------------------------
AUTHORIZED SIGNATORY FOR THE CONTRACTOR        AUTHORIZED SIGNATORY FOR
                                               (AGENCY ABBREVIATION)

TODD S. FARHA, CHIEF EXECUTIVE OFFICER
-------------------------------------          ---------------------------------
(TYPED NAME AND TITLE)                         (TYPED NAME AND TITLE)

6/26/03
-------------------------------------          ---------------------------------
DATE                                           DATE

[APPROVED
JUN 25 2003
WELLCARE
LEGAL SERVICES]

* Per/ Part I, Section (whatever section of Part I this ends up to be ...) of
this contract

** Department must make this determination before Contract is signed.

                                       7
<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                         DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   4

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001 - 8/12/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT. the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2
and 3 is hereby further amended as follows:

1. PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2 AND 3 IS FURTHER AMENDED
   TO EXTEND THE CONTRACT END DATE FOR A PERIOD OF TWELVE (12) DAYS THROUGH
   AUGUST 12, 2003. THE PURPOSE OF THIS EXTENSION IS TO PERMIT TIME FOR THE
   CENTERS FOR MEDICAID AND MEDICARE SERVICES TO REVIEW THE CONTRACT TERMS TO
   BECOME EFFECTIVE AUGUST 13, 2003.

2. APPENDIX I AS AMENDED BY AMENDMENT 2 IS HEREBY FURTHER AMENDED TO EXTEND THE
   EFFECTIVE DATE OF THE CAPITATION RATES FOR A PERIOD OF TWELVE (12) DAYS FROM
   7/31/03 TO 8/12/03. IF, THROUGH THE PASSAGE OF A BUDGET FOR STATE FISCAL YEAR
   ("SFY") 2004 THe CAPITATION RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003,
   THE DEPARTMENT SHALL, IN THE NEXT AMENDMENT TO THIS CONTRACT, AMEND THE
   CAPITATION RATES TO REFLECT SUCH REVISIONS AND SHALL MAKE ANY NECESSARY
   ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003
   TO REFLECT THE REVISED CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

FIRSTCHOICE HEALTH PLAN OF CT              DEPARTMENT OF SOCIAL SERVICES

/s/ Todd S. Farha                7/24/03
--------------------------------  -------  -----------------------------    ----
Signature (Authorized Official)   Date     Signature (Authorized Official)  Date

                         CHIEF EXECUTIVE                               DEPUTY
TODD S. FARHA                OFFICER       MICHAEL P. STARKOWSKI    COMMISSIONER
-----------------------  ---------------   ----------------------   ------------
Typed Name               Title             Typed Name               Title
(Authorized Official)                      (Authorized Official)

--------------------------------------------------------------------------------
Attorney General (as to form)                                Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:__________________

<PAGE>

                               APPENDIX - Amended

PLAN NAME:
FIRSTCHOICE
CAPITATION RATES
07/01/02-08/12/03

<TABLE>
<CAPTION>
                             FAIRFIELD    HARTFORD   LITCHFIELD   MIDDLESEX    NEW HAVEN      NEW LONDON     TOLLAND        WINDHAM
                             ---------    --------   ----------   ---------    ---------      ----------     -------        -------
<S>                          <C>          <C>        <C>          <C>          <C>            <C>            <C>            <C>
UNDER ONE                     $536.44     $606.89     $605.12      $717.18      $602.97        $600.00       $724.78        $581.51
AGES 1 TO 14                  $102.32     $110.46     $110.15      $130.10      $109.79        $109.23       $131.46        $107.71
MALE -AGES 15 TO 39           $127.22     $138.42     $138.03      $162.52      $137.60        $136.94       $164.18        $135.18
FEMALE - AGES 15 TO 39        $207.77     $231.48     $230.81      $273.76      $230.00        $228.84       $276.70        $223.07
MALE - AGES 40 AND OVER       $227.33     $254.24     $253.48      $301.18      $252.59        $251.31       $304.41        $244.68
FEMALE - AGES 40 AND OVER     $218.52     $244.15     $243.42      $289.20      $242.55        $241.32       $292.32        $235.04
</TABLE>

                                  PAGE 1 of 1
                                Effective 7/1/02
<PAGE>

[LOGO]                        STATE OF CONNECTICUT
                         DEPARTMENT OF SOCIAL SERVICES

                               CONTRACT AMENDMENT

AMENDMENT NUMBER:   5

CONTRACT #:         093-MED-FCHP-1

CONTRACT PERIOD:    08/11/2001-9/30/2003

CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT

CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2, 3
and 4 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3 AND 4 IS FURTHER
      AMENDED TO EXTEND THE CONTRACT END DATE FROM AUGUST 12, 2003 TO SEPTEMBER
      30, 2003.

2.    PART II "GENERAL CONTRACT TERMS FOR MCOs" IS DELETED IN ITS ENTIRETY AND
      REPLACED WITH PART II "GENERAL CONTRACT TERMS FOR MCOs" DATED AUGUST 13,
      2003 PAGES 1 THROUGH 115 ATTACHED HERETO AND INCORPORATED HEREIN BY
      REFERENCE.

3.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOs" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 ATTACHED HERETO AND INCORPORATED
      HEREIN BY REFERENCE SHALL TERMINATE ON THE DATE THAT THIS AMENDMENT
      EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT AMENDMENT TO EXTEND THE
      EFFECTIVE DATE OF THE CONTRACT.

4.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THEY SHALL NEGOTIATE
      A REIMBURSEMENT PROCESS IN THE EVENT OF A COURT DECISION REQUIRING FUTURE
      RE-ENROLLMENT OF AND HUSKY ADULT WITH INCOME ABOVE ONE HUNDRED PERCENT
      (100%) OF THE FEDERAL POVERTY LIMIT WHO CURRENTLY QUALIFIES FOR HUSKY
      SOLELY ON THE BASIS OF THE INJUNCTION PENDING APPEAL IN RABIN v. DSS.

5.    APPENDIX A IS DELETED IN ITS ENTIRETY AND REPLACED WITH APPENDIX A DATED
      AUGUST 13, 2003 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

6.    APPENDIX G IS DELETED IN ITS ENTIRETY AND REPLACED WITH APPENDIX G DATED
      AUGUST 13, 2003 ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

7.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 8/12/03 TO SEPTEMBER 30, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

8.    A NEW APPENDIX L (TEMPLATES FOR PHARMACY REPORTS) DATED AUGUST 13, 2003
      ATTACHED HERETO AND INCORPORATED HEREIN BY REFERENCE.

<PAGE>

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract, except those explicitly changed or described above
by this amendment, shall remain in full force and effect.

CONTRACTOR                                   DEPARTMENT

FIRSTCHOICE HEALTH PLAN OF CT                DEPARTMENT OF SOCIAL SERVICES

/s/: Todd S. Farha        8/11/03    /S/: Michael P. Starkowski       8/12/03
-----------------------   -------    -----------------------------    -------
Signature                 Date       Signature (Authorized Official)  Date
(Authorized Official)

                        CHIEF EXECUTIVE                             DEPUTY
TODD S.FARHA                OFFICER      MICHAEL P.STARKOWSKI    COMMISSIONER
----------------------  ---------------  ----------------------  ------------
Typed Name              Title            Typed Name              Title
(Authorized Official)                    (Authorized Official)

[APPROVED
AUG 11 2003
WELLCARE
LEGAL SERVICES]

OFFICE OF THE ATTORNEY GENERAL

--------------------------------------------------------------------------------
Attorney General (as to form)                              Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________
<PAGE>

                       ASSISTANT SECRETARY'S CERTIFICATE

      I, David Smith , the duly elected Assistant Secretary of FirstChoice
HealthPlans of Connecticut, Inc., a corporation organized under the laws of the
State of Connecticut (the "Corporation"), do hereby certify that the following
is a full and true copy of a resolution adopted at a meeting of the Board of
Directors of said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto executed the Assistant Secretary's
Certificate this 11th day of August 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/: David Smith
                                    --------------------------
                                    By: David Smith, Assistant Secretary

<PAGE>

August 13, 2003

PART I: STANDARD CONNECTICUT CONTRACT TERMS

PART II: GENERAL CONTRACT TERMS FOR MCOS

1.    DEFINITIONS

2.    DELEGATIONS OF AUTHORITY

3.    FUNCTIONS AND DUTIES OF THE MCO
      3.01  Provision of Services
      3.02  Non-Discrimination
      3.03  Member Rights
      3.04  Gag Rules
      3.05  Coordination and Continuation of Care
      3.06  Emergency Services
      3.07  Geographic Coverage
      3.08  Choice of Health Professional
      3.09  Provider Network
      3.10  Network Adequacy and Maximum Enrollment Levels
      3.11  Provider Contracts
      3.12  Provider Credentialing and Enrollment
      3.13  Second Opinions, Specialist Providers and the Referral Process
      3.14  PCP Selection, Scheduling and Capacity
      3.15  Women's Health, Family Planning Access and Confidentiality
      3.16  Pharmacy Access
      3.17  Mental Health and Substance Abuse Access
      3.18  Children's Issues and EPSDT Compliance
      3.19  Special Services for Children/Reinsurance
      3.20  Prenatal Care
      3.21  Dental Care
      3.22  Other Access Features
      3.23  Pre-Existing Conditions
      3.24  Newborn Enrollment
      3.25  Acute Care Hospitalization, Nursing Home or Subacute Stay at Time of
            Enrollment or Disenrollment
      3.26  Open Enrollment
      3.27  Special Disenrollment
      3.28  Linguistic Access
      3.29  Services to Members
      3.30  Information to Potential Members
      3.31  Marketing Requirements
      3.32  Health Education
      3.33  Internal and External Quality Assurance
      3.34  Inspection of Facilities
      3.35  Examination of Records
      3.36  Medical Records
      3.37  Audit Liabilities

<PAGE>

August 13 2003

      3.38  Clinical Data Reporting
      3.39  Utilization Management
      3.40  Financial Records
      3.41  Insurance
      3.42  Third Party Coverage
      3.43  Coordination of Benefits and Delivery of Services
      3.44  Passive Billing
      3.45  Subcontracting for Services
      3.46  Timely Payment of Claims
      3.47  Copayment Limits and Member Charges for Noncovered Services
      3.48  Insolvency Protection
      3.49  Acceptance of DSS Rulings
      3.50  Policy Transmittals
      3.51  Fraud and Abuse
      3.52  Persons with Special Health Care Needs

4.    FUNCTIONS AND DUTIES OF THE DEPARTMENT
      4.01  Eligibility Determinations
      4.02  Populations Eligible to Enroll
      4.03  Enrollment/Disenrollment
      4.04  Default Enrollment
      4.05  Lock-In
      4.06  Capitation Payments to MCO
      4.07  Retroactive Adjustments
      4.08  Information
      4.09  Ongoing MCO Monitoring
      4.10  Utilization Review and Control

5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS
      5.01  Competition Not Restricted
      5.02  Nonsegregated Facilities
      5.03  Offer of Gratuities
      5.04  Employment/Affirmative Action Clause
      5.05  Confidentiality
      5.06  Independent Capacity
      5.07  Liaison
      5.08  Freedom of Information
      5.09  Waivers
      5.10  Force Majeure
      5.11  Financial Responsibilities of the MCO
      5.12  Capitalization and Reserves
      5.13  Provider Compensation
      5.14  Members Held Harmless
      5.15  Compliance with Applicable Laws, Rules and Policies
      5.16  Advance Directives
      5.17  Federal Requirements and Assurances

                                    Part II
                                       2
<PAGE>

August 13 2003

      5.18  Civil Rights
      5.19  Statutory Requirements
      5.20  Disclosure of Interlocking Relationships
      5.21  DEPARTMENT'S Data Files
      5.22  Changes Due to a Section 1115 or 1915(b) Freedom of Choice
      5.23  Hold Harmless
      5.24  Executive Order Number 16

6.    GRIEVANCE SYSTEM AND PROVIDER DENIALS
      6.01  Grievances
      6.02  Notices of Action and Continuation of Services
      6.03  Appeals and Administrative Hearing Processes
      6.04  Expedited Appeals and Administrative Hearings
      6.05  Provider Appeal Process

7.    CORRECTIVE ACTION AND CONTRACT TERMINATION
      7.01  Performance Review
      7.02  Settlement of Disputes
      7.03  Administrative Errors
      7.04  Suspension of New Enrollment
      7.05  Monetary Sanctions
      7.06  Temporary Management
      7.07  Payment Withhold, Class C Sanctions or Termination for Clause
      7.08  Emergency Services Denials
      7.09  Termination for Default
      7.10  Termination for Mutual Convenience
      7.11  Termination for the MCO Bankruptcy
      7.12  Termination for Unavailability of Funds
      7.13  Termination for Collusion in Price Determination
      7.14  Termination Obligations of Contracting Parties
      7.15  Waiver of Default

8.    OTHER PROVISIONS
      8.01  Severability
      8.02  Effective Date
      8.03  Order of Precedence
      8.04  Correction of Deficiencies
      8.05  This is not a Public Works Contract

                                    Part II
                                       3
<PAGE>

August 13   2003

9.    APPENDICES
      A. Covered Benefits HUSKY A Covered Benefits
      B. Provider Credentialing and Enrollment Requirements
      C. EPSDT Periodicity Schedule
      D. DSS Marketing Guidelines
      E. Quality Assurance Program for Managed Care
      F. Unaudited Quarterly Financial Reports
      G. Medicaid Managed Care Eligibility Categories
      H. Managed Care Policy Transmittals
      I. Capitation Payment Amounts
      J. Physician Incentive Payments
      K. Recategorization Chart
      L. Quarterly Pharmacy Report
      M. Non-Hyde Amendment Abortions

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August 13 2003

PART I: STANDARD CONNECTICUT CONTRACT TERMS

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August 13, 2003

PART II: GENERAL CONTRACT TERMS FOR MCOs

1.    DEFINITIONS

As used throughout this contract, the following terms shall have the meanings
set forth below.

ABUSE: Provider and/or MCO practices that are inconsistent with sound fiscal,
business or medical practices and that result in an unnecessary cost to the
HUSKY A program, or the reimbursement for services that are not medically
necessary or that fail to meet professionally recognized standards for health
care, or a pattern of failing to provide medically necessary services required
by this contract. Member practices that result in unnecessary cost to the HUSKY
A program also constitute abuse.

ACS OR ACS STATE HEALTHCARE: The organization contracted by the DEPARTMENT to
perform certain administrative and operational functions for the HUSKY A and B
programs. Contracted functions include HUSKY application processing, HUSKY B
eligibility determinations, passive billing and enrollment brokering.

ACTION: The denial or limited authorization of a requested service, including
the type or level of service; the reduction, suspension, or termination of a
previously authorized service; the denial, in whole or in part, of payment for a
service; the failure to provide services in a timely manner, as defined by the
DEPARTMENT; the failure of an MCO to act within the timeframes for authorization
decisions set forth in this Contract.

ADVANCE DIRECTIVE: A written instruction, such as a living will or durable power
of attorney for health care, recognized under Connecticut law, relating to the
provision of health care when the individual is incapacitated.

AGENT: An entity with the authority to act on behalf of the DEPARTMENT.

APPEAL: A request to the MCO from a Member for a formal review of an MCO action.

CAPITATION RATE: The amount paid per Member by the DEPARTMENT to each Managed
Care Organization (MCO) on a monthly basis.

CAPITATION PAYMENT: The individualized monthly payment made by the DEPARTMENT
to the MCO on behalf of Members.

CMS: Centers for Medicare & Medicaid Services (CMS), a division within the
United States Department of Health and Human Services. This division was
formerly known as HCFA, the Health Care Financing Administration.

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August 13 2003

CLEAN CLAIM: A bill for service(s) or good(s), a line item of services or all
services and/or goods for a recipient contained on one bill which can be proces-
sed without obtaining additional information from the provider of service(s)or a
third party. A clean claim does not include a claim from a provider who is under
investigation for fraud or abuse or a claim under review for medical necessity.

COLD CALL MARKETING: Any unsolicited personal contact by the MCO with a
potential Member for the purpose of marketing.

COMMISSIONER: The Commissioner of the Department of Social Services, as defined
in Section 17b-3 of the Connecticut General Statutes.

CONSULTANT: A corporation, company, organization or person or their affiliates
retained by the DEPARTMENT to provide assistance in this project or any other
project, not the MCO or subcontractor.

CONTRACT ADMINISTRATOR: The DEPARTMENT employee responsible for fulfilling the
administrative responsibilities associated with this managed care project.

CONTRACT SERVICES: Those services which the MCO is required to provide to
Members under this contract.

DATE OF APPLICATION: The date on which a completed application for the HUSKY A
program is received by the DEPARTMENT or its agent, containing the applicant's
signature.

DAY: Except where the term business days is expressly used, all references in
this contract will be construed as calendar days.

DEPARTMENT OR DSS: The Department of Social Services, State of Connecticut.

EMERGENCY OR EMERGENCY MEDICAL CONDITION: A medical condition manifesting itself
by acute symptoms of sufficient severity (including severe pain) such that a
prudent layperson, who possesses an average knowledge of health and medicine,
could reasonably expect the absence of immediate medical attention to result in
placing the health of the individual (or with respect to a pregnant woman, the
health of the woman or her unborn child) in serious jeopardy, serious impairment
to body functions or serious dysfunction of any body organ or part.

EMERGENCY SERVICES: Covered inpatient and outpatient services that are: 1)
furnished by a provider that is qualified to furnish Medicaid services; and 2)
needed to evaluate or stabilize an emergency medical condition. Such services
shall include, but not be limited

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August 13 2003

to, behavioral health and detoxification needed to evaluate or stabilize an
emergency medical condition that is found to exist using the prudent layperson
standard.

EARLY AND PERIODIC SCREENING, DIAGNOSIS AND TREATMENT (EPSDT) CASE MANAGEMENT
SERVICES: Services such as making and facilitating referrals and development
and coordination of a plan of services that will assist Members under twenty-one
(21) years of age in gaining access to needed medical, social, educational, and
other services.

EPSDT DIAGNOSTIC AND TREATMENT SERVICES: All health care, diagnostic services,
and treatment necessary to correct or ameliorate defects and physical and mental
illnesses and conditions discovered by an interperiodic or periodic EPSDT
screening examination.

EPSDT SCREENING SERVICES: Comprehensive, periodic health examinations for
Members under the age of twenty-one (21) provided in accordance with the
requirements of the federal Medicaid statute at 42 U.S.C. Section 1396d(r)(l).

EPSDT SERVICES: Comprehensive child health care services to Members under
twenty-one (21) years of age, including all medically necessary prevention,
screening, diagnosis and treatment services listed in Section 1905(r) of the
Social Security Act.

EXTERNAL QUALITY REVIEW ORGANIZATION (EQRO): An entity responsible for
conducting reviews of the quality outcomes, timeliness of the delivery of care
and access to items and services for which the MCO is responsible under this
contract.

FORMULARY: A list of selected pharmaceuticals determined to be the most useful
and cost effective for patient care, developed by a pharmacy and therapeutics
committee at the MCO.

FQHC-SPONSORED MCO: An MCO that is more than fifty (50) percent owned by
Connecticut Federally Qualified Health Centers, certified by the Department of
Social Services to enroll Medicaid Members.

FRAUD: Intentional deception or misrepresentation, or reckless disregard or
willful blindness, by a person or entity with the knowledge that the deception,
misrepresentation, disregard or blindness could result in some unauthorized
benefit to himself or some other person, including any act that constitutes
fraud under applicable federal or state law.

GRIEVANCE: An expression of dissatisfaction about the MCO on any matter other
than an "action" as defined herein. Possible subjects for grievances include,
but are not limited to, the quality of care or services provided by the MCO and
aspects of interpersonal relationships such as rudeness of a provider or an MCO
employee, or failure to respect a Member's rights.

HEALTH EMPLOYER DATA INFORMATION SET (HEDIS): A standardized performance
measurement tool that enables users to evaluate the quality of different MCOs
based on

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August 13 2003

the following categories: effectiveness of care; MCO stability; use of services;
cost of care; informed health care choices; and MCO descriptive information.

HHS: The United States Department of Health and Human Services.

HUSKY, PART A OR HUSKY A: For purposes of this contract, HUSKY A includes all
those coverage groups previously covered in Connecticut Access, subject to
expansion of eligibility groups pursuant to Section 17b-266 of the Connecticut
General Statutes.

IN-NETWORK PROVIDERS OR NETWORK PROVIDERS: Providers who have contracted with
the MCO to provide services to Members.

LOCK-IN: Limitations on Member changes of managed care plans for a period of
time, not to exceed twelve (12) months.

MANAGED CARE ORGANIZATION (MCO): The organization signing this agreement with
the Department of Social Services.

MARKETING: Any communication from an MCO to a Medicaid recipient who is not
enrolled in that entity, that can be reasonably interpreted as intended to
influence the recipient to enroll or reenroll in that particular MCO or either
to not enroll in, or disenroll from, another MCO.

MARKETING MATERIALS: Any materials produced in any medium, by or on behalf
of an MCO that can reasonably be interpreted as intended to market to potential
Members.

MEDICAID: The Connecticut Medical Assistance Program operated by the Connecticut
Department of Social Services under Title XIX of the Federal Social Security
Act, and related State and Federal rules and regulations.

MEDICAID PROGRAM PROVIDER MANUALS: Service-specific documents created by
Connecticut Medicaid to describe policies and procedures applicable to the
Medicaid program generally and that service specifically.

MEDICAL APPROPRIATENESS OR MEDICALLY APPROPRIATE: Health care that is provided
in a timely manner and meets professionally recognized standards of acceptable
medical care; is delivered in the appropriate medical setting; and is the least
costly of multiple, equally-effective alternative treatments or diagnostic
modalities.

MEDICALLY NECESSARY/MEDICAL NECESSITY: Health care provided to correct or
diminish the adverse effects of a medical condition or mental illness; to assist
an individual in attaining or maintaining an optimal level of health, to
diagnose a condition or prevent a medical condition from occurring.

MEMBER: For the purposes of HUSKY A, a Medicaid client who has been certified by
the State as eligible to enroll under this contract, and whose name appears on
the MCO

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August 13 2003

enrollment information which the DEPARTMENT will transmit to the MCO every month
in accordance with an established notification schedule.

NATIONAL COMMITTEE FOR QUALITY ASSURANCE (NCQA): NCQA is a not-for-profit
organization that develops and defines quality and performance measures for
managed care, thereby providing an external standard of accountability.

OUT-OF-NETWORK PROVIDER: A provider that has not contracted with the MCO.

PASSIVE BILLING: Automatic capitation payments generated by the DEPARTMENT or
its agent based on enrollment.

PEER REVIEW ORGANIZATION (PRO): A professional medical organization which
conducts peer review of medical care certified by HCFA or CMS.

PHARMACY BENEFITS MANAGER (PBM): An entity which, through an arrangement with
the MCO, is responsible for managing or arranging for one or more of the
Medicaid pharmacy services provided by the MCO pursuant to this contract.

PHARMACY LOCK-IN: An optional MCO program, subject to approval by the
DEPARTMENT, to restrict certain Members to a specific pharmacy in order to
monitor services and reduce unnecessary or inappropriate utilization.

POST-STABILIZATION SERVICES: Covered services related to an emergency medical
condition that are provided after a Member is stabilized in order to maintain
the stabilized condition, or under the circumstances described in 42 CFR
422.114(3), to improve or resolve the Member's condition.

POTENTIAL MEMBER: A Medicaid recipient who is subject to enrollment in a managed
care organization but is not yet a Member of a specific MCO.

PRIMARY CARE PROVIDER (PCP): A licensed health care professional responsible for
performing or directly supervising the primary care services of Members.

PRIOR AUTHORIZATION: The process of obtaining prior approval as to the medical
necessity or appropriateness of a service or plan of treatment.

RISK: The possibility of monetary loss or gain by the MCO resulting from service
costs exceeding or being less than payments made to it by the DEPARTMENT.

ROUTINE CASES: A symptomatic situation (such as a chronic back condition) for
which the Member is seeking care, but for which treatment is neither of an
emergency nor an urgent nature.

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August 13 2003

SUBCONTRACT: Any written agreement between the MCO and another party to fulfill
any requirements of this contract, except a written agreement between the MCO
and a vendor.

SUBCONTRACTOR: The party contracting with the MCO to manage or arrange for one
or more of the Medicaid services provided by the MCO pursuant to this contract,
but excluding services provided by a vendor.

THIRD-PARTY: Any individual, entity or program which is or may be liable to pay
all or part of the expenditures for Medicaid furnished under a State plan.

TITLE XIX: The provisions of 42 United States Code Section 1396 et seq.,
including any amendments thereto. (see Medicaid)

URGENT CASES: Illnesses or injuries of a less serious nature than those
constituting emergencies but for which treatment is required to prevent a
serious deterioration in the Member's health and for which treatment cannot be
delayed without imposing undue risk on the Members' well-being until the Member
is able to secure services from his/her regular physician(s).

VENDOR: Any party with which the MCO has subcontracted to provide
administrative services.

WELL-CARE VISITS: Routine physical examinations, immunizations and other
preventive services that are not prompted by the presence of any adverse medical
symptoms.

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August 13 2003

2.    DELEGATIONS OF AUTHORITY

The State of Connecticut Department of Social Services is the single state
agency responsible for administering the Medicaid program. No delegation by
either party in administering this contract shall relieve either party of
responsibility for carrying out the terms of this contract.

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August 13 2003

3.    FUNCTIONS AND DUTIES OF THE MCO

The MCO agrees to the following duties:

3.01  PROVISION OF SERVICES

a.    The MCO shall provide to individuals enrolled under this contract,
      directly or through arrangements with others, all of the covered services
      described in Appendix A of this contract.

b.    The MCO shall ensure that the services provided to Members are sufficient
      in amount, duration and scope to reasonably be expected to achieve the
      purpose for which the service is provided. The services provided under
      this contract shall be in an amount, duration and scope that is no less
      than the amount, duration and scope of services for fee-for-service Medi-
      caid clients. The MCO shall not arbitrarily deny or reduce the amount
      duration or scope of a required service solely because of the Member's
      diagnosis, type of illness or medical condition.

c.    The MCO shall ensure that utilization management/review and coverage
      decisions concerning acute or chronic care services to each Member are
      made on an individualized basis in accordance with the contractual
      definitions for Medical Appropriateness or Medically Appropriate and
      Medically Necessary or Medical Necessity at Part II Section 1, General
      Contract Terms for MCOs. The MCO shall also ensure that its contracts with
      network providers require that the decisions of network providers
      affecting the delivery of acute or chronic care services to Members are
      made in accordance with the contractual definitions for Medical
      Appropriateness or Medically Appropriate and Medically Necessary and
      Medical Necessity.

d.    The MCO shall provide twenty-four (24) hour, seven (7) day a week
      accessibility to qualified medical personnel for Members in need of urgent
      or emergency care. The MCO may provide such access to medical personnel
      through either: 1) a hotline staffed by physicians, physicians on-call or
      registered nurses; or 2) a PCP on-call system. Whether the MCO utilizes a
      hotline or PCPs on-call, Members shall gain access to medical personnel
      within thirty (30) minutes of their call. The MCO Member handbook and MCO
      taped telephone message shall instruct Members to go directly to an
      emergency room if the Member needs emergency care. If the Member needs
      urgent care and has not gained access to medical personnel within thirty
      (30) minutes, the Member shall be instructed to go to the emergency room.
      The DEPARTMENT will randomly monitor the availability of such access.

e.    Changes to Medicaid covered services mandated by Federal or State law, or
      adopted by amendment to the State Plan for Medicaid, subsequent to the
      signing of this contract will not affect the contract services for the
      term of this contract, unless (1) agreed to by mutual consent of the
      DEPARTMENT and the MCO, or

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August 13 2003

      (2) unless the change is necessary to continue federal financial
      participation, or due to action of a state or federal court of law. If
      Medicaid coverage were expanded to include new services, such services
      would be paid for via the traditional Medicaid fee-for-service system
      unless covered by mutual consent between the DEPARTMENT and the MCO (in
      which case an appropriate adjustment to the capitation rates would be
      made). If Medicaid covered services are changed to exclude services, the
      DEPARTMENT may determine that such services will no longer be covered
      under HUSKY A and the DEPARTMENT will propose a contract amendment to
      reduce the capitation rate accordingly.

      In the event that the DEPARTMENT and the MCO are unable to agree on a
      contract amendment concerning the change to Medicaid covered services, the
      DEPARTMENT and the MCO shall negotiate a termination agreement to
      facilitate the transition of the MCO's Members to another MCO within a
      period of no less than ninety (90) days.

f.    Any change regarding the provision of covered services that will become
      effective during the term of this Contract shall be implemented by the MCO
      within sixty (60) days of receiving notice of the change from the
      DEPARTMENT, unless earlier compliance is required by law.

3.02  NON-DISCRIMINATION

a.    The MCO shall comply with all Federal and State laws relating to
      non-discrimination and equal employment opportunity, including but not
      necessarily limited to the Americans with Disabilities Act of 1990, 42
      U.S.C. Section 12101 et seq.; 47 U.S.C. Section 225; 47 U.S.C. Section
      611; Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
      Section 2000e; Title IX of the Education Amendments of 1972; Title VI of
      the Civil Rights Act, 42 U.S.C. 2000d et seq.; the Civil Rights Act of
      1991; Section 504 of the Rehabilitation Act, 29 U.S.C. Section 794 et
      seq.; the Age Discrimination in Employment Act of 1975, 29 U.S.C. Sections
      621-634; regulations issued pursuant to those Acts; and the provisions of
      Executive Order 11246 dated September 26, 1965 entitled "Equal Employment
      Opportunity" as amended by Federal Executive Order 11375, as supplemented
      in the United States Department of Labor Regulations (41 CFR Part 60-1 et
      seq., Obligations of Contractors and Subcontractors). The MCO shall also
      comply with Sections 4a-60, 4a-61, 31-51d, 46a-64, 46a-71, 46a-75 and
      46a-81 of the Connecticut General Statutes.

      The MCO shall also comply with the HCFA Civil Rights Compliance Policy,
      which mandates that all Members have equal access to the best health care,
      regardless of race, color, national origin, age, sex, or disability.

      The HCFA Civil Rights Compliance Policy further mandates that the MCO
      shall ensure that its subcontractors and providers render services to
      Members in a non-discriminatory manner. The MCO shall also ensure that
      Members are not

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August 13 2003

      excluded from participation in or denied the benefits of the HUSKY
      programs because of prohibited discrimination.

      The MCO acknowledges that in order to achieve the civil rights goals set
      forth in the HCFA Civil Rights Compliance Policy, CMS has committed itself
      to incorporating civil rights concerns into the culture of its agency and
      its programs and has asked all of its partners, including the DEPARTMENT
      and the MCO, to do the same. The MCO further acknowledges that CMS will be
      including the following civil rights concerns into its regular program
      review and audit activities: collecting data on access to and
      participation of minority and disabled Members; furnishing information to
      Members, subcontractors, and providers about civil rights compliance;
      reviewing HCFA publications, program regulations, and instructions to
      assure support for civil rights; and initiating orientation and training
      programs on civil rights. The MCO shall provide to the DEPARTMENT or to
      CMS, upon request, any available data or information regarding these civil
      rights concerns.

      Within the resources available through the capitation rate, the MCO shall
      allocate financial resources to ensure equal access and prevent
      discrimination on the basis of race, color, national origin, age, sex, or
      disability.

b.    Unless otherwise specified by the contract, the MCO shall provide covered
      services to HUSKY A Members under this contract in the same manner as
      those services are provided to other Members of the MCO, although delivery
      sites, covered services and provider payment levels may vary. The MCO
      shall ensure that the locations of facilities and practitioners providing
      health care services to Members are sufficient in terms of geographic
      convenience to low-income areas, handicapped accessibility and proximity
      to public transportation routes, where available. The MCO and its
      providers shall not discriminate among Members of  HUSKY A and other
      Members of the MCO. The MCO shall ensure that its network providers offer
      hours of operation that are no less than those offered to the MCO's
      commercial members or comparable to Medicaid fee-for-service, if the
      provider serves only Medicaid Members.

c.    Nothing in this section shall preclude the implementation of a pharmacy
      lock-in program by the MCO, if such program is approved by the DEPARTMENT.

3.03  MEMBER RIGHTS

The MCO shall have written policies regarding member rights. The MCO must comply
with all applicable state and federal laws pertaining to member rights and
privacy. The MCO shall further ensure that the MCO's employees, subcontractors
and network providers consider and respect those rights when providing services
to Members.

Member rights include, but are not limited to, the following:

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August 13 2003

      1.    the right to be treated with respect and due consideration for the
            Member's dignity and privacy;

      2.    the right to receive information on treatment options and
            alternatives in a manner appropriate to the Member's condition and
            ability to understand;

      3.    the right to participate in treatment decisions, including the right
            to refuse treatment;

      4.    the right to be free from any form of restraint or seclusion as a
            means of coercion, discipline, retaliation or convenience;

      5.    the right to receive a copy of his or her medical records,
            including, if the HIPAA privacy rule applies, the right to request
            that the records be amended or corrected as allowed in 45 CFR part
            164; and

      6.    freedom to exercise the rights describe herein without any adverse
            affect on the Member's treatment by the DEPARTMENT, the MCO or the
            MCO's subcontractors or network providers.

3.04  GAG RULES

Subject to the limitations described in 42 U.S.C. Section 1396u-2(b)(3)(B) and
(C), the MCO shall not prohibit or otherwise restrict a health care provider
acting within his or her lawful scope of practice from advising or advocating on
behalf of a Member, who is a patient of the provider, for the following:

      1.    the Member's health status, medical care, or treatment options,
            including any alternative treatment that may be self-administered;

      2.    any information the Member needs in order to decide among relevant
            treatment options;

      3.    the risks, benefits and consequences of treatment of nontreatment;

      4.    the Member's right to participate in decisions regarding his or her
            health care, including, the right to refuse treatment, and to
            express preferences about future treatment decisions

This prohibition applies regardless of whether benefits for such care or
treatment are provided under this contract.

3.05  COORDINATION AND CONTINUATION OF CARE

a.    The MCO shall have systems in place to provide well-managed patient care
      which satisfies the DEPARTMENT that appropriate patient care is being
      provided, including at a minimum:

      1.    Management and integration of health care through a PCP, gatekeeper
            or other means.

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      2.    Systems to assure referrals for medically necessary specialty,
            secondary and tertiary care.

      3.    Systems to assure provision of care in emergency situations,
            including an education process to help assure that Members know
            where and how to obtain medically necessary care in emergency
            situations.

      4.    A system by which Members may obtain a covered service or services
            that the MCO does not provide or for which the MCO does not arrange
            because it would violate a religious or moral teaching of the
            religious institution or organization by which the MCO is owned,
            controlled, sponsored or affiliated.

      5.    Coordination and provision of EPSDT screening services in accordance
            with the schedules for immunizations and periodicity of well-child
            services as established by the DEPARTMENT and federal regulations.

      6.    Provide or arrange for the provision of EPSDT case management
            services for Members under twenty-one (21) years of age when the
            Member has a physical or mental health condition that makes the
            coordination of medical, social, and educational services medically
            necessary. As necessary, case management services shall include but
            not be limited to:

            a.    Assessment of the need for case management and development of
                  a plan for services;

            b.    Periodic reassessment of the need for case management and
                  review of the plan for services;

            c.    Making referrals for related medical, social, and educational
                  services;

            d.    Facilitating referrals by providing assistance in scheduling
                  appointments for health and health-related services, and
                  arranging transportation and interpreter services;

            e.    Coordinating and integrating the plan of services through
                  direct or collateral contacts with the family and those
                  agencies and providers providing services to the child;

            f.    Monitoring the quality and quantity of services being
                  provided;

            g.    Providing health education as needed; and

            h.    Advocacy necessary to minimize conflict between service
                  providers and to mobilize resources to obtain needed services.

      7.    Provide necessary coordination and case management services for
            children with special health care needs.

      8.    If notified, PCPs will participate in the review and authorization
            of Individual Education Plans for Members receiving School Based
            Child

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            Health services and Individual Family Service Plans for Members
            receiving services from the Birth to Three program.

3.06  EMERGENCY SERVICES

a.    The MCO shall provide all emergency services twenty-four (24) hours each
      day, seven (7) days a week or arrange for the provision of said services
      twenty-four (24) hours each day, seven (7) days a week through its
      provider network.

b.    The MCO shall cover and pay for emergency services without regard to prior
      authorization and regardless of whether the provider that furnishes the
      services has a contract with the MCO.

c.    The MCO shall not limit the number of emergency visits.

d.    The MCO shall cover all services necessary to determine whether or not an
      emergency condition exists, even if it is later determined that the
      condition was not an emergency medical condition.

e.    The MCO shall not retroactively deny a claim for an emergency screening
      examination because the condition, which appeared to be an emergency
      medical condition under the prudent layperson standard, turned out to be
      non-emergent in nature.

f.    If the screening examination leads to a clinical determination by the
      examining physician that an actual emergency does not exist, then the
      nature and extent of payment liability will be based on whether the Member
      had acute symptoms under the prudent layperson standard at the time of
      presentation.

g.    The MCO shall not base its determinations on what constitutes an emergency
      medical condition on a list of diagnoses or symptoms. The determination of
      whether the prudent layperson standard is met shall be made on a
      case-by-case basis. However, the MCO may determine that the emergency
      medical condition definition is met, based on a list such as ICD-9 codes.

h.    Once the individual's condition is stabilized, the MCO may require prior
      authorization for a hospital admission or follow-up care.

i.    The MCO shall cover post-stabilization services obtained either within or
      outside the MCO's provider network, under the following circumstances;

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August 13 2003

      1.    the services were pre-approved by the MCO;

      2.    the services were not pre-approved by the MCO, but administered to
            maintain the Member's stabilized condition within one hour of a
            request to the MCO for pre-approval of further post-stabilization
            care services.

j.    The MCO shall cover post stabilization services that were obtained either
      within or outside the MCO's provider network and not pre-approved, but
      administered to maintain, improve or resolve the Member's stabilized
      condition in the following circumstances:

      1.    The MCO does not respond to a request for pre-approval of such
            services within one hour;

      2.    The MCO cannot be contacted; or

      3.    The MCO and the treating physician cannot reach an agreement
            concerning the Member's care and an MCO physician is not available
            for consultation. In this circumstance, the MCO must give the
            treating physician the opportunity to consult with an MCO physician
            and the treating physician may continue with care of the patient
            until an MCO physician is reached or one of the following criteria
            are met:

            i.    An MCO physician with privileges at the treating hospital
                  assumes responsibility for the Member's care;

            ii.   an MCO physician assumes responsibility for the member's care
                  through transfer;

            iii.  The MCO and the treating physician reach an agreement
                  concerning the Member's care.

k.    If there is a disagreement between a hospital or other treating facility
      and an MCO concerning whether the Member is stable enough for discharge or
      transfer from the emergency room, the judgment of the attending
      physician(s) or the provider actually treating the Member prevails and is
      binding on the MCO. This subsection shall not apply to a disagreement
      concerning discharge or transfer following an inpatient admission. The MCO
      may establish arrangements with hospitals whereby the MCO may send one of
      its own physicians or may contract with appropriate physicians with
      appropriate emergency room privileges to assume the attending physician's
      responsibilities to stabilize, treat, and transfer the Member.

l.    When a Member's PCP or another MCO representative instructs the Member to
      seek emergency care in-network or out-of-network, the MCO is responsible
      for payment for the screening examination and for other medically
      necessary emergency services, without regard to whether the Member's
      condition meets the emergency medical condition definition.

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August 13 2003

m.    If a Member believes that a claim for emergency services has been
      inappropriately denied by the MCO, the Member may seek recourse through
      the MCO's appeal and the DEPARTMENT's administrative hearing processes.

n.    When the MCO reimburses emergency services provided by an in-network
      provider, the rate of reimbursement will be subject to the contractual
      relationship that has been negotiated with said provider. When the MCO
      reimburses emergency services provided by an out-of-network provider
      within Connecticut, the rate of reimbursement will be no less than the
      fees established by the DEPARTMENT for the Medicaid fee-for-service
      program. When the MCO reimburses emergency services provided by an
      out-of-network provider outside of Connecticut, the MCO may negotiate a
      rate of reimbursement with said provider.

o.    The MCO may not make payment for emergency services contingent upon the
      Member providing the MCO with notification either before or after
      receiving emergency services. The MCO may, however, enter into contracts
      with providers or facilities that require, as a condition of payment, the
      provider or facility to provide notification to the MCO after Members are
      present at the emergency room, assuming adequate provision is given for
      such notification.

3.07  GEOGRAPHIC COVERAGE

a.    The MCO shall serve Members statewide. The MCO shall ensure that its
      provider network includes access for each Member to PCPs,
      Obstetric/Gynecological Providers and mental health providers at a
      distance of no more than fifteen (15) miles for PCPs and
      Obstetric/Gynecological Providers and no more than twenty (20) miles for
      general dentists and mental health providers as measured by the Public
      Utility Commission. The MCO shall ensure that its provider network has the
      capacity to deliver or arrange for all the goods and services reimbursable
      under the Medicaid fee-for-service program.

b.    On a monthly basis, the MCO shall provide the DEPARTMENT or its agent with
      a list of all contracted network providers. The list shall be in a format
      and contain such information as the DEPARTMENT may specify.

PERFORMANCE MEASURE: Geographic Access. The DEPARTMENT will randomly monitor
geographic access by reviewing the mileage to the nearest town containing a PCP
for every town in which the MCO has Members.

SANCTION: In any sampling, if more than two (2) percent of Members reside in
towns beyond fifteen (15) miles of a town containing a PCP the DEPARTMENT may
impose a strike towards a Class A sanction pursuant to Section 7.05.

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3.08  CHOICE OF HEALTH PROFESSIONAL

The MCO must inform each Member about the full panel of participating providers
in its network. To the extent possible and appropriate, the MCO must offer each
Member covered under this contract the opportunity to choose among
participating providers.

3.09  PROVIDER NETWORK

a.    The MCO shall maintain a provider network capable of delivering or
      arranging for the delivery of all covered health goods and services to all
      Members. In addition, the MCO's provider network shall have the capacity
      to deliver or arrange for the delivery of all the goods and services
      reimbursable under this contract regardless of whether all of the goods
      and services are provided through direct provider contracts. The MCO shall
      submit a file of their most current provider network listing to the
      DEPARTMENT or its agent. The file shall be submitted, at a minimum, once a
      month in the format specified by the DEPARTMENT.

b.    In establishing and maintaining its provider network, the MCO shall
      consider the following:

      1.    anticipated enrollment;

      2.    expected utilization of services, taking into consideration the
            characteristics and health care needs of the specific Medicaid
            populations in the MCO;

      3.    the number and types (in terms of training, experience, and
            specialization) of providers required to furnish the contracted
            Medicaid services;

      4.    the numbers of network providers who are not accepting new Medicaid
            patients;

      5.    the geographic location of providers and Medicaid Members,
            considering distance, travel time, the means of transportation
            ordinarily used by Medicaid members, and whether the location
            provider physical access for Members with disabilities.

c.    The MCO shall notify the DEPARTMENT or its agent, in a timely manner, of
      any changes made in the MCO's provider network. The monthly file submitted
      to the DEPARTMENT or its agent shall not contain any providers who are no
      longer in the MCO's network. The DEPARTMENT will randomly audit the
      provider network file for accuracy and completeness and take corrective
      action, if the provider network file fails to meet these requirements.

d.    If the MCO declines to include a provider or group of provider in its
      network, the MCO shall give the affected provider(s) written notice of the
      reason for its decision.

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e.    The MCO shall not discriminate against providers with respect to
      participation, reimbursement, or indemnification for any provider who is
      acting within the scope of that provider's license or certification under
      applicable State law, solely on the basis of the provider's license or
      certification. This shall not be construed to prohibit the MCO from
      including providers only to the extent necessary to meet the needs of the
      MCO's Members or from establishing measures designed to maintain the
      quality of services and control costs, consistent with its
      responsibilities. This shall not preclude the MCO from using different
      reimbursement amounts for different specialties or for different
      practitioners in the same specialty.

f.    The MCO's provider selection policies and procedures shall not
      discriminate against particular providers that serve high-risk populations
      or specialize in conditions that require costly treatment.

g.    The MCO shall not employ or contract with any provider excluded from
      participation in a Federal health care program under either Section 1128
      or 1128A of the Social Security Act.

3.10  NETWORK ADEQUACY AND MAXIMUM ENROLLMENT LEVELS

a.    On a quarterly basis, except as otherwise specified by the DEPARTMENT, the
      DEPARTMENT shall evaluate the adequacy of the MCO's provider network. Such
      evaluations shall use ratios of Members to specific types of providers
      based on Medicaid fee-for-service experience in order to ensure that
      access in the MCO is at least equal to access experienced in the Medicaid
      fee-for-service program for a similar population. For each county the
      maximum ratio of Members to each provider type shall be:

      1.    adult PCPs, including general practice specialists counted at 60.8%,
            internal medicine specialists counted at 88.9%, family practice
            specialists counted at 66.9%, nurse practitioners of the appropriate
            specialties, and physician assistants, 387 Members per provider;

      2.    children's PCPs, including pediatric specialists counted at 100%,
            general practice specialists counted at 39.2%, internal medicine
            specialists counted at 11.1%, family practice specialists counted at
            33.1%, nurse practitioners of the appropriate specialties, and
            physician assistants, 301 Members per provider; obstetrics and
            gynecology providers, including obstetrics and gynecology
            specialists, nurse midwives, and nurse practitioners of the
            appropriate specialty, 835 Members per provider;

      3.    dental providers, including general and pediatric dentists counted
            at 100%, and dental hygienists counted at 50%, 486 Members per
            provider; and

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      4.    behavioral health providers, including psychiatrists, psychologists,
            social workers, and psychiatric nurse practitioners, 459 Members per
            provider.

b.    In the event that the number of Members in a given county equals or
      exceeds ninety percent (90%) of the capacity determined in accordance with
      section a noted above, the DEPARTMENT shall evaluate the adequacy of the
      MCO's network on a monthly basis.

c.    Maximum Enrollment Levels: Based on the adequacy of the MCO's provider
      network the DEPARTMENT may establish a maximum HUSKY A enrollment level
      for Members in the MCO on a county-specific basis. The DEPARTMENT shall
      provide the MCO with written notification no less than thirty (30) days
      prior to the effective date of the maximum enrollment level.

d.    Subsequent to the establishment of this limit, if the MCO wishes to change
      its maximum enrollment level in a specific county, the MCO must notify the
      DEPARTMENT thirty (30) days prior to the desired effective date of the
      change. If the change is an increase, the MCO must demonstrate an increase
      in their provider network which would allow the MCO to serve additional
      Members. To do so the MCO must provide the DEPARTMENT with the signature
      pages from the executed provider contracts and/or signed letters of
      intent. The DEPARTMENT will not accept any other proof or documentation as
      evidence of a provider's participation in the MCO's provider network. The
      DEPARTMENT shall review the existence of additional capacity for
      confirmation no later than thirty (30) days following notice by the MCO.
      An increase will be effective the first of the month after the DEPARTMENT
      confirms additional capacity exists.

e.    In the event the DEPARTMENT deems that the MCO's provider network is not
      capable of accepting additional enrollments, the DEPARTMENT may exercise
      its rights under Section 7 of this contract, including but not limited to
      the rights under Section 7.04, Suspension of New Enrollments.

SANCTION: In the event of a suspension of enrollment due to any network
deficiencies, the MCO shall submit a corrective action plan to the DEPARTMENT.
If, subsequent to the DEPARTMENT's approval of the corrective action plan, the
network deficiency is not remedied within the time specified in the corrective
action plan, or if the MCO does not develop a corrective action plan
satisfactory to the DEPARTMENT, the DEPARTMENT may impose a strike towards a
Class A sanction for each month said suspension is in effect, in accordance with
Section 7.05.

3.11  PROVIDER CONTRACTS

All contracts between the MCO and its in-network providers shall, at a minimum,
include each of the following provisions:

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a.    MCO network providers serving the Medicaid population must meet the
      minimum requirements for participation in the Medicaid program as set
      forth in the Regulations of Connecticut State Agencies, Section
      17b-262-522 to Section 17b-262-533, as applicable;

b.    MCO Members shall be held harmless for the costs of all Medicaid-covered
      goods and services provided;

c.    Providers must provide evidence of and maintain adequate malpractice
      insurance. For physicians, the minimum malpractice coverage requirements
      are $1 million per individual episode and $3 million in the aggregate;

d.    Specific terms regarding provider reimbursement as specified in Timely
      Payment of Claims, Section 3.46 of this contract;

e.    Specific terms concerning each party's rights to terminate the contract;

f.    That any risk shifted to individual providers does not jeopardize access
      to care or appropriate service delivery;

g.    The exclusion of any provider that has been suspended from the Medicare or
      Medicaid program in any state;

h.    For PCPs, the provision of "on-call" coverage through arrangements with
      other PCPs; and

i.    That the MCOs and subcontractors require in-network behavioral health
      providers to participate in the DEPARTMENT's efforts to study access,
      quality and outcome. Upon renewal of its subcontracts and other provider
      contracts, the MCO shall include a provision that failure to participate
      shall constitute cause for termination of the in-network provider's
      contract, except that MCOs which have demonstrated to the DEPARTMENT's
      satisfaction that they have ensured provider participation in such efforts
      through means other than the provider contracts need not include this
      provision. In any event, the DEPARTMENT shall reimburse providers for
      costs above and beyond nominal costs incurred by such participation.

The MCO shall not adjust or change its reimbursements to federally qualified
health centers from the rate in effect at the time the DEPARTMENT implemented
the wraparound payment procedure.

3.12  PROVIDER CREDENTIALING AND ENROLLMENT

a.    The MCO shall have written policies and procedures for the selection and
      retention of providers. The MCO shall establish minimum credentialing
      criteria

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      and shall formally re-credential all professional participating providers
      in their network at least once every two (2) years or such other time
      period as established by the NCQA. The MCO shall create and maintain a
      credentialing file for each participating provider that contains evidence
      that all credentialing requirements have been met. The file shall include
      copies of all documentation to support that credentialing criteria have
      been met, including licenses, Drug Enforcement Agency (DEA) certificates
      and provider statements regarding lack of impairment. Credentialing files
      shall be subject to inspection by the DEPARTMENT or its agent.

b.    MCO's credentialing and recredentialing criteria for professional
      providers shall include at a minimum:

      1.    Appropriate license or certification as required by Connecticut law;

      2.    Verification that providers have not been suspended or terminated
            from participation in Medicare or the Medicaid program in any state;

      3.    Verification that providers of covered services meet minimum
            requirements for Medicaid participation;

      4.    Evidence of malpractice or liability insurance, as appropriate;

      5.    Board certification or eligibility, as appropriate;

      6.    A current statement from the provider addressing:

            a.    lack of impairment due to chemical dependency/drug abuse;

            b.    physical and mental health status;

            c.    history of past or pending professional disciplinary actions,
                  sanctions, or license limitations;

            d.    revocation and suspension of hospital privileges;

            e.    a history of malpractice claims; and

      7.    Evidence of compliance with Clinical Laboratory Improvement
            Amendments of 1988 (CLIA), Public Law 100-578, 42 USC Section 1395aa
            et seq. and 42 CFR Part 493 (as amended, 68 Fed. Reg. 3639-3714
            (2003)).

c.    The MCO may require more stringent credentialing criteria. Any other
      criteria shall be in addition to the minimum criteria set forth above.

d.    Additional MCO credentialing/recredentialing criteria for PCPs shall
      include, but not be limited to:

      1.    Adherence to the principles of Ethics of the American Medical
            Association, the American Osteopathic Association or other
            appropriate professional organization;

      2.    Ability to perform or directly supervise the ambulatory primary care
            services of Members;

      3.    Membership on the medical staff with admitting privileges to at
            least one accredited general hospital or an acceptable arrangement
            with a PCP with admitting privileges;

      4.    Continuing medical education credits;

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      5.    A valid DEA certification; and

      6.    Assurances that any Advanced Practice Registered Nurses (APRN),
            Nurse Midwives or Physician Assistants are performing within the
            scope of their licensure.

e.    For purposes of credentialing and recredentialing, the MCO shall perform a
      check on all PCPs and other participating providers by contacting the
      National Practitioner Data Bank (NPDB). The DEPARTMENT will notify the MCO
      immediately if a provider under contract with the MCO is subsequently
      terminated or suspended from participation in the Medicare or Medicaid
      programs. Upon such notification from the DEPARTMENT or any other
      appropriate source, the MCO shall immediately act to terminate the
      provider from participation in its network.

f.    The MCO may delegate credentialing functions to a subcontractor. The MCO
      is ultimately responsible and accountable to the DEPARTMENT for compliance
      with the credentialing requirements. The MCO shall demonstrate and
      document to the DEPARTMENT the MCO's significant oversight of its
      subcontractors performing any and all provider credentialing, including
      facility or delegated credentialing. The MCO and any such entity shall be
      required to cooperate in the performance of financial, quality or other
      audits conducted by the DEPARTMENT or its agent(s). Any subcontracted
      entity shall maintain a credentialing file for each in-network provider as
      set forth above.

g.    The MCO must adhere to the additional credentialing requirements set forth
      in Appendix B.

SANCTION: The DEPARTMENT may impose a Class B sanction pursuant to Section 7.05
if, upon completion of a performance review, it is established that a provider
in the MCO's network fails to meet the minimum credentialing criteria for
participation set forth in (a) and (b) above or a PCP in the MCO's network
fails to meet the criteria set forth in (d).

3.13  SECOND OPINIONS, SPECIALIST PROVIDERS AND THE REFERRAL PROCESS

a.    The MCO shall provide for a second opinion from a qualified health care
      professional within its provider network, or arrange for the ability of
      the Member to obtain one outside the network, at no cost to the Member.

b.    The MCO shall contract with a sufficient number and mix of specialists so
      that the Member population's anticipated specialty care needs can be
      substantially met within the MCO's network of providers. The MCO will also
      be required to have a system to refer Members to out-of-network
      specialists if appropriate participating specialists are not available.
      The MCO shall make specialist referrals available to

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      its Members when it is medically necessary and medically appropriate and
      shall assume all financial responsibility for any such referrals whether
      they be in-network or out-of-network. The MCO shall ensure that the Member
      does not incur any costs for such referrals whether the referral is to an
      in-network or out-of network provider. The MCO must have policies and
      written procedures for the coordination of care and the arrangement,
      tracking and documentation of all referrals to specialty providers.

3.14  PCP SELECTION, SCHEDULING AND CAPACITY

a.    The MCO shall implement procedures to ensure that each Member has an
      ongoing source of primary care appropriate to his or her needs and a
      person formally designated as primarily responsible for coordinating the
      health care services furnished to the Member.

b.    The MCO shall provide Members with the opportunity to select a PCP within
      thirty (30) days of enrollment. The MCO shall assign a Member to a PCP
      when a Member fails to choose a PCP within thirty (30) days after being
      notified to do so. The assignment must be appropriate to the Member's age,
      gender and residence.

c.    The MCO shall ensure that the PCPs in its network adhere to the following
      PCP scheduling practices:

      1.    Emergency cases shall be seen immediately or referred to an
            emergency facility;

      2.    Urgent cases shall be seen within forty-eight (48) hours of PCP
            notification;

      3.    Routine cases shall be seen within ten (10) days of PCP
            notification;

      4.    Well-care visits shall be scheduled within six (6) weeks of PCP
            notification;

      5.    EPSDT/HealthTrack comprehensive health screens and immunizations
            shall be scheduled in accordance with the DEPARTMENT's HealthTrack
            periodicity and immunization schedules;

      6.    New Members shall receive an initial PCP appointment in a timely
            manner; (for those Members who do not access goods and services
            within the first six (6) months of enrollment, the MCO shall
            identify and remedy any access problems); and

      7.    Waiting times at PCPs are kept to a minimum.

d.    The MCO shall report quarterly on each PCP's panel size, group practice
      and hospital affiliations in a format specified by the DEPARTMENT. The
      DEPARTMENT will aggregate reports received from all MCOs for both HUSKY A
      and HUSKY B. In the event that the DEPARTMENT finds a PCP with more than
      1,200 HUSKY (combined HUSKY A and HUSKY B) panel Members, the DEPARTMENT
      will notify the MCO if the PCP is part of the MCO's network.

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      The DEPARTMENT expects that the MCO will take appropriate action to ensure
      that patient access to the PCP is assured.

e.    The MCO shall maintain a record of each Member's PCP assignments for a
      period of two (2) years.

f.    The MCO shall track each Member's use of primary medical care services. In
      the event that a Member does not regularly receive primary medical care
      services from the PCP or the PCP's group other than visits to school based
      health clinics, the MCO shall contact the Member and offer to assist the
      Member in selecting a PCP.

g.    If the Member has not received any primary care services, the MCO shall
      contact the Member and offer to assist the Member in scheduling a
      well-care visit if the Member's last well-care visit was not within the
      appropriate guidelines for his or her age and gender.

PERFORMANCE MEASURE: PCP Appointment Availability. The DEPARTMENT or its agent
will routinely monitor appointment availability as measured by (b)(1) through
(b)(6) by using test cases to arrange appointments of various kinds with
selected PCPs. If less than ninety (90) percent of the sample make appointments
available within the required time, the DEPARTMENT shall require that the MCO
submit a corrective action plan, which will outline the steps that the MCO will
take to rectify the problem, within thirty (30) days.

3.15  WOMEN'S HEALTH, FAMILY PLANNING ACCESS AND CONFIDENTIALITY

a.    The MCO shall provide female Members with direct access to a women's
      health specialist in network for covered care necessary to provide women's
      routine and preventive health care services. This access shall be in
      addition to the Member's PCP if that provider is not a women's health
      specialist.

b.    The MCO shall notify and give each Member, including adolescents, the
      opportunity to use his or her own PCP or utilize any family planning
      service provider for family planning services without requiring a referral
      or authorization. The MCO shall make a reasonable effort to subcontract
      with all local family planning clinics and providers, including those
      funded by Title X of the Public Health Services Act, and shall reimburse
      providers for all family planning services regardless of whether that
      provider is a participating provider. The MCO shall reimburse
      out-of-network providers of family planning services at least the Medicaid
      fee-for-service rate for the service. The MCO may require family planning
      providers to submit claims or reports in specified formats before
      reimbursing services.

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c.    The MCO shall keep family planning information and records for each
      individual patient confidential, even if the patient is a minor.

d.    Family planning services which must be covered include:

      1.    reproductive health exams;

      2.    patient counseling;

      3.    patient education;

      4.    lab tests to detect the presence of conditions affecting
            reproductive health;

      5.    sterilizations;

      6.    screening, testing, and treatment of and pre and post- test
            counseling for sexually transmitted diseases and HIV; and

      7.    abortions, if the pregnancy is the result of an act of rape or
            incest or in the case where a woman suffers from a physical
            disorder, physical injury, or physical illness, including a
            life-endangering physical condition caused by or arising from the
            pregnancy itself, that would, as certified by a physician, place the
            woman in danger of death unless an abortion is performed.

e.    Pursuant to federal law ("the Hyde Amendment," as reflected in the federal
      appropriations for Title XIX) and 42 CFR Part 441, Subpart E, the
      DEPARTMENT may only seek federal funding for those abortions described in
      (d)(7) above. The MCO shall cover all abortions that fall within these
      circumstances. The MCO shall submit a Form W-484 for any such abortions
      and comply with the DEPARTMENT's Medical Services Policy concerning
      abortions.

f.    The MCO shall also cover all other medically necessary abortions not
      covered under federal law and described in (d)(7) above. The determination
      as to whether an abortion is medically necessary shall be made by the
      Member's PCP or another physician, in consultation with the Member. The
      MCO shall not require prior authorization for any such medically necessary
      abortion. The DEPARTMENT will not seek federal funding for any abortion
      covered under this contract. The DEPARTMENT shall only seek federal
      funding for abortions covered pursuant to federal law. The DEPARTMENT and
      the MCO shall enter into a separate contract for all medically necessary
      abortions that do not qualify for federal matching funds, as described in
      subsection (d) and (e) above.

g.    The MCO shall submit a report on a quarterly basis due fifteen (15) days
      after the end of the quarter for all abortions performed pursuant to
      subsection (f) above. The report format is set forth in Appendix M.

SANCTION: If the MCO fails to comply with the provisions in subsection (e), and
fails to accurately maintain and submit accurate records of those abortions
which meet the federal definition for funding, the DEPARTMENT may impose a Class
A sanction, pursuant to Section 7.05.

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3.16  PHARMACY ACCESS

For purposes of this section, "prescription" shall include authorization for
legend and over-the-counter drugs covered by Medicaid policy.

a.    Pharmacies must be available and accessible on a statewide basis. The MCO
      shall:

      1.    Maintain a comprehensive provider network of pharmacies that will
            within available resources assure twenty four (24) hour access to
            pharmaceutical goods and services;

      2.    The MCO may establish a pharmacy lock-in program for Members
            suspected of abuse or excessive utilization. Any MCO pharmacy
            lock-in program will be subject to DEPARTMENT approval;

      3.    Have established protocols to respond to urgent requests for
            medications;

      4.    Monitor and take steps to correct excessive utilization of regulated
            substances, including but not limited to, restricting pharmacy
            access pursuant to a pharmacy lock-in program approved by the
            DEPARTMENT; and

      5.    Require pharmacists to utilize the Automated Eligibility
            Verification System (AEVS) to determine client eligibility and MCO
            affiliation when there is a discrepancy between the information in
            the MCO's eligibility system and information given to the
            pharmacists by the Member, the Member's physician or other third
            party.

b.    The MCO shall require that its provider network of pharmacies offer
      medically necessary goods and services to the MCO's Members. The MCO may
      have a drug management program that includes a prescription drug
      formulary. The MCO drug formulary must include only Food and Drug
      Administration approved drug products and must be broad enough in scope to
      meet the needs of all Members. The MCO drug formulary shall consist of a
      reasonable selection of drugs which do not require prior approval for each
      specific therapeutic drug class.

c.    The MCO shall submit any deletions to its formulary and any new prior
      authorization requirements for formulary drugs to the DEPARTMENT at least
      thirty (30) days prior to making any such change. The MCO shall also
      submit all physician, pharmacist and Member letters, notices, e-mail
      alerts or other electronic or written communications related to the
      proposed formulary change to the DEPARTMENT thirty (30) days prior to
      issuing or sending any such communication. The MCO shall not implement any
      formulary deletion or additional prior authorization requirements without
      the prior written approval of the DEPARTMENT. The MCO shall not send or
      issue any communication

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August 13 2003

      related to a formulary change without the prior written approval of the
      DEPARTMENT. If, however, the DEPARTMENT does not respond to proposed
      formulary changes or communications submitted for approval within thirty
      (30) days of receipt from the MCO, the MCO may proceed with the change or
      issue the communication, as applicable.

      The MCO shall also submit subsequent additions to the formulary at the
      time the addition is made without seeking prior approval by the DEPARTMENT
      and regardless of whether the drug(s) to be added requires prior
      authorization. If the MCO's formulary includes a legend drug that requires
      prior authorization and the FDA approves the drug for over-the-counter
      use, the MCO is not required to seek the DEPARTMENT's approval to
      substitute the over-the-counter version with a prior authorization
      requirement.

      The MCO shall notify prescribing providers thirty (30) days in advance of
      any changes to the MCO's formulary.

      The DEPARTMENT reserves the right to identify clinical deficiencies in the
      content of or operational deficiencies of the MCO's formulary. In this
      instance, the MCO shall have thirty (30) days to address in writing the
      identified deficiencies to the DEPARTMENT's satisfaction. The MCO may
      request to meet with the DEPARTMENT prior to submission of the written
      response. If the DEPARTMENT is not satisfied with the MCO's response, the
      DEPARTMENT may require the MCO to add specific drugs to its formulary or
      to or eliminate prior authorization requirements for specific drugs. If
      the MCO disputes the DEPARTMENT's determination, the MCO may exercise its
      rights pursuant to section 7.02 of this Contract.

d.    The MCO shall ensure that Members using maintenance drugs (drugs usually
      prescribed to treat long term or chronic conditions including, but not
      limited to diabetes, arthritis and high blood pressure) are informed in
      advance, but no less than thirty (30) days in advance of any changes to
      the prescription drug formulary related to such maintenance drugs if the
      Member using the drug will not be able to continue using the drug without
      a new authorization. When the MCO deletes a drug from its formulary or
      imposes prior authorization requirements on additional drug(s), the MCO
      shall identify to the DEPARTMENT which of the affected drugs the MCO
      intends to treat as maintenance drugs. The DEPARTMENT may require the MCO
      to treat additional drugs as maintenance drugs for purposes of this
      subsection and subsection (e). If the MCO treats all drugs affected by a
      formulary change as maintenance drugs for purposes of this subsection and
      for purposes of subsection e below, the MCO is not required to designate
      specific drugs as maintenance drugs. In such circumstances, the MCO shall
      notify the DEPARTMENT that all drugs affected by the formulary change will
      be treated in the same manner.

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e.    If a prescribing provider seeks authorization to continue a maintenance
      drug that is being removed from the MCO's formulary or subjected to new
      prior authorization requirements at any time prior to the effective date
      of the change, the MCO shall conduct a medical necessity review. The MCO
      shall conduct the review, and, if the MCO does not approve the request,
      the MCO shall issue a notice of action in accordance with the provisions
      of subsection (i) below. If the MCO denies the prior authorization request
      for the maintenance drug, the MCO shall issue a notice of action at least
      ten days in advance of the effective date of the action. The MCO shall
      automatically continue authorization for the maintenance drug for at least
      the medical necessity review period plus, if the MCO does not approve the
      authorization, for the ten (10) day advance notic period, or the effective
      date of the action, whichever is later. If a Member requests an appeal and
      administrative hearing concerning a denial or termination that results
      from or relates to the imposition of new prior authorization requirements
      for or removal of the maintenance drug from the formulary, the MCO shall
      continue to authorize the drug for that Member pending a hearing decision.
      If the prescriber does not initiate the prior authorization process prior
      to the expiration of the existing authorization period, the Member shall
      receive a temporary supply of the maintenance drug if the conditions
      described in subsection (i) are met. If the MCO grandfathers some or all
      Members affected by the formulary changes for a period of more than ninety
      (90) days, the MCO shall either: 1) send a second advance notice letter at
      least thirty (30) days prior to the end of the extended authorization
      period or 2) ensure that if the Member's prescriber requests authorization
      prior to the end of the existing authorization period, that if the request
      is denied and the Member appeals, that the authorization will continue
      pending appeal.

f.    The MCO shall require that its provider network of pharmacies adheres to
      the provisions of Connecticut General Statutes Section 20-619 (b) and (c)
      related to generic substitutions for Medicaid recipients.

g.    If the MCO maintains a drug formulary, the MCO shall have a prior
      authorization process to permit access, at a minimum, to all medically
      necessary and appropriate drugs covered for the Medicaid fee-for-service
      population. The MCO shall develop a timely and efficient authorization
      process to obtain information from providers on medical necessity for a
      non-formulary drug, a formulary drug requiring prior authorization or a
      brand name drug where a generic substitution is available. The MCO shall
      make an individualized determination concerning medical necessity and
      appropriateness in each instance when a Member's prescribing provider
      requests a non-formulary drug, formulary drug requiring prior
      authorization or a brand name drug in accordance with the provisions of
      (f) above. If no request for prior authorization has been received by the
      MCO or the Pharmacy Benefits Manager (PBM) prior to the submission of a
      prescription to a pharmacy, the pharmacist may contact the prescribing
      physician and inform him or her of the prior authorization requirement.

                                     Part II
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August 13 2003

h.    Except as provided in subsection (n) below, in the event that a provider
      requests authorization for, or prescribes a non-formulary drug, a
      formulary drug requiring prior authorization or a brand name drug where a
      generic substitution is available but elects during the prior
      authorization process or in discussions with the pharmacist to prescribe a
      formulary, generic or alternate formulary drug that the provider agrees
      will be equally effective for the Member, the MCO is not required to issue
      a notice of action and is not required to provide a temporary supply of
      the drug for which the provider initially sought authorization.

i.    In the event that a provider requests authorization, or prescribes a
      non-formulary drug, a formulary drug requiring prior authorization or a
      brand name drug where a generic substitution is available the MCO must
      approve or deny the request as expeditiously as the Member's health
      condition requires, but no later than 14 calendar days following the MCO's
      receipt of the request.

      An additional 14 calendar days will be allowed if: 1) the Member or the
      requesting provider asks for the extension or 2) the MCO or its PBM
      documents that the extension is in the Member's interest because
      additional information is needed for the MCO to authorize the service and
      the failure to extend the authorization timeframe will result in denial of
      the service. The DEPARTMENT may request and review such documentation from
      the MCO.

j.    In the event that a provider certifies to the MCO or its PBM that the drug
      is necessary to address an urgent or emergent condition or that the
      standard authorization period could seriously jeopardize the Member's life
      or health or ability to attain, maintain or regain maximum function, the
      MCO or its PBM must make an expedited authorization decision and provide
      notice as expeditiously as the member's health condition requires and no
      later than 3 working days after receipt of the request for service. The
      MCO or its PBM may extend the 3 working days time period by up to 14
      additional calendar days if: 1) the Member or the provider requests the
      extension or 2) if the MCO or its PBM documents that the extension is in
      the Member's interest because additional information is needed for the MCO
      to authorize the service and the failure to extend the authorization
      timeframe will result in denial of the service. The DEPARTMENT may request
      such documentation from the MCO.

k.    The MCO or its PBM shall without delay authorize up to a thirty (30) day
      temporary supply of the drug if the provider certifies to the MCO or its
      PBM that the drug is necessary to address an urgent or emergent condition.
      The MCO is also required to authorize a thirty (30) day temporary supply
      of the drug on the day of submission of the prescription to the pharmacy
      if the MCO has been unable to contact the provider to discuss an effective
      formulary drug during normal business hours. The certification shall be in
      a manner to be specified by the MCO, subject to the DEPARTMENT's approval.
      If the original prescription

                                     Part II
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August 13 2003

      was for a period less then thirty (30) days, the temporary supply will be
      for the period prescribed.

l.    If the Member, upon receipt of a termination, suspension or reduction
      notice of action, timely requests an appeal and administrative hearing the
      MCO shall continue to authorize the drug for the Member pending a hearing
      decision or other resolution of the dispute concerning the prescription.
      As used within this section, "timely" means filing on or before the later
      of the following: (1) within ten (10) days of the MCO mailing of the
      notice of action; or (2) the intended effective date of the MCO's proposed
      action. If the Member does not request an appeal and administrative
      hearing, the MCO is no required to authorize any further refills.

m.    The MCO shall, on a quarterly basis, submit the report at Appendix L.

n.    If the DEPARTMENT or its agent determines that there is a pattern of
      denials for requested authorization for particular drugs, or any other
      pattern suggesting that the MCO's authorization process is one that does
      not appropriately consider each Member's individualized medical needs, the
      DEPARTMENT may require notices of action in circumstances other than those
      described above and/or may require the addition of a particular drug or
      drugs to the MCO's formulary as drugs that do not require prior
      authorizations.

3.17  MENTAL HEALTH AND SUBSTANCE ABUSE ACCESS

a.    The MCO shall provide to its Members all behavioral health care services
      (mental health and substance abuse) covered by Medicaid that are medically
      necessary and medically appropriate. These services may be provided by the
      MCO through contracts with providers of services or through subcontracted
      relationships with specialized behavioral health management entities. A
      Member will not need a PCP referral to obtain services; self-referral will
      be sufficient to obtain an initial service visit. The MCO may require
      prior authorization for an ongoing course of treatment. Members with
      mental health and substance abuse disorders shall not be denied coverage
      by the MCO for the initial visit, simply because they did not abide by the
      MCO's rules (either by going to an out-of-network provider or going to an
      in-network provider without an appropriate referral).

b.    Notwithstanding any contractual arrangement with a specialized management
      agency, the MCO is wholly responsible to ensure that medically necessary
      and medically appropriate services are provided to its Medicaid Members.

c.    The MCO shall contract with a consultant or employ a doctoral level mental
      health professional with appropriate qualifications, credentials and
      decision making authority who will have specific responsibilities for
      exercising oversight of the delivery of behavioral health services by the
      MCO or its subcontractors. Such person shall be responsible for promoting
      efforts to better integrate and

                                     Part II
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August 13 2003

      coordinate the provision of behavioral health care with other services.
      The individual shall be available by phone for consultation on an as
      needed basis, dedicated to the Connecticut Members, as well as have an
      extensive understanding of the State of Connecticut's Medicaid rules and
      regulations.

d.    In reference to services for children with psychiatric/mental health and
      substance abuse needs, the MCO and any subcontracted entity is required to
      contract with and refer Members to qualified Medicaid providers who meet
      benchmark requirements or demonstrate that equal or superior services are
      being made available through other providers. The benchmark providers are
      child guidance clinics, community mental health centers and clinics,
      family service agencies and other qualified substance abuse providers (who
      provide services in compliance with state law) with a specialization in
      serving children. Continuation of benchmark status is contingent upon
      participation in the DSS Study of Behavioral Health Outcomes. Any
      benchmark poviders who refuse to participate in the study will lose this
      status.

e.    The MCO and any subcontractor entity will cooperate in the identification
      and improvement of processes working toward the development and
      standardization of administrative procedures. The MCO and any
      subcontracted entity shall take steps to promote successful
      provider-Member relationships and will monitor the effectiveness of these
      relationships.

f.    The MCO is responsible for monitoring the performance of its network
      providers and for monitoring and ensuring contract compliance. The MCO
      shall also be responsible for ensuring that its subcontractors comply with
      Medicaid policy and this contract. Such monitoring will ensure that
      providers and subcontractors observe all contractual and policy
      requirements as well as measuring performance relating to such areas as
      access to care and ensuring quality of care. The MCO and any subcontracted
      entity are required to cooperate in the performance of financial, quality
      or other audits conducted by the DEPARTMENT or its agent(s).

g.    The MCO and its behavioral health subcontractor are required to
      participate in the DSS Study on Behavioral. Health Outcomes for children
      receiving outpatient treatment services.

SANCTION: Failure of the MCO and or its subcontractor(s) to participate in the
DEPARTMENT Study may constitute grounds for the imposition of a Class B sanction
pursuant to Section 7.05.

3.18  CHILDREN'S ISSUES AND EPSDT COMPLIANCE

In order to meet the requirements of the EPSDT program as set forth in Sections
1902(a)(43) and 1905(r) of the Social Security Act, the MCO shall:

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August 13 2003

a.    Provide EPSDT screening services in accordance with the periodicity
      schedule attached to this contract as Appendix C. Any changes in the
      periodicity schedule subsequent to the effective date of this contract
      shall be provided to the MCO sixty (60) days before the effective date of
      the change. The MCO shall not require prior authorization of EPSDT
      screening services;

b.    Provide interperiodic screening examinations when medically necessary, or
      in accordance with the provisions of Section 3.19(5)(a), to determine the
      existence of a physical or mental illness or condition, or to assist
      Members in meeting the medical requirements for certification or
      recertification in WIC. Such interperiodic screens shall include screens
      for anemia as recommended by the Centers for Disease Control (CDC). The
      MCO shall not require prior authorization of interperiodic screening
      examinations;

c.    Provide EPSDT screening services that at a minimum, include:

      1.    A comprehensive health and developmental history (including
            assessment of both physical and mental health development and
            assessment of nutritional status);

      2.    A comprehensive unclothed or partially draped physical exam;

      3.    Appropriate immunizations as currently recommended by the
            Connecticut Department of Public Health;

      4.    Laboratory tests, as set forth in the periodicity schedule at
            Appendix C

      5.    Vision and hearing screenings as set forth in the periodicity
            schedule at Appendix C;

      6.    Dental assessments as set forth in the periodicity schedule at
            Appendix C and

      7.    Health education, including anticipatory guidance.

d.    Provide all medically necessary health care, diagnostic services, and
      treatment for Members under twenty-one (21) covered under the federal
      Medicaid program and described in Section 1905(a) of the Social Security
      Act regardless of whether the health care, diagnostic services, and
      treatment are specified in the list of covered services at Appendix A of
      this contract and regardless of any limitations on the amount, duration,
      or scope of the services that would otherwise be applied.

e.    Take all necessary steps to ensure that its Members under the age of
      twenty-one (21) receive EPSDT screening services and any necessary
      diagnostic and treatment services, including, but not limited to:

      1.    Providing assistance in arranging and scheduling appointments;

      2.    Providing and arranging transportation;

      3.    Following up on missed appointments; and

      4.    Providing interpreters to Members with limited English proficiency
            and Members who are hearing and visually impaired.

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                                       31
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August 13 2003

f.    No later than sixty (60) days after enrollment in the plan and annually
      thereafter, use a combination of oral and written methods including
      methods for communicating with Members with limited English proficiency,
      Members who cannot read, and Members who are visually or hearing impaired,
      to:

      1.    Inform its Members about the availability of EPSDT screening,
            diagnostic and treatment services;

      2.    Inform its Members about the importance and benefits of EPSDT
            screening services;

      3.    Inform its Members about how to obtain EPSDT screening services; and

      4.    Inform its Members that assistance with scheduling appointments and
            transportation is available, and inform them how to obtain this
            assistance.

g.    Coordinate and enhance the services provided to Members under twenty-one
      (21) through the development and execution of memorandums of understanding
      (MOUs) with the following programs:

      1.    Healthy Families Connecticut;

      2.    Healthy Start;

      3.    The Special Supplemental Food Program for Women, Infants, and
            Children (WIC);

      4.    Birth-to-Three;

      5.    Head Start;

      6.    InfoLine's Maternal and Child Health Project; and

      7.    Other programs operated by the Departments of Children and Families,
            Education, Public Health, Mental Health and Addiction Services and
            Mental Retardation as designated by the DEPARTMENT.

h.    Include in the MOUs developed and executed under subsection (g) of this
      section provisions that specify how the MCO will work with the program,
      including, but not limited to:

      1.    A description of the services provided by the program;

      2.    Designation of a liaison at the MCO to work with the program on
            ensuring the provision of medically necessary and appropriate
            covered services by the MCO and the coordination of services
            provided by the MCO and the program;

      3.    Protocols for referrals to the program by the MCO;

      4.    Protocols for communication of information concerning individuals
            who are Members of the MCO who are receiving services from the
            program;

      5.    Protocols for the resolution of any issues that arise concerning the
            delivery of services to HUSKY Members who are receiving services
            from the program;

      6.    Compliance with HIPAA privacy rules if the agreement includes
            exchange of members' protected health inforamation; and

      7.    Any other mutually agreed upon provisions.

i.    The MCOs shall require PCPs to obtain all available vaccines free of
      charge from the Department of Public Health under the Vaccines for
      Children program.

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August 13 2003

j.    Contract with the Connecticut Immunization Registry and Tracking System to
      track childhood immunizations of its Members and report the immunizations
      to the DEPARTMENT.

k.    In order to carry out the responsibilities set forth in this section, the
      MCO shall identify children who are overdue for EPSDT screening services,
      and those who have missed EPSDT screening services. The MCO shall work to
      develop a plan for ensuring that Members under twenty-one (21) years of
      age who are overdue or late for screening examinations receive their EPSDT
      screening services and that other Members continue to receive their
      examinations on a regular basis.

l.    The MCO shall attain an annual EPSDT participation ratio and an annual
      EPSDT screening ratio of at least eighty (80) percent for the period from
      October 1, 2002 through September 30, 2003. The DEPARTMENT shall determine
      the MCO's participation and screening ratio from the encounter data as
      reported to the DEPARTMENT or its agent(s) in accordance with the
      methodology established by HCFA or CMS for the HCFA-416 report.

SANCTION: Failure to achieve a participation and/or screening ratio of eighty
(80) percent may subject the MCO to a Class B sanction in accordance with the
provisions of Section 7.05. However, no sanction shall apply if the MCO's
participation and screening ratios, although less than eighty (80) percent, are
greater than the participation and screening ratios for the MCO for the
equivalent period one year earlier plus one half the difference between the
ratios for the earlier period and eighty (80) percent.

3.19  SPECIAL SERVICES FOR CHILDREN/REINSURANCE

1.    DISCHARGE PLANNING PROCESS AND INPATIENT PSYCHIATRIC HOSPITAL REINSURANCE
      FOR CHILDREN

a.    The discharge planning process for children and adolescents with
      significant mental health and substance abuse disorders is of particular
      concern to the DEPARTMENT and DCF due to the potential unavailability of
      appropriate subacute or step-down placements (e.g., residential treatment
      with a clinical component, group home, specialized foster care). In order
      to protect these particularly vulnerable minors, MCOs are required to seek
      or develop alternatives to hospital-based care. MCOs are required to
      negotiate "step-down" rates with qualified institutional providers, as
      defined by the DEPARTMENT, to address the financial issues that arise in
      the discharge planning circumstances described in this section.

b.    The following provisions of this Section shall apply to all new admissions
      of children and adolescents eighteen (18) years of age and younger in
      qualified institutions.

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August 13 2003

      1.    REINSURANCE FOR ADMINISTRATIVELY NECESSARY DAYS

            On a limited basis, the MCO may authorize the admission of a child
            to a qualified institution for a one-day evaluation. If at the end
            of a twenty-four (24) hour period the MCO determines that there is
            no medical necessity for the continued admission but there is no
            immediate discharge option available, the remainder of the stay will
            qualify for 100% reinsurance by the DEPARTMENT. For the evaluation
            day, the MCO will pay the institution the rate for an acute care
            day. Beginning on day two (2) of the stay, the MCO will pay the
            institution a negotiated rate and bill the DEPARTMENT in the month
            following service delivery according to the process described below.
            Reinsurance for non-medically necessary days attendant to an
            evaluation stay may be claimed once per child per calendar year.

      2.    REINSURANCE FOR MEDICALLY NECESSARY DAYS

            Other than in the cases described above, where the length of stay in
            either a step down program or a hospital setting pursuant to a
            medically necessary admission extends beyond fifteen (15) days, the
            DEPARTMENT will provide reinsurance for the MCOs. Reinsurance shall
            be provided for medically necessary days of care provided at either
            an acute or a subacute level of care. Care provided to children
            admitted to subacute care pursuant to an observation bed stay shall
            be subject to the provisions of this section. For the purpose of
            this section, a medically necessary admission to inpatient
            psychiatric care for children will be defined to include those
            admissions which are court ordered, provided that there is
            consultation with the plan prior to the order regarding the
            appropriate level and setting for the care.

            The MCO may make decisions on the medical necessity of the admission
            and may evaluate the level of acuity of the child or adolescent at
            any time during the course of the stay. MCOs may redetermine the
            need for an acute level of care at any time based on changes in the
            patient's condition. However, within the first fifteen (15) days,
            the MCO shall provide all necessary acute or subacute care as part
            of the discharge process.

      3.    THE SCHEDULE FOR REINSURANCE IS AS FOLLOWS:

<TABLE>
<CAPTION>
# of days           State's Share          MCO's Share
<S>                 <C>                    <C>
0-15                      0%                  100%
16-45                    75%                   25%
46-60                    90%                   10%
60 +                    100%                    0%
</TABLE>

                                     Part II
                                       34
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August 13 2003

            If a psychiatric inpatient stay is interrupted due to an acute
            medical condition requiring an admission to a general hospital, the
            reinsurance day count will be suspended upon discharge from the
            psychiatric facility and will resume when the Member is readmitted
            to the psychiatric inpatient facility, if the readmission to the
            psychiatric inpatient facility is on the same day as the discharge
            from the general hospital.

            If there is a gap of one day or more between the discharge from the
            general hospital and readmission to the psychiatric facility, the
            admission to the psychiatric inpatient facility will be treated as a
            new admission and the new inpatient day count will be reset.

      4.    The MCO or its subcontractor shall incur the costs for the
            reinsurance and may bill the DEPARTMENT within ninety (90) days from
            the date the provider submits the claim to the MCO or its
            subcontractor. All initial reinsurance claims must be billed to the
            DEPARTMENT within twelve (12) months following service delivery.
            Reinsurance claims shall be submitted to the DEPARTMENT's Division
            of Fiscal Analysis and shall be reimbursed as a percentage of the
            facility specific per diem according to the state share described
            above. Claims may be submitted by the MCO or its behavioral health
            subcontractor with prior approval by the DEPARTMENT. The MCO or its
            subcontractor may retrospectively review claims submitted to the
            DEPARTMENT and submit corrections or readjustments to the DEPARTMENT
            within the DEPARTMENT'S timely filing limit. The DEPARTMENT also
            reserves the right to review the level of payments made under the
            reinsurance program retrospectively.

            The DEPARTMENT will designate a contact person for reinsurance
            claims.

3.    RESPONSIBILITIES OF THE DEPARTMENT OF CHILDREN AND FAMILIES

a.    DCF shall approve any placement, which is deemed by the MCO to be not
      medically necessary. If the DEPARTMENT determines that reinsurance claims
      were paid for services that were administratively necessary and not
      medically necessary, the DEPARTMENT will pursue reimbursement from DCF.

b.    In cases where the hospital identifies a discharge planning difficulty for
      youth under the direct auspices of DCF who are utilizing inpatient,
      hospital-based mental health or substance abuse services, the following
      discharge planning process will apply:

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August 13 2003

      1.    As soon as the hospital identifies a discharge planning difficulty,
            the MCO must contact DCF for assistance and notify the DEPARTMENT.
            The MCO in conjunction with the hospital and DCF, must attempt to
            resolve the discharge planning immediately. Service providers, the
            MCO, DCF and the Member and family must develop an individualized
            service plan that resolves the discharge issue while effectuating
            appropriate ongoing treatment. The MCO shall consult with DCF
            regarding the appropriate state licensed treatment setting. MCOs
            have the authority to transition the patient to any qualified
            provider of this level of care. Nothing in this section shall be
            construed to imply a time limit on the overall behavioral health or
            health care benefit in Medicaid managed care.

      2.    The DEPARTMENT will designate a contact person for clinical issues
            regarding discharge planning.

4.    THE FOLLOWING PROVISIONS WILL APPLY TO ADMISSIONS AT STATE FACILITIES.

a.    The discharge planning and reinsurance provisions described in this
      section shall apply to all new medically necessary and administratively
      necessary admissions at state operated facilities effective October 1,
      1998. When a child is admitted to a DCF facility, the MCO must reimburse
      the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admissions and stays at the facility.

b.    This discharge planning process and reinsurance program is not intended to
      force MCOs to continue funding the most restrictive levels of care in
      perpetuity; rather it is meant to insure the safety of children and
      adolescents and encourage the development of appropriate alternatives to
      hospital-based services.

5.    SPECIALIZED OUTPATIENT SERVICES FOR CHILDREN UNDER DCF CARE

a.    The MCO shall pay for a comprehensive multi-disciplinary examination for
      initial placement only, for each child entering DCF care, within thirty
      (30) days of placement into out-of-home care. The multi-disciplinary
      examination shall be authorized by either the child's PCP or the MCO and
      shall consist of a thorough assessment of the child's functional, medical,
      developmental, educational, and mental health status. Within each area of
      the assessment, the evaluation shall identify any additional specialized
      diagnostic and therapeutic needs. Physicians and other medical and mental
      health providers specializing in the assessment areas shall conduct the
      multi-disciplinary examination. Each multi-disciplinary examination shall
      occur at a single location. All components of the examination shall be
      performed on the same day, excluding additionally needed examinations,
      unless otherwise indicated. The provider shall report the findings and
      conclusions

                                     Part II
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<PAGE>

August 13 2003

      of the examination in a form acceptable to DCF. The report must be
      received by DCF within fifteen (15) days of the examination. The provider
      shall also provide for updates to DCF on any additional examinations.

b.    The providers of the MCO shall provide for training of foster parents on
      the use of special equipment or medications as needed.

c.    The MCO shall require regular collaboration between providers and DCF
      Regional Offices and Central Office medical, mental health and social work
      staff and consultants. The MCO shall assign staff to act as liaisons to
      identify, address and resolve health care delivery issues, barriers to
      comprehensive care and other problem areas. DCF shall specify the contact
      persons by name, title and phone number who will be available for
      quarterly meetings between DCF and the MCO and shall facilitate the
      initiation of these meetings with the MCO.

d.    The MCO shall include a panel of mental health providers who shall be
      qualified to perform psychological, psychiatric and developmental
      evaluations and perform assessment and treatment of sexual abuse and
      juvenile sexual offenders. DCF shall be available for consultation in the
      identification of such providers.

e.    In addition to standard prescription coverage, the MCO shall cover
      prescriptions in compliance with DCF policy for "Placement Medications"
      which are additional prescriptions which may be needed when children are
      placed or change placements. The MCO shall cover "Home Visit Medications".
      Home Visit Medications are additional prescriptions, which may be needed
      when children placed in out-of-home settings leave the placement for a
      home visit. Home Visit Medications should include only those doses which
      will be needed during the home visit, plus one extra dose.

f.    The MCO shall deliver a notice of action to an identified person at the
      DCF Central Office when a service is to be reduced, denied or terminated.
      DCF will, in turn, distribute the notice of action to its appropriate
      regional and local personnel.

3.20  PRENATAL CARE

a.    In order to promote healthy birth outcomes, the MCO or its contracted
      providers shall:

      1.    Identify enrolled pregnant women as early as possible in the
            pregnancy;

      2.    Conduct prenatal risk assessments in order to identify high risk
            pregnant women, arrange for specialized prenatal care and support
            services tailored to risk status, and begin care coordination that
            will continue throughout the pregnancy and early weeks of
            postpartum;

      3.    Refer enrolled pregnant women to the WIC program;

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August 13 2003

      4.    Offer case management services for assistance with obtaining
            prenatal care appointments, transportation, WIC, and other support
            services as necessary;

      5.    Offer prenatal health education materials and/or programs aimed at
            promoting healthy birth outcomes;

      6.    Offer HIV testing and counseling and all appropriate prophylaxis and
            treatment to all enrolled pregnant women;

      7.    Refer any pregnant Member who is actively abusing drugs or alcohol
            to a behavioral health subcontractor or provider of behavioral
            health/substance abuse services and treatment; and

      8.    Educate new mothers about the importance of the postpartum visit and
            well-baby care.

PERFORMANCE MEASURE: Early access to prenatal care: Percentage of enrolled women
who had a live birth, who were continuously enrolled in the MCO for 280 days
prior to delivery who had a prenatal visit on or between 176 to 280 days prior
to delivery.

PERFORMANCE MEASURE: Adequacy of prenatal care: Percentage of women with live
births who were continuously enrolled during pregnancy who had more than eighty
(80) percent of the prenatal visits recommended by the American College of
Obstetrics and Gynecology, adjusted for gestational age at enrollment and
delivery.

3.21  DENTAL CARE

a.    The MCO shall contract with a sufficient number of dentists throughout the
      state to assure access to oral health care. The MCO shall:

      1.    Maintain an adequate dental provider network throughout the state's
            eight (8) counties including access to orthodontic services;

      2.    For the purpose of enrollment capacity a dental hygienist meeting
            the criteria of Connecticut General Statutes Section 20-1261, with
            two (2) years of experience, working in an institution (other than
            hospital), a community health center, a group home, a preschool
            operated by a local board of education or head start program, or a
            school setting shall be counted as fifty (50) percent of a general
            dentist. If the MCO's provider network includes dental hygienists
            acting independently within their scope of practice to provide
            preventive services to Members, the MCO shall require that dental
            hygienists make appropriate referrals to in-network dentists for
            appropriate restorative and diagnostic services;

      3.    Implement a plan that includes a systematic approach for enhancing
            access to dental care through monitoring appointment availability,
            provision of training to providers around issues of cultural
            diversity and any other specialized programs;

                                     Part II
                                       38
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August 13 2003

      4.    To ensure that access standards are met with respect to dental
            screens and appointment availability. The MCO shall ensure that the
            scheduling of a routine dental visit is six (6) weeks;

      5.    Certify that all dentists in the MCO's network shall take Members
            and that MCO's HUSKY Members shall be assured the same access to
            providers as non-HUSKY Members. Nothing in this section shall
            preclude the implementation of limits on panel size by providers;

      6.    Implement procedures to provide all Members with the opportunity to
            choose a general dentist;

      7.    Implement specific outreach strategies to educate Members about the
            importance of regular dental care, with a focus on accessing age
            appropriate preventive care such as screenings and cleanings at
            least twice a year;

      8.    Provide for sufficient access to dental services for different age
            groups; and

      9.    Devise mechanisms to avoid unnecessary PCP visits related to dental
            problems.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members two (2) to twenty (20) years of age shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under children's dental access.

PERFORMANCE MEASURE: The MCO shall ensure that no less than eighty (80) percent
of continuously enrolled Members twenty-one (21) years of age and over shall
receive one screening and dental cleaning per twelve (12) month period. On a
quarterly basis, the DEPARTMENT shall, through the encounter data submitted by
the MCO, review the MCO's performance under adult dental access.

3.22  OTHER ACCESS FEATURES

a.    The MCO shall have systems in place to ensure access to medically
      necessary and medically appropriate well-care by its Members. The MCO
      shall develop procedures to identify access problems and shall take
      corrective action as problems are identified. These systems and
      initiatives shall include, but not be limited to:

      1.    Monitoring new Members to ensure that a well-care appointment is
            scheduled within six (6) months of enrollment for those whose last
            well-

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            care visit does not fall within the recommended age and gender
            appropriate schedules;

      2.    Monitoring and ensuring that Members receive well-care visits based
            on age and gender appropriate schedules;

      3.    Contacting and counseling Members who miss scheduled appointments;

      4.    Coverage and provision of services to newborns from the time of
            birth;

      5.    Assisting Members in accessing and locating linguistically and
            culturally appropriate services, including but not limited to,
            appropriate accommodation for Members with hearing disabilities;

      6.    Assisting disabled Members in accessing and locating services and
            providers that can appropriately accommodate their needs, for
            example wheelchair access to provider's office;

      7.    Development of special initiatives, case management, care
            coordination, and outreach to Members with special or multiple
            medical needs, for example persons with AIDS or HIV infected
            individuals;

      8.    Development of goals and action plans for incremental increases in
            utilization of services such as postpartum care, adolescent health,
            dental care and other health care measures agreed upon between the
            MCO and the DEPARTMENT;

      9.    Encouraging providers to offer extended business hours and weekend
            (Saturday) openings.

      10.   Monitoring timely access to care as described in Section 3.13(b).

b.    The MCO's access systems will be assessed as part of the annual
      performance review of the MCO.

c.    On or before November 1, 2003, the MCO shall submit to the DEPARTMENT an
      action plan to improve the delivery of well-child care to adolescents.
      This plan shall include measures to increase the volume of well-child
      screenings provided to adolescent members and to improve the quality and
      the completeness of those screenings according to the guidelines provided
      by the American Academy of Pediatrics. Emphasis should be placed on
      improving health risk assessment and anticipatory guidance during these
      visits. Following the submission of this plan, the MCOs will meet with the
      DEPARTMENT and representatives of other state agencies to develop a best
      practice model for the delivery of adolescent health care.

3.23  PRE-EXISTING CONDITIONS

a.    The MCO shall assume responsibility for all covered services as outlined
      in Appendix A for of each Member as of the effective date of coverage
      under the contract regardless of the new Member's health status.

b.    As outlined in Appendix K, for new Members who have transferred enrollment
      from another HUSKY MCO, coverage of services other than acute care
      hospitalization, nursing home care or care in a subacute facility shall be
      the

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August 13 2003

      responsibility of the MCO as of the beginning of the month during which
      enrollment becomes effective. Responsibility for acute hospitalization,
      nursing home or subacute care services at the time of enrollment or
      disenrollment is described in Section 3.25.

3.24  NEWBORN ENROLLMENT

Within six (6) months of a child's date of birth, the MCO must notify the
DEPARTMENT of newborns for which they have not received enrollment notification
from the DEPARTMENT. The MCO shall use the notification form made available by
the DEPARTMENT for this purpose. Should the MCO fail to report the child's
birth, the MCO shall reimburse the DEPARTMENT for any fee-for-service claims
paid for covered services that occurred for the newborn Members prior to
processing the newborn's enrollment into the MCO.

3.25  ACUTE CARE HOSPITALIZATION, NURSING HOME OR SUBACUTE STAY AT TIME OF
      ENROLLMENT OR DISENROLLMENT

For acute care requiring inpatient stay at a hospital, nursing home or subacute
facility, financial responsibility for covered services shall be determined as
follows:

a.    INPATIENT AT TIME OF ENROLLMENT

      Initial enrollment in HUSKY A should not commence during a recipient's
      inpatient stay at a hospital, nursing home or subacute facility unless the
      recipient is a newborn, born to a Member.

      The MCO shall notify the DEPARTMENT within sixty (60) days of the MCO's
      discovery of or from the date that the MCO receives information from which
      a determination can be made that initial enrollment will take effect
      during the course of a hospitalization. For those individuals who are
      inpatient in an MCO participating facility, the time period in which an
      MCO must notify the DEPARTMENT is limited to six (6) months from the
      enrollment effective date or sixty (60) days of discovery, whichever comes
      first. Upon timely notification to the DEPARTMENT by the MCO, the
      DEPARTMENT shall change the effective date to the first of the month after
      discharge. If the MCO fails to notify the DEPARTMENT of the inpatient
      status within the above specified time periods, the DEPARTMENT shall be
      relieved of its responsibility to change the enrollment effective date and
      the individual's initial enrollment effective date into the MCO shall be
      retained.

b.    HOSPITALIZATION AT TIME OF DISENROLLMENT

      Hospital costs for Members who are inpatient at the time of disenrollment
      from the MCO shall remain the financial responsibility of the MCO until
      discharge from the hospital. For purposes of this subsection, hospital
      costs shall include the

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      per diem hospital charge. Hospital charges shall not include charges
      related to the inpatient stay, but performed and billed separately, such
      as the services of the attending physician or a consulting specialist.
      Upon discovery of the Member's disenrollment, the MCO shall notify the
      individual's new MCO of the inpatient status and coordinate care and
      discharge planning with the new MCO. The MCO shall assume financial
      responsibility for all non-hospital costs as of the enrollment effective
      date for new Members who change MCOs while inpatient. Individuals who are
      disenrolled due to recategorization of their Medicaid coverage to a
      non-managed care category shall revert to fee-for-service upon
      recategorization.

c.    DISENROLLMENT RESULTING FROM LONG-TERM HOSPITALIZATION

      1.    Members who are inpatient in a subacute facility or a nursing home
            will remain the responsibility of the MCO until they are discharged
            from the facility. If the MCO reports to DSS or its agent, any
            patient in a subacute facility or a nursing home other than for the
            purpose of behavioral health prior to the ninety (90) continuous
            days from the date of admission, the DEPARTMENT will disenroll the
            Member at the end of the month, that the Member has been inpatient
            in the facility for ninety (90) continuous days. If the MCO reports
            to the DEPARTMENT beyond ninety (90) days, the change will be
            effective the end of the month during which the change was reported
            to DSS or its agent. The facility's per diem (room and board) costs
            for a Member who is inpatient in a subacute facility or a nursing
            home will remain the responsibility of the MCO unti1 the Member is
            discharged from the facility or disenrolled from managed care
            whichever comes first. Upon discovery of the Member's disenrollment,
            the MCO shall notify the individual's new MCO of the inpatient
            status and coordinate care and discharge planning with the new MCO.
            The MCO shall assume financial responsibility for all non-room and
            board costs as of the enrollment effective date for any new Member
            who changed MCOs while inpatient.

      2.    Members between the ages of eighteen (18) and twenty (20),
            inclusive, who are inpatient in Cedarcrest or Connecticut Valley
            Hospital will remain the responsibility of the MCO until they are
            discharged from the hospital. If the MCO reports to DSS or its
            agent, any Member between the ages of eighteen (18) and twenty (20),
            inclusive, who is a patient in Cedarcrest or Connecticut Valley
            Hospital prior to forty-five (45) continuous days from the date of
            admission, the DEPARTMENT will disenroll the Member at the end of
            the month that the Member has been inpatient for forty-five (45)
            continuous days. If the MCO reports to the DEPARTMENT beyond
            forty-five (45) days, the change will be effective the end of the
            month during which the change was reported to the DEPARTMENT or its
            agent.

3.26  OPEN ENROLLMENT

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a.    The MCO shall conduct continuous open enrollment during which the MCO
      shall accept clients eligible for coverage under this contract in the
      order in which they are enrolled without regard to the need for health
      services, health status of the client or any other factor(s).

b.    The MCO shall accept membership of newborns born to a Member upon the
      child's date of birth with the exception of newborns that are placed for
      private adoption or when the mother has indicated in writing that she does
      not wish Medicaid coverage for the child. The enrollment effective date
      for newborns shall be the first of the month in which the child was born.

c.    The MCO shall not discriminate against individuals eligible to enroll on
      the basis of race, color, or national origin and will not use any policy
      or practice that has the effect of discriminating on the any such basis.
      The MCO shall not discriminate in enrollment activities on the basis of
      health status or the client's need for health care services or on any
      other basis, and shall not attempt to discourage or delay enrollment with
      the MCO or encourage disenrollment from the MCO of eligible Medicaid
      clients.

d.    If the MCO discovers that a Member's new or continued enrollment was in
      error, the MCO shall notify the DEPARTMENT or its agent within sixty (60)
      days of the discovery or sixty (60) days from the date that the MCO had
      the data to determine that the enrollment was in error, whichever comes
      first. Other than the case of a newborn retroactively enrolled, failure to
      notify the DEPARTMENT or its agent within the parameters defined in this
      section and within established procedures will result in the retention of
      the Member by the MCO for the erroneous period of enrollment.

3.27  SPECIAL DISENROLLMENT

a.    The MCO may request in writing and the DEPARTMENT may approve
      disenrollment of specific Members when there is good cause. The request
      shall cite the specific event(s), date(s) and other pertinent information
      substantiating the MCO's request. Additionally, the MCO shall submit any
      other information concerning the MCO's request that the DEPARTMENT may
      require in order to make a determination in the case.

b.    Good cause is defined as a case in which a Member:

      1.    Exhibits uncooperative or disruptive behavior. If, however, such
            behavior results from the Member's special needs, good cause may
            only be found if the Member's continued enrollment seriously impairs
            the MCO's ability to furnish services to either the particular
            Member or others; or

      2.    Permits others to use or loans his or her membership card to others
            to obtain care or services.

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c.    The following shall not constitute good cause:

      1.    extensive or expensive health care needs;

      2.    a change in the member's health; status;

      3.    the member's diminished mental capacity; or

      4.    uncooperative or disruptive behavior related to a medical condition
            except as described in b.l, above.

d.    The effective date for an approved disenrollment shall be no later than
      the first day of the second month following the month in which the MCO
      files the disenrollment request. If the DEPARTMENT fails to make the
      determination within this timeframe, the disenrollment shall be deemed
      approved.

e.    The DEPARTMENT will notify an MCO prior to enrollment if a Member was
      previously disenrolled for cause from another MCO pursuant to this section

3.28  LINGUISTIC ACCESS

a.    The MCO shall take appropriate measures to ensure adequate access to
      services by Members with limited English proficiency. These measures shall
      include, but not be limited to the promulgation and implementation of
      policies on linguistic accessibility for MCO staff, network providers and
      subcontractors; the identification of a single individual at the MCO for
      ensuring compliance with linguistic accessibility policies; identification
      of persons with limited English proficiency as soon as possible following
      enrollment; provisions for translation services; and the provision of a
      Member handbook, notices of action and grievance/administrative hearing
      information in languages other than English. The MCO shall notify its
      members that oral interpretation is available for any language.

b.    Member educational materials must also be available in languages other
      than English and Spanish when more than five (5) percent of the MCO's
      Members in any county served by the MCO speaks the alternative language,
      provided, however, this requirement shall not apply if the alternative
      language has no written form. The MCO may rely upon initial enrollment and
      monthly enrollment data from the DEPARTMENT's Eligibility Management
      System (EMS) to determine the percentage of Members who speak alternative
      languages. The MCO shall inform members that written materials are
      available in these alternative languages.

c.    The MCO shall also take appropriate measures to ensure access to services
      by persons with visual and hearing disabilities. This shall include the
      provision of information in alternative formats and in an appropriate
      manner that takes into

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August 13 2003

      consideration the special needs of Members with disabilities. Information
      concerning Members with visual impairments and hearing disabilities will
      be made available through the daily and monthly EMS enrollment data.

SANCTION: For each documented instance of failure to provide appropriate
linguistic accessibility to Members, the DEPARTMENT may impose a strike towards
a Class A sanction pursuant to Section 7.05.

3.29  SERVICES TO MEMBERS

a.    The MCO shall have in place an ongoing process of Member education which
      includes, but is not limited to: development of a Member handbook;
      provider directory; newsletter; and other Member educational materials.
      The MCO's written materials for members must be in a language and format
      that may be easily understood. All written materials and correspondence to
      Members shall be culturally sensitive and written at no higher than a
      seventh grade reading level. All Member educational materials must be in
      both English and Spanish.

b.    At the time of initial enrollment, the MCO shall provide a member handbook
      to each Member. If a Member loses eligibility and re-enrolls in the MCO
      less than ninety (90) days after losing eligibility, the MCO is not
      required to send a new handbook. If the lapse in enrollment is more than
      ninety (90) days, the MCO shall send a new handbook. The MCO shall mail
      the Member handbook and provider directory to Members within one week of
      enrollment notification. At least once a year, thereafter, the MCO shall
      notify the Members of their right to request the following information.
      The Member handbook shall address and explain, at a minimum, the
      following:

        1.  The amount, duration and scope of covered services under the
            contract in sufficient detail that the Member understands the
            benefits to which they are entitled;

        2.  Restrictions on services (including limitations and services not
            covered) and circumstances in which the Member could be held liable
            for payment for services;

        3.  Prior authorization process;

        4.  Definition of and distinction between emergency care and urgent care
            and the extent to which emergency coverage is available, including:
            the fact that prior authorization is not necessary for emergency
            care, the procedures for obtaining emergency services including the
            use of 911; the locations of emergency settings which provide
            emergency services and post-stabilization services; the fact that
            the Member can obtain emergency care in any hospital or other
            setting and the post stabilization rules;

        5.  Policies on the use of urgent care services including a phone number
            which can be used for assistance in obtaining urgent care;

        6.  How to access care twenty-four (24) hours a day;

        7.  Assistance with appointment scheduling;

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        8.  Member rights and responsibilities, as described in Section 3.03;

        9.  Member services, including hours of operation;

        10. Enrollment/disenrollment/plan changes;

        11. Procedures for selecting and changing PCPs;

        12. Policies on referrals for specialty care and other benefits not
            furnished by the PCP;

        13. Availability of provider network directory and updates;

        14. An explanation of circumstances in which a Member is responsible for
            making co-payments;

        15. Restrictions on the Member's freedom of choice among providers;

        16. Limited liability for services from out-of-network providers;

        17. Access and availability standards;

        18. Special access and other MCO features of the health plan's program;

        19. Family planning services and the availability of family planning
            from out-of network providers;

        20. Case management services targeted to Members as medically necessary
            and appropriate;

        21. The MCO's appeal and the DEPARTMENT's administrative hearing
            process, including the right to a hearing, the method for obtaining
            a hearing, the right to representation; the right to file appeals
            and hearing requests and the time frames for filing; the
            availability of assistance with filing; the toll-free numbers for
            filing appeals; the circumstances in which services will be
            continued pending a hearing; the MCO's provider appeal process;

        22. Procedures to request non-emergency transportation and
            transportation options;

        23. EPSDT services for children;

        24. Coordination of benefits and third party liability;

        25. Description of drug formulary, prior approval and temporary supply
            process, if applicable

        26. Advance directives; and

        27. How to obtain any benefits that are available under the Connecticut
            Medicaid Plan but are not covered under this contract.

      Upon request, the MCO shall also provide Members with information on the
      structure and operation of the MCO and physician incentive plans.

c.    The MCO's provider directory shall include, at a minimum, the names,
      location, telephone numbers and non-English languages spoken by current
      contracted providers in the Member's service area, including
      identification of providers that are not accepting new patients. The
      provider directory shall include, at a minimum, information on PCPs,
      specialists and hospitals. The MCO shall make a good faith effort to give
      written notice of termination of a network provider within fifteen (15)
      days after receipt or issuance of the termination notice to each Member
      who designated the provider as his or her PCP and each member who was seen
      on a regular basis by the terminated provider.

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d.    All Member educational materials must be prior approved by the DEPARTMENT.
      Educational materials include, but are not limited to: Member handbook;
      Membership card; introductory and other text language from the provider
      directory; and all communications to Members that include HUSKY A program
      information. The MCO must wait until receiving DEPARTMENT written approval
      or thirty (30) days from the date of submittal before disseminating
      educational materials to Members. The DEPARTMENT reserves the right to
      request revisions or changes in the material at any time.

e.    The DEPARTMENT shall, to the extent feasible, notify the MCO more than
      thirty (30) days in advance of any significant change to the HUSKY
      program, for example a change in the scope of covered services resulting
      from legislation. The MCO shall give each Member written notice of any
      significant change, at least 30 days before the intended effective date of
      the change.

      The MCO must provide periodic updates to the handbook or inform Members,
      as needed, of changes to the Member information discussed above. The MCO
      shall update its Member handbook to incorporate all provisions and
      requirements of this contract within six (6) weeks of the start date. The
      MCO shall distribute the Member handbook within six (6) weeks of receiving
      the DEPARTMENT's written approval.

f.    The MCO shall maintain an adequately staffed Member services office to
      receive telephone calls and to meet personally with Members in order to
      answer Members' questions, respond to Members' complaints and resolve
      problems informally.

g.    The MCO shall identify to the DEPARTMENT the individual who is responsible
      for the performance of the Member Services Department.

h.    The MCO's Member Services Department shall include bilingual staff
      (Spanish and English) and translation services for non-English speaking
      Members. The MCO shall also make available translation services at
      provider sites either directly or through a contractual obligation with
      the service provider.

i.    The MCO shall require members of the Member Services Department to
      identify themselves to Members when responding to Members' questions or
      complaints. At a minimum, ninety (90) percent of all incoming calls shall
      be answered by a staff Member within the first minute and the call
      abandonment rate shall not exceed five (5) percent. The MCO sha11 submit
      call response and abandonment reports for the preceding six (6) month
      period to the DEPARTMENT upon request.

j.    When Members contact the Member Services Department to ask questions
      about, or complain about, the MCO's failure to respond promptly to a
      request for goods

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      or services, or the denial, reduction, suspension or termination of goods
      or services, the MCO shall: attempt to resolve such concerns informally,
      and inform Members of the appeal and administrative hearing processes and,
      upon request, mail to them, within one business day, forms and
      instructions for filing a grievance.

k.    The MCO shall maintain a grievance report in the format designated by the
      DEPARTMENT pursuant to Section 6.01. These reports shall be made available
      to the DEPARTMENT upon request

l.    At the time of enrollment and at least anually thereafter, the MCO shall
      inform its Members of the procedural steps for filing an appeal and
      requesting an administrative hearing.

m.    The MCO shall monitor and track PCP transfer requests and follow up on
      complaints made by Members as necessary.

n.    The MCO will participate in an NCQA Consumer Assessment of Health Plans
      Survey (CAHPS) of combined HUSKY A and B Members using an independent
      vendor, and paid for by the MCO.

o.    The MCO may provide outreach to its current Members at the time of the
      Member's renewal of eligibility. The outreach may involve special mailings
      or phone calls as reminders that the Member must complete the HUSKY
      renewal forms to ensure continued coverage.

SANCTION: If either the incoming call response or call abandonment standards set
forth in paragraph h are not met for ninety (90) percent of the days during the
six (6) month review period, the DEPARTMENT may impose a strike towards a Class
A sanction pursuant to Section 7.05.

3.30  INFORMATION TO POTENTIAL MEMBERS

Informational materials for potential members shall also be provided in a manner
and format that may be easily understood. The MCO shall make the following
information available to potential Members, upon request the locations,
qualifications, non-English languages spoken by and availability of the MCO's
network providers. The MCO shall provide a summary of this information to the
DEPARTMENT, in a format to be approved by the DEPARTMENT. The DEPARTMENT shall
provide the summary information to all potential Members.

The MCO shall also provide oral interpretation services in all non-English
languages to potential Members.

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3.31  MARKETING REQUIREMENTS

DSS marketing restrictions apply to subcontractors and providers of care as well
as to the MCOs. The MCO shall notify all its subcontractors and network
providers of the DEPARTMENT's marketing restrictions. The detailed marketing
guidelines are set forth in Appendix D.

a.    PROHIBITED MARKETING ACTIVITIES

      The following activities are prohibited, in all forms of communication,
      regardless of whether they are performed by the MCO directly, by its
      contracted providers, or its subcontractors:

      1.    Asserting or implying that a Member will lose or not qualify for
            HUSKY benefits unless he/she enrolls in the MCO, or creating other
            threatening scenarios that do not accurately depict the consequences
            of choosing a different MCO;

      2.    Discriminating (in marketing or in the course of the enrollment
            process) against any eligible individual on the basis of health
            status or need for future health care services;

      3.    Making inaccurate, misleading or exaggerated statements (e.g. about
            the nature of the eligibility or enrollment process, the positive
            attributes of the MCO, or about the disadvantages of competing
            MCOs);

      4.    Any unsolicited personal contact including telephonic, door-to-door
            marketing or other cold call marketing or enrollment activities to
            potential Members;

      5.    Failing to submit for approval marketing materials or marketing
            approaches when such approval is required by DSS (see Appendix D).
            MCOs, subcontractors and their providers must wait until receiving
            DSS written approval before disseminating any such information to
            potential Members. DSS reserves the right to request revisions or
            changes in material at any time;

      6.    Making any statements or assertions that the MCO is endorsed by the
            DEPARTMENT or CMS or any other governmental entity;

      7.    Seeking to influence enrollment in conjunction with the sale or
            offering of private insurance; and

      8.    Conducting any form of individual or group solicitation activity
            other than those expressly permitted under Appendix D, the DSS
            Marketing Guidelines, unless prior approval is obtained from DSS.

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b.    Any type of marketing activity which has not been clearly specified as
      permissible under these guidelines should be assumed to be prohibited. The
      MCO shall contact the DEPARTMENT for guidance and approval for any
      activity not clearly permissible under these guidelines.

c.    The MCO shall submit all marketing materials to the DEPARTMENT for
      approval. The DEPARTMENT will provide comments on the marketing materials
      to the MCO within thirty (30) days of receipt of the materials.

d.    The MCO shall ensure that, before enrolling, members receive accurate
      written information needed to make an informed decision on whether to
      enroll.

e.    The MCO shall distribute marketing materials on a statewide basis.

SANCTION: If the MCO or its providers fails to submit marketing materials for
prior approval, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

SANCTION: If the MCO or its providers engages in inappropriate marketing
activities at provider sites, the DEPARTMENT may impose a Class B or Class C
sanction pursuant to Section 7.05 as it deems appropriate.

SANCTION: If the MCO or its providers engages in cold call or door-to-door
marketing, the DEPARTMENT may impose Class C sanctions pursuant to Section 7.05.

3.32  HEALTH EDUCATION

The MCO must routinely, but no less frequently than annually, remind and
encourage Members to utilize benefits including physical examinations which are
available and designed to prevent illness. The MCO must also offer periodic
screening programs which in the opinion of the medical staff would effectively
identify conditions indicative of a health problem. The MCO shall keep a record
of all activities it has conducted to satisfy this requirement.

3.33  INTERNAL AND EXTERNAL QUALITY ASSURANCE

a.    The MCO is required to provide a quality level of care for all services
      that it provides and for which it contracts. These services are expected
      to be medically necessary and may be provided by participating providers.
      A Quality Assessment and Performance Improvement program shall be
      implemented by the MCO to assure the quality of care. The EQRO shall
      monitor the MCO's compliance with all requirements in this section.

b.    The MCO shall comply with federal regulations and DEPARTMENT policies and
      requirements concerning Quality Assessment and Performance Improvement and

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      utilization review set forth below. The MCO will develop and implement an
      internal Quality Assessment and Performance Improvement program consistent
      with the Quality Assessment and Performance program guidelines as provided
      in Appendix E.

c.    The MCO shall comply with all applicable federal regulations concerning
      Quality Assessment and Performance Improvement.

d.    The MCO shall operate a Quality Assessment and Performance Improvement
      system which:

      1.    Is consistent with applicable federal regulations;

      2.    Provides for review by appropriate health professionals of the
            process followed in providing health services;

      3.    Provides for systematic data collection of performance and
            participant results;

      4.    Provides for interpretation of these data to the practitioners;

      5.    Provides for making needed changes;

      6.    Provides for the performance of at least one performance improvement
            project of the MCO's own choosing;

      7.    Provides for participation in at least one performance improvement
            project conducted by the EQRO; and

      8.    Has in effect mechanisms to detect both under utilization and over
            utilization of services.

e.    The MCO shall provide descriptive information on the operation,
      performance and success of its Quality Assessment and Performance
      Improvement program to the DEPARTMENT or its agent upon request.

f.    The MCO shall maintain and operate a Quality Assessment and Performance
      Improvement program which includes at least the following elements:

      1.    A Quality Assessment and Performance Improvement plan.

      2.    A full-time Quality Assessment and Performance Improvement Director,
            who is responsible for the operation and success of the Quality
            Assessment and Performance Improvement Program. This person shall
            have adequate experience to ensure successful Quality Assessment and
            Performance Improvement, and shall be accountable for the Quality
            Assessment and Performance Improvement systems of all the MCO's
            providers, as well as the MCC's subcontractors.

      3.    The Quality Assessment and Performance Improvement Director shall
            spend an adequate percentage of time on Quality Assessment and
            Performance Improvement activities to ensure that a successful
            Quality Assessment and Performance Improvement Program will exist.
            Under the

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            Quality Assessment and Performance Improvement program, there shall
            be access on an as-needed basis to the full compliment of health
            professions (e.g., pharmacy, physical therapy, nursing, etc.) and
            administrative staff. Oversight of the program shall be provided by
            a Quality Assessment and Performance Improvement committee that
            includes representatives from:

                  a.    a variety of medical disciplines (e.g., medicine,
                        surgery, mental health, etc.);

                  b.    administrative staff; and Board of Directors of the MCO.

      4.    Make available case management training for PCPs designed by the
            DEPARTMENT or its agent.

g.    The Quality Assessment and Performance Improvement committee shall be
      organized operationally within the MCO such that it can be responsible for
      all aspects of the Quality Assessment and Performance Improvement program.

h.    Quality Assessment and Performance Improvement activities shall be
      sufficiently separate from Utilization Review activities, so that Quality
      Assessment and Performance Improvement activities can be distinctly
      identified as such.

i.    The Quality Assessment and Performance Improvement activities of the MCO's
      network providers and subcontractors, if separate from the MCO's Quality
      Assessment and Performance Improvement activities, shall be integrated
      into the overall MCO Quality Assessment and Performance Improvement
      program, and the MCO shall provide feedback to the in-network
      providers/subcontractors regarding the operation of any such independent
      Quality Assessment and Performance Improvement effort. The MCO shall
      remain, however, fully accountable for all Quality Assessment and
      Performance Improvement relative to its in-network providers and
      subcontractors.

j.    The Quality Assessment and Performance Improvement committee shall meet at
      least quarterly and produce written documentation of committee activities
      to be shared with the DEPARTMENT.

k.    The results of the Quality Assessment and Performance Improvement
      activities shall be reported in writing at each meeting of the Board of
      Directors.

l.    The MCO shall have a written procedure for following up on the results of
      Quality Assessment and Performance Improvement activities to determine
      success of implementation. Follow-up shall be documented in writing.

m.    Where the DEPARTMENT determines that a Quality Assessment and Performance
      Improvement plan does not meet the above requirements, the DEPARTMENT may
      provide the MCO with a model plan. The MCO agrees to

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      modify its Quality Assessment and Performance Improvement plan based on
      negotiations with the DEPARTMENT.

n.    The MCO shall monitor access to and quality of health care goods and
      services for its Member population, and, at a minimum, use this mechanism
      to capture and report all of the DEPARTMENT's required utilization data.
      The MCO shall be subject to an annual medical audit by the DEPARTMENT's
      Quality Assessment and Performance Improvement contractor and shall
      provide access to the data and records requested for this purpose.

o.    To the extent permitted under state and federal law, the MCO certifies
      that all data and records requested shall, upon reasonable notice, be made
      available to the DEPARTMENT or its agent.

p.    The MCO will be an active participant in at least one of the EQRO's
      quality improvement focus studies each year

q.    The MCO must comply with external quality review that will be implemented
      by an organization contracted by the DEPARTMENT. This may include
      participating in the design of the external review, collecting data
      including, but not limited to, encounter and medical data, and/or making
      data available to the review organization.

r.    The MCO must conduct at least one performance improvement project that:

      1.    Focuses on one of the following areas:

            a.    Prevention and care of acute and chronic conditions;

            b.    High volume services;

            c.    Continuity and coordination of care;

            d.    Appeals, grievances and complaints;

            e.    Access to and availability of services; or

            f.    Other projects subject to DEPARTMENT approval.

      2.    Includes the measurement of performance and quality indicators that
            are:

            a.    Objective;

            b.    Clearly and unambiguously defined;

            c.    Based on current clinica1 knowledge or health services
                  research;

            d.    Valid and reliable;

            e.    Systematically collected; and

            f.    Capable of measuring outcomes such as changes in health status
                  or Member satisfaction or valid proxies of those outcomes.

      3.    Implements system interventions to achieve quality improvement;

      4.    Evaluates the effectiveness of the interventions;

      5.    Plans and initiates activities for increasing or sustaining
            improvement; and

      6.    Represents the entire population to which the quality indicator is
            relevant.

s.    The MCO shall maintain a health information system that collects,
      analyzes,

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      integrates and reports data. The system must provide information on areas
      including but not limited to utilization, appeals and hearings.

t.    With the approval of the DEPARTMENT, the MCO may conduct performance
      improvement projects for the combined HUSKY A and HUSKY B populations.

3.34  INSPECTION OF FACILITIES

a.    The MCO shall provide the State of Connecticut and any other legally
      authorized governmental entity, or their authorized representatives, the
      right to enter at all reasonable times the MCO's premises or other places,
      including the premises of any subcontractor, where work under this
      contract is performed to inspect, monitor or otherwise evaluate work
      performed pursuant to this contract. The MCO shall provide reasonable
      facilities and assistance for the safety and convenience of the persons
      performing those duties. The DEPARTMENT and its authorized agents will
      request access in advance in writing except in case of suspected fraud and
      abuse.

b.    In the event right of access is requested under this section, the MCO or
      subcontractor shall upon request provide and make available staff to
      assist in the audit or inspection effort, and provide adequate space on
      the premises to reasonably accommodate the State or Federal
      representatives conducting the audit or inspection effort.

c.    The MCO shall be given ten (10) business days to respond to any findings
      of an audit before the DEPARTMENT shall finalize its findings. All
      information so obtained will be accorded confidential treatment as
      provided under applicable law.

3.35  EXAMINATION OF RECORDS

a.    The MCO shall develop and keep such records as are required by law or
      other authority or as the DEPARTMENT determines are necessary or useful
      for assuring quality performance of this contract. The DEPARTMENT shall
      have an unqualified right of access to such records in accordance with
      Part II Section 3.34.

b.    Upon non-renewal or termination of this contract, the MCO shall turn over
      or provide copies to the DEPARTMENT or to a designee of the DEPARTMENT all
      documents, files and records relating to persons receiving services and to
      the administration of this contract that the DEPARTMENT may request, in
      accordance with Part II, Section 3.34.

c.    The MCO shall provide the DEPARTMENT and its authorized agents with
      reasonable access to records the MCO maintains for the purposes of this
      contract.

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      The DEPARTMENT and its authorized agents will request access in writing
      except in cases of suspected fraud and abuse. The MCO must make all
      requested medical records available within thirty (30) days of the
      DEPARTMENT's request. Any contract with a subcontractor must include a
      provision specifically authorizing access in accordance with the terms set
      forth in Part II, Section 3.34.

d.    The MCO shall maintain the confidentiality of patients' records in
      conformance with this contract and state and federa1 statutes and
      regulations, including but not limited to the Health Insurance Portability
      and Accountability Act (HIPAA), 42 U.S.C. Section 1320 d-2 et seq. and the
      implementing privacy regulations at 45 CFR pts. 160 and 164.

e.    The MCO, for purposes of audit or investigation, shall provide the State
      of Connecticut, the Secretary of HHS and his/her designated agent, and any
      other legally authorized governmental entity or their authorized agents
      access to all the MCO's materials and information pertinent to the
      services provided under this contract, at any time, until the expiration
      of three (3) years from the completion date of this contract as extended.

f.    The State and its authorized agents may record any information and make
      copies of any materials necessary for the audit.

g.    The MCO and its subcontractors shall retain financial records, supporting
      documents, statistical records and all other records supporting the
      services provided under this contract for a period of five (5) years from
      the completion date of this contract. The MCO shall make the records
      available at all reasonable times at the MCO's general offices. The
      DEPARTMENT and its authorized agents will request access in writing except
      in cases of suspected fraud and abuse. If any litigation, claim or audit
      is started before the expiration of the five (5) year period, the records
      must be retained until all litigation, claims or audit findings involving
      the records have been resolved. The MCO must make all requested records
      available within thirty (30) days of the DEPARTMENT's request.

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3.36  MEDICAL RECORDS

a.    In compliance with all state and federal law governing the privacy of
      individually identifiable health care information including the Health
      Insurance Portability and Accountability Act (HIPAA), 42 USC Sections
      1320d-2 et seq., and the implementing privacy regulations at 45 CFR pts
      160 and 164, the MCO shall establish a confidential, centralized record,
      for each Member, which includes information of all medical goods and
      services received. The MCO may delegate maintenance of the centralized
      medical record to the Member's PCP, provided however, that the record
      shall be made available upon request and reasonable notice, to the
      DEPARTMENT or its agent(s) at a centralized location. The medical record
      shall meet the DEPARTMENT's medical record requirements as defined by the
      DEPARTMENT in its regulations, and shall comply with the requirements of
      NCQA or other national accrediting body with a recognized expertise in
      managed care.

b.    The MCO shall also simultaneously maintain, with the medical record, a
      record of all contacts with each Member that the MCO will maintain in a
      computerized database and make available to the DEPARTMENT, at its
      request. Claims and encounter records will be provided to the DEPARTMENT
      in an electronic medium as specified by the DEPARTMENT, and its agent(s).
      The medical record shall demonstrate coordination of Member care; for
      example, relevant medical information from referral sources and
      out-of-network family planning providers shall be reviewed and entered
      into Members' medical records. For those MCOs that are governed under
      Connecticut General Statutes Chapter 705 Section 38a-975 et seq., known as
      the "Connecticut Insurance Information and Privacy Act", such MCO shall be
      required to observe the provisions of such Act with respect to disclosure
      of personal and privileged information as such terms are defined under the
      Act.

c.    The MCO shall not turn over or provide documents, files and records
      pertaining to a Member to another health plan unless the Member has
      changed enrollment to the other plan and the MCO has been so notified by
      the DEPARTMENT or its agent.

3.37  AUDIT LIABILITIES

In addition to and not in any way in limitation of the MCO's obligations
pursuant to this contract, it is understood and agreed by the MCO that the MCO
shall be held liable for any finally determined State or Federal audit
exceptions and shall return to the DEPARTMENT all payments made under the
contract to which exception has been taken or which have been disallowed because
of such an exception.

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3.38  CLINICAL DATA REPORTING

a.    Utilization Reporting: The MCO shall submit reports to the DEPARTMENT in
      the areas listed below. The purpose of the reports is to assist the
      DEPARTMENT in its efforts to assess utilization and evaluate the
      performance of the HUSKY A program and of the MCO.

      Utilization reports shall cover the following areas:

      1.    Inpatient Care;

      2.    Preventive Care;

      3.    Dental Care;

      4.    Behavioral Health Care;

      5.    Other Services;

      6.    Maternal and Child Health;

      7.    EPSDT, known as HealthTrack; and

      8.    Immunization Information.

b.    The DEPARTMENT shall consult with the MCO, through a workgroup comprised
      of DEPARTMENT and MCO representatives that meets on a periodic basis, or a
      similar process, on the necessary data, methods of collecting the data and
      the format and media for new reports or changes to existing reports.

c.    The DEPARTMENT shall provide the MCO with final specifications for
      submitting all reports no less than ninety (90) days before the reports
      are due. The MCO shall submit reports on a schedule to be determined by
      the DEPARTMENT, but not more frequently than quarterly. Before the
      beginning of each calendar year, the DEPARTMENT shall provide the MCO with
      a schedule of utilization reports which shall be due that calendar year.
      Due dates for the reports shall be at the discretion of the DEPARTMENT,
      but not earlier than ninety (90) days after the end of the period that
      they cover.

d.    For each report the DEPARTMENT shall consider using any HEDIS standards
      promulgated by the NCQA which cover the same or similar subject matter.
      The DEPARTMENT reserves the right to modify HEDIS standards, or not use
      them at all, if in the DEPARTMENT's judgment, the objectives of the HUSKY
      A program can be better served by using other methods.

e.    EPSDT (HealthTrack): The MCO shall submit to the DEPARTMENT reports on
      compliance with screening requirements of the EPSDT program sufficient to
      enable the DEPARTMENT to comply with its reporting obligations under
      federal and state requirements and to assess and evaluate the performance
      of the MCO in the screening requirements of the EPSDT program. These
      obligations include, but are not limited to, submitting reports to federal
      and state agencies.

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f.    Maternal and Prenatal Care:

      The MCO shall report aggregate summary data on outcomes of maternal and
      prenatal care to the DEPARTMENT no less frequently than quarterly. Such
      data will include:

      1.    Number of deliveries during the quarter to women enrolled in the MCO
            at the time of delivery;

      2.    Number of live births;

      3.    Number of fetal deaths;

      4.    Number of very low birthweight babies, defined as weighing less than
            one thousand five hundred grams;

      5.    Number of hospital inpatient/NICU days for very low birthweight
            babies;

      6.    Number of moderately low birthweight babies, defined as weighing
            less than two thousand five hundred grams;

      7.    Number of hospital/NICU days for moderately low birthweight babies;

      8.    Number of deliveries by cesarean section;

      9.    Number of women who delivered and had no prenatal care;

      10.   Number of women with inadequate prenatal care;

      11.   Number of women with deliveries who have received a postpartum
            visit; and

      12.   For the purpose of adjusting comparisons amongst plans, aggregate
            measures of weeks of pregnancy at the time of enrollment in the
            plan.

      The report will be due within six (6) months after the last day of the
      quarter in which the deliveries occurred. The DEPARTMENT will specify the
      methodology for preparing the report, no less than ninety (90) days prior
      to the end of the quarter which is the subject of the report and after
      consultation with the MCO. If the change requires the collection of
      additional data elements not currently being captured, the DEPARTMENT will
      notify the MCO no less than ninety (90) days prior to the beginning of the
      first quarter affected by the change.

g.    Encounter Data:

      1.    The MCO shall provide the DEPARTMENT with an electronic record of
            every encounter between a network provider and a Member within
            fifteen (15) days of the close of the month in which the specific
            encounter occurred, was paid for, or was processed whichever is
            later but no later than 180 days from the encounter. Such encounters
            shall be coded and formatted in accordance with the specifications
            outlined in the State's Encounter Submission and Reporting Guide.
            The DEPARTMENT or its agent shall analyze each month's encounter
            submission file. The DEPARTMENT or its agent wi11 reject those
            records that contain invalid or missing data and result in a
            critical edit failures as outlined in the Encounter Submission and
            Reporting Guide.

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      2.    Encounter data and any other types of data submitted by the MCO that
            the DEPARTMENT designates as data relied upon by the DEPARTMENT to
            set rates must be certified by one of the following: the MCO's Chief
            Executive Officer or Chief Financial Officer or an individual who
            has delegated authority to sign for and who reports directly to
            either the Chief Executive Officer or Chief Financial Officer. The
            certification must attest, based on the best knowledge, information
            and belief, as follows: 1) to the accuracy, completeness and
            truthfulness of the data and 2) to the accuracy, completeness and
            truthfulness of the reports required pursuant to this section. The
            MCO shall submit the certification concurrently with the certified
            data.

      PERFORMANCE MEASURE: The overall volume of rejected encounters shall not
      exceed five (5) percent in any given month.

      3.    The MCO shall resubmit rejected encounter records in accordance with
            the following schedule:

            a.    90% of rejected encounters shall be resubmitted within 30
                  days;

            b.    95% of rejected encounters shall be resubmitted within 60
                  days;

            c.    no less than 98% of rejected encounters shall be resubmitted
                  within 90 days.

      4.    The DEPARTMENT or its agent shall also analyze the MCO's encounter
            submissions for completeness. On a quarterly basis, no less than six
            (6) months from the date of service on the encounter, the DEPARTMENT
            or its agent will compare encounter data utilization levels to the
            MCO self-reported utilization levels in the reports specified in
            Sections 3.38(a)-(f).

      PERFORMANCE MEASURE: Encounter data shall not be over or under the MCO
      self-reported utilization levels for the same time period by ten (10)
      percent or more.

      5.    The DEPARTMENT or its EQRO, may choose a random sample of no more
            than one hundred (100) encounters for each year. The MCO will make
            the medical records of each encounter so chosen available to the
            DEPARTMENT or EQRO at a central location upon reasonable notice. The
            EQRO shall review the medical records and report back to the
            DEPARTMENT on the extent to which the information in each field of
            the encounter record corresponds to the information contained in the
            medical record. Prior to making its report to the DEPARTMENT, the
            EQRO shall afford the MCO a reasonable opportunity to suggest
            corrections to or comment upon the EQRO's findings.

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SANCTION: Failure to comply with the above reporting requirements in a complete
and timely manner may result in a strike towards a Class A sanction pursuant to
Section 7.05.

3.39  UTILIZATION MANAGEMENT

a.    The MCO and all subcontractors are required to be licensed by the
      Connecticut Department of Insurance as utilization review companies. The
      MCO may subcontract with a licensed utilization review company to perform
      some or all of the MCO's utilization management functions.

b.    The MCO and its subcontractors shall develop and adhere to written
      policies and procedures for processing requests for initial and continuing
      authorizations of services. The MCO shall have mechanisms in place to
      ensure consistent application of review criteria for authorization
      decisions. Authorization decisions must be made by a health care
      professional who has appropriate clinical expertise in treating the
      Member's condition or disease.

c.    The MCO must provide a written notice of action, as described in Section
      6.02, of any decision to deny a service authorization request or to
      authorize a service in an amount, duration, or scope that is less than
      requested or any decision to terminate, suspend or reduce a previously
      authorized Medicaid-covered service. The provider requesting authorization
      shall also receive notice of authorization decisions, except the provider
      notice need not be in writing.

d.    The MCO shall make authorization decisions and issue a written notice of
      action and notice to the provider as expeditiously as the Member's health
      condition requires, but not to exceed fourteen (14) calendar days
      following receipt of the request for service. This standard 14 day
      authorization period may be extended one time only by an additional
      fourteen (14) days if:

      1.    the Member or requesting provider asks for an extension; or

      2.    the MCO documents that the extension is in the Member's interest
            because additional information is needed to authorize the service
            and the failure to extend the timeframe will result in the denial of
            the service. The DEPARTMENT may request such documentation from the
            MCO.

e.    The MCO shall expedite its authorization decision if a provider indicates,
      or the MCO determines that following the timeframe in subsection (d) of
      this section could seriously jeopardize the Member's life or health or
      ability to attain, maintain or regain maximum function. In such
      circumstances the MCO shall issue a decision no later than three working
      days after receipt of the request for service. This three day period may
      be extended for an additional fourteen days if either criteria in (d)(l)
      or (d)(2). above, are met.

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f.    If the MCO subcontracts for any portion of the utilization management
      function, the MCO shall provide a copy of any such subcontract to the
      DEPARTMENT and any such subcontracts will be subject to the provisions of
      Section 5.08 of this contract. The DEPARTMENT will review and approve the
      subcontract, subject to the provisions of Section 3.45, to ensure the
      appropriateness of the subcontractor's policies and procedures. The MCO is
      required to conduct regular and comprehensive monitoring of the
      utilization management subcontractor.

g.    The MCO shall not compensate any subcontractor or other entity performing
      utilization management or utilization review functions so as to provide
      any incentive for the individual to deny, limit or discontinue medically
      necessary services to any Member.

3.40  FINANCIAL RECORDS

a.    Accounting: The MCO shall maintain for the purpose of this contract, an
      accounting system of procedures and practices that conforms to Generally
      Accepted Accounting Principles.

b.    The MCO shall permit audits or reviewe by the DEPARTMENT and HHS or their
      agent(s) of the MCO's financial records related to the performance of this
      contract and, for any subcontract that is a risk contract as defined in 42
      CFR 438.2, any such subcontractors' financial records related to the
      performance of this contract. In addition, the MCO will be required to
      provide Claims Aging Inventory Reports, Claims Turn Around Time Reports,
      cost, and other reports as outlined in subsections (c) and (d) below or as
      otherwise directed by the DEPARTMENT.

c.    Reports specific to the MCO's Medicaid line of business shall be provided
      in formats developed by the DEPARTMENT. All reports described in Sections
      3.40(c)(1) and 3.40(c)(2) shall contain separate sections for HUSKY A and
      HUSKY B. It is anticipated that the requirements in this area will be
      modified to enable the DEPARTMENT to respond to inquiries that the
      DEPARTMENT receives regarding the financial status of the HUSKY program,
      to determine the relationship of capitation payments to actual
      appropriations for the program, and to allow for proper oversight of
      fiscal issues related to the managed care programs. The MCO will cooperate
      with the DEPARTMENT or its agent(s) to meet these objectives. The
      following is a list of required reports:

      1.    Audited financial reports with an income statement by MCO HUSKY line
            of business. If the MCO is licensed as a health care center or
            insurance company, both the annual audited financial reports for the
            MCO and the audited financial reports per MCO HUSKY line of business
            shall be conducted and reported in accordance with C.G.S. Section
            38a - 54. If the MCO is not licensed as a health care center or
            insurance company, the annual audited financial reports for the MCO
            and the audited financial reports per

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            MCO line of business shall be completed in accordance with generally
            accepted auditing principles.

            The MCO may elect to combine HUSKY A and HUSKY B in the audited
            financial statement. If this election is made, the MCO shall also
            submit the following: a separate unaudited income statement for
            HUSKY A and HUSKY B, which will be compared to the audited financial
            statement.

      2.    Unaudited financial reports, HUSKY line of business (formats shown
            in Appendix F). The reports shall be submitted quarterly, forty-five
            (45) days subsequent to the end of each quarter. Every line of the
            requested report must contain a dollar figure or an indication that
            said line is not applicable.

      3.    Annual and Quarterly Statements. If the MCO is licensed as a health
            care center or insurance company, the MCO is required to submit
            Annual and Quarterly Statements to the Department of Insurance in
            accordance with C.G.S. Section 38a-53. One copy of each statement
            shall be submitted to the DEPARTMENT in accordance with the
            Department of Insurance submittal schedule.

      4.    Claims Aging Inventory Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). The Claims Aging Inventory
            Report will include a11 HUSKY claims outstanding as of the end of
            each quarter by type of claim, claim status and aging categories. If
            a subcontractor is used to provide services and adjudicate claims or
            a vendor is used to adjudicate claims, the MCO is responsible for
            providing a Claims Aging Inventory Report in the required format for
            each current or prior subcontractor who has claims outstanding. The
            Claims Aging Inventory Reports will be submitted to the DEPARTMENT
            forty-five (45) days subsequent to the end of each quarter.

      5.    Denied Claims Report. The MCO shall also submit a Denied Claims
            report, to include all HUSKY provider claims denied as of the end of
            each quarter. The MCO and the DEPARTMENT shall establish a joint
            workgroup to develop the criteria and format for the denied claims
            report.

      6     Claims Turn Around Time Report (format shown in Appendix F, or any
            other format approved by the DEPARTMENT). For those claims processed
            in forty-six (46) days or more, the report shall indicate if
            interest was paid in accordance with Section 3.46 of this contract.
            If a subcontractor is used to provide services and adjudicate claims
            or a vendor is used to adjudicate claims, the MCO is responsible for
            providing a Claims Turn Around Time Report in the required format
            for each current or prior subcontractor who has claims outstanding.
            The Claims Turn

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            Around Time Report will be submitted to the DEPARTMENT forty-five
            (45) days subsequent to the end of each quarter.

d.    The MCO shall maintain accounting records in a manner which will enable
      the DEPARTMENT to easily audit and examine any books, documents, papers
      and records maintained in support of the contract. All such documents
      shall be made available to the DEPARTMENT at its request, and shall be
      clearly identifiable as pertaining to the contract.

e.    The MCO shall make available on request all financial reports required by
      the terms of any current contract with any other state agency(s) provided
      the said agency agrees that such information may be shared with the
      DEPARTMENT.

f.    The MCO shall submit to the DEPARTMENT on a quarterly basis, capitation
      income and disbursement reports from mental health and dental
      subcontractors with whom they have a risk arrangement. The report shall be
      in a format specified by the DEPARTMENT and shall include total payment
      received for Medicaid members from the MCO and breakdown of payment by
      categories as specified in Sec. 3.45 (j)(2).

3.41  INSURANCE

a.    The MCO, its successors and assignees shall procure and maintain such
      insurance as is required by currently applicable federal and state law and
      regulation. Such insurance should include, but not be limited to, the
      following:

      1.    liability insurance (general, errors and omissions, and directors
            and officers coverage);

      2.    fidelity bonding or coverage of persons entrusted with handling of
            funds;

      3.    workers compensation; and

      4.    unemployment insurance.

b.    The MCO shall name the State of Connecticut as an additional insured party
      under any insurance, except for professional liability, workers
      compensation, unemployment insurance, and fidelity bonding maintained for
      the purposes of this contract. However, the MCO shall name the State of
      Connecticut as either a loss payee or additional insured for fidelity
      bonding coverage.

3.42  THIRD PARTY COVERAGE

The DEPARTMENT is the payer of last reson when third party resources are
available to cover the costs of medical services provided to Medicaid
recipients. Pursuant to this requirement, the MCO is required to comply with
federal and state statutes and regulations regarding third party liability. The
MCO shall be responsible for making every reasonable effort to determine the
legal liability of third parties to pay for services rendered to Members under
this contract. The MCO shall be responsible for identifying

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appropriate third party resources, and if questions arise they shall consult
with the DEPARTMENT. The MCO shall pursue, collect, and retain any monies from
third party payers for services to the MCO's Members under this contract,
subject to the following terms and conditions:

a.    The DEPARTMENT hereby assigns to the MCO all rights to third party
      recoveries from Medicare, health insurance, casualty insurance, workers'
      compensation, tortfeasors, or any other third parties who may be
      responsible for payment of medical costs for the MCO's Members.

      1.    The MCO will have primary responsibility for cost avoidance through
            the coordination of benefits relative to federal and private health
            insurance resources including, but not limited to Medicare,
            individual health insurance, employment-related group health
            insurance and self administered or self funded health benefit plan,
            including ERISA (Employee Retirement and Income Security Act) plans.
            The MCO shall avoid initial payments of claims, as permitted by
            federal law, where federal or private health insurance resources are
            available. When cost avoidance is not possible, the MCO may utilize
            post payment recovery. If a third party insurer requires the Member
            to pay any copayment, coinsurance or deductible, the MCO is
            responsible for making any such payments to the extent that the
            third party insurer's co-payment exceeds the co-payment applicable
            under this contract.

      2.    The MCO may assign the right of recovery to their subcontractors
            and/or network providers. Notwithstanding any such assignment of the
            right of recovery, the MCO remains responsible for the effective and
            diligent performance of third party recovery.

      3.    In pursing third party recovery, the MCO, network providers, and
            subcontractors shall seek recovery of the cost of services actually
            rendered to the Member, notwithstanding the fact that the MCO may
            pay the subcontractor on a capitated basis.

      4.    The MCO or its assignee must initiate third party recoveries within
            sixty (60) days of the date of service or within sixty (60) days
            after the end of the month in which the MCO 1earns of the existence
            of the liable third party. The MCO or its assignees must maintain
            dated documentation of all claims to third parties. The MCO must
            document initiation of recovery by formal communication in written
            or electronic form to the liable third party, specifically
            requesting reimbursement up to the legal limit of liability for any
            services provided to the MCO's Member covered under the State
            Medicaid Plan.

      5.    The right to pursue, collect and retain recovery from claims not
            initiated and documented within sixty (60) days as stated above,
            will revert to the

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            DEPARTMENT and the MCC or its assignees will lose any right of
            recovery.

      6.    When the MCO seeks recovery from a third party for care provided to
            a Member following an accident, the MCO may recover only its cost of
            care.

b.    The MCO shall maintain records of recoveries of all third party
      collections, including cost avoidance, and recovery actions. The
      DEPARTMENT will specify a schedule and format for reporting such
      collections. The amounts avoided or recovered by the MCO shall be
      considered in establishing future capitated rates paid to the MCO.

c.    The MCO shall fully cooperate with the DEPARTMENT in all third party
      recovery efforts.

d.    The DEPARTMENT shall supply the MCO with a monthly file of Members where
      third party coverage has been identified. The information shall also be
      available to the MCO and its assignees from the DEPARTMENT'S Automated
      Electronic Voice Response System.

e.    The MCO shall notify the DEPARTMENT within thirty (30) days if the MCO or
      its network provider or subcontractor discovers that a Member has become
      eligible for coverage by a liable third party. The MCO shall notify the
      DEPARTMENT within thirty (30) days if the MCO or its in-network provider
      or subcontractor discovers that a Member has lost eligibility for coverage
      by a liable third party.

3.43  COORDINATION OF BENEFITS AND DELIVERY OF SERVICES

a.    The MCO shall ensure that the rules related to the coordination of
      benefits in Section 3.41 do not present any barriers to Members' access to
      the covered services under this contract.

b.    The MCO shall educate its Members on how to access services when a Member
      is covered by a third party insurer.

c.    If a third party insurer requires the Member to pay any co-payment,
      coinsurance or deductible, the MCO is responsible for paying the portion
      of the third party insurer's co-payment that exceeds the co-payment
      applicable under this contract, not to exceed the amount allowed per the
      MCO's fee schedule, even if the services are provided outside of the MCO's
      provider network.

d.    If a Member's third party insurer pays for only some services covered
      under this contract or for only part of a particular service, the MCO
      shall be liable up to the allowed amount in accordance with the MCO's fee
      schedule, for the full extent of

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      services covered under this contract, even if the services are provided
      outside of the MCO's provider network.

e.    If a Member is covered by a third party insurer, the MCO is bound by any
      prior authorization decisions made by the third party insurer.

3.44  PASSIVE BILLING

Capitation payments to the MCO shall be based on a passive billing system. The
MCO is not required to submit claims for the capitation payment for its HUSKY A
membership. Capitation payments will be based on MCO membership data as
reflected in the enrollment files provided by the DEPARTMENT to the MCOs. On a
monthly basis ACS will provide the MCO with a detailed capitation remittance
file.

3.45  SUBCONTRACTING FOR SERVICES

   a. Licensed health care facilities, group practices and licensed health care
      professionals operating within the scope of their practice may contract
      with the MCO directly or indirectly through a subcontractor who directly
      contracts with the MCO. The MCO shall be held directly accountable and
      liable for all of the contractual provisions under this contract
      regardless of whether the MCO chooses to subcontract their
      responsibilities to a third party. No subcontract shall operate to
      terminate the legal responsibility of the MCO to assure that all
      activities carried out by the subcontractor conform to the provisions of
      the contract. Subcontracts shall not terminate the legal liability of the
      MCO under this contract.

   b. The MCO may subcontract for any function, excluding Member Services,
      covered by this contract, subject to the requirements of this contract.
      Before delegating any of the requirements of this contract, the MCO shall
      evaluate the prospective subcontractor's ability to perform the activities
      to be delegated. All subcontracts shall be in writing, shall include any
      general requirements of this contract that are appropriate to the services
      being provided, and shall assure that all delegated duties of the MCO
      under this contract are performed, including any reporting requirements.
      The subcontract shall also provide for revocation or other sanctions if
      the subcontractor's performance is inadequate. All subcontracts shall also
      provide for the right of the DEPARTMENT or other governmental entity to
      enter the subcontractor's premises to inspect, monitor or otherwise
      evaluate the work being performed as a delegated duty of this contract, as
      specified in Section 3.34, Inspection of Facilities. All subcontracts
      shall comply with the requirements of 42 CFR 4386 that are appropriate to
      the service or activity delegated under the subcontract.

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   c.    With the exception of subcontracts specifically excluded by the
         DEPARTMENT, all subcontracts shall include verbatim the HUSKY A
         definitions of Medical Appropriateness / Medically Appropriate and
         Medically Necessary/Medical Necessity as set forth in Part II, General
         Contract Terms for the MCOs. All subcontracts shall require the use of
         these definitions by subcontractors in all requests for approval of
         coverage of goods or services made on behalf of HUSKY A Members. All
         subcontracts shall also provide that decisions concerning both acute
         and chronic care must be made according to these definitions.

   d.    Within fifteen (15) days of the effective date of this contract, the
         MCO shall provide the DEPARTMENT with a report of those functions under
         this contract that the MCO shall be providing through a subcontract and
         copies of the contracts between the MCO and the subcontractor. The
         report shall identify the names of the subcontractors, their addresses
         and a summary of the services they will be providing. If the MCO enters
         into any additional subcontracts after the MCO's initial compliance
         with this section, the MCO shall obtain the advance written approval of
         the DEPARTMENT. The MCO shall provide the DEPARTMENT with a draft of
         the proposed subcontract thirty (30) days in advance of the completion
         of the MCO's negotiation of such subcontract. In addition, amendments
         to any subcontract, excluding those of a technical nature, shall
         require the pre-review and approval of the DEPARTMENT.

   e.    All behavioral health and dental subcontracts which include the payment
         of claims on behalf of HUSKY A Members for the provision of goods and
         services to HUSKY A Members shall require a performance bond, letter of
         credit, statement of financial reserves or payment withhold
         requirements. The performance bond, letter of credit, statement of
         financial reserves or payment withhold requirements shall be in a form
         mutually agreed upon by the MCO and the subcontractor. The amount of
         the performance bond shall be sufficient to ensure the completion of
         the subcontractor's claims processing and provider payment obligations
         under the subcontract in the event the contract between the MCO and the
         subcontractor is terminated. The MCO shall submit reports to the
         DEPARTMENT upon the DEPARTMENT's request related to any payments made
         from the performance bonds or any payment withholds.

   f.    All behavioral health and dental subcontracts which include the payment
         of claims on behalf of HUSKY A Members for the provision of goods and
         services to HUSKY A members shall require the submission of a
         capitation income and disbursement report in a format specified by the
         DEPARTMENT. The report shall be submitted quarterly and shall include
         the amount of payment received for Medicaid members; amount paid
         directly to providers of health services on behalf of Medicaid members;
         administrative costs and profits.

   g.    All subcontracts shall include provisions for a well-organized
         transition in the event of termination of the subcontract for any
         reason. Such provisions shall

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      ensure that an adequate provider network will be maintained at all times
      during any such transition period and that continuity of care is
      maintained for all Members.

h.    Prior to the approval by the DEPARTMENT of any subcontract with a
      behavioral health or dental subcontractor, the MCO shall submit a plan to
      the DEPARTMENT for the resolution of any outstanding claims submitted by
      providers to the MCO's previous behavioral health or dental subcontractor.
      Such plan shall meet the requirements described in subsection (j) below.

i.    The MCO shall monitor all subcontractors' performance on an ongoing basis
      and subject the subcontractor to formal review once a year. All
      subcontracts shall provide that if the MCO identifies deficiencies or
      areas for improvement, the MCO and the subcontractor shall take corrective
      action.

j.    In the event that a subcontract is terminated, the MCO shall submit a
      written transition plan to the DEPARTMENT sixty (60) days in advance of
      the scheduled termination. The transition plan shall include provisions
      concerning financial responsibility for the final settlement of provider
      claims and data reporting, which at a minimum must include a claims aging
      report prepared in accordance with Section 3.39 (c)(5) of this contract,
      with steps to ensure the resolution of the outstanding amounts. This plan
      shall be submitted prior to the DEPARTMENT's approval of the replacement
      subcontractor.

k.    All subcontracts shall also include a provision that the MCO will withhold
      a portion of the final payment to the subcontractor, as a surety bond to
      ensure compliance under the terminated subcontract.

1.    The MCO shall have no right to and shall not assign, transfer or delegate
      this contract in its entirety, or any right on duty arising under this
      contract without the prior written approval of the DEPARTMENT. The
      DEPARTMENT in its discretion may grant such written approval of an
      assignment, transfer or delegation provided, however, that this paragraph
      shall not be construed to grant the MCO any right to such approval.

m.    This section shall not be construed as restricting the MCO from entering
      into contracts with participating providers to provide health care
      services to Members.

3.46  TIMELY PAYMENT OF CLAIMS

The MCO shall pay 90 (ninety) percent of all clean claims from providers in
group or individual practices or who practice in shared health facilities within
thirty (30) days from the date of receipt. The MCO shall pay ninety-nine (99)
percent of all clean claims from providers in group or individual practices or
who practice in shared health facilities

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within ninety (90) days from the date of receipt. These time limitations do not
apply if the MCO and its providers stipulate to an alternative schedule in their
provider contracts. If the MCO or any subcontractor or vendor who adjudicates
claims fails to pay a clean claim within forty-five (45) days of receipt, or as
otherwise stipulated by a provider contract, the MCO, vendor or subcontractor
shall pay the provider the amount of such clean claims plus interest at the rate
of fifteen (15) percent per annum or otherwise as stipulated by a provider
contract. In accordance with Section 3.40 (c)(5), Financial Records, the MCO
shall provide to the DEPARTMENT information related to interest paid beyond the
forty-five (45) day timely filing limit or otherwise stipulated by a provider
contract.

3.47  CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES

Members shall be responsible for a $1.00 co-payment for prescription drugs. The
co-payment shall apply to each prescription drug, covered over the counter
medication and refill. The following services and individuals shall be exempt
from the co-payment requirement:

      1)    Members under the age of 21;

      2)    Pregnant women, including the period of 60 days post-partum. This
            post-partum period begins on the 1ast day of pregnancy and extends
            through the end of the month in which the 60-day period following
            termination of pregnancy ends;

      3)    Members who are inpatients in the following medical institutions:
            acute care hospital, psychiatric hospital, chronic disease hospital
            or nursing facility;

      4)    Prescription for family planning drugs or supplies;

      5)    Compounded prescriptions.

The MCO shall ensure that the dispensing pharmacist is responsible for
collecting the co-payment at the time of the service unless the pharmacist, in
filling certain prescriptions, does not normally have face-to face contact with
the Member. If the pharmacist does not have face-to-face contact with the Member
in dispensing a prescription, the provider has the right to bill the Member for
the $1.00 co-payment.

Pursuant to 42 U.S.C. Section 1396o(e), no provider may deny care or services to
an individual eligible for such care or services because of an inability to pay
a co-payment. The MCO shall ensure that its providers do not refuse to render
the service or fill a prescription if the Member is unable to pay the
co-payment. The MCO may permit its providers to ask for the unpaid co-payment at
a subsequent visit or to bill the Member for the outstanding co-payment. The
pharmacist shall accept the Member's declaration that he is unable to pay the
co-payment.

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Except for the prescription drug co-payment described above, no deductibles or
co-payments or similar cost-sharing charges are permitted for HUSKY A covered
services.

A provider shall be permitted to charge an eligible Member for goods or services
which are not coverable only if the Member knowingly elects to receive the goods
or services and enters into an agreement in writing to pay for such goods or
services prior to receiving them. For purposes of this section noncovered
services are services not covered under the Medicaid state plan, services which
are provided in the absence of appropriate authorization, and services which are
provided out-of-network unless otherwise specified in the contract, policy or
regulation (e.g., family planning, mental health or emergency room services).

3.48  INSOLVENCY PROTECTION

Unless the MCO is (or is controlled by) one or more federally qualified health
care centers and meets the solvency standards established by the DEPARTMENT for
those centers, the MCO shall meet the solvency standards established by the
State of Connecticut for private health maintenance organizations, or be
licensed or certified by the State as a risk bearing entity. The MCO must
maintain protection against insolvency as required by the DEPARTMENT including
demonstration of adequate initial capital and ongoing reserve contributions. The
MCC must provide financial data to the DEPARTMENT in accordance with the
DEPARTMENT's required formats and timing.

3.49  ACCEPTANCE OF DSS RULINGS

In cases where there is a dispute between the MCO and an out-of-network provider
about whether a service is medically necessary, is an emergency, or is an
appropriate diagnostic test to determine whether an emergency condition exists,
the DEPARTMENT will hear appeals, filed within one year following the date of
service and make final determinations. The DEPARTMENT will accept written
comments from all parties to the dispute prior to making the decision, and order
or not order payment, as appropriate. The MCO shall accept the DEPARTMENT's
determinations regarding appeals.

3.50  POLICY TRANSMITTALS

The MCO shall comply with the provisions and requirements in the DEPARTMENT's
Managed Care Policy Transmittals as set forth in Appendix H. In addition, the
MCO shall comply with any future Managed Care Policy Transmittals issued by the
DEPARTMENT. The MCO shall comply with the Medical Services Policy as set forth
in the DEPARTMENT's provider manuals and the Regulations of Connecticut State
Agencies.

3.51  FRAUD AND ABUSE

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a.    The MCO shall not knowingly take any action or fail to take action that
      could result in an unauthorized benefit to the MCO, its employees, its
      subcontractors, its vendors, or to a Member.

b.    The MCO commits to preventing, detecting, investigating, and reporting
      potential fraud and abuse occurrences, and shall assist the DEPARTMENT and
      HHS in preventing and prosecuting fraud and abuse in the HUSKY program.

c.    The MCO acknowledges that the HHS, Office of the Inspector General, has
      the authority to impose civil monetary penalties on individuals and
      entities that submit false and fraudulent claims to the HUSKY program.

d.    The MCO shall immediately notify the DEPARTMENT when it detects a
      situation of potential fraud or abuse, including, but not limited to, the
      following:

      1.    False statements, misrepresentation, concealment, failure to
            disclose, and conversion of benefits;

      2.    Any giving or seeking of kickbacks, rebates, or similar
            remuneration;

      3.    Charging or receiving reimbursement in excess of that provided by
            the DEPARTMENT; and

      4.    False statements or misrepresentation made by a provider,
            subcontractor, or Member in order to qualify for the HUSKY program.

e.    Upon written notification of the DEPARTMENT, the MCO shall cease any
      conduct that the DEPARTMENT or its agent deems to be abusive of the HUSKY
      program, and to take any corrective actions requested by the DEPARTMENT or
      its agent.

f.    The MCO attests to the truthfulness, accuracy, and completeness of all
      data submitted to the DEPARTMENT, based on the MCO's best knowledge,
      information, and belief. This data certification requirement includes
      encounter data and also applies to the MCO's subcontractors.

g.    The MCO shall have administrative and management procedures and a
      mandatory compliance plan to guard against fraud and abuse. The MCO's
      compliance plan shall include but not necessarily be limited to, the
      following efforts:

      1.    The designation of a compliance officer and a compliance committee,
            responsible to senior management;

      2.    Written policies, procedures and standards that demonstrate
            commitment to comply with all applicable Federal and State
            standards;

      3.    Effective lines of communication between the compliance officer and
            MCO employees;

      4.    Conducting regular reviews and audits of operations to guard against
            fraud and abuse;

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      5.    Assessing and strengthening internal controls to ensure claims are
            submitted and payments are made properly;

      6.    Effectively training and educating employees, providers, and
            subcontractors about fraud and abuse and how to report it;

      7.    Effectively organizing resources to respond to complaints of fraud
            and abuse;

      8     Establishing procedures to process fraud and abuse complaints; and

      9.    Establishing procedures for prompt responses to potential offenses
            and reporting information to the DEPARTMENT.

h.    The MCO shall examine publicly available data, including but not limited
      to the CMS Medicare/Medicaid Sanction Report and the CMS website
      (http://www.oig.hhs.gov) to determine whether any potential or current
      employees, providers, or subcontractors have been suspended or excluded or
      terminated from the Medicare or Medicaid programs and shall comply with,
      and give effect to, any such suspension, exclusion, or termination in
      accordance with the requirements of state and federal law.

i.    The MCO must provide full and complete information on the identity of each
      person or corporation with an ownership or controlling interest, five (5)
      percent, in the managed care plan, or any subcontractor in which the MCO
      has a five (5) percent or more ownership interest.

j.    The MCO must immediately provide full and complete information when it
      becomes aware of any employee or subcontractor who has been convicted of a
      civil or criminal offense related to that person's involvement under
      Medicare, Medicaid, or any other federal or state assistance program prior
      to entering into or renewing this contract.

SANCTION: The DEPARTMENT may impose a sanction, up to and including a Class C
sanction for the failure to comply with any provision of this section, or take
any other action set forth in Section 7 of this contract, including terminating
or refusing to renew this contract or any other Sanction or remedy allowed by
federal or state law.

3.52  PERSONS WITH SPECIAL HEALTH CARE NEEDS

a.    The DEPARTMENT will provide to the MCO information to identify Members who
      are: 1) eligible for Supplemental Security Income; 2) over sixty-five (65)
      years of age; 3) children who are receiving foster care or otherwise in an
      out of home placement or receiving Title IV E foster care or adoption
      services; and 4) children who are enrolled in Title V's Children with
      Special Health Care Needs program.

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b.    The MCO shall conduct an assessment of these individuals and other persons
      with special health care needs and make a referral to the Member's PCP to
      develop a treatment plan, as appropriate.

c.    The MCO shall report to the DEPARTMENT, in a format specified by the
      DEPARTMENT, on quality indicators such as utilization of specialty
      services and case management to be developed jointly between the
      DEPARTMENT and the MCOs.

4. FUNCTIONS AND DUTIES OF THE DEPARTMENT

4.01  ELIGIBILITY DETERMINATIONS

The DEPARTMENT will determine the initial and ongoing eligibility for medical
assistance of each individual enrolled under this contract in accordance with
the DEPARTMENT's continuous and guaranteed eligibility policies.

4.02  POPULATIONS ELIGIBLE TO ENROLL

Appendix G contains a list of the Medicaid groups currently eligible for managed
care enrollment. New eligibility groups may be added to the managed care
population. The DEPARTMENT will notify the MCO of any changes in the eligibility
categories to be included. Additional groups included by the DEPARTMENT may be
served at the MCO's option.

4.03  ENROLLMENT/DISENROLLMENT

Enrollment, disenrollment and initial selection of PCP will be handled by the
DEPARTMENT through a contract with a central enrollment broker. Coverage for new
Members will be effective the first of the month and coverage for disenrollments
will terminate at the end of the month. Members remain continuously enrolled
throughout the term of this contract, except in situations where clients change
health plans, lose their Medicaid eligibility, receive Medicare, or are
recategorized into a Medicaid category not included in the managed care
initiative. Disenrollments due to loss of eligibility become effective upon loss
of eligibility and are effective on the last day of the month. Disenrollments
due to receipt of Medicare become effective the month following the month in
which DSS receives information of the existence of the Medicare coverage. Adults
receiving SSI become disenrolled from the MCO upon the recategorizing of their
Medicaid status from a family to an adult coverage group or the month following
the month in which the DEPARTMENT receives information of the individual's
receipt of SSI, whichever comes first. The DEPARTMENT will notify the MCO of
enrollments and disenrollments specific to the MCO via a daily data file. The
enrollments and

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disenrollments processed on any given day will be made available to the MCO via
the data file the following day (i.e. after the daily overnight batching has
been processed).

In addition to the daily data file, a full file of all the Members will be made
available on a monthly basis. Both the daily data file and the monthly full file
can be accessed by the MCO electronically via dial-up.

4.04  DEFAULT ENROLLMENT

The DEPARTMENT shall, on a rotating basis among all of the participating MCO's
and as the MCO's enrollment capacity allows, assign default Members to the MCO.

The default assignment methodology is structured to evenly distribute families
among all the participating MCOs. However, due to variability in MCO service
area and enrollment capacity, family size and loss of Medicaid eligibility, the
outcome of the default assignment may not result in an even net default
distribution among all the MCOs.

4.05  LOCK-IN

a.    Members may request disenrollment from the MCO after one (1) month. Upon
      availability of MIS Support, the DEPARTMENT will implement a lock-in
      period of up to twelve (12) months for managed care Members. The
      DEPARTMENT's implementation of lock-in will comply with all provisions of
      42 CFR 438.56. Members will not be allowed to change plan enrollment
      during the lock-in period except for cause. The lock-in period is subject
      to the following provisions and exceptions:

      1.    The first ninety (90) days of enrollment into a new MCO will be
            designated as the free-look period during which time the Member may
            change plans;

      2.    The last sixty (60) days of the lock-in period will be an open
            enrollment period, during which time Members may change plans;

      3.    Plan changes made during the open enrollment period will go into
            effect on the first day of the month following the end of the
            lock-in period; and

      4.    Members who do not change plans during the open enrollment period
            will continue the enrollment in the same MCO and be assigned to a
            new twelve (12) month lock-in period.

      The process being considered for implementation of lock-in for the
      existing HUSKY A membership is as follows: lock-in will be imposed on
      approximately twenty (20) percent of the membership each month over a
      consecutive five (5)

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      month period. Targeting for each month will be based on the last digit of
      the client ID number for the head-of-household. For example, families
      whose head-of-household has a client ID number that ends in 0 or 1 will be
      phased-in during the first month, those with 2 and 3 will be done in the
      second month, etc.

b.    The following shall constitute good a use for a Member to disenroll from
      the plan during the lock-in period:

      1. Unfavorable resolution of the MCO's internal complaint process and
      continued dissatisfaction due to repeated incidents of any of the
      following:

a.    documented long waiting times for appointments:

            1.    more than forty-five (45) days for well-care visit;

            2.    more than two (2) business days for non-urgent, symptomatic
                  office visit; and

            3.    unavailability of same day office visit or same day referral
                  to an emergency provider for emergency care services

b.    documented inaccessibility of health plan by phone or mail:

            1.    phone calls not answered promptly;

            2.    caller placed on hold for extended periods of time;

            3.    phone messages and letters not responded to promptly; and

            4.    repeated rude and demeaning treatment by MCO staff.

c.    Prior to pursuing the MCO's internal grievance process and without filing
      an appeal through the plan, dissatisfaction due to any of the following:

      1.    Discriminatory treatment as documented in a complaint filed with the
            State of Connecticut Commission on Human Rights and Opportunities
            (CHRO) or the DEPARTMENT's Affirmative Action Division;

      2.    PCP who has served the Member's specific documentable needs (i.e.
            language or physical accessibility) left health plan and there is no
            other suitable PCP within reasonable distance to the Member; or

      3.    Member has a pending lawsuit against the MCO (verification of
            pending lawsuit must be provided).

d     Child placed under DCF guardianship whose placement is changed to a
      location or facility not affiliated with the current health plan.

4.06  CAPITATION PAYMENTS TO MCO

a.    In full consideration of contract services rendered by the MCO, the
      DEPARTMENT agrees to pay the MCO monthly payments based on the

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      capitation rates specified in Appendix I, as amended. The DEPARTMENT shall
      provide the actuarial basis for future capitation rates upon CMS review
      and approval.

b.    Upon validation of client eligibility and MCO membership, the DEPARTMENT
      will pay the capitation payments in the month following the month to which
      the capitation payments apply or for retroactive enrollments, the month
      following the enrollment processing month in accordance with Connecticut
      General Statutes Section 4a-71 through 4a-72.

c.    Payment to the MCO shall be based on the enrollment data transmitted from
      the DEPARTMENT to ACS each month. The MCO will be responsible for
      detecting the source of any inconsistency in capitation payments. The MCO
      must notify the DEPARTMENT of any inconsistency between enrollment and
      payment data. The DEPARTMENT agrees to provide to the MCO information
      needed to determine the source of the inconsistency within sixty (60)
      working days after receiving written notice of the request to furnish such
      information. The DEPARTMENT will recoup overpayments or reimburse
      underpayments. The adjusted payment (representing reinstated recipients)
      for each month of coverage shall be included in the next monthly
      capitation payment, based on updated MCO enrollment information for that
      month of coverage.

d.    Any retrospective adjustments to prior payments will be made in the form
      of an addition to or subtraction from the current month's capitation
      payment. Positive adjustments are particularly likely for newborns,
      because the MCO may be aware of births before the DEPARTMENT.

4.07  RETROACTIVE ADJUSTMENTS

a.    When a Member loses Medicaid eligibility and managed care enrollment but
      regains coverage within sixty (60) days, and the coverage is made
      retroactive such that the entire coverage gap is eliminated, the
      DEPARTMENT shall reinstate enrollment into the MCO retroactive to the time
      of disenrollment. The MCO will remain responsible for the cost of
      in-network covered services and the cost of emergency and family planning
      services received by the Member during this sixty (60) day period.

b.    In instances where enrollment is disputed between two (2) MCOs or the MCO
      and Medicaid fee-for-service program the DEPARTMENT will be the final
      arbiter of Membership status and reserves the right to recover
      inappropriate capitation payments. Capitation payments for retroactive
      enrollment adjustments will be made to the MCO pursuant to rules outlined
      in Section II, 4.06(d), Capitation Payments to MCO.

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4.08  INFORMATION

The DEPARTMENT will make known to each MCO complete and current information
which relates to pertinent statutes, regulations policies, procedures, and
guidelines affecting the operation of this contract. This information shall be
available either through direct transmission to the MCO by reference to public
resource files accessible to the MCO personnel.

4.09  ONGOING MCO MONITORING

a.    To ensure access and the quality of care, the DEPARTMENT or its agent
      shall undertake plans to conduct monitoring activities, including but not
      limited to the following:

      1.    Analyze the MCO's access enhancement programs, financial and
            utilization data, and other reports to monitor the value the MCO is
            providing in return for the State's capitation payments. Such
            efforts shall include, but not be limited to, on-site reviews and
            audits of the MCO and its subcontractors and network providers.

      2.    Conduct regular recipient surveys of Members to address issues such
            as satisfaction with plan services to include administrative
            services, satisfaction with treatment by the plan or its providers,
            and reasons for disenrollment and access.

      3.    Review the MCO certifications on a regular basis.

      4.    Analyze encounter data, actual medical records, correspondence,
            telephone logs and other data to make inferences about the quality
            of and access to specific services.

      5.    Sample and analyze encounter data, actual medical records,
            correspondence, telephone logs and other data to make inferences
            about the quality of and access to MCO services.

      6.    Test the availability of and access to MCO services by attempting to
            make appointments.

      7.    At its discretion, commission or conduct additional objective
            studies of the effectiveness of the MCO, as well as the availability
            of, quality of and access to its services.

4.10  UTILIZATION REVIEW AND CONTROL

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The DEPARTMENT shall waive, to the extent allowed by law, any current DEPARTMENT
requirements for prior authorization, second opinions, co-payment, or other
Medicaid restrictions for the provision of contract services provided by the MCO
to Members.

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5.    DECLARATIONS AND MISCELLANEOUS PROVISIONS

5.01  COMPETITION NOT RESTRICTED

In signing this contract, the MCO asserts that no attempt has been made or will
be made by the MCO to induce any other person or firm to submit or not to submit
an application for the purpose of restricting competition.

5.02  NONSEGREGATED FACILITIES

a.    The MCO certifies that it does not and will not maintain or provide for
      its employees any segregated facilities at any of its establishments; and
      that it does not permit its employees to perform their services at any
      location, under its control, where segregated facilities are maintained.
      As Contractor, the MCO agrees that a breach of this certification is a
      violation of Equal Opportunity in Federal employment. In addition,
      Contractor must comply with the Federal Executive Order 11246 entitled
      "Equal Employment Opportunity" as amended by Executive Order 11375 and as
      supplemented in the United States Department of Labor Regulations (41 CFR
      Part 30). As used in this certification, the term "segregated facilities"
      includes any waiting rooms, restaurants and other eating areas, parking
      lots, drinking fountain, recreation or entertainment areas,
      transportation, and housing facilities provided for employees which are
      segregated on the basis of race, color, religion, or national origin,
      because of habit, local custom, national origin or otherwise.

b.    The MCO further agrees, (except where it has obtained identical
      certifications from proposed subcontractors for specific time periods)
      that it will obtain identical certifications from proposed subcontractors
      which are not exempt from the provisions for Equal Employment Opportunity;
      that it will retain such certifications in its files; and that it will
      forward a copy of this clause to such proposed subcontractors (except
      where the proposed subcontractors have submitted identical certifications
      for specific time periods).

5.03  OFFER OF GRATUITIES

The MCO, its agents and employees, certify that no elected or appointed official
or employee of the DEPARTMENT has or will benefit financially or materially from
this contract. The contract may be terminated by the DEPARTMENT if it is
determined that gratuities of any kind were either offered to or received by any
of the aforementioned officials or employees of the MCO, its agent or employee.

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5.04  EMPLOYMENT/AFFIRMATIVE ACTION CLAUSE

The MCO agrees to supply employment/affirmative action information as required
for agency compliance with Title VI and VII of the Civil Rights Acts of 1964 and
Connecticut General Statutes, Section 46a-68 and Section 46a-71.

5.05  CONFIDENTIALITY

a.    The MCO agrees that all material and information, and particularly
      information relative to individual applicants or recipients of assistance
      through the DEPARTMENT, provided to the Contractor by the State or
      acquired by the Contractor in performance of the contract whether verbal,
      written, recorded magnetic media, cards or otherwise shall be regarded as
      confidential information and all necessary steps shall be taken by the
      Contractor to safeguard the confidentiality of such material or
      information in conformance with federal and state statutes and
      regulations.

b.    The MCO agrees not to release any information provided by the DEPARTMENT
      or providers or any information generated by the MCO without the express
      consent of the Contract Administrator, except as specified in this
      contract and as permitted by applicable law.

5.06  INDEPENDENT CAPACITY

The MCO, its officers, employees, subcontractors, or any other agent of the
Contractor in performance of this contract will act in an independent capacity
and not as officers or employees of the State of Connecticut or of the
DEPARTMENT.

5.07  LIAISON

Both parties agree to have specifically named liaisons at all times. These
representatives of the parties will be the first contacts regarding any
questions and problems which arise during implementation and operation of the
contract.

5.08  FREEDOM OF INFORMATION

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a.    Due regard will be given for the protection of proprietary information
      contained in all documents received by the DEPARTMENT; however, the MCO is
      aware that all materials associated with the contract are subject to the
      terms of the state Freedom of Information Act, Conn. Gen. Stat. Sections
      1-200 et seq., and all rules, regulations and interpretations resulting
      therefrom. When materials are submitted by the MCO or a subcontractor to
      the DEPARTMENT and the MCO or subcontractor believes that the materials
      are proprietary or confidential in some way and that they should not be
      subject to disclosure pursuant to the Freedom of Information Act, it is
      not sufficient to protect the materials from disclosure for the MCO to
      state generally that the material is proprietary in nature and therefore,
      not subject to release to third parties. If the MCO or the MCO's
      subcontractor believes that any portions of the materials submitted to the
      DEPARTMENT are proprietary or confidential or constitute commercial or
      financial information, given in confidence, those portions or pages or
      sections the MCO believes to be proprietary must be specifically
      identified as such. Convincing explanation and rationale sufficient to
      justify each claimed exemption from release consistent with Section 1-210
      of the Connecticut General Statutes must accompany the documents when they
      are submitted to the DEPARTMENT. The rationale and explanation must be
      stated in terms of the prospective harm to the MCO's or subcontractor's
      competitive position that would result if the identified material were to
      be released and the reasons why the materials are legally exempt from
      release pursuant to the above cited statue. The final administrative
      authority to release or exempt any or all material so identified by the
      MCO or the subcontractor rests with the DEPARTMENT. The DEPARTMENT is not
      obligated to protect the confidentiality of materials or documents
      submitted to it by the MCO or the subcontractor if said materials or
      documents are not identified in accordance with the above-described
      procedure.

b.    The MCO understands the DEPARTMENT's need for access to eligibility and
      paid claims information and is willing to provide such data relating to
      the MCO to accommodate that need. The MCO is committed to providing the
      DEPARTMENT access to all information necessary to analyze cost and
      utilization trends; to evaluate the effectiveness of Provider Networks,
      benefit design, and medical appropriateness; and to show how the HUSKY
      population compares to the MCO's enrolled population as a whole. The MCO
      and the DEPARTMENT each understand and agree that the systems, procedures
      and methodologies and practices used by the MCO, its affiliates and agents
      in connection with the underwriting, claims processing, claims payment and
      utilization monitoring functions of the MCO, together with the
      underwriting, Provider Network, claims processing, claims history and
      utilization data and information related to the MCO and its agents, may
      constitute information which is proprietary to the MCO and/or its
      affiliates (collectively, the "Proprietary Information"). Accordingly, the
      DEPARTMENT acknowledges that the MCO shall not be required to divulge
      Proprietary Information if such disclosure would jeopardize or impair its
      relationships with providers or suppliers or would materially adversely
      affect the MCO's or any of its Affiliates' ability to service

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      the needs of its customers or the DEPARTMENT as provided under this
      Contract unless the DEPARTMENT determine that such information is
      necessary in order to monitor contract compliance or to fulfill Part II
      Sections 3.33 and 3.34 of Part II of this contract. The DEPARTMENT agrees
      not to disclose publicly and to protect from public disclosure any
      proprietary or trade secret information provided to the DEPARTMENT by the
      MCO and/or its Affiliates' under this contract to the extent that such
      information is exempted from public disclosure under the Connecticut
      Freedom of Information Act.

5.09  WAIVERS

Except as specifically provided in any section of this contract, no covenant,
condition, duty, obligation or undertaking contained in or made a part of the
contract shall be waived except by the written agreement of the parties, and
forbearance or indulgence in any form or manner by the DEPARTMENT or the MCO in
any regard whatsoever shall not constitute a waiver of the covenant, condition,
duty, obligation or undertaking to be kept, performed, or discharged by the
DEPARTMENT or the MCO; and not withstanding any such forbearance or indulgence,
until complete performance or satisfaction of all such covenants, conditions,
duties, obligations and undertakings, the DEPARTMENT or MCO shall have the right
to invoke any remedy available under the contract, or under law or equity.

5.10  FORCE MAJEURE

The MCO shall be excused from performance hereunder for any period that it is
prevented from providing, arranging for, or paying for services as a result of a
catastrophic occurrence or natural disaster including but not limited to an act
of war, and excluding labor disputes.

5.11  FINANCIAL RESPONSIBILITIES OF THE MCO

a.    The MCO must maintain at all times financial reserves in accordance with
      the Connecticut Health Centers Act under Section 38a-175 et seq. of the
      Connecticut General Statutes and with the requirements outlined in the
      DEPARTMENT's Request for Application.

b.    The MCO's physician incentive plans must comply with the requirements of
      1903(m)(2)(a)(x) of the Social Security Act and 42 CFR 422.208 and 42 CFR
      422.210.

c.    The DEPARTMENT reserves the right to inspect any physician incentive
      plans.

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d.    If the MCO is not a federally-qualified MCO or Competitive Medical Plan,
      the MCO must complete a HCFA Section 1318 Financial Disclosure Report,
      prior to the start of the contract.

5.12  CAPITALIZATION AND RESERVES

a.    The MCO shall comply with and maintain capitalization and reserves as
      required by the appropriate regulatory authority.

b.    If the MCO is licensed by the State of Connecticut, the MCO shall
      establish and maintain capitalization and reserves as required by the
      Connecticut Department of Insurance.

c.    If the MCO is majority-owned by federally qualified health centers (FQHCs)
      and not licensed by the State of Connecticut, the MCO will establish and
      maintain sequestered capital of $500,000 plus two (2) percent of ongoing
      annual capitation premiums.

      1.    These funds shall be placed in restricted account for the duration
            of the FQHC plan's existence, to be accessed only in the event such
            funds are needed to meet unpaid claims liabilities.

      2.    This restricted account shall be established such that any
            withdrawals or transfers of funds will require signatures of
            authorized representatives of the FQHC plan and the DEPARTMENT.

      3.    The initial $500,000 must be deposited into the account by the
            beginning of the MCO's first enrollment period.

      4.    The MCO must make quarterly deposits into this account so that the
            account balance is equal to $500,000 plus two (2) percent of the
            premiums received during the preceding twelve (12) months.

5.13  PROVIDER COMPENSATION

a.    The MCO shall comply with CMS's Physician Incentive Plan (PIP)
      requirements in 42 CFR 422.208 and 42 CFR 422.210. The MCO may operate a
      PIP only if:

      1.    no specific payment can be made directly or indirectly under a PIP
            to a physician or physician group as an inducement to reduce or
            limit medically necessary services furnished to an individual
            Member; and

      2.    the stop-loss protection, Member survey, and disclosure requirements
            of 42 CFR. 422.208 and 42 CFR 422.210 are met.

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b.    The MCO shall disclose to the DEPARTMENT the following information on PIPs
      in sufficient detail to determine whether the incentive plan complies with
      the regulatory requirements of 42 CFR 422.208. The disclosure must
      contain:

      1.    Whether services not furnished by the physician or physician group
            are covered by the PIP. If only the services furnished by the
            physician or physician group are covered by the incentive plan,
            disclosure of other aspects of the plan need not be made.

      2.    The type of incentive arrangement (i.e. withhold, bonus,
            capitation).

      3.    If the incentive plan involves a withhold or bonus, the percent of
            the withhold or bonus.

      4.    Proof that the physician or physician group has adequate stop-loss
            protection, including the amount and type of stop-loss protection.

      5.    The panel size and, if patients are pooled, the method used.

      6.    In the case of those MCOs that are required by 42 CFR. 422.208(h) to
            conduct Member surveys, the survey results.

c.    The MCO shall disclose this information to the DEPARTMENT (1) prior to
      approval of its contract as required by federal regulation and (2) upon
      the contract anniversary or renewal effective date. The MCO shall provide
      the capitation data required (see (6) above) for the previous contract
      year to the DEPARTMENT three (3) months after the end of the contract
      year. The MCO will provide to the Member upon request information
      regarding whether the MCO uses a physician incentive plan that affects the
      use of referral services, the type of incentive arrangement, whether
      stop-loss protection is provided, and the survey results of any Member
      survey conducted. See Appendix J for the applicable regulations and
      disclosure forms.

d.    The DEPARTMENT may impose Class C sanctions pursuant to Section 7.05 for
      failure to comply with 42 CFR 422.208 and 422.210

5.14  MEMBERS HELD HARMLESS

a.    The MCO shall not hold a Member liable for:

      1.    The debts of the MCO in the event of the MCO's insolvency;

      2.    The cost of Medicaid-covered services provided pursuant to this
            contract to the Member if the DEPARTMENT does not pay the MCO or the
            DEPARTMENT or the MCO does not pay the health care provider that
            furnishes the services under a contractual, referral, or other
            arrangement; and/or

      3.    Payments for covered services furnished under a contract, referral,
            or other arrangement, to the extent those payments are in excess of
            the amount that the Member would owe if the MCO directly provided
            the service.

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5.15  COMPLIANCE WITH APPLICABLE LAWS, RULES AND POLICIES

The MCO in performing this contract shall comply with all applicable federal and
state laws, regulations and written policies, including those pertaining to
licensing. In the provision of services under this Contract, the MCO and its
subcontractors shall comply with all applicable federal and state statutes and
regulations, and all amendments thereto, that are in effect when the agreement
is signed, or that come into effect during the term of the Contract. This
includes, but is not limited to Title XIX of the Social Security Act and Title
42 of the Code of Federal Regulations.

5.16  ADVANCE DIRECTIVES

a.    The MCO shall comply with the provisions of 42 CFR 422.128 relating to
      written policies and procedures for advance directives. The MCO shall:

      1.    Maintain written policies and procedures that meet the requirements
            for advance directives in Subpart 1 of 42 CFR pt. 489;

      2.    Maintain policies and procedures for all adults receiving medical
            care through the MCO;

      3.    Provide each adult Member with written information on advance
            directives policies, including a description of Connecticut General
            Statutes Sections 19a-570-19a-580d; and

      4.    Provide each adult Member with information on changes in Connecticut
            law regarding advance directives as soon as possible, but no later
            than ninety (90) days after the effective date of the change.

5.17  FEDERAL REQUIREMENTS AND ASSURANCES

GENERAL

a.    The MCO shall comply with those federal requirements and assurances for
      recipients of federal grants provided in OMB Standard Form 424B (4-88)
      which are applicable to the MCO. The MCO is responsible for determining
      which requirements and assurances are applicable to the MCO. Copies of the
      form are available from the DEPARTMENT.

b.    The MCO shall provide for the compliance of any subcontractors with
      applicable federal requirements and assurances.

c.    The MCO shall comply with all applicable provisions of 45 CFR 74.48 and
      all applicable requirements at 45 CFR 74.48 Appendix A.

LOBBYING

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a.    The MCO, as provided by 31 U.S.C. 1352 and 45 CFR 93.100 et seq., shall
      not pay federally appropriated funds to any person for influencing or
      attempting to influence an officer or employee of any agency, a member of
      the U.S. Congress, an officer or employee of the U.S. Congress or an
      employee of a member of the U.S. Congress in connection with the awarding
      of any federal contract, the making of any cooperative agreement or the
      extension, continuation, renewal, amendment or modification of any federal
      contract, grant, loan or cooperative agreement.

b.    The MCO shall submit to the DEPARTMENT a disclosure form as provided in 45
      CFR 93.110 and Appendix B to 45 CFR Part 93, if any funds other than
      federally appropriated funds have been paid or will be paid to any person
      for influencing or attempting to influence an officer or employee of any
      agency, a member of the U.S. Congress, an officer or employee of the U.S.
      Congress or an employee of a member of the U.S. Congress in connection
      with this contract.

BALANCED BUDGET ACT AND IMPLEMENTING REGULATIONS

The MCO shall comply with all applicable provisions of 42 U.S.C. Section
1396u-2, 42 U.S.C. Section 1396b(m) and 42 CFR Parts 431 and 438.

CLEAN AIR AND WATER ACTS

The MCO and all subcontractors with contracts in excess of $100,000 shall
comply with all applicable standards, orders or regulations issued pursuant to
the Clean Air Act as amended, 42 U.S.C. 7401, et seq. and section 508 of the
Clear Water Act (33 U.S.C. 1368), Executive Order 11738, and 40 CFR Part 15).

ENERGY STANDARDS

The MCO shall comply with all applicable standards and policies relating to
energy efficiency which are contained in the state energy plan issued in
compliance with the federal Energy Policy and Conservation Act, 42 USC Sections
6231 - 6246. The MCO further covenants that no federally appropriated funds have
been paid or will be paid on behalf of the DEPARTMENT or the contractor to any
person for influencing or attempting to influence an officer or employee of any
federal agency, a member of Congress, an officer or employee of Congress, or an
employee of a member of Congress in connection with the awarding of any federal
contract, the making of any federal grant, the making of any federal loan, the
entering into of any cooperative agreement, or the extension, continuation,
renewal, amendment, or modification of any federal contract, grant, loan, or
cooperative agreement. If any funds other than federally appropriated funds have
been

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paid or will be paid to any person for influencing or attempting to influence an
officer or employee of any federal agency, a member of Congress, or an employee
of a member of Congress in connection with this contract, grant, loan, or
cooperative agreement, the contractor shall complete and submit Standard Form -
LLL, "Disclosure Form to Report Lobbying," in accordance with its instructions.

MATERNITY ACCESS AND MENTAL HEALTH PARITY

The MCO shall comply with the maternity access and mental health parity
requirements of the Public Health Services Act, Title XXVII, Subpart 2, Part A,
Section 2704, as added September 26, 1996, 42 U.S.C. Section 300gg-4, 300 gg-5,
insofar as such requirements apply to providers of group health insurance.

5.18  CIVIL RIGHTS

FEDERAL AUTHORITY

The MCO shall comply with the Civil Rights Act of 1964 (42 U.S.C. Section 2000d,
et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6 [ILLEGIBLE] 01, et
seq.), the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101, et
seq.) and Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Section 794,
et seq.

DISCRIMINATION

Persons may not, on the grounds of race, color, national origin, creed, sex,
religion, political ideas, marital status, age or disability be excluded from
employment in, denied participation in, denied benefits or be otherwise
subjected to discrimination under any program or activity connected with the
implementation of this contract. The MCO shall use hiring processes that foster
the employment and advancement of qualified persons with disabilities.

MERIT QUALIFICATIONS

All hiring done in connection with this contract must be on the basis of merit
qualifications genuinely related to competent performance of the particular
occupational task. The MCO, in accordance with Federal Executive Order 11246,
dated September 24, 1965 entitled "Equal Employment Opportunity", as amended by
Federal Executive Order 11375 and as supplemented in the United States
Department of Labor Regulations, 41 CFR Part 60-1, et seq., must provide for
equal employment opportunities in its employment practices.

CONFIDENTIALITY

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The MCO shall, in accordance with relevant laws, regulations and policies,
protect the confidentiality of any material and information concerning an
applicant for or recipient of services funded by the DEPARTMENT. Access to
patient information, records, and data shall be limited to the purposes outlined
in 42 CFR 434.6(a)(8) and Conn. Gen. Stat. Section 17b-90. All requests for data
or patient records for participation in studies, whether conducted by the MCO or
outside parties, are subject to approval by the DEPARTMENT.

5.19  STATUTORY REQUIREMENTS

a.    A State licensed MCO shall retain at all times during the period of this
      contract a valid Certificate of Authority issued by the State Commissioner
      of Insurance.

b.    The MCO shall adhere to the provisions of the Clinical Laboratory
      Improvement Amendments of 1988 (CLIA) Public Law 100-578,42 USC Section
      1395aa et seq.

5.20  DISCLOSURE OF INTERLOCKING RELATIONSHIPS

An MCO which is not also a Federally-qualified Health Plan or a Competitive
Medical Plan under the Public Health Service Act must report on request to the
State, to the Secretary and the Inspector General of DHHS and the Comptroller
General, a description of transactions between the MCO and parties in interest
including related parties as defined by federal and state law. Transactions that
must be reported include: (a) any sale, exchange, or leasing of property; (b)
any furnishing for consideration of goods, services or facilities (but not
salaries paid to employees); and (c) any loans or extensions of credit.

5.21  DEPARTMENT'S DATA FILES

a.    The DEPARTMENT's data files and data contained therein shall be and remain
      the DEPARTMENT's property and shall be returned to the DEPARTMENT by the
      MCO upon the termination of this contract at the DEPARTMENT's request,
      except that any DEPARTMENT data files no longer required by the MCO to
      render services under this contract shall be returned upon such
      determination at the DEPARTMENT's request.

b.    The DEPARTMENT's data shall not be utilized by the MCO for any purpose
      other than that of rendering services to the DEPARTMENT under this
      contract, nor shall the DEPARTMENT's data or any part thereof be
      disclosed, sold, assigned, leased or otherwise disposed of to third
      parties by the MCO unless there has been prior written DEPARTMENT
      approval. The MCO may disclose

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      material and information to subcontractors and vendors, as necessary to
      fulfill the obligations of this contract.

c.    The DEPARTMENT shall have the right of access and use of any data files
      retained or created by the MCO for systems operation under this contract
      subject to the access procedures defined in Part II Section 3.34.

d.    The MCO shall establish and maintain at all times reasonable safeguards
      against the destruction, loss or alteration of the DEPARTMENT's data and
      any other data in the possession of the MCO necessary to the performance
      of operations under this contract.

5.22  CHANGES DUE TO A SECTION 1115 OR 1915(b) FREEDOM OF CHOICE WAIVER

The conditions of enrollment described in the contract, including but not
limited to enrollment and the right to disenrollment, are subject to change as
provided in any waiver under Section 1115 or 1915(b) of the Social Security Act
(as amended) obtained by the DEPARTMENT.

5.23  HOLD HARMLESS

The MCO agrees to indemnify, defend and hold harmless the State of Connecticut
as well as all Departments, officers, agents and employees of the State from all
claims, losses or suits accruing or resulting to any contractors,
subcontractors, laborers and any person, firm or corporation who may be injured
or damaged through the fault of the MCO in the performance of the contract.

The MCO, at its own expense, shall defend any claims or suits which are brought
against the DEPARTMENT or the State for the infringement of any patents,
copyrights, or other proprietary rights arising from the MCO's or the State's
use of any material or information prepared or developed by the MCO in
conjunction with the performance of this contract; provided any such use by the
State is expressly contemplated by this contract and approved by the MCO. The
State, its Departments, officers, employees, contractors, and agents shall
cooperate fully in the MCO's defense of any such claim or suit as directed by
the MCO. The MCO shall, in any such suit, satisfy any damages for infringement
assessed against the State or the DEPARTMENT, be it resolved by settlement
negotiated by the MCO, final judgment of a court with jurisdiction after
exhaustion of available appeals, consent decree, or any other manner approved by
the MCO.

5.24  EXECUTIVE ORDER NUMBER 16

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This contract is subject to Executive Order No. 16 of Governor John G. Rowland
promulgated August 4, 1999 and, as such, this Agreement may be cancelled,
terminated or suspended by the State for violation of or noncompliance with said
Executive Order No. 16. The parties to this contract, as part of the
consideration hereof, agree that:

a.  The MCO shall prohibit employees from bringing into the state work site,
      except as may be required as a condition of employment, any weapon or
      dangerous instrument as defined in subsection (b).

b.  Weapon means any firearm, including a BB gun, whether loaded or unloaded,
      any knife (excluding a small pen or pocket knife), including a switchblade
      or other knife having an automatic spring release device, a stiletto, any
      police baton or nightstick or any martial arts weapon or electronic
      defense weapon. Dangerous instrument means any instrument, article or
      substance that, under the circumstances, is capable of causing death or
      serious physical injury.

c.  The MCO shall prohibit employees from using, attempting to use or
      threatening to use any such weapon or dangerous instrument in the state
      work site and employees shall be prohibited from causing or threatening to
      cause physical injury or death to any individual in the state work site.

d.  The MCO shall adopt the above prohibitions as work rules, violations of
      which shall subject the employee to disciplinary action up to and
      including discharge. The MCO shall insure that all employees are aware of
      such work rules.

e.  The MCO agrees that any subcontract it enters into in furtherance of the
      work to be performed hereunder shall contain the provisions (a) through
      (d).

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6.    GRIEVANCE SYSTEM AND PROVIDER APPEALS

      The MCO shall establish and maintain a grievance system that meets all
      statutory and regulatory requirements. The MCO's grievance system shall
      include a grievance process, an appeal process and access to and
      participation in the DEPARTMENT'S administrative hearings process.

6.01  GRIEVANCES

a.    The MCO shall have a system in place to handle grievances. Grievances are
      expressions of dissatisfaction about any matter, other than those matters
      that qualify as an action. The subject matters of grievances may include,
      but are not limited to, quality of care, rudeness by a provider or MCO
      staff person or failure to respect a Member's rights.

b.    The MCO shall maintain adequate records to document the filing of a
      grievance, the actions taken, the MCO personnel involved and the
      resolution. The Department will prescribe a reporting format for tracking
      of grievances.

c.    A Member, or a provider acting on a Member's behalf, may file a grievance
      either orally or in writing. The MCO shall acknowledge the receipt of each
      grievance and provide reasonable assistance with the process, including
      but not limited to providing interpreter services and toll free numbers
      with TTY/TTD and interpreter capability.

d.    If the grievance involves a denial of expedited review of an appeal or
      some other clinical issue, the grievance must be reviewed by a health care
      professional with appropriate clinical expertise.

e.    The MCO shall dispose of each grievance as expeditiously as the member's
      health requires. If the Member filed the grievance orally, the MCO may
      resolve the grievance orally, but shall maintain documentation of the
      grievance and its resolution. If the Member filed a written grievance, the
      resolution shall be in writing. If applicable, each grievance shall be
      handled by an individual who was not involved in any previous level of
      decisionmaking. Each grievance shall be disposed of in ninety (90) days or
      less

6.02  NOTICES OF ACTION AND CONTINUATION OF BENEFITS

a.    The MCO or its subcontractor (as duly authorized by the MCO) shall mail a
      notice of action to a Member when the MCO takes action upon a request for
      services from the Member's treating PCP, or other treating provider,
      functioning within his or her scope of practice as defined under state
      law. For purposes of this requirement, an "action" includes:

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            1.    The denial or limited authorization of a requested service,
                  including the type or level of service;

            2.    The reduction, suspension or termination of a previously
                  authorized service;

            3.    The denial, in whole or in part, of payment for a service;

            4.    The failure to act within the timeframes for utilization
                  review decisions, as described in Section 3.39

            5.    The failure to provide access to services in a timely manner
                  as required by 3.14(c)(1) through (c)(4) and 3.21(a)(4) or the
                  failure to provide access to consultations and specialist
                  referrals within three (3) months.

            The notice of action requirements shall apply to all categories of
            covered services including transportation to medically necessary
            appointments.

            The MCO is required to issue a notice for actions described in
            (a)(3) above if the denial of payment for services already rendered
            may or will result in the Member being held financially responsible.
            Such circumstances include, but are not limited to, the provision of
            emergency services that do not appear to meet the prudent layperson
            standard, the provision of services outside of the United States
            without prior authorization, and the provision of non-covered
            services with the Member's written consent as described in 3.47. The
            MCO is not required to issue a notice of action for the denial of
            payment for covered services that have already been provided to the
            Member if the denial is based on a procedural or technical issue,
            including but not limited to a provider's failure to comply with
            prior authorization rules for services that the Member has already
            received, incorrect coding or late filing by a provider for services
            that the Member has already received. In these circumstances,
            coverage of the service is not at issue and the Member may not be
            held financially liable for the services. Nothing herein shall
            relieve the MCO from its responsibility to issue a notice of action
            in all circumstances in which a provider requests prior
            authorization for a service and the request is denied in whole or in
            part, as required in a.(1) above. Nothing herein shall relieve the
            MCO from its responsibility to hold a Member harmless for the cost
            of Medicaid covered services and its responsibility to ensure that
            the MCO's network providers hold a Member harmless for the cost of
            Medicaid covered services.

            The MCO is required to issue a notice of action for actions
            described in a.(5) above, only if the Member notifies the MCO of his
            or her inability to obtain timely access to services. In such
            instances, the MCO shall provide the Member with immediate
            assistance in accessing the services. If the Member has been unable
            to access emergency services, the MCO shall issue a notice of action
            immediately. For non-emergent services, if a

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                  Member contacts the MCO concerning the inability to access a
                  covered service within the timeframes referenced in (a)(5)
                  above, and three (3) business days later the Member has not
                  accessed or made arrangements for receiving the service that
                  are satisfactory to the Member, the MCO shall issue a notice
                  of action.

b.    The MCO shall issue a notice of action if the MCO approves a good or
      service that is not the same type, amount, duration, frequency or
      intensity as that requested by the provider, consistent with current DSS
      policy.

c.    The MCO shall identify if the Member reads only a language other than
      English. For Members who do not read English, the notice of action shall
      be provided in accordance with Sections 3.28(a) and 3.29(h).

d.    Except as provided in (h) below, the MCO shall mail an advance notice of
      action for a termination, suspension or reduction of a previously
      authorized service to a Member at least ten (10) days before the date of
      any action described in (a) above, consistent with current DSS policy. The
      MCO may shorten the period of advance notice to five (5) days before the
      date of action if: 1) the MCO has facts indicating that the action should
      be taken because of probable fraud by the Member; and 2) the facts have
      been verified, if possible, through secondary sources.

e.    All notices related to actions described in (a) above shall clearly state
      or explain:

      1.    the action the MCO intends to take or has taken;

      2.    the reasons for the action;

      3.    the statute, regulation, the DEPARTMENT's Medical Services Policy
            section, or when there is no appropriate regulation, policy or
            statute, the HUSKY A contract provision that supports the action;

      4.    the address and toll-free number of the MCO's Member Services
            Department;

      5.    the Member's right to challenge the action by filing an appeal and
            requesting an administrative hearing;

      6.    the procedure for filing an appeal and for requesting an
            administrative hearing;

      7.    how the Member may obtain an appeal form and, if desired, assistance
            in completing and submitting the appeal form;

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      8.    that the Member will lose his or her right to an appeal and
            administrative hearing if he or she does not complete and file a
            written appeal form with the DEPARTMENT within sixty (60) days from
            the date the MCO mailed the initial notice of action;

      9.    that the MCO must issue a decision regarding an appeal by the date
            that the administrative hearing is scheduled, but no more than
            thirty (30) days following the date the DEPARTMENT receives it;

      10.   that, if the Member files an appeal he or she is entitled to meet
            with or speak by telephone with the MCO representative who will
            decide the appeal, and is entitled to submit additional
            documentation or written material for the MCO's consideration;

      11.   that the Member may proceed automatically to an administrative
            hearing if he or she is dissatisfied with the MCO's appeal decision
            concerning the denial of coverage of goods or services or a
            reduction, suspension, or termination of ongoing goods or services,
            or if the MCO fails to render an appeal decision by the date the
            administrative hearing is scheduled;

      12.   that at an administrative hearing, the Member may represent himself
            or herself or use legal counsel, a relative, a friend, or other
            spokesperson;

      13.   that if the Member obtains legal counsel who will represent the
            Member during the appeal or administrative hearing process, the
            Member must direct his or her legal counsel to send written
            notification of the representation to the MCO and the DEPARTMENT;

      14.   that if the circumstances require advance notice, the Member's right
            to continuation of previously authorized goods and services,
            provided that the Member files a grievance/request for
            administrative hearing form with the DEPARTMENT on or before the
            intended effective date of the MCO's action or within ten (10)
            calendar days of the date the notice of action is mailed to the
            Member, whichever is later;

      15.   the circumstances under which expedited resolution is available and
            how to request expedited resolution; and

      16.   any other information specified by the DEPARTMENT.

f.    In the case of a child who is under the care of the Department of Children
      and Families (DCF), the MCO must send the notice of action to the child's
      foster parents and the DCF contact person specified by the DEPARTMENT.

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g.    The NOA shall be mailed within the following timeframes:

      1)    for termination, suspension, or reduction of previously authorized
            Medicaid covered services, 10 days in advance of the effective date;

      2)    for standard authorization decisions to deny or limit services, as
            expeditiously as the Member's health condition requires, not to
            exceed fourteen (14) calendar days following receipt of the request
            for services;

      3)    if the MCO extends the fourteen day time frame for denial or
            limitation of a service as permitted in Section 3.39d (1)(i) and
            (ii), as expeditiously as the Member's condition requires and no
            later than the date the extension expires;

      4)    for service authorization decisions not reached within the
            timeframes in 3.39 (which constitutes a denial and thus is an
            adverse action), on the date the timeframe expires;

      5)    for expedited service authorization decisions as expeditiously as
            the Member's health condition requires and no later than three (3)
            business days after receipt of the request for services;

      6)    for denial of payment where the Member may be held liable, at the
            time of any action affecting the claim

      7)    for failure to provide timely access to services as expeditiously as
            the Member's health requires, but no later than three (3) business
            days after the Member contacts the MCO.

h.          The ten (10) day advance notice requirements do not apply to the
            circumstances described in 42 CFR 431.213. Notice of action need not
            be sent to the Member ten (10) days in advance of the action, but
            may be sent no later than the date of action and will be considered
            an exception to the advance notice requirement, if the action is
            based on any of the following circumstances:

      1)    a denial of services;

      2)    the MCO has received a clear, written statement signed by the Member
            that:

            a.    the Member no longer wishes to receive the goods or services;
                  or

            b.    the Member gives information which requires the reduction,
                  suspension, or termination of the goods or services, and the
                  Member indicates that he or she understands that this must be
                  the result of supplying that information; and

      3)    the Member has been admitted to an institution where he or she is
            ineligible for the goods or services. In this instance, the Member
            must be notified on the notice of admission that any goods or
            services being reduced, suspended, or terminated will be reevaluated
            for medical necessity upon discharge, and the Member will have the
            right to appeal any post-discharge decisions.

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            If the circumstances are an exception to the advance notice
            requirement as set forth above the Member does not have the
            automatic right to continuation of ongoing goods or services. In
            these circumstances, however, and in any instance in which the MCO
            fails to issue an advance notice when required, the reduced,
            suspended, or terminated goods and services must be reinstated if
            the Member files a written appeal form with the DEPARTMENT within
            ten (10) days of the date the notice is mailed to the Member.

i.    The MCO shall follow the requirements for continuation of services set
      forth in 42 CFR 438.420. The right to continuation of ongoing goods or
      services applies to the scope of services previously authorized. The right
      to continuation of services does not apply to subsequent requests for
      approval that result in denial of the additional request or
      re-authorization of the request at a different level than requested. For
      example, the right to continuation of services does not apply:

                  1.    when a prescription (including refills) runs out and the
                        Member requests a new prescription for the same
                        medication; or

                  2.    to a request for additional home health care services
                        following the expiration of the approved number of home
                        health visits

      The MCO shall treat such requests as a new service authorization request
      and provide a denial notice.

j.    Notice of action is not required if the member's treating physician or
      PCP, using his or her professional judgment, refuses to prescribe (or
      prescribes an alternative to) a particular service sought by a member.
      Notice of action is also not required if the Member's treating physician
      or PCP, using his or her professional judgment, orders the reduction,
      suspension, or termination of goods or services. Such decisions do not
      constitute an action by the MCO. If, however, the Member disagrees with
      the provider and contacts the MCO to request authorization for the service
      the MCO shall conduct an expedited review of the request, according to the
      timeframe in 3.39(e). If the MCO affirms the provider's action to deny,
      terminate, reduce or suspend the service, the MCO shall issue a notice of
      action. If the Member requests an appeal and hearing, the MCO shall
      continue authorization for the services, to the extent services were
      previously authorized, unless the MCO determines that continued provision
      of the services could be harmful to the Member. The MCO shall also advise
      the Member of his or her right to a second opinion from another provider.
      Because only a licensed health care provider, and not the MCO, may
      prescribe or provide medical services, the Member may not be able to
      receive some or all of the requested goods or services while the appeal is
      pending. If the MCO approves the Member's request for the

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      good or service, the MCO shall inform the Member of the approval and shall
      inform the Member of the right to a second opinion.

k.    The DEPARTMENT will provide a standardized notice of action form to be
      used by the MCO and its subcontractors. The DEPARTMENT will also provide a
      standardized appeal form to be used by the MCO and its subcontractors. The
      MCO and its subcontractors shall not alter the standard format of either
      form without prior, written approval of the DEPARTMENT.

l.    The DEPARTMENT will conduct random reviews of the MCO and its
      subcontractors, as appropriate, to ensure that Members are sent accurate,
      complete and timely notices of action.

SANCTION: If the DEPARTMENT determines during any audit or random monitoring
visit to the MCO or one of its subcontractors that a notice of action fails to
meet any of the criteria set forth herein, the DEPARTMENT may impose a strike
towards a Class A sanction. If the deficiencies which give rise to a Class A
sanction continue for a period in excess of ninety (90) days, the DEPARTMENT may
impose a Class B sanction.

6.03  APPEALS AND ADMINISTRATIVE HEARING PROCESSES

a.    The MCOs shall have a timely and organized appeals process. The appeals
      process shall be available for resolution of disputes between the MCO and
      its Members concerning the MCO's actions as defined in 6.02.

b.    The MCO shall develop written policies and procedures for its appeals
      process. Those policies and procedures must be approved by the DEPARTMENT
      in writing and must include the elements specified in this contract. The
      MCO shall not be excused from providing the elements specified in this
      contract pending the DEPARTMENT's written approval of the MCO's policies
      and procedures.

c.    The MCO shall maintain a record keeping system for appeals which shall
      include a copy of the appeal, the response, the resolution and supporting
      documentation.

d.    The MCO must clearly specify in its Member handbook/packet the procedural
      steps and timeframes for filing an appeal and administrative hearing
      request, including the timeframe for maintaining benefits pending the
      conclusion of the appeal and administrative hearing processes. The Member
      handbook/packet shall also list the addresses, office hours, and toll-free
      telephone numbers for the Member Services office.

e.    The MCO shall ensure that network providers and subcontractors are
      familiar with the appeal process and shall provide information on the
      process to providers and subcontractors. The MCO shall provide information
      on the appeal process to its providers and subcontractors at the time it
      enters into contracts or subcontracts.

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      The MCO must ensure that appeal forms are available at each primary care
      site. At a minimum, appeals assistance must include providing forms on
      request, assisting the Member in filling out the forms upon request, and
      sending the completed form to the DEPARTMENT upon request.

f.    The MCO shall develop and make available to Members and potential Members
      appropriate foreign language versions of appeals materials, including but
      not limited to, the standard information contained in notices of action
      and appeals forms. Such materials shall be made available in Spanish,
      English, or any other languages if more than five (5) percent of the MCO's
      Members in any county of the State served by the MCO speak the alternative
      language. Such foreign language materials must be approved, in writing, by
      the DEPARTMENT.

g.    A Member may request an appeal either orally or in writing. When
      requesting an appeal orally, unless the member is seeking an expedited
      appeal review, the Member must follow up an oral request with a written,
      signed appeal form within five (5) days of the oral request. The MCO shall
      advise any member who requests an appeal orally, that the Member must file
      a written appeal form in order to receive an administrative hearing. In
      all other respects, the process for pursuing an appeal and for requesting
      an administrative hearing shall be unified. The MCO and the DEPARTMENT
      shall treat the filing of a written appeal as a simultaneous request for
      an administrative hearing. The MCO shall attempt to resolve appeals at the
      earliest point possible. If the MCO is not able to render a decision by
      the time the administrative hearing is scheduled, the Member will
      automatically proceed to the administrative hearing.

h.    Appeals may be filed by the Member, the Member's authorized
      representative, or the Member's conservator on a form approved by the
      DEPARTMENT. A provider, acting on behalf of the member and with the
      Member's written consent, may file an appeal. A provider may not file an
      administrative hearing request on behalf of a Member unless the authorized
      representative requirements in DSS Uniform Policy Manual Section 1525.05
      are met. The MCO shall request a copy of the written consent from the
      Member. Appeals shall be mailed or faxed to a single address within the
      DEPARTMENT. The appeal form must state both the mailing address and fax
      number at the DEPARTMENT where the form must be sent. If the MCO or its
      subcontractor receive an appeal directly from a Member or the Member's
      authorized representative or conservator, the MCO shall date stamp and fax
      the appeal to the appropriate fax number at the DEPARTMENT within two (2)
      business days.

i.    Upon receipt of a written appeal, the DEPARTMENT will schedule an
      administrative hearing and notify the Member and MCO of the hearing date
      and location. If a Member is disabled, the hearing may be scheduled for
      the Member's home, if requested by the Member.

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j.    The DEPARTMENT will date stamp and forward the appeal by fax to the MCO
      within two (2) business days of receipt. The fax to the MCO will include
      the date the Member mailed the appeal to the DEPARTMENT. The postmark on
      the envelope will be used to determine the date the appeal was mailed.

k.    The MCO's review of the appeal must be carried out by an individual or
      individuals having final decisionmaking authority. Any appeal stemming
      from an action based on a determination of medical necessity or involving
      any other clinical issues must be decided by one or more physicians who
      were not involved in making that medical determination.

l.    The MCO may decide an appeal on the basis of the written documentation
      available unless the Member requests an opportunity to meet with the
      individual or individuals making that determination on behalf of the MCO
      and/or requests the opportunity to submit additional documentation or
      other written material. The Member shall have a right to review his or her
      MCO record, including medical records and any other documents or records
      considered during the appeal process. The Member's right to access medical
      records shall be consistent with HIPAA privacy regulations and any
      applicable state or federal law.

m.    If the Member wishes to meet with the decisionmaker, the meeting can be
      held via the telephone or at a location accessible to the Member,
      including the Member's home if requested by a disabled Member. Subject to
      approval of the DEPARTMENT's Regional Offices, any of the DEPARTMENT'S
      office locations may be available for video conferencing. The MCO must
      invite a representative of the DEPARTMENT to attend any such meeting.

n.    The MCO must mail to the Member, by certified mail, a written appeal
      decision, described below, with a copy to the DEPARTMENT, by the date of
      the DEPARTMENT's administrative hearing as expeditiously as the Member's
      health condition requires, but no later than thirty (30) days from the
      date on which the appeal was received by the DEPARTMENT. If the Member is
      dissatisfied with the MCO's decision regarding the denial, reduction,
      suspension, or termination of goods or services, or if the MCO does not
      render a decision by the time of the administrative hearing, the Member
      may automatically proceed to the administrative hearing.

o.    The MCO's written appeal decision must include the Member's name and
      address; the provider's name and address; the MCO name and address; a
      complete description of the information or documents reviewed by the MCO;
      a complete statement of the MCO's findings and conclusions, including the
      section number and text of any contractual provision or DEPARTMENTAL
      policy provision that is relevant to the grievance decision; and a clear
      statement of the MCO disposition of the appeal.

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p.    Along with its written appeal decision, the MCO must remind the Member, on
      a form approved by the DEPARTMENT that:

      1.    if the Member is dissatisfied with the MCO's appeal decision, the
            DEPARTMENT has already reserved a time to hold an administrative
            hearing concerning that decision;

      2.    that the Member has the right to automatically proceed to the
            administrative hearing, and that the MCO must continue previously
            authorized goods and services pending the administrative hearing
            decision;

      3.    if the appeal pertains to the suspension, reduction, or termination
            of goods or services which have been maintained during the appeals
            process, and the MCO's appeals decision affirms the suspension,
            reduction, or termination of goods or services, those goods or
            services will be suspended, reduced, or terminated in accordance
            with the MCO's appeals decision unless the Member proceeds to an
            administrative hearing; and

      4.    if the Member fails to appear at the administrative hearing, the
            Member's reserved hearing time will be cancelled and any disputed
            goods or services that were maintained will be suspended, reduced,
            or terminated in accordance with the MCO's appeals decision.

q.    If the Member proceeds to an administrative hearing, the MCO must make its
      entire file concerning the Member and the appeal, including any materials
      considered in making its decision, available to the DEPARTMENT.

r.    If the MCO fails to issue an appeal decision by the date that an
      administrative hearing is scheduled, but no later than thirty (30) days
      following the date the grievance was received by the DEPARTMENT, an
      administrative hearing will be held as originally scheduled. At the
      hearing, the MCO must prove good cause for having failed to issue a timely
      decision regarding the appeal. Good cause for the MCO's failure to issue a
      timely decision shall include, but not be limited to, documented efforts
      to obtain additional medical records necessary for the MCO's decision on
      the appeal and the Member's refusal to sign a release for medical records
      necessary for the decision on the appeal.

      The MCO's inability to prove good cause shall constitute a sufficient
      basis for upholding the appeal, and the hearing officer, in his or her
      discretion, may uphold the appeal solely on that basis.

      If the MCO proves good cause for having failed to issue a timely appeal
      decision, the hearing officer may order a continuance of the hearing
      pending the issuance of the grievance decision by a certain date or the
      hearing officer may proceed with the hearing.

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s.    A representative of the MCO shall prepare the summary for the
      administrative hearing, subject to approval by the DEPARTMENT prior to the
      hearing, and shall present proof of all facts supporting its initial
      action if the administrative hearing proceeds in the absence of an appeal
      decision. The MCO shall submit a final, signed hearing summary to the
      DEPARTMENT no later than five (5) business days prior to the scheduled
      hearing date. The MCO's representative shall also present any provisions
      of this contract or any DEPARTMENT policies which support its decision.

t.    If the Member is represented by legal counsel at the hearing and has not
      notified either the DEPARTMENT or the MCC of the representation, the MCO
      may request a continuance of the hearing or may ask the hearing officer to
      hold the hearing record open for additional evidence or submissions. The
      decision as to whether a continuance will be granted or the record will be
      held upon is within the hearing officer's discretion.

u.    If a representative of the MCO fails to attend a scheduled session of an
      administrative hearing, the MCO's failure to attend shall constitute a
      sufficient basis for upholding the appeal, and the hearing officer, in his
      or her discretion, may close the hearing and uphold the appeal solely on
      that basis. This provision shall not apply unless the MCO receives notice
      of the hearing at least seven (7) business days prior to the
      administrative hearing.

v.    If the DEPARTMENT is advised that the Member does not intend to proceed to
      an administrative hearing, the DEPARTMENT will fax such notice to the MCO.

w.    The MCO must designate one primary and one back-up contact person for its
      grievance/administrative hearing process.

x.    If the DEPARTMENT's hearing officer reverses the MCO's decision to deny,
      limit or delay services that were not furnished while the appeal was
      pending, the MCO shall authorize or provide the disputed services
      promptly, and as expeditiously as the Member's health condition requires.

6.04  EXPEDITED REVIEW AND ADMINISTRATIVE HEARINGS

a.    Subject to Section 6.02 above, the appeal process must allow for expedited
      review. If the appeal contains a request for expedited review, it will be
      forwarded by fax to the MCO within one business day of receipt by the
      DEPARTMENT. The fax will include the date the Member mailed the appeal.
      The postmark on the envelope will be used to determine the date the appeal
      was mailed. If the MCO

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      receives an oral request for expedited appeal, the MCO shall notify the
      DSS liaison by fax or telephone within one business day of the oral
      request.

b.    The MCO must determine, within one business day of receiving the grievance
      which contains a request for an expedited review from the DEPARTMENT, or
      within one business day of receiving an oral request for an expedited
      appeal, whether to expedite the appeal or whether to perform it according
      to the standard timeframes. If the Member's provider indicates or the MCO
      determines that the appeal meets the criteria for expedited review, the
      MCO shall notify the DEPARTMENT immediately that the MCO will be
      conducting the appeal on an expedited basis.

c.    An expedited appeal must be performed when the standard timeframes for
      determining a grievance could seriously jeopardize the life or health of
      the Member or the Member's ability to attain, maintain or regain maximum
      function. The MCO must expedite its review in all cases in which the
      Member's provider indicates, in making the request for expedited review
      on behalf of the Member or supporting the member's request, that taking
      the time for a standard grievance review could seriously jeopardize the
      Member's life or health or ability to attain, maintain, or regain maximum
      function and if the DEPARTMENT requests the MCO to conduct an expedited
      review because the DEPARTMENT believes a specific case meets the criteria
      for expedited review.

d.    If the MCO denies a request for expedited review, the MCO shall perform
      the review within the standard timeframe and make reasonable efforts to
      give the Member prompt oral notice of the denial and follow up within two
      calendar days with a written notice.

e.    Unless the Member asks to meet with the decisionmaker or to submit
      additional information, an expedited review must be completed and an
      appeal decision must be issued within a timeframe appropriate to the
      condition or situation of the Member, but no more than three (3) business
      days from the DEPARTMENT's receipt of the written appeal or three (3)
      business days from an oral request received by the MCO.

f.    The MCO may extend the timeframe for decisions in paragraph d by up to 14
      days if: 1) the Member requests the extension or 2) MCO can demonstrate
      that the extension is in the member's interest because additional
      information is needed to decide the appeal and if the timeframe is not
      extended, the appeal will be denied. The DEPARTMENT may request this
      documentation from the MCO. If an extension is given and the member asks
      to meet with the decisionmaker and/or submit additional information, the
      decisionmaker must offer to meet with the Member within three (3) business
      days of receiving the appeal. The meeting with the Member can be held via
      the telephone or at a location accessible to the Member, and subject to
      approval of the DEPARTMENT's Regional Offices, any of the DEPARTMENT's
      office locations may be available for video conferencing.

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g.    The MCO shall ensure that no punitive action is taken against a provider
      who requests an expedited appeal or supports a Member's appeal.

h.    The MCO shall issue a written appeal decision for expedited appeals. The
      written notice of the resolution must meet the requirements of 6.03(o) and
      (p). The MCO shall also make reasonable efforts to provide the Member oral
      notice of an expedited appeal decision.

i. The DEPARTMENT also provides expedited administrative hearings for HUSKY A
      Members, where required. The DEPARTMENT shall issue a hearing decision as
      expeditiously as the Member's health condition requires, but no later than
      three (3) working days after the DEPARTMENT receives from the MCO, the
      case file and information for any appeal that meets the requirements for
      an expedited hearing. A Member is entitled to an expedited hearing for the
      denial of a service if the denial met the criteria for expedited appeal
      but was not resolved within the expedited appeals timeframe or was
      resolved within the expedited appeals timeframe, but the appeals decision
      was wholly or partially adverse to the Member.

SANCTION: If the MCO fails to provide expedited appeals in appropriate
circumstances, the DEPARTMENT may impose a Class B sanction pursuant to Section
7.05.

6.05  PROVIDER APPEAL PROCESS

a.    The MCO shall have an internal appeal process through which a health care
      provider may appeal the MCO decision on behalf of a Member.

b.    The health care provider appeal process shall not include any appeal
      rights to the DEPARTMENT or any rights to an administrative hearing.

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7.    CORRECTIVE ACTION AND CONTRACT TERMINATION

7.01  PERFORMANCE REVIEW

a.    A designated representative of the MCO and a designated representative of
      the DEPARTMENT shall meet on an annual basis, and as requested by either
      party, to review the performance of the MCO under this contract. The
      DEPARTMENT will keep written minutes of such meetings. In the event of any
      disagreement regarding the performance of services by the MCO under this
      contract, the designated representatives shall discuss the problem and
      shall negotiate in good faith in an effort to resolve the disagreement.

b.    In the event that no such resolution is achieved within a reasonable time,
      the matter shall be referred to the Contract Administrator as provided
      under Article 7.02, the Disputes clause of this contract. If the Contract
      Administrator determines that the MCO has failed to perform as measured
      against applicable contract provisions, the Contract Administrator may
      impose sanctions or any other penalty, set forth in this Section including
      the termination of this contract in whole or in part, as provided under
      this Section.

7.02  SETTLEMENT OF DISPUTES

Any dispute arising under the contract which is not disposed of by agreement
shall be decided by the Contract Administrator whose decision shall be final and
conclusive subject to any rights the MCO may have in a court of law. The
foregoing shall not limit any right the MCO may have to present claims under
Connecticut General Statutes Section 4-141 et seq. or successor provisions
regarding the claims commissioner, including without limitation Connecticut
General Statutes Section 4-160 regarding authorization of actions. In connection
with any appeal to the Contract Administrator under this paragraph, the MCO
shall be afforded an opportunity to be heard and to offer evidence in support of
its appeal. Pending final decision of a dispute, the MCO shall proceed
diligently with the performance of the contract in accordance with the Contract
Administrator's decision.

7.03  ADMINISTRATIVE ERRORS

The MCO shall be liable for the actual amount of any costs in excess of $5,000
incurred by the DEPARTMENT as the result of any administrative error (e.g.
submission of erroneous capitation, encounter or reinsurance data) of the MCO or
its subcontractors. The DEPARTMENT may request a refund of, or recoup from
subsequent capitation payments, the actual amount of such costs.

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7.04  SUSPENSION OF NEW ENROLLMENT

Whenever the DEPARTMENT determines that the MCO is out of compliance with this
contract, unless corrective action is taken to the satisfaction of the
DEPARTMENT, the DEPARTMENT may suspend enrollment of new Members under this
contract. The DEPARTMENT, when exercising this option, must notify the MCO in
writing of its intent to suspend new enrollment at least thirty (30) days prior
to the beginning of the suspension period. The suspension period may be for any
length of time specified by the DEPARTMENT, or may be indefinite. The suspension
period may extend up to the contract expiration date as provided under PART I.
(The DEPARTMENT may also notify existing Members of MCO non-compliance and
provide an opportunity to disenroll from the MCO and to re-enroll in another
MCO.)

7.05  MONETARY SANCTIONS

It is agreed by the DEPARTMENT and the MCO that if by any means, including any
report, filing, examination, audit, survey, inspection or investigation, the MCO
is determined to be out of compliance with this contract, damage to the
DEPARTMENT may or could result. Consequently, the MCO agrees that the DEPARTMENT
may impose any of the following sanctions for noncompliance under this contract.
Unless otherwise provided in this contract, sanctions imposed under this
section shall be deducted from capitation payment or, at the discretion of the
DEPARTMENT, paid directly to the DEPARTMENT.

A.    SANCTIONS FOR NONCOMPLIANCE

      1. CLASS A SANCTIONS. THREE (3) STRIKES. SANCTIONS WARRANTED AFTER
         THREE (3) OCCURRENCES

      For noncompliance of the contract which does not rise to the level
      warranting Class B sanctions as defined in subsection (a)(2) of this
      section or Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class A
      sanctions in any provision of this contract, the following course of
      action will be taken by the DEPARTMENT:

            Each time the MCO fails to comply with the contract on an issue
            warranting a Class A sanction, the MCO receives a strike. The MCO
            will be notified each time a strike is imposed. After the third
            strike for the same contract provision, a sanction may be imposed.
            If no specific time frame is set forth in any such contractual
            provision, the time frame is deemed to be the full length of the
            contract.

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            The MCO will be notified in writing at least thirty (30) days in
            advance of any sanction being imposed and will be given an
            opportunity to meet with the DEPARTMENT to present its position as
            to the DEPARTMENT's determination of a violation warranting a Class
            A sanction. At the DEPARTMENT's discretion, a sanction will
            thereafter be imposed. Said sanction will be no more than $2,500
            after the first three (3) strikes. The next strike for noncompliance
            of the same contractual provision will result in a sanction of no
            more than $5,000 and any subsequent strike for noncompliance of the
            same contractual provision will result in a Class A sanction of no
            more than $10,000.

      2. CLASS B SANCTIONS. SANCTIONS WARRANTED UPON SINGLE OCCURRENCE

      For noncompliance with the contract which does not warrant the imposition
      of Class C sanctions as defined in subsection (b) of this section,
      including, but not limited to, those violations defined as Class B
      sanctions in any provision of this contract, the following course of
      action will be taken by the DEPARTMENT:

            The DEPARTMENT may impose a sanction at the DEPARTMENT's discretion
            if, after at least thirty (30) days notice to the MCO and an
            opportunity to meet with the DEPARTMENT to present the MCO's
            position as to the DEPARTMENT's determination of a violation
            warranting a Class B sanction, the DEPARTMENT determines that the
            MCO has failed to meet a performance measure which merits the
            imposition of a Class B sanction not to exceed $10,000.

b.    CLASS C SANCTIONS. SANCTIONS RELATED TO NONCOMPLIANCE POTENTIALLY
      RESULTING IN HARM TO AN INDIVIDUAL MEMBER

      (i) The DEPARTMENT may impose a Class C sanction on the MCO for
          noncompliance potentially resulting in harm to an individual Member,
          including, but not limited to, the following:

      1.    failing to substantially authorize medically necessary items and
            services that are required (under law or under this contract) to be
            provided to an Member covered under this contract;

      2.    imposing a premium or charge on Members except as specifically
            permitted under provisions of the approved Medicaid State Plan and
            the provisions of this Contract;

      3.    discriminating among Members on the basis of their health status or
            requirements for health care services, including expulsion or
            refusal to re-enroll an individual, except as permitted by Title
            XIX, or engaging in any practice that would reasonably be expected
            to have the effect of denying or discouraging enrollment with the
            MCO by eligible individuals whose medical condition or history
            indicates a need for substantial future medical services;

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      4.    misrepresenting or falsifying information that is furnished to the
            Secretary, the DEPARTMENT; Member, potential Member, or a health
            care provider;

      5.    failing to comply with the physician incentive requirements under
            Section 1903(m)(2)(A)(x) of the Social Security Act and 42 CFR
            422.208 and 422.210;

      6.    distributing directly or through any agent or independent contractor
            marketing materials that have not been approved by the DEPARTMENT or
            containing false or misleading information; and

      7.    failing to comply with any other requirements of 42 U.S.C. 1396b(m)
            or 42 U.S.C. 1396u-2.

      (ii) Class C sanctions for noncompliance with the contract under this
           subsection include the following:

      1.   withholding the next month's capitation payment to the MCO in full or
           in part;

      2.    assessment of liquidated damages:

            a.    for each determination that the MCO fails to substantially
                  provide medically necessary services, makes misrepresentations
                  or false statements to Members, potential Members or health
                  care providers, engages in marketing violations or fails to
                  comply with the physician incentive plan requirements, not
                  more than $25,000;

            b.    for each determination that the MCO discriminates among
                  Members on the basis of their health status or requirements
                  for health care services or engages in any practice that has
                  the effect of denying or discouraging enrollment with the
                  MCO by eligible individuals based on their medical condition
                  or history that indicates a need for substantial future
                  medical services, or the MCO misrepresents or falsifies
                  information furnished to the Secretary or DEPARTMENT, not more
                  than $100,000;

            c.    for each determination that the MCO has discriminated among
                  Members or engaged in any practice that has denied or
                  discouraged enrollment, $15,000 for each individual not
                  enrolled as a result of the practice up to a total of
                  $100,000;

            d.    for a determination that the MCO has imposed premiums or
                  charges on Members in excess of the premiums or charges
                  permitted, double the excess amount but not more than
                  $25,000. The excess amount charged in such a circumstance must
                  be deducted from the penalty and returned to the Member
                  concerned;

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      3.    freeze on new enrollment and/or alter the current enrollment; or

      4.    appointment of temporary management as described in 7.06.

      (iii) Prior to imposition of any Class C sanction, the MCO will be
            notified at least thirty (30) days in advance and provided, at a
            minimum, an opportunity to meet with the DEPARTMENT to present its
            position as to the DEPARTMENT's determination of a violation
            warranting a Class C Sanction. For any contract violation under this
            subsection, at the DEPARTMENT's discretion, the MCO may be permitted
            to submit a corrective action plan within twenty (20) days of the
            notice to the MCO of the violation. Immediate compliance (within
            thirty (30) days) under any such corrective action plan may result
            in the imposition of a lessor sanction on the MCO. If any sanction
            issued under this subsection is equivalent to termination of the
            contract, the MCO shall be offered a hearing to contest the
            imposition of such a sanction.

C.  OTHER REMEDIES

      1.    Notwithstanding the provisions of this section, failure to provide
            required services will place the MCO in default of this contract,
            and the remedies in this section are not a substitute for other
            remedies for default which the DEPARTMENT may impose as set forth in
            this contract.

      2.    The imposition of any sanction under this section does not preclude
            the DEPARTMENT from obtaining any other legal relief to which it may
            be entitled pursuant to state or federal law.

D.    CMS SANCTIONS

      Pursuant to 42 CFR 438.730, the DEPARTMENT may recommend the imposition of
      sanctions to CMS and CMS may sanction the MCO as described in that
      section. In the alternative, CMS may independently initiate the sanction
      process described in 42 CFR 438.730(a) through (d). The MCO shall comply
      with all applicable sanction provisions set forth in 42 CFR 438.730. CMS
      may deny payment to the DEPARTMENT for new Members under the circumstances
      described in 42 CFR 438.730(e) and capitation payments to the MCO will be
      denied so long as payment for those Members is denied by CMS.

7.06  TEMPORARY MANAGEMENT

The DEPARTMENT may impose temporary management upon a finding by the DEPARTMENT
that: 1) there is continued egregious behavior by the MCO; 2) there is a
substantial risk to the health of the Members or 3) temporary management is
necessary to ensure the health of the MCO's members while improvements are made
to remedy the violations or until there is an orderly termination or
reorganization of the MCO. For purposes of this section, "egregious behavior"
shall include but not be limited to any of

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the violations described in 7.05b(ii)(2) or any other MCO behavior that is
contrary to Sections 1903(m) and 1932 of the Social Security Act. After a
finding pursuant to this subsection, individuals enrolled with the MCO must be
permitted to terminate enrollment without cause and the MCO shall be responsible
for notification of such right to terminate enrollment. Nothing in this
subsection shall preclude the DEPARTMENT from proceeding under the termination
provisions of the contract rather than imposing temporary management. If
however, the DEPARTMENT chooses not to first terminate the contract and repeated
violations of substantive requirements in section 1903(m) or 1932 of the Social
Security Act occur, the DEPARTMENT must than impose temporary management and
allow individuals to disenroll without cause. The Department may impose
temporary management without a hearing.

7.07  PAYMENT WITHHOLD, CLASS C SANCTIONS OR TERMINATION FOR CAUSE

The DEPARTMENT may withhold capitation payments, impose sanctions including
Class C Sanctions set forth in Section 7.05 or terminate the contract for cause.
Cause shall include, but not be limited to: 1) use of funds and/or personnel for
purposes other than those described in the HUSKY A program and this contract and
2) if a civil action or suit in federal or state court involving allegations of
health fraud or violation of 18 U.S.C. Section 1961 et seq. is brought on
behalf of the DEPARTMENT.

7.08  EMERGENCY SERVICES DENIALS

If the MCO has a pattern of inappropriately denying payments for emergency
services as defined in Part II, Definitions, the MCO may be subject to
suspension of new enrollments, withholding of capitation payments, contract
termination, or refusal to contract in a future time period. This applies not
only to cases where the DEPARTMENT has ordered payment after appeal, but also to
cases where no appeal has been made (i.e., the DEPARTMENT is knowledgeable about
documented abuse from other sources.)

7.09  TERMINATION FOR DEFAULT

a.    The DEPARTMENT may terminate performance of work under this contract in
      whole, or in part, whenever the MCO materially defaults in performance of
      this contract and fails to cure such default or make progress satisfactory
      to the DEPARTMENT toward contract performance within a period of thirty
      (30) days (or such longer period as the DEPARTMENT may allow). Such
      termination shall be referred to herein as "Termination for Default."

b.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default,
      the notice of

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      termination shall be deemed to have been rescinded and the contract
      reinstated for the balance of the term.

c.    If after notice of termination of the contract for default, it is
      determined by the DEPARTMENT or a court that the MCO was not in default
      or that the MCO's failure to perform or make progress in performance was
      due to causes beyond control and without the error or negligence of the
      MCO, or any subcontractor, the notice of termination shall be deemed to
      have been issued as a termination for convenience pursuant to Section 7.09
      and the rights and obligations of the parties shall be governed
      accordingly.

d.    In the event the DEPARTMENT terminates the contract in full or in part as
      provided in this clause, the DEPARTMENT may procure, services similar to
      those terminated, and the MCO shall be liable to the DEPARTMENT for any
      excess costs for such similar services for any calendar month for which
      the MCO has been paid to provide services to HUSKY A clients. In addition,
      the MCO shall be liable to the DEPARTMENT for administrative costs
      incurred by the DEPARTMENT in procuring such similar services. Provided,
      however, that the MCO shall not be liable for any excess costs or
      administrative costs if the failure to perform the contract arises out of
      causes beyond the control and without error or negligence of the MCO or
      any of its subcontractors.

e.    In the event of a termination for default, the MCO shall be financially
      responsible for Members in the current month at the applicable capitation
      rate.

f.    The rights and remedies of the DEPARTMENT provided in this clause shall
      not be exclusive and are in addition to any other rights and remedies
      provided by law or under this contract.

g.    In addition to the termination rights under Part I Section 8, the MCO may
      terminate this contract on ninety (90) days written notice in the event
      that the DEPARTMENT fails to (a) pay capitation claims in accordance with
      Part II Section 4.06 and Part II Section 3.01 of this contract (b) provide
      eligibility or enrollment/disenrollment information and shall fail to cure
      such default or make progress satisfactory to the MCO within a period of
      sixty (60) days of such default.

7.10  TERMINATION FOR MUTUAL CONVENIENCE

The DEPARTMENT and the MCO may terminate this contract at any time if both
parties mutually agree in writing to termination. At least sixty (60) days shall
be allowed. The effective date must be the first day of a month. The MCO shall,
upon such mutual agreement being reached, be paid at the capitation rate for
enrolled recipients through the termination of the contract.

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7.11  TERMINATION FOR FINANCIAL INSTABILITY OF THE MCO

In the event of financial instability of the MCO, the DEPARTMENT shall have the
right to terminate the contract upon the same terms and conditions as a
Termination for Default.

7.12  TERMINATION FOR UNAVAILABILITY OF FUNDS

a.    The DEPARTMENT at its discretion may terminate at any time the whole or
      any part of this contract or modify the terms of the contract if federal
      or state funding for the contract or for the Medicaid program as a whole
      is reduced or terminated for any reason. Modification of the contract
      includes, but is not limited to, reduction of the rates or amounts of
      consideration, reducing services covered by the MCO, or the alteration of
      the manner of the performance in order to reduce expenditures under the
      contract. Whenever possible, the MCO will be given thirty (30) days
      notification of termination.

b.    In the event of a reduction in the appropriation from the state or federal
      budget for the Division of Health Care Financing of the Department of
      Social Services or an across-the-board budget reduction affecting the
      Department of Social Services, the DEPARTMENT may either re-negotiate this
      contract or terminate with thirty (30) days written notice. Any reduction
      in the capitation rates that is agreed upon by the parties or any
      subsequent termination of this contract by the DEPARTMENT in accordance
      with this provision shall only affect capitation payments or portions
      thereof for covered services purchased on or after the effective date of
      any such reduction or termination. Should the DEPARTMENT elect to
      renegotiate the contract, the DEPARTMENT will provide the MCO with those
      contract modifications, including capitation rate revisions, it would deem
      acceptable.

c.    The MCO shall have the right not to extend the contract if the new
      contract terms are deemed to be insufficient notwithstanding any other
      provision of this contract. The MCO shall have a minimum of sixty (60)
      days to notify the DEPARTMENT regarding its desire to accept new terms. If
      the new capitation rates and any other contract modifications are not
      established at least sixty (60) days prior to the expiration of the
      initial or extension agreement, the DEPARTMENT will reimburse the MCO at
      the higher of the new or current capitation rates for that period during
      which the new contract period had commenced and the MCO's sixty (60) day
      determination and notification period had not been completed, and the MCO
      will be held to the terms of the executed contract.

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7.13  TERMINATION FOR COLLUSION IN PRICE DETERMINATION

In competitive bidding markets, the MCO has previously certified that the prices
presented in its proposal were arrived at independently, without consultation,
communication, or agreement with any other bidder for the purpose of
restricting competition; that, unless otherwise required by law, the prices
quoted have not been knowingly disclosed by the MCO, prior to bid opening,
directly or indirectly to any other bidder or to any competitor; and that no
attempt has been made by the MCO to induce any other person or firm to submit or
not to submit a proposal for the purpose of restricting competition.

In the event that such action is proven, the DEPARTMENT shall have the right to
terminate this contract upon the same terms and conditions as a Termination for
Default.

7.14  TERMINATION OBLIGATIONS OF CONTRACTING PARTIES

a.    The MCO shall be provided the opportunity for a hearing prior to any
      termination of this contract pursuant to any provision of this contract.
      The DEPARTMENT shall give the MCO written notice of its intent to
      terminate, the reason for the termination and the date and time of the
      hearing. After the hearing, the DEPARTMENT shall give the MCO written
      notice of its decision affirming or reversing the proposed termination. In
      the event of a decision to affirm the termination, the DEPARTMENT's
      written notice shall include the effective date of termination. The
      DEPARTMENT may notify Members of the MCO and permit such Members to
      disenroll immediately without cause during the hearing process.

b.    Upon contract termination, the MCO shall allow the DEPARTMENT, its agents
      and representatives full access to the MCO's facilities and records to
      arrange the orderly transfer of the contracted activities. These records
      include the information necessary for the reimbursement of any outstanding
      Medicaid claims.

c.    Where this contract is terminated due to cause or default by the MCO: 1)
      The DEPARTMENT shall be responsible for notifying all Members of the date
      of termination and process by which the Members will continue to receive
      services and 2) the MCO shall notify all providers and be responsible for
      all expenses related to notification to providers and members.

d.    If this contract is terminated for any reason other than default by the
      MCO,

      1.    The MCO shall ensure that an adequate provider network will be
            maintained at all times during the transition period and that
            continuity of care is maintained for all Members;

      2.    The MCO shall submit a written transition plan to the DEPARTMENT
            sixty (60) days in advance of the scheduled termination;

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      3.    The DEPARTMENT shall be responsible for notifying all Members of the
            date of termination and process by which the Members will continue
            to receive services;

      4.    The DEPARTMENT shall be responsible for all expenses relating to
            said notification to members;

      5.    The MCO shall notify all providers and be responsible for all
            expenses related to such notification; and

      6.    The DEPARTMENT shall withhold a portion, not to exceed $100,000, of
            the last month's capitation payment as a surety bond for a six (6)
            month period to ensure compliance under the contract.

7.15  WAIVER OF DEFAULT

Waiver of any default shall not be deemed to be a waiver of any subsequent
default. Waiver of breach of any provision of the contract shall not be deemed
to be a waiver of any other or subsequent breach and shall not be construed to
be a modification of the terms of the contract unless stated to be such in
writing, signed by an authorized representative of the DEPARTMENT, and attached
to the original contract.

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8.    OTHER PROVISIONS

8.01  SEVERABILITY

If any provision of this procurement or the resultant contract is declared or
found to be illegal, unenforceable, or void, then both parties shall be relieved
of all obligations under that provision. The remainder of this procurement or
the resultant contract shall be enforced to the fullest extent permitted by law.

8.02  EFFECTIVE DATE

This contract is subject to review for form an substance by the U.S. Department
of Health and Human Services Centers for Medicare and Medicaid Services and the
DEPARTMENT, and will not become effective until it is approved by those
agencies.

8.03  ORDER OF PRECEDENCE

This contract shall be read together to achieve one harmonious whole. However,
should any irreconcilable conflict arise between Part I and Part II of this
contract, Part II shall prevail.

8.04  CORRECTION OF DEFICIENCIES

This contract does not release the MCO from its obligation to correct any and
all outstanding certification deficiencies. Failure to correct all outstanding
material deficiencies may cause the MCO to be determined in Default of this
contract.

8.05  THIS IS NOT A PUBLIC WORKS CONTRACT

The DEPARTMENT and the MCO as parties to this purchase of service Contract
mutually covenant, acknowledge and agree that this contract does not constitute
and shall not be construed to constitute a public works contract. The DEPARTMENT
and the MCO's mutual agreement that this contract is not a public works contract
shall have full force and effect on Part I Section 32 and other Sections of this
contract as applicable.

9.0   APPENDICES

The following appendices that were attached to the Purchase of Service Contract
between the MCO and the DEPARTMENT effective August 11, 2001, have not changed
since that date and are hereby incorporated by reference as if fully set forth
herein: Appendix B Provider Credentialing and Enrollment; Appendix C, EPSDT
Periodicity Schedule,

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Appendix D, DSS Marketing Guidelines; Appendix E, Quality Assurance Program;
Appendix F, Unaudited Quarterly Financial Reports; Appendix H, Managed Care
Policy Transmittals; Appendix J, Physician Incentive Payments, Appendix K.
Recategorization Chart. The remaining appendices are attached hereto.

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                                     HUSKY A

                                Covered Services

For purposes of this contract, the information contained in the Department's
Medical Services Policy Manuals and Departmental regulations has been summarized
to provide an overview for reference of the goods and services covered by the
Medicaid program (see attached list of Medical Assistance Program policies and
regulations). Any limitations or exclusions to these covered goods and services
are also overviewed.

Plans should be advised that, notwithstanding the following summary overview,
guidance issued by the Department in the form of policy transmittals,
regulations, provider bulletins, provider manuals, letters, and other written
correspondence is the final authority regarding covered goods and services. The
intent of the summary is to provide a quick working guide. These policies are
available at the Connecticut Medical Assistance Program website:
www.ctmedicalprogram.com. Whenever any questions regarding Medicaid policy
occur, health plans should consult with the Department's Medical Administration
Policy Unit for clarification.

Health plans are required to cover identical goods and services that are covered
under the Medicaid program; health plans do not have the option of adding or
subtracting from the 'benefit package'. These goods and services are included in
plans' capitation rates. However, this does not preclude a decision to provide
an additional benefit (i.e., a noncovered service) for a given member. For
example, on a case-by-case basis, a health plan may decide to cover the cost of
installing a ramp or providing homemaker services or provide inpatient
behavioral health services in an Institution for the Treatment of Mental
Diseases (IMD) (all noncovered services) if so doing would enable a member to
remain at home rather than be placed in an institutionalized setting or to
receive services in a more cost-effective manner.

Under current Medicaid Fee-For-Service (FFS) reimbursement methodology, various
administrative procedures related to payment for covered goods and services are
in place. These procedures are not incumbent upon health plans under Medicaid
Managed Care (MMC). For example, currently Medicaid FFS has administrative
procedures related to physical therapy provided in the home. When physical
therapy exceeds two (2) sessions per any consecutive seven (7) day period,
prior authorization is required.

Whether or not a given health plan requires prior authorization prior to
physical therapy being provided in the home, or requires prior authorization
after x number of visits, or does not require prior authorization at all is not
prescribed. The management of the "benefit" is at the discretion of the health
plan. However, a health plan cannot decide to limit a covered good or service
(e.g., cut off all physical therapy home visits after x number of visits). The
number of medically necessary visits will vary by member, and the health plan
cannot set a limit for members unless the Medicaid "benefit" itself is
specifically limited in Medical Services Policy.

Additionally, medically necessary behavioral health services for children in
Medicaid Managed Care shall include:

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August 13, 2003

a) the coordination of and linkage to those social and medical services which
ensure the health and safety of the child; b) preventive health care services
that are designed to avoid the need for future medically necessary services; c)
services for chronic, long-term disorders which if left untreated, will effect
the physical or mental health of the child; and (d) the duration of treatment
provided by a managed health plan for these children shall be based on the
individual needs of the child.

The summary overview is divided into three (3) sections. Section A contains a
listing of covered goods and services included in the capitation rates. It also
lists the major limitations and exclusions to these covered goods and services.
Section B contains a listing of covered goods and services not included in the
capitation rates. Section C contains a listing of noncovered services.

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August 13, 2003

                         SUMMARY DESCRIPTION OF BENEFITS

A.    COVERED SERVICES INCLUDED IN THE CAPITATION PAYMENT

1.  Hospital Inpatient Care (acute care hospitals) - Medically necessary and
    medically appropriate hospital inpatient acute care, procedures, and
    services, as authorized by the responsible physician(s) or dentist, and
    covered under Department of Social Services (DSS) policies and regulations.

    a.  Administratively Necessary Days (ANDs) are covered when a nursing home
        placement delay is due to unavailability of beds. However, a patient is
        required to accept the first available, medically appropriate bed.

    b.  Organ transplants are covered if they are of demonstrated therapeutic
        value, medically necessary and medically appropriate, and likely to
        result in the prolongation and the improvement in the quality of life of
        the applicant. The DSS Transplant Advisory Committee has developed, and
        continues to develop, medical criteria relating to particular organ
        transplant procedures. These criteria are available for use by health
        plans. The criteria are guidelines. However, a final decision to deny a
        transplant request is not to be rendered without considering the medical
        opinion of a qualified organ transplantation expert(s) in the community.

    c.  Mental health and substance abuse services in a general hospital
        psychiatric unit are covered--regardless of the age of the individual.

2.  Psychiatric (mental health/substance abuse) Facility Inpatient Care

    a.  Medically necessary psychiatric hospital care, procedures, and services
        as covered under DSS policy and regulation.

    b.  Some psychiatric hospitals may qualify as an Institution for Mental
        Diseases (IMD). An IMD is defined as a facility of more than sixteen
        (16) beds that is primarily engaged in providing diagnosis, treatment,
        or care of persons with mental diseases. Medically IMD necessary care is
        only covered for individuals under age 21 and 65 years of age or older.
        IMD services for individuals aged 21 through 64 are noncovered services
        (see Section C.1 of this summary overview).

3.  Freestanding Alcohol Treatment Center Inpatient Care

    a.  Services must be provided by a program holding a current and active
        license to operate a Private Freestanding Facility for the Care and
        Treatment of Substance Abusive or Dependent Persons.

    b.  Services under the Medicaid program shall be for alcohol detoxification
        and shall be limited to: a) the acute and evaluation phase of the
        treatment program and b) a ten (10) day period for each occurrence Acute
        treatment and evaluation provides medical management of detoxification
        and assessment of the individual's total situation in an inpatient
        milieu for the purpose of formulating and implementing a plan of care in
        addition to detoxification.

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August 13, 2003

    c.  Services must predominately focus on the medical and/or psychological
        management of alcohol abuse and other medical or psychological
        conditions which impact upon or are related to alcohol abuse. Treatment
        and care shall be provided under the direction of a physician within the
        scope of accepted medical practice.

4.  Chronic Disease Hospital Inpatient Care - Such medically necessary care,
    procedures, and services as covered under DSS policy and regulation.

5.  Nursing Facility (Skilled Nursing and Intermediate Care) Inpatient Care -
    Such medically necessary care is covered while the patient remains in a
    managed care coverage group. For coverage in nursing Homes which are
    characterized as, institutions for mental disease' see Section CA of this
    summary overview.

6.  Intermediate Care Facility (Mentally Retarded) Inpatient Care - Such
    medically necessary care is covered while the patient remains in a managed
    care coverage group.

7.  Christian Science Sanitoria Service - Such medically necessary care is
    covered while the patient remains in a managed care coverage group.

8.  Hospital Outpatient Care (General Hospital, Psychiatric Hospital, and
    Chronic Disease Hospital) - Preventive, diagnostic, therapeutic,
    rehabilitative, or palliative medical services provided to an outpatient by
    or under the direction of a physician or dentist in a licensed hospital
    facility.

9.  Physician Services - Primary and specialty services provided by a licensed
    physician or doctor of osteopathy and performed within the scope of practice
    of medicine or osteopathy as defined by State law.

10. Psychologist Services - Clinical, diagnostic, and remedial services
    personally performed by a psychologist. Services include: a) counseling and
    psychotherapy to individuals who are experiencing problems of a mental or
    behavioral nature and b) measuring and testing of personality, aptitudes,
    emotions, and attitudes.

    Note: Effective 9/1/03, psychologist services provided by independently
    enrolled psychologists are no longer covered for individuals who are 21
    years of age or older.

11. Nurse-Midwifery Services - Services provided by a licensed, certified
    nurse-midwife which are related to the care, and to the management of the
    care, of essentially normal mothers and newborns (only throughout the
    maternity cycle) and well woman gynecological care, including family
    planning services.

12. Nurse Practitioner Services - Services which are provided by a licensed
    Advanced Practice Registered Nurse (APRN) and which are within his or her
    scope of practice as defined by State law.

13. Chiropractor Services - Manual manipulation of the spine performed by a
    licensed chiropractor within the scope of chiropractic practice. Noncovered
    services:

    a.  Prescription or administration of any medicine or drug or the
        performance of any surgery;

    b.  X-rays furnished by a chiropractor.

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August 13, 2003

    c.  Manipulation of other parts of the body (e.g., shoulder, arm, knee,
        etc.) even when for subluxation of the spine; and

    d.  Lab work ordered by a chiropractor.

Note: Effective 1/1/03, chiropractor services provided by independently enrolled
chiropractors are no longer covered for individuals who are 21 years of age or
older.

14. Naturopathic Services - Services provided by a licensed naturopath which
    conform to accepted methods of diagnosis and treatment and which are within
    the scope of naturopathic practice.

Note: Effective 1/1/03, naturopathic services provided by independently enrolled
naturopaths are no longer covered for individuals who are 21 years of age or
older.

15. Podiatrist Services - Services provided by a licensed podiatrist which
    conform to accepted methods of diagnosis and treatment and which are within
    the scope of podiatric practice.

Note: Effective 1/1/03, podiatrist services provided by independently enrolled
podiatrists are no longer covered for individuals who are 21 years of age or
older.

    a.  Limitations of Coverage

        i.   Orthotic and/or corrective arch supports for recipients under five
             years of age; and

        ii.  Orthotic and/or corrective arch supports only once every two (2)
             years.

    b.  Noncovered Services

        i.   Services of assistants at surgery;

        ii.  Simplified tests requiring minimal time or equipment and employing
             materials nominal in cost such as Clinitest, testape, Hematest,
             Bumintest, Dextrostix, nonphotolitric hemogloblin, etc.;

        iii. Simple foot hygiene; and

        iv.  Repairs to devices judged to be necessitated by willful or
             malicious abuse on the part of the patient.

16. Laboratory Services - Laboratory services: a) ordered by a duly licensed
    physician or other licensed practitioner of the healing arts; and b)
    performed in a laboratory which is certified according to the applicable
    provisions of the Clinical Laboratory Improvement Amendments of 1988 (CLIA )
    and meets all applicable licensing, accreditation and certification
    requirements for the specific services and procedures it provides.

17. Outpatient Medical Rehabilitation Services - Medically necessary and
    medically appropriate outpatient rehabilitation services provided by a
    licensed or certified practitioner. Such services include: physical
    therapy, occupational therapy, speech therapy, audiology, inhalation
    therapy, social services, psychological services, traumatic brain injury
    (T.B.I.) day treatment, neuropsychological evaluation, electonystagmography,
    and early childhood intervention services.

                                       5
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Note: Effective 1/1/03, services provided by independently enrolled physical
therapists, audiologists and speech pathologists are no longer covered for
individuals who are 21 years of age or older. Services provided by independently
enrolled psychologists will no longer be covered for individuals who are 21
years of age or older effective 9/1/03.

      a.    Limitations include:

            i.    Sheltered workshop services for individuals who are primarily
                  developmentally disabled are covered only if their need for
                  this type of program stems from an etiology readily
                  identifiable as medical or psychological in origin;

            ii.   T.B.I. treatment programs are limited to individuals who have
                  sustained injury from interaction of any external forces
                  resulting in the central nervous system (brain) dysfunctions.
                  Developmental impairment primarily contributing to brain
                  dysfunction is not included. The impairment must be readily
                  identifiable as having been sustained through injury;

            iii.  The T.B.I. program is primarily a medical rehabilitation
                  program, however, vocational, social, and educational services
                  may be covered only when these services are: a) related to the
                  individual's injury, b) are reasonable and necessary for the
                  diagnosis or treatment of the injury, and c) are a part of the
                  recipient's written individual plan of care; and

            iv.   Programs relating to the learning of basic living skills, or
                  other activities of daily living, are limited to individuals
                  who have lost or had impaired functions of daily living and
                  require retraining to maximize restoration of these skills.

      b.    Noncovered Services include:

            i.    Services which are related solely to specific employment
                  opportunities, work skills, work settings, and/or academic
                  skills and are not reasonable or necessary for the diagnosis
                  or treatment of an illness or injury;

            ii.   Speech services involving nondiagnostic, nontherapeutic,
                  routine, repetitive, and reinforced procedures or services for
                  the patient's general good and welfare; and

            iii.  Services ordinarily covered are not covered if an individual's
                  expected restoration potential would be insignificant in
                  relation to the extent and duration of rehabilitation services
                  required to achieve such potential.

18.   Vision Care - Services performed by a licensed ophthalmologist,
      optometrist, or optician which conform to accepted methods of diagnosis
      and treatment.

      Limitations of Coverage

            i.    Contact lenses are covered when such lenses provide better
                  management of a visual or ocular condition than can be
                  achieved with spectacle lenses, including, but not limited to
                  the diagnosis of Unilateral Aphakia, Keratoconus, Corneal
                  Transplant, and High Anisometropia;

            ii.   Prescription sunglasses are covered when light sensitivity
                  which will hinder driving or seriously handicap the outdoor
                  activity of a patient is evident;

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August 13, 2003

            iii.  Trifocals are covered when the patient has a special need due
                  to job training program or extenuating circumstances;

            iv.   Extended wear contact lenses are covered for aphakia and for
                  members whose coordination or physical condition make daily
                  usage of contact lenses impossible;

            v.    Oversize lens are covered only when needed for physiological
                  reasons, and not for cosmetic reasons; and

            vi.   A spare pair of eyeglasses is not covered.

19.   Dental Care - Services performed by a licensed dentist or dental hygienist
which conform to accepted methods of diagnosis and treatment.

The categories of covered services are as follows:

      a.    Diagnostic Services

            i.    Home visits;

            ii.   Radiographs: a) intraoral, complete series; b) bitewing films;
                  and c) periapical films; and

            iii.  Oral examinations: a) initial oral exam; b) periodic oral
                  exam; and c) emergency oral exam.

      b.    Preventive Services

            i.    Prophylaxis;

            ii.   Fluoride treatment for children under 21;

            iii.  Space maintainers;

            iv.   Night guards; and

            v.    Pit and fissure sealants for children ages 5 through 16. Prior
                  authorization is required for children under 5 and persons
                  over 16.

      c.    Restorative Services - limited to the restoration of carious
            permanent, and primary teeth.

            i.    Fillings; and

            ii.   Crowns.

      d.    Endodontics

            i.    Root canal therapy and/or apicoectomy; and

            ii.   Apexification.

      e.    Prosthodontics - removable, complete, and partial prostheses;

      f.    Dental Surgery;

      9.    Edodontia (extractions);

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      h.    Orthodontics under the Early Periodic Screening, Diagnosis and
            Treatment (EPSDT) program;

      i.    Alveolectomy (alveoplasty);

      j.    Patient Management - in connection with dental services to
            individuals with cognitive disabilities;

      k.    General Surgical Anesthesia;

      l.    Prosthodontics with use on a regular basis;

      m.    Removable, complete and partial denture prostheses only; and

      n.    Replacement of existing dentures, only once in any five (5) years.

      o.    Relining or rebasing existing dentures - Two (2) year period.

      p.    Denture labeling, for patients in long-term care facilities only.

The categories of noncovered services are as follows:

      a.    Fixed Bridges

      b.    Periodontia

      c.    Implants

      d.    Transplants

      e.    Cosmetic Dentistry

      f.    Vestibuloplasty

      g.    Unilateral Removable Appliances

      h.    Partial dentures where there are at least eight (8) posterior teeth
            in occlusion and no missing anterior teeth.

      i.    Restorative procedures to deciduous teeth nearing exfoliation.

20.   Durable Medical Equipment - equipment which: a) can stand repeated use; b)
      is primarily and customarily used to serve a medical purpose; c) is
      generally not useful to a person in the absence of an illness or injury;
      and d) excludes items that are disposable.

      Equipment covered includes: wheelchairs and accessories, walking aids,
        bathroom equipment (e.g., commode and safety equipment), hospital beds
        and accessories, inhalation therapy equipment (e.g., IPPR machines,
        suction machines, nebulizers, and related equipment), enteral/parenteral
        therapy equipment, and the repair and replacement of durable medical
        equipment (DME) and related equipment.

21.   Orthotic and Prosthetic Devices - Mechanical appliances and devices for
      the purpose of providing artificial replacement of missing parts, and/or
      prevention or correction of disorders in involving physical deformities
      and impairments.

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August 13, 2003

      a.    Devices covered include: braces, corsets, collars, arch supports,
            footplates, orthopedic shoes, orthopedic prostheses, hearing aids
            (including batteries, earmolds, and cords).

      b.    Limitations: i) orthotic and/or corrective arch supports are not
            provided for recipients under five years of age; ii) Metatarsus
            Adductus Shoes are limited to a congenital metatarsus adductus
            condition and are limited to children through age four as medically
            necessary.

22.   Oxygen Therapy - oxygen, equipment, supplies, and services related to the
      delivery of oxygen.

23.   Respiratory Therapy - services include: intermittent positive pressure
      breathing, ultrasonography, aerosol, sputum induction, percussion and
      postural drainage, arterial puncture, and withdrawal of blood for
      diagnosis.

24.   Dialysis - hemodialysis and peritoneal dialysis services are covered,
      including the treatment of end stage renal disease.

25.   School-Based Clinics - services provided at a facility: a) located on the
      grounds of a public school; b) serving enrolled recipients on a scheduled
      basis or for an emergency situation; and c) licensed as an outpatient
      medical facility to provide comprehensive care.

      a.    Covered services include: health assessments; family planning
            services; diagnosis and/or treatment of illness or injuries;
            laboratory testing (performed by the School-Based Health Clinic);
            follow-up visits; EPSDT services; one-on- one health education,
            medical social work services, and nutritional counseling; and mental
            health and substance abuse services including diagnostic
            assessments, individual, group, and family therapy or counseling.

      b.    Noncovered services include: mandated school health screenings,
            simple intervention of a health problem such as nonmedical personnel
            could render, visits where the presenting health problem does not
            require a health or mental health assessment/evaluation, visits for
            the sole purpose of administering or monitoring medications,
            services which are not part of the written individual plan of care,
            and visits for mental health or substance abuse determined by the
            clinic to be beyond the scope of the clinic.

26.   Family Planning and Abortion - medically approved diagnostic procedures,
      treatment, counseling, drugs, supplies, or devices which are prescribed or
      furnished by a provider to individuals of child bearing age for the
      purpose of enabling such individuals to freely determine the number and
      spacing of their children.

      Noncovered services include: a) sterilizations for patients who are under
      age twenty-one (21), mentally incompetent, or institutionalized; and b)
      hysterectomies performed solely for the purpose of rendering an individual
      permanently incapable of reproducing.

27.   Ambulatory Surgery - Services include preoperative examinations, operating
      and recovery room services, and all required drugs and medicine.

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28.   Early and Periodic Screening, Diagnostic and Treatment (EPSDT) Services
      (HealthTrack Services)- Comprehensive child health care services to
      recipients under twenty-one (21) years of age, including all medically
      necessary prevention, screening, diagnosis, and treatment services listed
      in Section 1905(r) of the Social Security Act.

      EPSDT Covered Services are described below:

      a.    Initial and Periodic Comprehensive Health Screenings - includes the
            following services provided at the intervals recommended in the
            Periodicity Schedule consistent with the standards of the American
            Academy of Pediatrics and Center for Disease Control:

            i.    a comprehensive health and developmental history, including
                  assessment of both physical and mental health development and
                  nutritional assessments;

            ii.   a comprehensive unclothed physical examination;

            iii.  appropriate immunizations according to age and health history,
                  unless medically contraindicated at the time;

            iv.   appropriate laboratory tests (including blood lead level
                  assessments appropriate for age and risk factors);

            v.    health education (including anticipatory guidance and risk
                  assessment);

            vi.   diagnosis and treatment of problems found during the
                  screening;

            vii.  vision screenings - an objective vision screening is indicated
                  beginning at three years of age as indicated in accordance
                  with the Periodicity Schedule;

            viii. hearing screenings - an objective hearing screening is
                  indicated beginning at four years of age according to the
                  Periodicity Schedule; and

            ix.   dental screenings are recommended in the Periodicity Schedule,
                  for example, an initial direct referral to a dentist beginning
                  at age two.

      b.    Dental Services - includes those dental services provided by or
            under the direction of a dentist, in addition to the dental
            screening, that are recommended in the Periodicity Schedule. Dental
            services also include relief of pain and infections, restoration of
            teeth, and maintenance of dental health.

      c.    Administration and Medical Interpretation of Developmental Tests -
            objective standardized tests, recognized by the Connecticut
            Birth-To-Three Council, for further diagnosis and treatment of
            problems found during a periodic comprehensive health screen or
            interperiodic encounter. Such tests include, but are not limited to,
            the Battelle, the Mullen, and the Bayley.

      d.    Case Management Services - The following services are determined to
            be necessary when a child evidences a need for such services as a
            result of a periodic comprehensive health screening or interperiodic
            encounter:

            i.    Initial case management assessment and periodic reassessment,
                  including development of the plan of services and revision as
                  necessary.

            ii.   Ongoing case management, including, at a minimum:

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August 13, 2003

            A)    assistance in implementing the plan of services, which
                  includes: facilitating referrals, providing assistance in
                  scheduling needed health or health-related services, and
                  helping to identify and link with the child's health and
                  social service providers. Particularly, the case management
                  provider shall identify the child's health home or, if
                  necessary, participate in linking the child with a quality
                  health home, and encourage continuity of care;

                  B)    monitoring the delivery of and facilitating access to a
                        periodic comprehensive health screening at the intervals
                        recommended in the Periodicity Schedule, and other
                        screening, diagnosis, and treatment services. Such
                        activities also include follow-up on missed
                        appointments, and, if necessary, assistance with
                        arranging medical transportation, child care, and
                        interpreter services;

                  C)    coordinating and integrating the plan of services, as
                        necessary, through direct or collateral contacts with
                        the family and members of their team of direct service
                        providers, as appropriate;

                  D)    monitoring the quality and quantity of needed services
                        that are being provided, and evaluating outcomes and
                        assessing future needs which might support changes in
                        the plan of services, including completing a quarterly
                        progress note;

                  E)    providing health education, as needed, and in
                        coordinating with a direct service provider,
                        interpreting and reinforcing the service provider's
                        recommendations for the health of the child; and

                  F)    providing client advocacy to ensure the smooth flow of
                        information between the child, the child's
                        representative, providers, and agencies, to minimize
                        conflict between service providers, and to mobilize
                        resources to obtain needed services.

      e.    Interperiodic Encounters

            i.    An encounter or visit to determine if there is a problem, or
                  to treat a problem that was not evident at the time of the
                  regularly scheduled periodic comprehensive screening but needs
                  to be addressed before the next periodic comprehensive
                  screening;

            ii.   Any screening, in addition to the screenings recommended in
                  the Periodicity Schedule, to determine the existence of
                  suspected physical, mental, or developmental conditions;

            iii.  An encounter or follow-up visit in the case of a child whose
                  physical, mental, or developmental illness or condition has
                  already been diagnosed prior to the child being Medicaid
                  eligible (e.g., a pre-existing condition), but needs to be
                  addressed before the next scheduled screening interval
                  recommended in the Periodicity Schedule, if there are
                  indications that the illness or condition may have become more
                  severe or changed sufficiently so that further examination is
                  medically necessary; and

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August 13, 2003

            iv.   An encounter necessary to provide immunizations, vision,
                  and/or hearing screenings (e.g., which had been deemed
                  medically contraindicated at the time of the periodic
                  comprehensive health screening).

      f.    Personal Care Services - services for a child who has a diagnosed
            disability and is judged to be able to benefit from one (1) or more
            personal care service activities as the result of a periodic
            comprehensive health screen or interperiodic encounter performed by
            a primary care provider.

            i.    Covered personal care services include all tasks to assist a
                  child with major life activities of self-care and instrumental
                  activities as identified in the personal care services plan of
                  care:

                  A)    covered major life activities include, but are not
                        limited to, dressing, bathing, eating, and personal
                        health care maintenance; and

                  B)    covered instrumental activities include, but are not
                        limited to, cooking, cleaning, travel, and shopping.

            ii.   The following services are not covered:

                  A)    personal care services provided to an individual who
                        does not reside at home;

                  B)    personal care services provided by a family member;

                  C)    home health services which duplicate personal care
                        services (e.g., home health aide services are not
                        covered when personal care services are appropriate);

                  D)    transportation of the personal attendant to and from the
                        child's home to provide services;

                  E)    acute health care services which are covered under other
                        DSS regulations;

                  F)    personal care services when the child is eligible for or
                        receiving comparable services from another agency or
                        program; and

                  G)    personal care services for the care or assistance that
                        would routinely be given to a child in the absence of a
                        disability.

      g.    EPSDT Special Services - other medically necessary and medically
            appropriate health care, diagnostic services, treatment, or other
            measures necessary to correct or ameliorate disabilities and
            physical and mental illnesses and conditions discovered as a result
            of a periodic comprehensive health screening or interperiodic
            encounter, whether or not the good or service is included in the
            Connecticut Medicaid Program State Plan as a good or service
            available to all other Medicaid recipients. Such services include,
            but are not limited to, medically necessary and medically
            appropriate over-the-counter drugs and personal care services.

      h.    All medically necessary diagnosis and treatment services available
            to all Medicaid recipients under the Connecticut Medical Assistance
            Program.

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29.   Diagnostic Services - Medical procedures (e.g., radiology, cardiology,
      EEG, and ultrasound procedures) or supplies recommended by a physician or
      other licensed practitioner of the healing arts, within the scope of
      his/her practice under State law, to enable the identification of the
      existence, nature, or extent of illness, injury, or other health
      deviation.

30.   Home Health Care - Medically necessary home health services ordered by the
      licensed practitioner and provided by a licensed home health agency on a
      part-time or intermittent basis to members who reside at home, as defined
      by Departmental policy, for the purpose of enabling the patient to remain
      at home or to provide a less costly alternative to institutional care.

31.   Mental Health/Substance Abuse Services-Medically necessary outpatient
      Mental Health and Substance Abuse services provided by a licensed
      psychiatrist (or under the supervision of a licensed psychiatrist) or
      other licensed or certified mental health practitioner. Such services
      must be provided within the scope of the practitioner's
      license/certification.

      a.    Covered services include:

            i.    Initial evaluation (diagnostic);

            ii.   Mental health and substance abuse treatment services:

                  A)    Individual psychotherapy;

                  B)    Group psychotherapy;

                  C)    Family therapy;

                  D)    Specialized treatment, such as methadone maintenance and
                        outpatient detoxification; and

                  E)    Partial hospitalization.

            iii.  Physical/neurological exams in connection with evaluation of
                  mental illness;

            iv.   Parent interview/group - Children's Mental Health Services;

            v.    Psychological testing - performed by licensed psychologists
                  only; and

            vi.   Neuropsychological evaluation performed by a qualified
                  neuropsychologist.

      b.    Noncovered services: Hypnosis or electroshock therapy, unless
            personally performed by a licensed practicing physician (M.D.).

32.   Medical Transportation Services

      a.    Emergency and Nonemergency Ambulance Service is covered when: Q the
            patient's condition requires medical attention during transit; or
            ii) the patient's diagnosis indicates that the patient's condition
            might deteriorate in transit to the point where medical attention
            would be needed; or iii) the patient's condition requires hand
            and/or feet restraints; or iv) the ambulance is responding to an
            emergency; or v) no alternative less expensive means of
            transportation is

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August 13, 2003

            available. Ambulance trips to an emergency room, regardless of the
            outcome, nor ambulance trips in response to a 911 call, cannot be
            subject to prior authorization.

      b.    Air Transportation - when a medical condition or time constraint
            dictates its use.

      c.    Critical Care Helicopter - when a medical condition or time
            constraint dictates its use.

      d.    Other Nonambulance Transportation [Livery, Invalid Coach, Commercial
            Carrier, Taxi, Private Transportation, Service bus ("Dial-a-Ride"
            type service), etc.] - when needed to obtain necessary medical
            services covered by Medicaid, and when it is not available from
            volunteer organizations, other agencies, personal resources, etc. To
            administer this benefit, DSS currently employs the following
            limitations on services:

            i.    requirement of prior authorization;

            ii.   requirement of the use of the nearest appropriate provider of
                  medical services when a determination has been made that
                  traveling further distances provides no medical benefit to the
                  patient; and

            iii.  requirement of the use of the least expensive appropriate
                  method of transportation, depending on the availability of the
                  service and the physical and medical circumstances of the
                  patient.

      e.    Transportation for relatives or foster parents of a Medicaid
            recipient - only under the following circumstances:

i.    the person needs to be present at and during the medical service being
      provided to the patient (for example, in parent/child situations); and

ii.   the person needs to be trained by hospital staff to provide unpaid health
      care in the home to the patient, and without this health care being
      provided the patient would not be able to return home.

vii.  Children under twelve (12) years of age shall be escorted to medical
      appointments. Either the child's parent foster parent, caretaker, legal
      guardian or the Department of Children and Families (DCF), as appropriate,
      shall be responsible for providing the escort.

viii. For children between the ages of twelve (12) to fifteen (15) years, a
      consent form signed by a parent, caretaker or guardian shall be required
      in order for a child to be transported without parental consent as
      specified by state statute (i.e., for family planning and mental health
      treatment).

ix.   For children sixteen (16) years or older, no consent form shall be
      required.

      f.    Out-of-State Transportation Services - when out-of-state- medical
            services are needed because of the following:

            i.    a medical emergency;

            ii.   the patient's health would be endangered if required to travel
                  to Connecticut; and

            iii.  needed medical services are not available in Connecticut.

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33.   Medical Surgical Supplies - those items which are prescribed by a
      physician to meet the needs or requirements of a specific medical and/or
      surgical treatment. They are generally disposable and not reusable.

      a.    Covered services include: gauze pads, surgical dressing material,
            splints, tracheotomy tube, diabetic supplies, elastic hosiery,
            sterile gloves, incontinence supplies, thermometers, blood pressure
            kit (aneroid type including stethoscope, but limited to use in the
            home for patient's diagnosed to have complicated cardiac conditions
            and labile hypertension), enteral/parenteral feeding therapy
            supplies including solutions and manufacturing materials,

      b.    Items considered first aid supplies such as, bandages, solutions,
            vaseline, etc., are not covered services.

34)   Pharmacy Services

      a)    Covered services

            i)    Drugs prescribed by a licensed authorized practitioner. The
                  MCO may use a prescription drug formulary which is described
                  in Section 3.15, Pharmacy Access of the contract.

            ii)   Over-The-Counter (OTC) Drugs on the State of Connecticut's OTC
                  Formulary, including liquid generic antacids, birth control
                  products, calcium preparations, diabetic-related products,
                  electrolyte replacement products, heratinics, nutritional
                  supplements and vitamins (prenatal, pediatric, high potency).

      b)    Noncovered Services

            i)    Drugs included in the Food and Drug Administration's Drug
                  Efficacy Study Implementation Program;

            ii)   Alcoholic liquors;

            iii)  Items used for personal care and hygiene or cosmetic purposes;

            iv)   Drugs solely used to promote fertility;

            v)    Drugs not directly related to the patient's diagnosis, when
                  diagnosis is required by the DEPARTMENT to be written on the
                  prescription;

            vi)   Any vaccines and/or biologicals which can be obtained free of
                  charge from the CT. State Department of Health Services. The
                  DEPARTMENT will notify pharmacists of such vaccines or
                  biologicals;

            vii)  Any drugs used in the treatment of obesity unless caused by a
                  medical condition;

            viii) Controlled substances dispensed to HUSKY members which are in
                  excess of the product manufacturer's recommendation for safe
                  and effective use for which there is no documentation of
                  medical justification in the pharmacy's file; and,

            ix)   drugs used to promote smoking cessation.

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35.   Emergency Services - such inpatient and outpatient services in and out of
      the health plan's service area are covered services.

36.   Dental Hygienist Services - Services which are provided by a licensed
      dental hygienist and which are within his or her scope of practice as
      defined by State Law.

B.    COVERED SERVICES NOT INCLUDED IN THE CAPITATION PAYMENT

1.    School-Based Child Health Services - Medically necessary special education
      related diagnostic and treatment services provided to children by or on
      behalf of school districts pursuant to the Individuals with Disabilities
      Education Act (IDEA) and Connecticut General Statutes (CGS). Diagnostic
      services must be ordered by a Planning and Placement Team and treatment
      services must be prescribed in a child's Individualized Education Program
      (IEP)--and verified by a physician's signature.

2.    Connecticut Birth to Three Program Services - The Connecticut Birth to
      Three Program, pursuant to the Individuals with Disabilities Education Act
      (IDEA) and Connecticut General Statutes (CGS), provides a range of early
      intervention services for eligible children from birth to three years of
      age with developmental delays and disabilities. Eligibility of children is
      determined by Department of Mental Retardation (DMR) staff or entities
      with which DMR contracts. Services are authorized in an Individualized
      Family Service Plan (IFSP) and verified by a physician's signature.

3.    Inpatient Department of Children and Families (DCF). Operated Psychiatric
      Facilities - The discharge planning and reinsurance provisions described
      in Section 3.18 (Special Services for Children) shall apply to all new
      medically necessary and administratively necessary admissions at DCF
      operated facilities effective October 1, 1998. When a child is admitted to
      a DCF facility, the child will remain enrolled in the MCO and the MCO must
      reimburse the DCF facility at the rate as calculated by the Office of the
      Comptroller, provided that such admissions shall be governed by a
      memorandum of understanding between the MCOs and DCF outlining the terms
      and conditions for admission and stays at the facility.

C.    NONCOVERED SERVICES

1.    Institutions for Mental Disease (IMD) - The federal definition of an IMD
      is a hospital, nursing facility, freestanding alcohol treatment center, or
      other institution of more than sixteen (16) beds that is primarily engaged
      in providing diagnosis, treatment, or care of persons with mental
      diseases.

      a.    IMD Exclusion - Medicaid does not cover IMD services (i.e., these
            services are excluded). States, rather than the Federal Government,
            have principle responsibility for funding inpatient psychiatric
            services; therefore, State funding of IMI)s is not through the
            Medicaid program.

      b.    Exceptions - certain individuals are not part of the IMD exclusion
            (i.e., they are covered by Medicaid for services in IMDs):

            i.    inpatient psychiatric services for individuals under age 21;

                                       16
<PAGE>

August 13, 2003

            ii.   individuals 65 years of age or older who are in hospitals or
                  nursing facilities that are IMDs.

2.    Services and/or procedures considered to be of an unproven, experimental,
      or research nature or cosmetic, social, habilitative, vocational,
      recreational, or educational.

3.    Services in excess of those deemed medically necessary to treat the
      patient's condition.

4.    Services not directly related to the patient's diagnosis, symptoms, or
      medical history.

5.    Any services or items furnished for which the provider does not usually
      charge.

6.    Medical services or procedures in the treatment of obesity, including
      gastric stapling. When obesity is caused by an illness (hypothyroidism,
      Cushing's disease, hypothalamic lesions) or aggravates an illness
      (cardiac and respiratory diseases, diabetes, hypertension) services in
      connection with the treatment of obesity could be covered services.

7.    Services related to transsexual surgery or for a procedure which is
      performed as part of the process of preparing an individual for
      transsexual surgery, such as hormone therapy and electrolysis.

8.    Services for a condition that is not medical in nature.

9.    Routine physical examinations requested by third parties, such as
      employers or insurance companies.

10.   Drugs that the Food and Drug Administration (FDA) has proposed to withdraw
      from the market in a notice of opportunity for hearing.

11.   Tattooing or tattoo removal.

12.   Punch graft hair transplants.

13.   Tuboplasty and sterilization reversal.

14.   Implantation of nuclear-powered pacemaker.

15.   Nuclear powered pacemakers.

16.   Inpatient charges related to autopsy.

17.   All services or procedures of a plastic or cosmetic nature performed for
      reconstructive purposes, including but not limited to lipedtomy, hair
      transplant, rhinoplasty, dermabrasion, and chernabrasion.

18.   Drugs solely used to promote fertility.

19.   Drugs used to promote smoking cessation.

20.   Services which are not within the scope of a practitioner's practice under
      state law.

21.   Acupuncture provided outside of pain management therapy.

                                       17
<PAGE>

August 13, 2003

             MEDICAL ASSISTANCE PROGRAM POLICIES AND REGULATIONS BY
                                 PROVIDER AREA

<TABLE>
<CAPTION>
Provider Area                                  Policy or Regulation Sections
-------------                                  -----------------------------
<S>                                            <C>
Birth to Three                                 Sections 17b-262-597 through 17b-262-605
                                               of the Regulations of Connecticut State
                                               Agencies

Case Management Services to Persons            Proposed Regulations
Under 21

Chiropractic Services                          Sections 17b-262-535 through 17b-262-545
                                               of the Regulations of Connecticut State
                                               Agencies

Clinics                                        Sections 171 through 171 B. XI of Medical
                                               Services Policy and Sections 17-134d-7
                                               through 17-134d-8, 17-134d-56 and 17-
                                               134d-70 through 17-134d-78 of the
                                               Regulations of Connecticut State Agencies

Mental Health Clinics                          Sections 171.1 through 171.11.iii.m. of
                                               Medical Services Policy

Rehabilitation Clinics                         Sections 171.2 through 171.2l.lll.k. of
                                               Medical Services Policy

Dental Clinics                                 Sections 171.3 through 171.3l.lll.f. of
                                               Medical Services Policy

Medical Clinics                                Sections 171.4 through 171.4l.lll.i. of
                                               Medical Services Policy

Dental Services                                Sections 184 through 184l.lll.h. of Medical
                                               Services Policy and Section 17-134d-35 of
                                               the Regulations of Connecticut State
                                               Agencies

Dialysis                                       Sections 17b-262-651 through 17b-262-
                                               660 of the Regulations of Connecticut State
                                               Agencies

Early and Periodic Screening, Diagnostic       Included in Regulations with Other
and Treatment Services (Health Track           Providers
Services)

Family Planning, Abortions and                 Sections 173 through 173l. of Medical
Hysterectomies                                 Services Policy

Freestanding Alcohol Treatment Centers         Sections 160 through 160l. of Medical
                                               Services Policy

Home Health Services                           Sections 185 through 185l.lll.b.4. of
</TABLE>

                                       18
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
                                               Medical Services Policy and Sections 17-134d-37,
                                               17-134d-48, 17-134d-60, 17-134d-62 and 17b-262-1
                                               through 17b-262-9 of the Regulations of Connecticut
                                               State Agencies

Hospital Inpatient Services                    Sections 150.1 through 150.1I.VI.d of
                                               Medical Services Policy and Sections 19a-630,
                                               17b-225, 17b-238 through 17b-247, 17b-262,
                                               19-13D, 19a-490 through 19a-493, 19a-495 of the
                                               Regulations of Connecticut State Agencies

Hospital Outpatient Services                   Sections 150.2 through l50.2J.V.n of
                                               Medical Services Policy and Sections 4-67c (fees),
                                               17-311 (payments), 17-312 (payments), 19a-490
                                               (licensing), 19a-493 (licensing) of the Connecticut
                                               General Statutes and Sections 19-13D, 17-134d-2
                                               (Medical Care), 17-134d-40 (payments - clinic),
                                               17-134d-63 (out-of-state hospitals), 17-134d-86
                                               (emergency room) of the Regulations of Connecticut
                                               State Agencies.

Inpatient Psychiatric Hospital Services        Sections 17b-262-499 through 17b-262-510 of the
                                               Regulations of Connecticut State Agencies

Intermediate Care Facility                     Sections 156 through 156l.l.b.6. of Medical
                                               Services Policy and Section 17-134d-47 of
                                               the Regulations of Connecticut State
                                               Agencies.

Independent Radiology and Ultrasound           Sections 17b-262-512 through 17b-262-520 of the
Centers                                        Regulations of Connecticut State Aagencies.

Independent Therapy Services                   Sections 17b-262-630 through 17b-262-640 of the
                                               Regulations of Connecticut State Agencies.

Laboratory Services                            Sections 17b-262-641 through 17b-262-650 of the
                                               Regulations of Connecticut State Agencies.

Medical Equipment, Devices and Supplies        See Below.
(MEDS)

Medical Surgical Supplies                      Sections 188 through 188J. of Medical
                                               Services Policy

Durable Medical Equipment                      Sections 17b-262-672 through 17b-262-
</TABLE>

                                       19
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
                                               682 of Medical Services Policy

Orthotic and Prosthetic Devices                Sactions 190 through 190l.iii.k. of Medical
                                               Services Policy

Oxygen Therapy                                 Section 196 of Medical Services Policy and
                                               17-134d-83 through 17-134d-85 of the
                                               Regulations of Connecticut State Agencies

Natureopathic Services                         Sections 17b-262-547 through 17b-262-
                                               557 of the Regulations of Connecticut State
                                               Agencies

Nurse-Midwifery Services                       Sections 17b-262-573 through 17b-262-
                                               585 of the Regulations of Connecticut State
                                               Agencies

Nurse Practitioner Services                    Sections 17b-262-607 through 17b-262-
                                               618 of the Regulations of Connecticut State
                                               Agencies

Pharmacy                                       Sections 174 through 174H.IV.a.4. of
                                               Medical Services Policy and Section 17-
                                               134d-81 of the Regulations of Connecticut
                                               State Agencies

Physician's Services                           Sections 17b-262-337 through 17b-262-
                                               449 of the Regulations of Connecticut State
                                               Agencies

Podiatric Services                             Sections 179 through 179l.ll.b. of Medical
                                               Services Policy

Provider Participation                         Sections 17b-262-522 through 17b-262-
                                               533 of the Regulations of Connecticut State
                                               Agencies

Psychiatrists                                  Sections 17b-262-452 through 17b-262-
                                               463 of the Regulations of Connecticut State
                                               Agencies

Psychologists                                  Sections 17b-262-467 through 17b-262-
                                               478 of the Regulations of Connecticut State
                                               Agencies

School Based Child Health Services             Sections 17b-262-213 through 17b-262-
                                               224 of the Regulations of Connecticut State
                                               Agencies

Skilled Nursing Facility                       Sections 154 through 154l.l.b.6. of Medical
                                               Services Policy and Sections 17-134d-46, 17-134d-68
                                               and 117-134d-79 of the Regulations of Connecticut
                                               State Agencies
</TABLE>

                                       20
<PAGE>

August 13, 2003

<TABLE>
<S>                                            <C>
Targeted Case Management Services              Sections 194 through 194J.b and 195
                                               through 195J. of Medical Services Policy and Sections
                                               17-134d-82 and 17-134d-139 through 17-134d-149 of the
                                               Regulations of Connecticut State Agencies

Transportation Services                        Section 17b-134d--33 of the Regulations
                                               of Connecticut State Agencies

Vision Care Services                           Sections 17b-262-559 through 17b-262-
                                               571 of the Regulations of Connecticut State
                                               Agencies, DSS Policy Transmittal MS 93-
                                               18 and DSS Policy Bulletin 98-19.
</TABLE>

                                       21
<PAGE>

August 13, 2003

                  Appendix G: Medicaid Managed Care Eligibility
                                   Categories

Revised 8/13/03

<PAGE>

August 13, 2003

HUSKY A MEDICAID COVERAGE
GROUPS

<TABLE>
<CAPTION>
Eligibility
    Code       Description
-----------    -----------
<S>            <C>
    F01        Temporary Assistance to Needy Families (TANF)
    F03        Transitional Work Extension
    F04        Child Support Extension
    F05        Work Supplementation
    F07        Family Coverage (100% FPL)
    F08        Special Child Care Deduction
    F09        Eligible for TANF except for Non-Medicaid Requirements
    F10        Newborn Coverage
    F11        Newborn Children
    F12        CN Ribicoff Children
    F25        Children under 185 % of the Federal Poverty Level (FPL)
    F95        Children under 18, 18-21, and Caretaker Relatives
    P01        Pregnant Women who meet TANF Financial Requirements
    P02        Pregnant Women under 185 % of the Federal Poverty Level (FPL)
    P95        Pregnant Women Coverage
 MO1\M02       Pregnant Women Extension (Post-Partum)
 D01\D02       DCF Children
</TABLE>

Revised 8/13/03

<PAGE>

                            APPENDI[ILLEGIBLE]-Amended

PLAN NAME:
FIRSTCHOICE
CAPITATION RATES
07/01/02 - 09/30/03

<TABLE>
<CAPTION>
                             FAIRFIELD   HARTFORD   LITCHFIELD   MIDDLESEX    NEW HAVEN   NEW LONDON    TOLLAND    WINDHAM
                             ----------  --------   ----------   ---------    ---------   ----------    -------    -------
<S>                          <C>         <C>        <C>          <C>          <C>         <C>           <C>        <C>
UNDER ONE                     $536.44    $606.89     $605.12      $717.18      $602.97     $600.00      $724.78    $581.51
AGES 1 TO 14                  $102.32    $110.46     $110.15      $130.10      $109.79     $109.23      $131.46    $107.71
MALE - AGES 15 TO 39          $127.22    $138.42     $138.03      $162.52      $137.60     $136.94      $164.18    $135.18
FEMALE - AGES 15 TO 39        $207.77    $231.48     $230.81      $273.76      $230.00     $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER       $227.33    $254.24     $253.48      $301.18      $252.59     $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER     $218.52    $244.15     $243.42      $289.20      $242.55     $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1
                                Effective 7/1/02

<PAGE>

August 13, 2003                     Appendix L

PHARMACY REPORT # 1: PRESCRIPTION EQUEST PROCESS FOR LEGEND DRUGS

NAME OF MCO                                          Quarter Ending

NUMBERS ARE FOR PRESENTATION PURPOSES ONLY.

<TABLE>
<CAPTION>
                                                                  NUMBER OF REQUESTS *
                                               -----------------------------------------------------
                                                          TEMPORARY
                                                           SUPPLY
REQUESTS FOR AUTHORIZATION AND OUTCOME         TOTAL **    GRANTED     APPROVED     DENIED     OTHER
--------------------------------------         --------    -------     --------     ------     -----
<S>                                            <C>        <C>          <C>          <C>        <C>
1. URGENT CERTIFIED BY PRESCRIBER                 =           =            =           -         -

2. ROUTINE                                        -                        =           =         -

3. TEMPORARY SUPPLY ISSUED PENDING REVIEW         =           =            =           -         -

4. UNDUPLICATED TOTAL OF REQUESTS FOR PERIOD      -           -            -           -         -
</TABLE>

<TABLE>
<CAPTION>
                                                                  NUMBER OF REQUESTS
                                               -----------------------------------------------------
                                                          TEMPORARY
                                                           SUPPLY
REQUESTS FOR AUTHORIZATION AND OUTCOME         TOTAL **    GRANTED     APPROVED     DENIED     OTHER
--------------------------------------         --------    -------     --------     ------     -----
<S>                                            <C>        <C>          <C>          <C>        <C>
5. SUBSEQUENT REFILL OF A DRUG PREVIOUSLY
ISSUED AS A TEMP. SUPPLY IN EITHER 1 OR 3
ABOVE (URGENT CERTIFIED BY PRESCRIBER/TEMP
SUPPLY PENDING REVIEW)                            -                        =           =         -

6. A TEMPORARY SUPPLY ISSUED IN 1 OR 3 ABOVE,
BUT PRESCRIPTION DOES NOT HAVE ANY REFILLS
(I.E. 10 DAY TREATMENT)                           =

7. TOTAL MEMBER MONTHS THIS QUARTER               =

8. NUMBER PER MEMBER PER MONTH (4/7)            #VALUE!     #VALUE!     #VALUE!     #VALUE!   #VALUE!
</TABLE>

<PAGE>

August 13, 2003                            Appendix L

<TABLE>
<S>                                            <C>
9. TOTAL PRESCRIPTIONS FILLED BY THE MCO
THIS QUARTER

10. PERCENT OF AUTH. REQUESTS TO TOTAL
PRESCRIPTIONS FILLED BY THE MCO
(EXAMPLE 2+5/9)                                 #DIV/0!
</TABLE>

TICK MARK LEGEND

      *     Drugs requiring authorization include non-formulary drugs, formulary
            drugs that require authorization, and brand name drugs where a
            generic substitute is available. It excludes those prescriptions
            which may require prior authorization but on-line edits in the POS
            system approve and adjudicate the claim without any intervention on
            the part of the MCO and/or Pharmacy Benefits Manager. It also
            excludes over the counter drugs.

      **    Include only requests for authorization completed during this
            quarter.

     ***    The time elapsed between when the request was received by PBM or MCO
            and when the decision was made.

      1.    Initial requests received from a provider for an urgent/emergent
            medication need, where a temporary supply is issued.

      2.    Requests for authorization of non-formulary drugs, formulary drugs
            that require authorization, and brand name drugs where a generic
            substitute is available. All scenarios which do not meet the
            criteria of category 1 or 3.

      3.    All prescriptions that result in the issuance of a temporary supply
            except for temporary supplies issued upon provider certification of
            urgency

      4.    The total of request certified as urgent by prescriber, requests
            that are routine, and requests pending review. The total of 1, 2 and
            3 above.

      5.    Requests received from provider after a temporary supply has already
            been issued in either 1 or 3 above.

      6.    A temporary supply was provided to the member in either 1 or 3
            above, however, a refill of the prescription has not been requested.

      7.    The total member months for reporting period.

<PAGE>

August 13, 2003                            Appendix L

<TABLE>
<CAPTION>
                       TURN AROUND TIME TO APPROVE/DENY OR ISSUE A TEMPORARY        AVERAGE TIME ELAPSED SINCE AUTHORIZATION
   PERCENT OF TOTAL                         SUPPLY (carret)                    REQUEST RECEIVED BY MCO (HOURS) *** (double carret)
--------------------  -------------------------------------------------------- ---------------------------------------------------
TEMP SUPPLY
  GRANTED              <24 HOURS - 5                                                                            WEIGHTED
 /APPROVED    DENIED       DAYS        6 - 10 DAYS    11 - 14 DAYS    >14 DAYS    APPROVALS      DENIALS      AVERAGE TOTAL
----------   -------   -------------   -----------    ------------    --------    ---------      -------      -------------
<S>          <C>       <C>             <C>            <C>             <C>         <C>            <C>          <C>

  #VALUE!    #VALUE!        =              -               -              -           =            0.00          #VALUE!

  #VALUE!    #VALUE!        =              =               5             11           =               =          #VALUE!

  #VALUE!    #VALUE!        =              -               -              -           =            0.00          #VALUE!

  #DIV/0!    #DIV/0!        =              -               5             11         #VALUE!       #VALUE!        #VALUE!
</TABLE>

<TABLE>
<CAPTION>
                       TURN AROUND TIME TO APPROVE/DENY OR ISSUE A TEMPORARY          AVERAGE TIME ELAPSED SINCE REQUEST
   PERCENT OF TOTAL                         SUPPLY                                  RECEIVED BY MCO (DAYS) (doule carret)
--------------------  --------------------------------------------------------  -------------------------------------------
                       <24 HOURS - 5                                                                            WEIGHTED
  APPROVED    DENIED       DAYS        6 - 10 DAYS    11 - 14 DAYS    >14 DAYS    APPROVALS      DENIALS      AVERAGE TOTAL
----------   -------   -------------   -----------    ------------    --------    ---------      -------      -------------
<S>          <C>       <C>             <C>            <C>             <C>         <C>            <C>          <C>

  #VALUE!    #VALUE!       1,292           9               6              32         2.59          1.19           #VALUE!

  #VALUE!    #VALUE!
</TABLE>

<PAGE>

PHARMACY REPORT # 2: TOP 30 LEGED DRUGS BY NUMBER OF REQUESTS DENIED

NAME OF MCO     Quarter Ending

<TABLE>
<CAPTION>
                                                                                     PERCENT OF AUTHORIZATION
                                                                                       REQUESTS (EXCLUDING NO
                                                  NUMBER OF AUTHORIZATION REVIEWS    REFILLS) COMPLETED DURING      TEMPORARY
                                                      COMPLETED THIS QUARTER*              THE QUARTER            SUPPLY ISSUED
                                                ----------------------------------   -------------------------   ---------------
                                                           NUMBER        NUMBER       PERCENT          PERCENT      TEMPORARY
     BRAND NAME OF DRUG   THERAPEUTIC CLASS     SUBTOTAL  APPROVED      DENIED (7)    APPROVED          DENIED        SUPPLY
     ------------------   -----------------     --------  --------      ----------    --------         -------   ------------------
                                                                                                                 (Sum of Rows 1 & 3
                                                                                                                  from Report #1)
<S>  <C>                  <C>                   <C>       <C>           <C>           <C>              <C>       <C>
 1
----------------------------------------------------------------------------------------------------------------------------------
 2
----------------------------------------------------------------------------------------------------------------------------------
 3
----------------------------------------------------------------------------------------------------------------------------------
 4
----------------------------------------------------------------------------------------------------------------------------------
 5
----------------------------------------------------------------------------------------------------------------------------------
 6
----------------------------------------------------------------------------------------------------------------------------------
 7
----------------------------------------------------------------------------------------------------------------------------------
 8
----------------------------------------------------------------------------------------------------------------------------------
 9
----------------------------------------------------------------------------------------------------------------------------------
10
----------------------------------------------------------------------------------------------------------------------------------
11
----------------------------------------------------------------------------------------------------------------------------------
12
----------------------------------------------------------------------------------------------------------------------------------
13
----------------------------------------------------------------------------------------------------------------------------------
14
----------------------------------------------------------------------------------------------------------------------------------
15
----------------------------------------------------------------------------------------------------------------------------------
16
----------------------------------------------------------------------------------------------------------------------------------
17
----------------------------------------------------------------------------------------------------------------------------------
18
----------------------------------------------------------------------------------------------------------------------------------
19
----------------------------------------------------------------------------------------------------------------------------------
20
----------------------------------------------------------------------------------------------------------------------------------
21
----------------------------------------------------------------------------------------------------------------------------------
22
----------------------------------------------------------------------------------------------------------------------------------
23
----------------------------------------------------------------------------------------------------------------------------------
24
----------------------------------------------------------------------------------------------------------------------------------
25
----------------------------------------------------------------------------------------------------------------------------------
26
----------------------------------------------------------------------------------------------------------------------------------
27
----------------------------------------------------------------------------------------------------------------------------------
28
----------------------------------------------------------------------------------------------------------------------------------
29
----------------------------------------------------------------------------------------------------------------------------------
30
----------------------------------------------------------------------------------------------------------------------------------
                                      SUB TOTAL:     0         0              0         #DIV/0!          #DIV/0!          0
                                                     -----------------------------------------------------------------------------
 ALL OTHER DRUGS REQUIRING PRIOR AUTHORIZATION (1)
                                                     -----------------------------------------------------------------------------
 GRAND TOTAL DRUGS REQUIRING AUTHORIZATION (2)
                                                     -----------------------------------------------------------------------------
TOTAL AUTHORIZATION REVIEWS COMPLETED DURING THE QUARTER                                               REASON FOR DENIAL PERCENT %
                                                     -----------------------------------------------------------------------------

<CAPTION>

                                                            REASON FOR DENIAL
      ------------------------------------------------------------------------------------------------------------------------------
                                                   EQUALLY
      STEP THERAPY    QUANTITY                    EFFECTIVE        MEDICAL        NOT A COVERED
      CRITERIA NOT     LIMITS     INAPPROPRIATE  ALTERNATIVE    NECESSITY NOT      BENEFIT (I.E       LACK OF           TOTAL DENIAL
        MET (4)     EXCEEDED (5)    DIAGNOSIS    ON FORMULARY   ESTABLISHED (6)   FERTILITY DRUGS)  INFORMATION  OTHER      CODE
      ------------  ------------  -------------  ------------   ---------------   ----------------  -----------  -----  ------------
<S>   <C>           <C>           <C>            <C>            <C>               <C>               <C>          <C>    <C>
 1
------------------------------------------------------------------------------------------------------------------------------------
 2
------------------------------------------------------------------------------------------------------------------------------------
 3
------------------------------------------------------------------------------------------------------------------------------------
 4
------------------------------------------------------------------------------------------------------------------------------------
 5
------------------------------------------------------------------------------------------------------------------------------------
 6
------------------------------------------------------------------------------------------------------------------------------------
 7
------------------------------------------------------------------------------------------------------------------------------------
 8
------------------------------------------------------------------------------------------------------------------------------------
 9
------------------------------------------------------------------------------------------------------------------------------------
10
------------------------------------------------------------------------------------------------------------------------------------
11
------------------------------------------------------------------------------------------------------------------------------------
12
------------------------------------------------------------------------------------------------------------------------------------
13
------------------------------------------------------------------------------------------------------------------------------------
14
------------------------------------------------------------------------------------------------------------------------------------
15
------------------------------------------------------------------------------------------------------------------------------------
16
------------------------------------------------------------------------------------------------------------------------------------
17
------------------------------------------------------------------------------------------------------------------------------------
18
------------------------------------------------------------------------------------------------------------------------------------
19
------------------------------------------------------------------------------------------------------------------------------------
20
------------------------------------------------------------------------------------------------------------------------------------
21
------------------------------------------------------------------------------------------------------------------------------------
22
------------------------------------------------------------------------------------------------------------------------------------
23
------------------------------------------------------------------------------------------------------------------------------------
24
------------------------------------------------------------------------------------------------------------------------------------
25
------------------------------------------------------------------------------------------------------------------------------------
26
------------------------------------------------------------------------------------------------------------------------------------
27
------------------------------------------------------------------------------------------------------------------------------------
28
------------------------------------------------------------------------------------------------------------------------------------
29
------------------------------------------------------------------------------------------------------------------------------------
30
------------------------------------------------------------------------------------------------------------------------------------
          0              0             0              0               0                  0               0         0         0
      ------------------------------------------------------------------------------------------------------------------------------

      ------------------------------------------------------------------------------------------------------------------------------
TOTAL AUTHORIZATION REVIEWS COMPLETED DURING THE QUARTER                                                 REASON FOR DENIAL PERCENT %
                                                     -------------------------------------------------------------------------------

      ------------------------------------------------------------------------------------------------------------------------------
         #DIV/0!       #DIV/0!       #DIV/0!       #DIV/0!          #DIV/0!            #DIV/0!        #DIV/0!   #DIV/0!    #DIV/0!
      ------------------------------------------------------------------------------------------------------------------------------

</TABLE>

TOTAL PRESCRIPTIONS FILLED (3)
(INCLUDING AUTHORIZED (18) AND TEMPORARY SUPPLIES (15) FROM ABOVE)

PERCENT OF AUTH. REQUESTS TO TOTAL PRESCRIPTIONS FILLED BY THE MCO
(EXAMPLE 22/10,00)

TICK MARK LEGEND

  *   Drugs requiring authorization include non-formulary drugs, formulary drugs
      that require authorization, and brand name drugs where a generic
      substitute is available. It excludes those prescriptions which may require
      prior authorization but on-line edits in the POS system approve and
      adjudicate the claim without any intervention on the part of the MCO
      and/or Pharmacy Benefits Manager. This report also excludes over the
      counter drugs.

 **   Include only requests for authorization completed during this quarter.

(1)   Any additional prescriptions requiring prior authorization count not
      accounted for within the top 30 denied drugs.

(2)   The sum of all drugs which require authorization. This amount should tie
      into the total approved, denied and temp supply given on the Prescription
      Request Process Report.

(3)   The total HUSKY A prescriptions filled (units dispensed) for the reporting
      period being displayed.

(4)   A process of reviewing prescription requests (e.g. might include
      determining if drug A & B were used prior to approving drug C).

(5)   Evaluation of the quantity of drugs being utilized over a specific time
      period.

(6)   Examples of medical necessity not established may include but not be
      limited to off-label utilization per FDA.

(7)   Sort Records/Rows 3-32 (Drugs 1-30) by Column F 'Number of Authorization
      Reviews Denied' from most to least.
<PAGE>

[QUI TRANSTULIT SUSTINET LOGO]              STATE OF CONNECTICUT
                                        DEPARTMENT OF SOCIAL SERVICES

                                             CONTRACT AMENDMENT

AMENDMENT NUMBER:      6
CONTRACT #:            093-MED-FCHP-1
CONTRACT PERIOD:       08/11/2001 - 10/31/2003
CONTRACTOR NAME:       FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS:    23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4 and 5 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2,3, 4 AND 5 IS FURTHER
      AMENDED TO EXTEND THE CONTRACT END DATE FROM SEPTEMBER 30, 2003 TO OCTOBER
      31, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 9/30/03 TO OCTOBER 31, 2003. IF, THROUGH THE PASSAGE
      OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION RATES ARE TO
      BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE NEXT AMENDMENT
      TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE EXPIRATION OF THIS
      AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT SUCH REVISIONS AND
      SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION PAYMENTS MADE TO THE
      CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT     [APPROVED SEP 29 2003 WELLCARE LEGAL SERVICES]

/s/ Todd S. Farha                 9/29/03
-------------------------------   ---------------
Signature (Authorized Official)   Date

TODD S. FARHA                     PRESIDENT & CEO
-------------------------------   ---------------
Typed Name (Authorized Official)  Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES
_____________________________     ______________
Signature (Authorized Official)     Date

MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
-------------------------------   -------------------
Typed Name (Authorized Official)  Title

<PAGE>

OFFICE OF THE ATTORNEY GENERAL

______________________________    ________________
Attorney General (as to form)     Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

<PAGE>

                                 APPEND -Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRSTCHOICE

CAPITATION RATES
07/01/02 - 10/31/03

                           FAIRFIELD   HARTFORD     LITCHFIELD    MIDDLESEX     NEW HAVEN    NEW LONDON     TOLLAND    WINDHAM
                           ---------   --------     ----------    ---------     ---------    ----------     -------    -------
<S>                        <C>         <C>          <C>           <C>           <C>          <C>            <C>        <C>
UNDER ONE                   $536.44    $606.89       $605.12       $717.18       $602.97       $600.00      $724.78    $581.51
AGES 1 TO 14                $102.32    $110.46       $110.15       $130.10       $109.79       $109.23      $131.46    $107.71
MALE-AGES 15 TO 39          $127.22    $138.42       $138.03       $162.52       $137.60       $136.94      $164.18    $135.18
FEMALE-AGES 15 TO 39        $207.77    $231.48       $230.81       $273.76       $230.00       $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER     $227.33    $254.24       $253.48       $301.18       $252.59       $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER   $218.52    $244.15       $243.42       $289.20       $242.55       $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications, contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 29th day of September, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    --------------------------------------------
                                    By: Thaddeus Bereday, Secretary

<PAGE>

                                             STATE OF CONNECTICUT
[QUI TRANSTULIT SUSTINET LOGO]           DEPARTMENT OF SOCIAL SERVICES

                                              CONTRACT AMENDMENT

AMENDMENT NUMBER:   7
CONTRACT #:         093-MED-FCHP-1
CONTRACT PERIOD:    08/11/2001 - 11/30/2003
CONTRACTOR NAME:    FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS: 23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4, 5 and 6 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3, 4, 5 AND 6 IS
      FURTHER AMENDED TO EXTEND THE CONTRACT END DATE FROM OCTOBER: 1, 2003 TO
      NOVEMBER 30, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    SECTION 3.47 OF PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED AUGUST 13,
      2003 IS DELETED IN ITS ENTIRETY AND REPLACED WITH SECTION 3.47 (EFFECTIVE
      11/01/03) AS SET FORTH ON PAGE 3 OF THIS AMENDMENT.

4.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 10/31/03 TO NOVEMBER 30, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

                                   Page 1 of 3

<PAGE>

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT

/s/ Thaddeus Bereday                       10/29/03
--------------------
Signature (Authorized Official)            Date
          Thaddeus Bereday
          Senior Vice President &
          General Counsel                  _________________________
Typed Name (Authorized Official)           Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES

/s/ Michael P. Starkowski                  10/31/03
-----------------------------
Signature (Authorized Official)            Date

MICHAEL P. STARKOWSKI                      DEPUTY COMMISSIONER
Typed Name (Authorized Official)           Title

OFFICE OF THE ATTORNEY GENERAL

_____________________________              ________________________
 Attorney General (as to form)                         Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

                                   Page 2 of 3

<PAGE>
\
3.47        CO-PAYMENT LIMITS AND MEMBER CHARGES FOR NONCOVERED SERVICES
            (EFFECTIVE 11/01/03)

a.    Pursuant to Section 72 of Public Act 3-03 of the June 30 Special Session
      and Section 11 of Public Act 03-1 of the September 8 Special Session,
      Members shall be responsible for a $1.50 co-payment for prescription drugs
      and a $2.00 co-payment for outpatient services.

b.    The MCO shall implement the $2.00 co-pay for outpatient services in
      accordance with the provisions of Provider Bulletin PB 2003-89, September
      2003.

c.    The $1.50 co-payment for prescription drugs shall apply to each
      prescription drug, covered over the counter medication and refill. The
      following services and individuals shall be exempt from the $1.50
      co-payment for prescription drugs requirement:

            1)    Members under the age of 21;

            2)    Pregnant women, including the period of 60 days post-partum.
                  This post-partum period begins on the last day of pregnancy
                  and extends through the end of the month in which the 60-day
                  period following termination of pregnancy ends;

            3)    Members who are inpatients in the following medical
                  institutions: acute care hospital, psychiatric hospital,
                  chronic disease hospital or nursing facility, as more fully
                  described in Provider Bulletin PB 2003-45, June 2003;

            4)    Prescription for family planning drugs or supplies;

            5)    Compounded prescriptions.

d.    The MCO shall ensure that the dispensing pharmacist is responsible for
      collecting the co-payment at the time of the service unless the
      pharmacist, in filling certain prescriptions, does not normally have
      face to face contact with the Member. If the pharmacist does not have
      face-to-face contact with the Member in dispensing a prescription, the
      provider has the right to bill the Member for the $1.50 co-payment.

e.    Pursuant to 42 U.S.C. 13960(e), no provider may deny care or services to
      an individual eligible for such care or services because of an inability
      to pay a co-payment. The MCO shall ensure that its providers do not refuse
      to render the service or fil1 a prescription if the Member is unable to
      pay the co-payment. The MCO may permit its providers to ask for the unpaid
      co-payment at a subsequent visit or to bill the Member for the outstanding
      co-payment. The provider shall accept the Member's declaration that he is
      unable to pay the co-payment.

f.    Except for the prescription drug and outpatient services co-payments
      described above, no deductibles or co-payments or similar cost-sharing
      charges are permitted for HUSKY A covered services.

g.    A provider shall be permitted to charge an eligible Member for goods or
      services which are not coverable only if the Member knowingly elects to
      receive the goods or services and enters into an agreement in writing to
      pay for such goods or services prior to receiving them. For purposes of
      this section noncovered services are services not covered under the
      Medicaid state plan, services which are provided in the absence of
      appropriate authorization, and services which are provided out-of-network
      unless otherwise specified in the contract, policy or regulation (e.g.,
      family planning, mental health or emergency room services).

                                   Page 3 of 3

<PAGE>

                                APPENDIX   Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRST CHOICE

CAPITATION RATES
07/01/02 - 11/30/03

                           FAIRFIELD     HARTFORD     LITCHFIELD    MIDDLESEX    NEW HAVEN    NEW LONDON     TOLLAND    WINDHAM
                           ---------     --------     ----------    ---------    ---------    ----------     -------    -------
<S>                        <C>           <C>          <C>           <C>          <C>          <C>            <C>        <C>
UNDER ONE                   $536.44      $606.89       $605.12       $717.18      $602.97       $600.00      $724.78    $581.51
AGE 1 TO 14                 $102.32      $110.46       $110.15       $130.10      $109.79       $109.23      $131.46    $107.71
MALE - AGES 15 TO 39        $127.22      $138.42       $138.03       $162.52      $137.60       $136.94      $164.18    $135.18
FEMALE - AGE 15 TO 39       $207.77      $231.48       $230.81       $273.76      $230.00       $228.84      $276.70    $223.07
MALE - AGES 40 AND OVER     $227.33      $254.24       $253.48       $301.18      $252.59       $251.31      $304.41    $244.68
FEMALE - AGES 40 AND OVER   $218.52      $244.15       $243.42       $289.20      $242.55       $241.32      $292.32    $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications, contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same may; determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 29th day of October, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    --------------------------------------------
                                    By: Thaddeus Bereday, Secretary

<PAGE>

            Chronic Inpatient
            ICF/MR (Intermediate Care Facility for the Mentally Retarded)
            SNF (Skilled Nursing Facility)
            ICF (Intermediate Care Facility)
            ICF-2
            Super SNF
            CDH Outpatient (Chronic Disease Hospital Outpatient)

Please be aware that Code 06 - Boarding Home may also be used to describe a
Non-ICF Group Home. Additionally, Code 05 - Rest Home is also used for a Home
for the Aged.

Some institutions are listed as a Multi-care institution since they consist of
segregated units each of which are devoted to various complexities of patient
care. An institution may be classified as a Boarding Home in one section and an
Intermediate Care Facility for the Mentally Retarded in another section. Again,
ASK AND CODE THE PATIENT LOCATION AS THE PRESCRIBER OR FACILITY DIRECTS.

AS A REMINDER, federal law under Section 1916(e) of the Social Security Act
requires that no provider enrolled in the Medicaid Program may deny care or
services to an individual eligible for such care or services because of an
inability to pay a copayment. If the client cannot pay the copayment, a provider
may not refuse to render the service or not fill the prescription for that
reason. However, a provider may ask for the unpaid copayment at a subsequent
visit or bill the client for the outstanding copayment. The client's own
declaration that he/she is unable to pay is the basis for determining when a
client is unable to pay.

This bulletin and other program information can be found at
WWW.CTMEDICALPROGRAM.COM. Questions regarding this bulletin may be directed to
the EDS Provider Assistance Center - Monday through Friday from 8:30 a.m. to
5:00 p.m. at:

In-state toll free..........  800-842-8440 OR  EDS
Out-of-state or in the                         PO Box 2991            [EDS LOGO]
local New Britain, CT area..  860-832-9259     Hartford, CT 06104

                                                                          2 of 2
<PAGE>

                 CONNECTICUT DEPARTMENT OF SOCIAL SERVICES
[LOGO]           MEDICAL ASSISTANCE PROGRAM
                 PROVIDER BULLETIN

                 PB 2003-89                                       SEPTEMBER 2003

TO:         SELECT PROVIDERS

SUBJECT:    CO-PAY FOR OUTPATIENT SERVICES

The Department of Social Services is implementing a patient co-payment
requirement for recipients of Medicaid. Effective NOVEMBER 1, 2003 and forward,
Medicaid enrolled providers of certain outpatient services shall collect a $2.00
CO-PAYMENT per client, per date of service.

EXEMPTIONS:

The co-payment requirement does not apply to the following:

-     children under 21 years of age;

-     women who are pregnant or in the postpartum period. The postpartum period
      is the 60 day period following child birth;

-     family planning services and supplies;

-     emergency services provided by a hospital for revenue center codes 450 -
      452 and 459;

-     clients who have Medicare as their primary insurance, provided Medicare
      makes a payment towards the deductible;

-     hospital outpatient laboratory services revenue center codes 300 - 309
      only;

-     clients residing in a nursing facility, chronic disease hospital or
      intermediate care facility for the mentally retarded (ICF/MR).

CONDITIONS FOR CO-PAYMENT

Federal law under Section 1916(e) of the Social Security Act requires that no
provider enrolled in the Medicaid program may deny care or services to an
individual eligible for such care or services because of the inability to pay a
co-payment. Therefore, if the client cannot pay the co-payment, a provider may
not refuse to render the service for that reason. However, a provider may ask
for the unpaid co-payment at a subsequent visit or bill the client for the
outstanding co-payment. The client's own declaration that he/she is unable to
pay is the basis for determining when a client is unable to pay.

OUTPATIENT SERVICES/PROVIDERS THAT REQUIRE A CO-PAY

The following provider types shall collect the $2.00 co-payment from appropriate
clients if the services are performed in one of the designated facility types
identified below.

-     Ambulatory Surgical Centers

-     Dental & Dental Group

-     Dental Clinic

-     FQHC (Dental, Medical, Mental Health)

-     Hospital Dental Clinic

-     Hospital Outpatient

-     Independent Radiology

-     Medical Clinic

-     Mental Health Clinic

-     Methadone Maintenance Clinic

-     Nurse Midwife & Nurse Midwife Group

-     Nurse Practitioner & Nurse Practitioner Group

-     Optician & Optician Group

-     Optometrist & Optometrist Group

-     Physician & Physician Group

-     Psychiatric Hospital Outpatient

-     Rehabilitation Center Clinic

<PAGE>

DESIGNATED FACILITY TYPE

The co-payment requirement applies if the service provided by one of the above
referenced provider types is rendered in any of the following facility types.
The corresponding facility type code would be indicated on the claim form.

<TABLE>
<CAPTION>
FACILITY TYPE                                           FACILITY TYPE CODE
-------------                                           ------------------
<S>                                                     <C>
Office                                                        11
Outpatient Hospital                                           22
Ambulatory Surgical Center                                    24
Independent Clinic                                            49
Federally Qualified Health Center (FQHC)                      50
Psychiatric Facility Partial Hospitalization                  52
Community Mental Health Center                                53
Non-Residential Substance Abuse Treatment Facility            57
Comprehensive Outpatient Rehabilitation Facility              62
Public Health Clinic                                          71
</TABLE>

CLAIMS PROCESSING INSTRUCTIONS

Providers should bill their usual and customary charge. The $2.00 co-payment
will be systematically deducted from the allowed amount once per provider, per
client, per date of service. If a claim is billed with span dates of service on
one detail line, then the claim detail will have $2.00 deducted for each date of
service. If a claim is submitted with multiple procedure codes for the same date
of service on separate details the $2.00 co-payment will be deducted from the
first paid detail.

Explanation of benefits (EOB) code 364, "Payment Reduced By Co-pay" will be
posted to each detail that a co-payment was deducted from. If both co-payment
and other insurance were deducted from the same detail, EOB 416, "Payment Amount
Reduced By Other Insurance And Co-pay" will be posted to the detail.

This bulletin and other program information can be found at
WWW.CTMEDICALPROGRAM.COM. Questions regarding this bulletin may be directed to
the EDS Provider Assistance Center - Monday through Friday from 8:30 a.m. to
5:00 p.m. at:

In-state toll free..........  800-842-8440 or    EDS

Out-of-state or in the                           PO Box 2991          [EDS LOGO]

local New Britain, CT area..  860-832-9259       Hartford, CT 06104

<PAGE>

                                           STATE OF CONNECTICUT
[QUI TRANSTULIT SUSTNET LOGO]          DEPARTMENT OF SOCIAL SERVICES

                                            CONTRACT AMENDMENT

AMENDMENT NUMBER:    8
CONTRACT #:          093-MED-FCHP-1
CONTRACT PERIOD:     08/11/2001 - 12/31/2003
CONTRACTOR NAME:     FIRST CHOICE HEALTH PLAN OF CT
CONTRACTOR ADDRESS:  23 MAIDEN LANE, NORTH HAVEN, CT 06473-4201

Contract number 093-MED-FCHP-1 by and between the Department of Social Services
(the "Department") and Firstchoice Health Plan of CT (the "Contractor") for the
provision of services under the HUSKY A program as amended by Amendments 1, 2,
3, 4, 5, 6 and 7 is hereby further amended as follows:

1.    PARAGRAPH 1 OF PART I AS AMENDED BY AMENDMENTS 1, 2, 3, 4, 5, 6 AND 7 IS
      FURTHER AMENDED TO EXTEND THE CONTRACT END DATE FROM NOVEMBER 30, 2003 TO
      DECEMBER 31, 2003.

2.    THE CONTRACTOR AND THE DEPARTMENT FURTHER AGREE THAT THE PARTIES'
      OBLIGATION TO COMPLY WITH PART II "GENERAL CONTRACT TERMS FOR MCOS" DATED
      AUGUST 13, 2003 PAGES 1 THROUGH 115 OF AMENDMENT 5 SHALL TERMINATE ON THE
      DATE THAT THIS AMENDMENT EXPIRES UNLESS THE PARTIES AGREE IN A SUBSEQUENT
      AMENDMENT TO EXTEND THE EFFECTIVE DATE OF THE CONTRACT.

3.    APPENDIX I IS HEREBY FURTHER AMENDED TO EXTEND THE EFFECTIVE DATE OF THE
      CAPITATION RATES FROM 11/30/03 TO DECEMBER 31, 2003. IF, THROUGH THE
      PASSAGE OF A BUDGET FOR STATE FISCAL YEAR ("SFY") 2004 THE CAPITATION
      RATES ARE TO BE REVISED EFFECTIVE JULY 1, 2003, THE DEPARTMENT, IN THE
      NEXT AMENDMENT TO THIS CONTRACT WHICH MAY BE ENTERED INTO PRIOR TO THE
      EXPIRATION OF THIS AMENDMENT, SHALL AMEND THE CAPITATION RATES TO REFLECT
      SUCH REVISIONS AND SHALL MAKE ANY NECESSARY ADJUSTMENTS TO CAPITATION
      PAYMENTS MADE TO THE CONTRACTOR SINCE JULY 1, 2003 TO REFLECT THE REVISED
      CAPITATION RATES.

                            ACCEPTANCES AND APPROVALS

This document constitutes an amendment to the above numbered contract. All
provisions of that contract and prior amendments, except those explicitly
changed or described above by this amendment, shall remain in full force and
effect.

                                   Page 1 of 2

<PAGE>

CONTRACTOR

FIRSTCHOICE HEALTH PLAN OF CT     [APPROVED NOV 25 2003 WELLCARE LEGAL SERVICES]

/s/ Todd S. Farha
-------------------------------   ___________________
Signature (Authorized Official)        Date

________________________________  ___________________
Typed Name (Authorized Official)       Title

DEPARTMENT

DEPARTMENT OF SOCIAL SERVICES
_____________________________     ______________
Signature (Authorizd Official)    Date

MICHAEL P. STARKOWSKI             DEPUTY COMMISSIONER
---------------------             -------------------
Typed Name (Authorized Official)  Title

OFFICE OF THE ATTORNEY GENERAL

___________________________________________________________________
 Attorney General (as to form)                 Date

( ) THIS CONTRACT DOES NOT REQUIRE THE SIGNATURE OF THE ATTORNEY GENERAL
PURSUANT TO AN AGREEMENT BETWEEN THE DEPARTMENT AND THE OFFICE OF THE ATTORNEY
GENERAL DATED:_____________________

                                   Page 2 of 2

<PAGE>

                              APPENDIX      Amended

<TABLE>
<CAPTION>
PLAN NAME:
FIRSTCHOICE

CAPITATION RATES
07/01/02 - 12/31/03

                            FAIRFIELD    HARTFORD   LITCHFIELD     MIDDLESEX    NEW HAVEN    NEW LONDON       TOLLAND      WINDHAM
                            ---------    --------   ----------     ---------    ---------    ----------       -------      -------
<S>                         <C>          <C>        <C>            <C>          <C>          <C>              <C>          <C>
UNDER ONE                    $536.44     $606.89      $605.12       $717.18      $602.97       $600.00        $724.78      $581.51
AGES 1 TO 14                 $102.32     $110.46      $110.15       $130.10      $109.79       $109.23        $131.46      $107.71
MALE - AGES 15 TO 39         $127.22     $138.42      $138.03       $162.52      $137.60       $136.94        $164.18      $135.18
FEMALE - AGES 15 TO 39       $207.77     $231.48      $230.81       $273.76      $230.00       $228.84        $276.70      $223.07
MALE - AGES 40 AND OVER      $227.33     $254.24      $253.48       $301.18      $252.59       $251.31        $304.41      $244.68
FEMALE - AGES 40 AND OVER    $218.52     $244.15      $243.42       $289.20      $242.55       $241.32        $292.32      $235.04
</TABLE>

                                   PAGE 1 OF 1

                                Effective 7/1/02
<PAGE>

                             SECRETARY'S CERTIFICATE

      I, Thaddeus Bereday, the duly elected Secretary of FirstChoice HealthPlans
of Connecticut, Inc., a corporation organized under the laws of the State of
Connecticut (the "Corporation"), do hereby certify that the following is a full
and true copy of a resolution adopted at a meeting of the Board of Directors of
said Corporation, duly held on the 23rd day of May, 2003:

            "RESOLVED, that the officers of the Corporation be, and they hereby
            are, authorized to sign and execute in the name of the Corporation
            all applications contracts, leases and other deeds and documents or
            instruments in writing of whatsoever nature that may be required in
            the ordinary course of the business of the Corporation and that may
            be necessary to secure for operation of the corporate affairs,
            governmental permits and licenses for, and incidental to, the lawful
            operations of the business of the Corporation, and to do such acts
            and things as such officers deem necessary or advisable to fulfill
            such legal requirements as are applicable to the Corporation and its
            business."

            "RESOLVED, that the officers of the Corporation and each of them
            acting singly are hereby authorized, empowered and directed to
            execute and deliver, in the name and on behalf of the Corporation,
            such further agreements, instruments, documents, certificates and
            filings, with such changes in the terms and provisions thereof as
            the officer executing the same man determine necessary or
            appropriate, and to do and perform such other acts and deeds as they
            or any of them determine necessary or appropriate, in order to
            effectuate the purposes and intent of the foregoing resolutions."

and I do further certify that the above resolution has not been in any way
altered, amended or repealed, and is now in full force and effect.

      IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal of said Corporation this 25th day of November, 2003.

                                    FirstChoice HealthPlans of Connecticut, Inc.

                                    /s/ Thaddeus Bereday
                                    -------------------------------------------
                                    By: Thaddeus Bereday, Secretary

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