EXHIBIT 10.18
(LETTERHEAD)
Mr. X. Xxxx Xxxxxxx
Director, WC Services
Humana Inc. - Workers
Compensation Services
000 Xxxx Xxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000-0000
Re: ABCIC-Humana Contract Renewal
Dear Xxxx:
This letter shall confirm our agreement reached yesterday to extend the
existing contract between Humana Medical Plan, Inc. (Humana) and Associated
Business and Commerce Insurance Corp. (ABCIC). The contract shall be amended to
reflect the following revised provisions with the balance of the contract deemed
ratified and confirmed:
1. The Plan and Administrative Services Fee Exhibit shall be amended to
reflect a "Capitation Payment" of twenty-five (25%) percent.
2. The service areas for the capitation rate shall consist of all service
areas approved by FAHCA for Humana as of September 1, 1996. Any additional
service areas shall be added by mutual consent under separate financial
arrangements.
3. We agree to present Humana first to our potential policyholders and will
provide your named representative a 24 hour "window" to talk with any
policyholders who indicate to ABCIC staff that they prefer another provider.
However, because of the serveral reasons we have discussed, the contract must
remain nonexclusive.
4. Retrospective rated policies issued by us shall not be a part of our
managed care arrangement.
5. Our existing agreement gives Humana the option to obtain reinsurance
coverage under our policies provided we mutually agree on an appropriate
prorated portion of premium to be paid by Humana. If we cannot agree as to
premium, Humana then has the right to secure its reinsurance coverage from any
source of Humana's choice. We agree to amend this provision by adding a right of
first refusal in ABCIC to meet another reinsurance quote, presuming that we
cannot get together on a price.
Mr. X. Xxxx Xxxxxxx
Humana, Inc. - Workers
Compensation Services
August 9, 1996
Page 2
6. The term of this contract extension shall be two (2) years.
7. The reimbursement procedure on existing retrospectively rated accounts
shall be adjusted as follows: ABCIC will reimburse Humana for the difference
between Humana's actual medical costs plus ten percent of such medical costs
and the capitation payments previously paid to Humana on such accounts, subject
to a total maximum reimbursement of $100,000. The actual medical costs shall be
valued as of July, 1998 and shall be paid on or before July 1, 1999.
8. We agree that we will jointly negotiate an idemnity bonus plan. The plan
shall be subject to agreement by acturaries for ABCIC and Humana. The 1996
idemnity and medical-legal expense (as defined in Paragraph 1.20 of our
agreement) loss ratio, as calculated and determined, shall be the benchmark for
1997. An average of the 1996 and 1997 ratios shall be used as the benchmark for
1998. An initial calculation will be made six (6) months following the
expiration of each contract year with a final accounting at twenty-four (24)
months. If the loss ratio decreases, Humana shall share twenty-five (25%)
percent of such savings, however, if it increases, Humana shall pay twenty-five
(25%) percent of the increase.
I have informed the staff at ABCIC that our agreement has been renewed and
we are presently enrolling new policyholders in our managed care arrangement.
Xxxx, your efforts in correcting the initial problems we encountered are
appreciated and I look forward to our continuing relationship.
Very truly yours,
/s/ XXXXXXXX X. XXXXXXXXXX
--------------------------
Xxxxxxxx X. Xxxxxxxxxx
LJM/lkm
cc: Xx. Xxx Xxx, President, ABCIC
Xx. Xxx Xxxxx, President, CCI
Xx. Xxxxx Xxxxx, Vice President, ABCIC
