Engagement Letter - HealthAxis Inc. and MEGA Life and Health Insurance Co.
[GRAPHIC OMITTED]
May 29, 2001
The MEGA Life and Health Insurance Company
9151 Grapevine Highway
North Richland Hills, TX 76180
Attn: Mr. Phil Myhra
President
RE: Engagement Letter between Healthaxis, Inc. ("Healthaxis") and
The MEGA Life and Health Insurance Company ("MEGA") regarding
Microsoft Biztalk Server ("BTS") and Accelerator for HIPAA
("A4H") Product Integration Project (the "Project")
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Gentlemen:
Thank you for selecting Healthaxis to assist MEGA with the
above-referenced Project. As you know, Healthaxis is able to offer MEGA these
services as a result of Healthaxis' participation in the Microsoft Early Adopter
Program ("EAP") for the A4H product. As we have discussed, in order to include
the Project for MEGA within the EAP program and in order to meet the aggressive
time frames we are committing to below, we must limit the scope of our
engagement to be very specific and restrict the personnel resources involved
from all sides to ensure a small, cohesive and manageable team. This Engagement
Letter sets forth the terms and conditions which will apply for the Project, all
of which are as follows:
1. Scope of Services. The scope of services (the "Scope of Services")
to be provided by Healthaxis in connection with the Project, as more
particularly outlined in the Project Initiation Proposal attached hereto as
Exhibit D, will be as follows:
(a) Healthaxis will acquire for UICI in UICI's name (a) the
equipment identified in Exhibit A, (b) the Microsoft product licenses
for the BTS and A4H software identified in Exhibit A (which will
include all current HIPAA-mandated transaction sets) (collectively, the
"BTS/A4H Product") in accordance with Microsoft's standard license
terms for the BTS/A4H Product (including first year maintenance and
support by Microsoft personnel for the BTS/A4H Product and upgrades and
supplements to such BTS/A4H Product), and (c) all documentation
associated with such equipment and software (the "Documentation"), it
being acknowledged that the cost of such equipment, BTS/A4H Product and
Documentation shall be included in the total fixed price for the
Project as provided in Paragraph 7 hereof.
(b) Healthaxis will install the BTS/A4H Product on the
equipment identified in Exhibit A attached hereto.
(c) Healthaxis will integrate the BTS/A4H Product with the
MEGA Insurance Center Processor 1/PACE legacy claims system (the
"Legacy System") to allow MEGA to electronically receive the following
three (3) HIPAA-mandated transactions:
(i) the inbound X12N v4010 837 Institutional;
(ii) the inbound X12N v4010 837 Professional, and
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The MEGA Life and Health Insurance Company
May 29, 2001
Page 2
(iii) the inbound X12N v4010 837 Dental.
In particular, Healthaxis will provide all professional services
necessary to develop the BTS and A4H system and integrate the BTS/A4H
Product to extract the EDI transaction sets for these three (3) inbound
transactions (the 837-I, 837-P and 837-D), to warehouse the
transactions, to map the data to the MEGA Legacy System format and then
to deliver the transactions to the MEGA Legacy System for processing in
the format currently used by that system. Data elements in these
standard transactions that are not used by the MEGA Legacy System (if
any) will not be mapped to the Legacy System. Data elements required
for claim review and inclusion in workflow will either be added as a
record addendum to the existing GCR52KSD format or created in a
separate file for inclusion in MEGA's existing workflow and archive
systems. Incorporation of the data elements in the workflow system will
be the responsibility of Healthaxis AST and is excluded from the scope
of Services for the Project. A schematic depicting the entire Scope of
Services for the Project is attached hereto as Exhibit B.
(d) Healthaxis will provide scheduled training of and
knowledge transfer to MEGA personnel and Healthaxis AST personnel
assigned to MEGA with regard to the BTS/A4H Product and the HIPAA
implementation guides published by WPC, all in accordance with the
training schedule and training plan set forth on Exhibit C attached
hereto. Without limiting the generality of the foregoing, scheduled
training will consist of a 2-day EDI boot camp provided by WPC
personnel and the BTS and orchestration boot camp provided by
Healthaxis personnel (which will be conducted with the assistance of
and participation of Microsoft personnel). AST personnel will also be
invited to participate in any additional product specific training that
Healthaxis may acquire from WPC or Microsoft during the Project.
Knowledge transfer will occur as provided in Paragraph 4 hereof.
Although Microsoft's BTS/A4H Product includes all current
HIPAA-mandated transaction sets, MEGA acknowledges its understanding that the
Project and Scope of Services to be provided by Healthaxis pursuant to
Engagement Letter does not cover any HIPAA-mandated transaction sets except for
the three (3) specific transactions as provided in subparagraph (c) above. In
addition, the Scope of Services to be provided by Healthaxis hereunder expressly
does not include any modifications to the MEGA Legacy System for any purpose. To
the extent Legacy System changes are required or desired to be undertaken in
order to accept and process the output files from this Project, or as MEGA
undertakes projects to receive or send other HIPAA transactions, these changes
and these projects will be handled as separate projects managed and undertaken
by the AST team resources under the Master Agreement.
2. Project Plan and Schedule.Attached hereto as Exhibit D is a complete
Project Initiation Proposal setting forth the major milestone deliverables by
Healthaxis in connection with the agreed Scope of Services (and certain AST
parallel and subsequent projects), as well as the Project Schedule, which
currently contemplates a final Project completion date of July 16, 2001. Certain
deliverables and milestones will require the input or signoff by MEGA. MEGA
agrees that its Designated Project Lead will provide all input and sign-offs on
a timely basis as set forth in the Project Schedule, provided in all cases that
as at such dates the services theretofore performed by Healthaxis are in
compliance with the Scope of Services, the Project Plan, the Performance
Criteria and the Project Schedule and in all other cases with the terms of this
Agreement, which compliance may be verified by an independent adviser engaged by
MEGA.
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The MEGA Life and Health Insurance Company
May 29, 2001
Page 3
3. Performance Criteria; Testing. Healthaxis will perform the Scope of
Services in such a fashion to meet the specific performance criteria (the
"Performance Criteria") set forth on Exhibit E attached hereto. Testing will be
conducted using a model office test environment with data captured and delivered
from identified MEGA vendors using the X12N v4010 compliant format and
successfully processed through the MEGA PACE and/or Processor 1 systems.
The Project will be deemed completed upon receipt of all of the
following:
(i) EHNAC certification pursuant to STFCF of the three (3)
HIPAA-mandated transactions covered by the Scope of Services;
(ii) Delivery of the equipment, software, and documentation identified
in Exhibit A and certification that such equipment is fully
functional and operating;
(iii) The Microsoft standard end user product licenses (which will be
substantially in the form of such as attached hereto as Exhibit
F) for the BTS/A4H Product shall have been executed by Microsoft
and delivered to UICI;
(iv) The balance of the Scope of Services and deliverables as provided
and described in Paragraph 1 hereof shall have been completed to
the satisfaction of MEGA in accordance with the Performance
Criteria as set forth in Exhibit E hereto;
(v) Healthaxis AST and MEGA signoff on satisfactory completion of
training in accordance with the training plan and training
schedule set forth in Exhibit C"; and
(vi) Signoff by MEGA that Model Office testing verifies the Scope of
Services and deliverables, specifically addressing the following:
o Full cycle processing through the MEGA PACE and/or Processor
1 system, data validation and transformation including
eligibility verification and repricing status. MEGA
acknowledges that completion of modifications to the MEGA
PACE and/or Processor 1 system which are required to meet
this completion criteria (if any) will remain a Healthaxis
AST responsibility and are not included in the fixed price
Project.
o Completion of PACE/Processor 1 modifications required to
process the three (3) HIPAA-mandated transactions. MEGA
acknowledges that completion of modifications to the MEGA
PACE and/or Processor 1 system which are required to meet
this completion criteria (if any) will remain a Healthaxis
AST responsibility and are not included in the fixed price
Project.
o Incorporation of claim information into the MEGA workflow
system and additional reporting or enhancements not required
for EDI processing, completion of which MEGA acknowledges
will remain a Healthaxis AST responsibility and is not
included in the fixed price or Scope of Services or Project
deliverables but will be required prior to Project
implementation.
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The MEGA Life and Health Insurance Company
May 29, 2001
Page 4
4. Resources and Project Management. The Project is being undertaken at
the request of Healthaxis in order to enable Healthaxis to obtain valuable
experience in working with Microsoft in the EAP for the A4H product. As such,
Healthaxis will be working closely with personnel from the Microsoft Consulting
Services Health Care Group and the Microsoft BTS and A4H product teams, which
have committed resources to the Project pursuant to a separate arrangement
between Healthaxis and Microsoft. In addition, WPC, as both a subcontractor to
Microsoft and as a direct consultant to Healthaxis, has committed certain
resources to the Project by separate arrangement with Healthaxis. The Healthaxis
Project resources will consist of the Healthaxis e-Transport team, certain ATD
resources, the Healthaxis HIPAA team and other designated resources on an
as-needed basis. Healthaxis acknowledges that it gave MEGA very little time to
review and understand the EAP for the A4H product proposal. Healthaxis asked
MEGA to move much more rapidly than would be typical or customary in a
technology project of this nature, primarily for the benefit of Healthaxis.
Healthaxis understands that MEGA must give priority to running its business,
paying claims and servicing its insured customers. Healthaxis agrees to provide
MEGA all reasonable opportunity during the Project, either through AST personnel
or through outside consultants, to analyze and review the impact the Project has
or might have on MEGA's business and to take all reasonable and appropriate
steps to ensure that MEGA's business continues in an uninterrupted and in the
ordinary course.
MEGA shall designate the senior project managers depicted in the
Project Organization Chart in the Project Initiation Proposal as its "Designated
Project Leads" and sufficient technical resources to participate in scheduled
training and knowledge transfer from the core Healthaxis Project team. The MEGA
Designated Project Leads will serve as the sole points of contact for MEGA on
the Project. The additional technical resources (including AST resources and any
outside consultants working for MEGA) will be entitled to monitor and review
progress on the Project, to observe the delivery efforts of the core Healthaxis
team, and to participate in training sessions which are to be held during the
Project with regard to BTS, A4H and or the HIPAA implementation guides published
by WPC. Training and knowledge transfer will be focused in the areas of EDI
mapping and BTS orchestration (workflow). Healthaxis will designate a single
designated Project team member to serve as the lead point of contact for all
training and knowledge transfer activities.
During the Project, any and all contact by MEGA or MEGA personnel with
Microsoft or WPC on or related to the Project shall be made through Healthaxis.
Notwithstanding the foregoing, Healthaxis will make all reasonable efforts to
facilitate the participation of the MEGA Designated Project Lead in meetings and
communications involving Healthaxis, Microsoft and/or WPC when relevant to the
delivery of the Scope of Services on behalf of MEGA or when relevant to
continuing to operate MEGA's business in the ordinary course in conjunction with
the EPA for A4H project (in contrast to meetings and communications related to
Microsoft and/or WPC product development issues arising as a result of the
Healthaxis EAP arrangement with these parties).
Healthaxis acknowledges and agrees that one of the key objectives for
this Project is that MEGA/AST personnel will be able to support the BTS and A4H
products and undertake additional projects based on these products with limited
or no support from Healthaxis' other resources. As a result of this process and
staffing arrangement, Healthaxis will be permitted to focus on the Project and
its commitments under the EAP program, while at the same time permitting and
facilitating the maximum training and knowledge transfer to the MEGA/AST team
resources so that MEGA/AST will be positioned to leverage MEGA's investment in
the BTS/A4H Product, and to develop MEGA's own relationship with Microsoft for
ongoing services, support and assistance directly from Microsoft. Following
completion of the Project, Healthaxis will make its core Project team resources
available on an ongoing basis to assist MEGA/AST with their initiatives in these
areas upon request. All such post-Project services will be governed by the
Master Agreement.
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The MEGA Life and Health Insurance Company
May 29, 2001
Page 5
5. Publicity. Upon completion of the Project in compliance with the
Scope of Services, the Project Plan, the Performance Criteria and the Project
Schedule, MEGA will be entitled to participate in the preparation of any joint
press releases and other publicity that Healthaxis, Microsoft and/or WPC may
disseminate regarding the Project; provided, however that no press release or
other publicity may be disseminated with respect to the Project by any party
without the prior written consent of MEGA. Provided that the Project is
successfully completed in compliance with the Scope of Services, the Project
Plan, the Performance Criteria and the Project Schedule, MEGA agrees to
participate in the preparation of a written case study by Microsoft for
publication. Except for these coordinated press activities upon completion of
the Project, neither Healthaxis nor MEGA shall be entitled to disclose to any
third party (other than Microsoft or WPC or any third party adviser engaged by
MEGA) its participation in, or any details concerning, the Project without the
prior written consent of the other party. Healthaxis shall cause Microsoft and
WPC to be subject to a similar restriction in Healthaxis' agreements with such
parties, and MEGA shall cause any third party adviser engaged by MEGA to be
subject to a similar restriction in MEGA's agreement with such third party.
Notwithstanding the foregoing, nothing hereunder shall restrict MEGA or
Healthaxis from disclosing its participation in the Project if such party is
otherwise compelled to do so by law or governmental authority.
6. Non-Disturbance. Healthaxis agrees, and will cause Microsoft and WPC
and any other subcontractor involved in providing services to MEGA through
Healthaxis in connection with the Project to agree, to undertake the Scope of
Services in connection with the Project in a manner that will not interfere
with, disrupt or disturb in any respect the regular ongoing business activities
of MEGA, including without limitation MEGA's underwriting, actuarial, claims
administration and claims paying and servicing activities and/or MEGA's computer
and information technology systems. In connection therewith, Healthaxis agrees
to indemnify and hold MEGA and MEGA's employees, officers, directors and sole
shareholder harmless from and against any and all losses, damages (including,
without limitation, actual damages, compensatory damages, punitive damages and
extra-contractual damages), liabilities, penalties, costs and expenses
(including, without limitation, attorneys' fees, investigation costs and all
other reasonable costs associated with the defense thereof), as incurred,
arising out of or relating to Healthaxis' violation of the covenant contained in
this Paragraph 6.
7. Project Fees. The total fixed price for the Project payable by MEGA
to Healthaxis shall be $515,000.00, payable as follows:
(i) $175,000.00 shall be payable simultaneously with the execution
of this Engagement Letter;
(ii) $170,000.00 shall be due and payable upon delivery of the gold
code for beta testing as provided in the Project Plan (which
is expected to be on or before June 22, 2001); and
(iii) $170,000.00 shall be due and payable upon satisfaction of all
conditions to completion of the Project as provided in
Paragraph 3 hereof.
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The MEGA Life and Health Insurance Company
May 29, 2001
Page 6
Project fees shall expressly cover the equipment, Documentation, and software
identified in Exhibit A, the Microsoft standard product licenses for the BTS/A4H
Product for this specific equipment configuration, and the balance of the Scope
of Services as provided and described in Paragraph 1 hereof. The $515,000.00
fixed price covers the services provided by the core Healthaxis Project team
only and does not include the costs of the MEGA/AST team personnel involvement,
which costs will continue to be billed to MEGA on a monthly basis. Services not
expressly included in the Scope of Services as provided for in this Engagement
Letter, and services that are expressly excluded, will not be and are not
covered by the fixed price as provided for in this Engagement Letter.
Notwithstanding anything in the foregoing to the contrary, if the
Project shall not have been completed in accordance with Paragraph 3 hereof on
or before August 15, 2001, then in such event the obligations of MEGA hereunder
shall terminate and shall be of no further force or effect; provided, however,
MEGA shall have taken title to and possession of the equipment, BTS/A4H Product
Software, Documentation, and work performed to date as identified in Paragraph 1
and Exhibit A hereto.
This Engagement Letter constitutes a Fixed-Price Project pursuant to
the Information Technology Services Agreement between UICI and Healthaxis dated
January 3, 2000 (the "Master Agreement"). Any additional services beyond the
Scope of Services expressly set forth in this Engagement Letter will be governed
by the Master Agreement unless expressly agreed to otherwise by the parties in
writing.
If the above meets with your approval, please execute this Engagement
Letter in the space provided below to indicate MEGA's acceptance and agreement
to same. Please return one fully executed original to us.
Once again, thank you for selecting Healthaxis to provide the services
described herein.
Healthaxis, Inc.
By:
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Its:
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The MEGA Life and Health Insurance Company
By:
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Its:
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Exhibits: Exhibit A: Schedule of Project Equipment, Documentation, and
Software
Exhibit B: Schematic Depicting Project Scope of Services
Exhibit C: Training Schedule and Training Plan
Exhibit D: Project Initiation Proposal
Exhibit E: Performance Criteria
Exhibit F: Form of Microsoft End User Product Licenses
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Exhibit A
EQUIPMENT and SOFTWARE
BTS and A4H Hardware:
BTS Server
Compaq Proliant DL380 (1GHz single CPU - Upgradeable to 2)
1GB Total Ram
(3)18.2 GB - 15,000RPM Ultra3 SCSI Drives (Configured to RAID 5)
Hot Redundant PWS
Dual Redundant NIC
BTS and A4H Software:
Microsoft Accelerator for HIPAA (BTS-A4H)
Microsoft BTS Enterprise (single CPU License)
Microsoft Windows 2000 Advanced Server
Microsoft SQL Server 2000
GAP Analysis testing tool
Desktop compliance testing tool
12 HIPAA Compliant Transaction Sets
Complete WPC HIPAA Documentation Data Element Enabled
Additional Hardware Added after 5/11/01 meeting with AST:
Proliant ML 370 (Dual - 1GHz CPU's)
2GB Total SD RAM
(6) 36.4 GB - 10,000RPM Ultra3 SCSI Drives (Configured to RAID 5)
Hot Redundant PWS
Dual Redundant NIC
Note: Included software licenses are for the specified Equipment Configuration
only and includes first year maintenance on the A4H software product.
<PAGE>
EXHIBIT B
Schematic Depicting Project Scope of Services
-----
Internet -------- HTTPS / | WORKFLOW
| alt (SMIME) / | Reports
| alt (FTP w/encryption) / -----
| BTS A4H /
------------------------- |---------------| /
| | File Drop | BizTalk |
| EDI Data Landing Zone |--------------------------------->| Server |
| | | Accelerator |
------------------------- | for |
| HIPAA |
|---------------|
|
|
|
v
---------------------------------------------------------
| BisTalk |
| Server |
| ------ | Transaction ID Added
| | | -----------------------------------|--- (Mainframe Object ID)
| | | |
| ------ |
| | ------ | Data Warehouse
| | | | ---------------------|--- *Reporting
| --------->| |-----| | *DACS
| ------ v |
| ------ |
| | |------------|--- De-Identified Data
| -------- | | | Warehouse
| | ------ | *DACS
| v | *Utilities (DTS)
| ------ |
| | |-------------------------|--- Business Rules Applied to
| ----------| | | Transactions
| | ------ |
| v |
| ------ |
Map to File Layout for ----|--------- | | |
Mainframe | | | |
| ------ |
---------------------------------------------------------
|
|
|
|
---------
|
|
|
v
----------------------------
| File Output/ | ---------------
| Batch Builder |----> 837 Delivered |
| Move to Mainframe | | to PACE |
| File Rules for PACE Drop | ---------------
----------------------------
<PAGE>
EXHIBIT C
Training Schedule and Training Plan
-EDI Boot Camp: (2 full days), Tentative Date 06/08
-Attendees: Seven (7) Healthaxis AST and MEGA Resources
-BTS Mapper and A4H: (2 full days), Date 05/24-25
-Attendees: 4 Healthaxis AST Resources
-BTS Orchestration (2 full days), Date 5/30-31
-Attendees: 2 Healthaxis AST Resources
-MF-Pace Integration, Date to be Determined (Joint AST and Health Axis)
-Attendees: Seven (7) Healthaxis AST and MEGA Resources
Goal is to provide the Healthaxis AST and MEGA Team with the knowledge
and resources to be autonomous in using A4H and BTS functionality and have the
ability to add transactions into and out of the MEGA mainframe legacy systems.
<PAGE>
EXHIBIT D
Project Initiation Proposal
<PAGE>
EXHIBIT E
Performance Criteria
-Volume, Training, Sign-off, EHNAC Certification
-2 Servers and 2 Licenses
-30,000 HIPAA compliant 837 Completed in six (6) hours processed thru BTS A4H
<PAGE>
EXHIBIT F
Microsoft End User A4H/BTS Product Licenses
TO BE ATTACHED