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To: RON BL who wrote (192)	4/4/1999 9:24:00 PM
From: Steven M. Kaplan	Respond to of 570

>>HealthAxis will also manage the entire process of bringing Carrier Partners online. Through HealthAxis' strategic partner, HPS, HealthAxis will have the ability to offer new Carrier Partners claims processing services. In many cases, Carrier Partners may prefer to handle their own claims administration. In this event, the HealthAxis technology team will assist the Carrier Partner in writing the appropriate system interfaces. In either case, HealthAxis will provide a totally automated back-end solution for Internet-based insurance products. Accordingly, the Carrier Partner can focus primarily on underwriting the risk while HealthAxis will manage and assist in the resolution of many other technological issues. Namely, HealthAxis will assist in the process of writing proprietary software to interface between the Carrier Partner's legacy systems, and the HealthAxis web environment. It is intended that this software will provide a seamless connection whereby pertinent information downloaded and uploaded from each of the Carrier Partners will be accessible through the HealthAxis web site.<<

To: RON BL who wrote (192)	4/4/1999 9:25:00 PM
From: Steven M. Kaplan	Read Replies (1) \| Respond to of 570

>>HealthAxis Web Site and Operations General: The HealthAxis web site provides a fully transactional platform for the sale of health insurance over the Internet. The HealthAxis web site guides a consumer through every step in the health insurance purchase process from education and price quotation through enrollment and post sale service. The Company believes that no other insurance web site currently has the breadth of functionality - covering all pre- and post-sale activities. Quoting Process: The HealthAxis' price quotation service is offered through a user friendly quoting tool called "ClickQuoteTM". With the entry of minimal information, the customer is able to obtain an accurate price quote in as little as thirty seconds, depending on connection speeds. The quote is customizable by the change of the claims deductible, which the consumer can adjust using a single mouse click. If so inclined, the consumer can proceed directly from the ClickQuoteTM to an application to purchase the desired policy. Upon the addition of multiple carriers to the HealthAxis web site, customers will be prompted to select from among competing brands and/or plan types. Users can also use the ClickQuoteTM as a launch point from which to discover more information about the products available on HealthAxis. Enrollment Process: HealthAxis believes that it can significantly enhance the ease of enrollment, traditionally the most onerous task in the insurance purchasing process. HealthAxis believes it has created several features that will make the application process as simple to use as possible. First, HealthAxis' enrollment forms come with extensive, context-sensitive "help" modules to assist consumers in understanding the application questions. HealthAxis also provides a progress bar which allows consumers to monitor their progress through the application. HealthAxis believes this kind of tool helps manage expectations and reduces the application abandonment rate. Also, HealthAxis' unique 'save application' feature allows consumers to "save" their work without losing the information already provided. Saved applications reside in a password protected personal space which only the specific user can access. Users are able to return to their saved applications at any time to finish their work and subsequently submit their enrollment information. Upon completion of the enrollment forms, a consumer simply clicks the "send" button to submit the application to HealthAxis. Certain Carrier Partners, at their own discretion, may charge application fees which will be assessed by way of electronic funds transfer, credit card or check. Customer Call Center: HealthAxis provides a toll free telephone Customer Call Center to aid customers in the purchase of health insurance via the HealthAxis web site. HealthAxis' Customer Service Representatives are on-site, seven days a week, at the Customer Call Center located at the Company's Norristown headquarters. Many of the Customer Service Representatives are licensed insurance agents and all are versed in the products sold on the web site. Customer Service Representatives answer questions pertaining to product information, corporate information, as well as technical assistance regarding the web site and operating a web browser. HealthAxis currently employs 16 Customer Service Representatives and intends to increase the number of Customer Service Representatives as web site traffic requires increases. The Customer Call Center will also have product specialists who will handle more detailed questions regarding the products offered. These product specialists will be expensed to the Carrier Partner whose product they represent. Underwriting Process: Applications submitted are electronically transmitted to HPS, the third party administrator currently used by HealthAxis for all PALHIC products, or to another third party processor designated by the Carrier Partner. Professional underwriters review submitted applications to determine if additional information is required. In the event additional information is required, an underwriter will contact the applicant and request further information. If medical records are required, the applicant can download an authorization form from the web site, sign it, and send it in to HPS or another administrator designated by the Carrier Partner. If the application is complete, the underwriting determination shall be made by HPS using the pre-established criteria agreed upon by HPS and the Carrier Partner. Carrier Partners will have the option of using their existing underwriting and processing operations or appointing HPS or another third-party administrator to handle the transaction. Management believes that HealthAxis' ability to sell and service policies is not impaired by a Carrier Partner's selection of an underwriter/administrator. Each Carrier Partner will be able to adhere to its own underwriting procedures and standards. Policy Issuance Process: Once a policy is underwritten, the new HealthAxis policyholder is mailed a plastic identification card with an accompanying welcome letter. The letter directs the policyholder to his or her HealthAxis personal space where HealthAxis has deposited an electronic copy of the policy certificate. Customer Inquiry Process: HealthAxis provides its customers with a robust, online customer service facility. Customers have access to their policy information, billing data, claims history and claims status reports. These records are viewable on www.healthaxis.com via the customer's personal space. All records are kept in a fully secure, online environment. HealthAxis believes that empowering customers with the ability to self-service administrative issues provides a cost savings to the delivery of the post-sale insurance services and improves customers' access to their own personal data. Under the traditional agent-based system, the customer would be required to call either the agent who sold the product or the underwriter's customer service center. HealthAxis' 24 hour a day, seven-day a week online access provides convenient and immediate access for HealthAxis customers relative to the availability of either underwriter call centers or insurance agents. Further, a customer can review his or her policy information in a private environment, without having to engage in conversation with either an underwriter's customer service representative or the local insurance agent.<<

To: RON BL who wrote (192)	4/4/1999 9:28:00 PM
From: Steven M. Kaplan	Read Replies (1) \| Respond to of 570

>>Policy Maintenance Process: HealthAxis provides customers with the ability to modify personal data such as address, phone numbers, billing preferences and other information. This tool further empowers the customer with the ability to manage his or her insurance relationship. Policy maintenance is another example of HealthAxis' ability to utilize the functionality of the Internet to lower the cost of selling and servicing health insurance. Billing Process: Customers can select from multiple payment methods including credit card or an automatic debit from their checking account. The traditional "direct bill" (personal check every month) will be available in the future. The web site is fully enabled to process both credit card and monthly debit transactions.Sales and Marketing Insurance Product Offerings: HealthAxis' mission is to offer consumers a select list of affordable insurance products from trusted, reputable vendors which meet HealthAxis' value criteria. These specific product offerings will vary by state based on the availability of product supply, which is generally dictated by the state regulatory environment. The HealthAxis web site utilizes customer zip code information to determine which set of products to offer to a given customer. HealthAxis intends to offer a selection of products supplied by leading insurance carriers. HealthAxis currently offers products of PALHIC and has entered into Carrier Partners agreements with CRLC, Fortis, SLICOA, ALIC and UICI to offer their insurance products online in the future. HealthAxis is committed to offering its customers a choice of products in order to position HealthAxis as a "trusted advisor" rather than a salesperson for a particular product. Product Portfolio: Currently HealthAxis offers the individual health insurance underwritten by PALHIC through its web site. Following the addition of additional carrier partner products, HealthAxis' insurance product portfolio expects to include the following: Individual Health Critical Care College Student Health Small Group Health Long Term Disability Senior Health Prescription Long Term Care Senior Life Vision Dental Short Term Health As HealthAxis increases its product mix, HealthAxis will seek to take advantage of cross-selling opportunities for companion products. Although, these policies are relatively inexpensive, they are important additions to general health coverage. HealthAxis also intends to utilize its data warehouse to identify these customer cross-sale opportunities.<<

To: RON BL who wrote (192)	4/4/1999 9:30:00 PM
From: Steven M. Kaplan	Read Replies (1) \| Respond to of 570

>>General Marketing Strategy: HealthAxis' marketing strategy is designed to promote awareness of the HealthAxis name, increase customer traffic to the web site, encourage purchases of HealthAxis' insurance products over the Internet, build customer loyalty through efficient claims processing and the availability of access to claims related and other information over the Internet, and maximize annual renewals. Commencing in the second quarter of 1999, HealthAxis intends to employ a combination of online and off-line advertising and promotion campaigns to stimulate web site traffic and increase its brand name recognition. The marketing efforts will also educate consumers as to the opportunity offered by online insurance purchasing, promote HealthAxis' brand name, and reduce its reliance on any one source of consumer traffic. Web Site Promotion and Strategic Alliances: HealthAxis' core promotional strategy involves the development of exclusive distribution relationships with major Internet gateways. HealthAxis' principal Distribution Partners are AOL, CNet, and Lycos. The Company expects these strategic relationships to raise brand awareness and to provide access to millions of online users. Based upon International Data Corp's ("IDC") estimate of 65 million U.S. Internet users, HealthAxis' relationship with AOL, alone, provides the Company with access to over 13.5 million members, representing approximately 20% of all U.S. Internet users. Use of Related Online Channels: HealthAxis Distribution Partners are expected to add value to HealthAxis not just by the placement of banners and buttons, but by building information-rich environments attractive to HealthAxis' potential customer base. As these online services increasingly enhance their "insurance centers" and related product offerings, the Company believes overall customer traffic to HealthAxis should increase. The Company intends to prominently place itself not just in "insurance centers," but across multiple Internet channels to enhance the likelihood of attracting potential customer interest. Examples of such non-insurance channels may include, but are not limited to, health, money and business and shopping. Online and Offline Marketing: HealthAxis marketing efforts will extend beyond the confines of its marketing arrangements with its Distribution Partners. HealthAxis intends to execute a variety of incremental media purchases both on the web and in traditional advertising mediums such as direct mail, radio, print and billboards. On the World Wide Web, HealthAxis plans to drive traffic to its site by buying spot media space both on additional portals and web sites that target the Company's core audience. The combination of exclusive distribution relationships and spot media purchases across multiple advertising mediums is intended to stimulate HealthAxis traffic and enhance the brand awareness among the target customer market.<<

To: RON BL who wrote (192)	4/4/1999 9:32:00 PM
From: Steven M. Kaplan	Respond to of 570

>>Online Demographics: The demographics of the Company's potential customers are closely aligned with those of the online community. Generally, Internet subscribers are (i) predominately younger than the average for the general population; (ii) have higher household incomes than the national average; (iii) obtain higher educational levels than the national average; and (iv) include a high proportion of self-employed, small office and home office individuals. Based upon statistical information provided by AOL, the average AOL subscriber is 37 years old, has a household income of $60,000 or greater, has a college education and is self-employed. Target Marketing Strategy: The primary target markets are the small group and the individual market. Within the individual market, the targeted customers are individuals who are not covered by a corporate sponsored health plan. Potential individual customers include (but are not limited to) people who are self-employed, part-time employees or full-time independent contractors or other individuals who are not covered by a corporate sponsored health plan. Initially within the small group market, the Company intends to focus its marketing efforts on groups of four or less, including small office and home office-based individuals. The Company believes its combination of cost advantage and customer-centric shopping environment will prove a compelling proposition for its targeted customer segments. The small office/home office community is a highly attractive market to HealthAxis. HealthAxis expects to exploit this market with both its individual and small group products. The cost savings resulting from buying direct can be substantial when experienced by multiple employees, even for very small groups. HealthAxis expects the average size of a group sale to increase over time. Product Pricing: HealthAxis believes that pricing will represent its single most important competitive advantage relative to the competing health insurance distribution channels. Offering product to consumers via the Internet will allow the Company to re-engineer a multi-layered distribution system that has historically added significant cost to the typical health insurance product. Depending on the policy, consumers may enjoy savings of up to 15% as compared to product offered through the traditional insurance distribution system. The Company plans to continually monitor its price competitiveness across the country. HealthAxis evaluates pricing environments on a zip code by zip code basis, to ensure the competitiveness of its products. HealthAxis plans to strive to be a cost leader at any given level of plan benefits in the markets in which it participates. Life Cycle Marketing: The Company's market research indicates that the purchase of health insurance is generally associated with a variety of identifiable life events. These events represent situations in which a potential customer may recognize a heightened need for insurance and include, among other things, loss of job, new job, graduation from college, marriage, birth of a child, divorce, relocation, starting a new business and discontinuing operations of an existing business. These life events generally result in the destruction of existing health care relationships and require the establishment of new ones. Identifying these events and targeting individuals experiencing such events are important elements of the Company's marketing strategy.<<

To: RON BL who wrote (192)	4/4/1999 9:33:00 PM
From: Steven M. Kaplan	Respond to of 570

THE AOL CONNECTION: >>Direct Marketing: HealthAxis plans to use direct marketing techniques to target new and existing customers with promotions. HealthAxis plans to send e-mail letters to potential customers highlighting HealthAxis products and the advantages of Internet based insurance product purchases. The Company's agreement with AOL gives HealthAxis the right to send a mailing to AOL's customer base. The Internet allows rapid and effective experimentation and analysis, instant user feedback and efficient personalization of insurance products for each customer, all of which the Company seeks to incorporate in its marketing activities. Direct e-mail to HealthAxis customers also will be an important driver of the Company's cross-selling efforts. HealthAxis' customer relationship will allow the Company to target existing customers with offers for related, ancillary health care insurance products. For example, following the customer's initial purchase of an individual health insurance policy, the Company might send that Customer an e-mail introducing a long-term disability product.<<

To: RON BL who wrote (192)	4/4/1999 9:34:00 PM
From: Steven M. Kaplan	Respond to of 570

NEW FOCUS: >>During 1998 the Company revised its strategy to focus predominately on HealthAxis, the Company's E-Commerce insurance marketing subsidiary along with more focused strategy for PILIC. In early 1998 the Company determined that the Internet provided the opportunity to sell health insurance direct to the consumer thereby reaching individuals under-served by insurance agents at a cost potentially lower than the Company's current traditional agency marketing channel. In light of the losses experienced in the Company's small group and managed care products and the need to devote capital and focus to HealthAxis, the Company entered into various agreements to sell PILIC's subsidiaries MMC, PALHIC and NIA and cede 100% of the group medical and group life business during 1998.<<

To: RON BL who wrote (192)	4/4/1999 9:36:00 PM
From: Steven M. Kaplan	Respond to of 570

>>Note F - AOL Interactive Marketing Agreement HealthAxis's Amended and Restated Interactive Marketing Agreement ("IM Agreement") with AOL, dated November 13, 1998, provides that HealthAxis will be the exclusive third-party direct marketer of managed-care and indemnity health insurance policies, dental insurance, vision insurance, prescription coverage, critical care insurance and long-term care insurance coverage and, subject to certain restrictions, the non-exclusive third party marketer of life and long-term disability (collectively, the "Products") for individuals and groups of less than fifty individuals in the United States via AOL's online service. Under the IM Agreement, AOL will advertise the Products to its subscribers on AOL's online network and the Products will be sold online through HealthAxis's web site. The amount of promotions that AOL will provide HealthAxis is contingent upon HealthAxis's ability to offer policies in all of the fifty states, the quality of the policies offered, the adherence of HealthAxis to AOL's standards and other similar factors. The IM Agreement's initial term ends January 31, 2000, and can be extended for a renewal term of two additional years at HealthAxis's election. Upon expiration of both the initial and the renewal terms, AOL may renew the IM Agreement for additional one-year terms. See Note AA<<

To: RON BL who wrote (192)	4/4/1999 9:37:00 PM
From: Steven M. Kaplan	Respond to of 570

>>Note G - CNet Promotional Agreement: HealthAxis's amended agreement with CNet provides that CNet will promote HealthAxis as its exclusive provider of medical and PPO, dental, vision, prescription, long term care, and long term disability insurance through the Internet and television, for a total approximating $2,400 (of which $500 has been accounted for as advertising and promotional expense). The balance of $1,900 will be paid in two increments of $1,008 (in 1999) and $882 (in 2000) and accounted for as prepaid interactive marketing expense and amortized over the initial term of the agreement. HealthAxis may, at its option, extend the agreement during a renewal term until March 31, 2001 by paying CNet an additional $7,500 of which $1,875 and $5,625 would be due in 2000 and 2001, respectively. In addition, HealthAxis shall pay to CNet certain fees based upon the success of sales from the co-branded web site. Since signing the original agreement CNet and Snap.Com have become separate entities. Consequently, CNet and Snap.Com have extended an offer whereby they are requesting HealthAxis to separate the CNet agreement into two agreements with CNet and Snap.Com. If the agreement is split, the payments as discussed above will remain substantially the same. HealthAxis is currently negotiating with both companies and has a verbal agreement to suspend the payments due in 1999 until such time as the new arrangement can be mutually agreed upon.<<

To: RON BL who wrote (192)	4/4/1999 9:39:00 PM
From: Steven M. Kaplan	Respond to of 570

>>Note H - Lycos Promotional Agreement HealthAxis's amended agreement with Lycos provides that Lycos will make HealthAxis the exclusive provider of medical, HMO, PPO, indemnity, dental, vision, prescription, long term care, and long term disability insurance through the Internet, for total payments approximating $9,060 (of which $800 has been paid and accounted for as prepaid interactive marketing expense) during the term of the agreement which shall extend for twenty-four months from the launch of the co-branded version of HealthAxis's site expected to be on or about May 31, 1999. Of the remaining $8,260 payments to Lycos, $1,275, $5,345 and $1,640 are due in 1999, 2000 and 2001, respectively. In addition, HealthAxis shall pay to Lycos certain fees based upon the success of sales from the co-branded web site.<<

To: RON BL who wrote (192)	4/4/1999 9:41:00 PM
From: Steven M. Kaplan	Read Replies (1) \| Respond to of 570

>>Note I - HPS E-Commerce Agreement On May 29, 1998, HealthAxis, PAMCO, and Provident Health Services, Inc. ("PHS"), a wholly-owned subsidiary of PAMCO, entered into an Internet claims administration agreement with HPS (the "E-Commerce Agreement") which provides HPS with the right to be the exclusive administrator of all insurance business sold over HealthAxis' web site and any other form of electronic commerce ("e-commerce") used by HealthAxis underwritten by PILIC and PALHIC during the term of the E-Commerce Agreement. HealthAxis also agreed to use its best efforts to provide HPS with the right of first refusal to provide claims administration services for insurance business sold by HealthAxis but not underwritten by PILIC and PALHIC that may require the services of a third party administrator.<<