0006007 Informal Interpretation

[redacted]

Attorneys at Law

June 15, 2000

Via Federal Express

Michael B. Verne, Esq.

Federal Trade Commission

Premerger Notification Office

Mail Drop - Room H-301

6th Street and Pennsylvania Avenue, N.W.

Washington, DC 20580

Re: HSR Filing Question

Dear Mike:

I am writing to confirm that a transaction proposed by our client does not require a filing under the Hart-Scott-Rodino Act.

Overview of Entities

As indicated in the diagram below, Insurer A, which is a health insurer, owns Subsidiary A, which is a health maintenance organization ("HMO"). System B owns Insurer B (which operates an HMO and PPO, Subsidiary B (a third-party administrator ("TPA")), and a number of hospitals ("Hospital B"). Subsidiary B provides TPA services to Insurer B. Both Insurer A and System B have assets and annual net sales in excess of $100 million. Insurer A and System B have proposed a multi-part transaction, which includes among other things the formation of a joint venture.

[see PDFfile for Diagram]

Description of Transaction

First, Subsidiary A will purchase some of the HMO membership (i.e., enrollees) of Insurer B. The purchase price is $2 million, which represents fair market value.

Second, Subsidiary A will purchase 51% of the stock of Subsidiary B. The purchase price will be $1 million, which represents fair market value. Subsidiary B does not have annual net sales or total assets of $25 million or more. {802.20}

Third, Insurer A and Insurer B will form a joint venture to coordinate the administration of the insurance business sold from Insurer B to Subsidiary A and certain other insurance business of Insurer A and Subsidiary A. The joint venture itself is expected to hold few if any assets - its assets will certain be less than $1 million. The profits or losses of the business in the joint venture will be divided in agreed proportions, subject to change under certain circumstances, with 50% to 60^ going to Insurer A and 40% to 50% to Insurer B. Upon termination of the joint venture, Insurer B will also receive 50% of the value of any membership that may be added to the joint venture business during its term. {JV is not a $10MM person.}

In addition, Hospitals B have agreed to amend Insurer A's hospital contract with Hospitals B to include a most favored nation ("MFN") clause. the MFN clause generally provides that during the term of the joint venture, and for up to two years thereafter, rates charged to Insurer A and Subsidiary A, including rates applicable to business in the joint venture will be 5% better than the rates given to any other insurer by Hospital B.

The benefits to the parties are summarized below:

.

Conclusion

It is our conclusion that no filing is required because the financial thresholds that would trigger a filing requirement is not met. After you have had a chance to review this letter, please call me at and let me know whether you agree. Thanks in advance for you help.

Sincerely,

[redacted]

[redacted]