Scott and White Health Plan

“Donald Grobowsky and Louis Casey, Jr. are both directors at First State Bank.”

“Baylor Scott & White Holdings became the sole member of SWHP in 2014.”

“SWHP is a Texas nonprofit organization in which Baylor Scott & White Holdings, a tax exempt, Texas nonprofit corporation, is the sole member.”

“As disclosed in Part VI, Line 6, Baylor Scott & White Holdings ("Parent"), a Texas nonprofit corporation, is the sole member of the organization. Prior to October 1, 2013, Scott & White Healthcare had control and substantial reserved powers over the organization, including those to elect and remove the governing body of the organization. Effective October 1, 2013, SWHC transferred control and its reserved powers over the organization to Baylor Scott & White Health, LLC and subsequently to the Parent on March 1, 2014. The Parent's Board of Trustees is comprised of a majority of independent community representatives that provide leadership and governance to the Parent and its affiliated tax exempt entities including, the filing organization, to ensure it is meeting its charitable purpose.”

“Prior to October 1, 2013, all rights and powers were reserved to the sole member, Scott & White Healthcare (SWHC), except only those rights and powers expressly set forth in the bylaws, required by state or federal law. For example, the member's reserved rights and powers include, without limitation, approval of the organization's articles of incorporation and bylaws and amendments thereto, appointment and removal of members of the organization's governing body, approval of dissolutions and mergers, and other similar decisions over the organization. Effective October 1, 2013, SWHC transferred control and its reserved powers over the organization to Baylor Scott & White Health, LLC and subsequently to Baylor Scott & White Holdings on March 1, 2014.”

“The Form 990 is prepared and reviewed by Baylor Scott & White Health's ("BSWH") tax department. During the return preparation process the tax department works with other functional areas including finance, accounting, treasury, legal, human resources, and corporate compliance for advice, information and assistance to prepare a complete and accurate return. Upon completion, the Form 990 is reviewed by the organization's President, financial officer and/or other key officers. A complete final copy of the return is provided to the organization's governing body for review and comment prior to filing with the IRS.”

“SWHP is a Texas nonprofit organization in which Baylor Scott & White Holdings, a tax exempt, Texas nonprofit corporation, is the sole member. Persons with an actual or perceived ability to influence SWHP have the duty to disclose annually and otherwise promptly as potential conflicts are identified, any familial, professional or financial relationships with entities or individuals that do, or seek to do business with the organization or that compete with the organization. These individuals include the organization's officers, governing body, management, physicians with administrative services agreements, and other key personnel who interact with outside organizations or businesses on behalf of the organization. SWHP's parent, Baylor Scott & White Holdings ("Parent"), and its Board of Trustees, Audit and Compliance Committee and the Corporate Compliance Committee review or receive reports on all relevant disclosures submitted by these individuals to determine whether a conflict of interest exists and to determine an appropriate resolution, if necessary any individual with a perceived or potential conflict is prohibited from voting or participating in the decision making process regarding such transaction with that individual or business.”

“Process for determining compensation: The organization, a controlled affiliate of BSW Holdings, recognizes that those chosen to lead the organization are vital to its ongoing success and growth. Thus, it must attract, retain and engage the highest quality officers and key employees to lead the organization and help the entire Baylor Scott & White organization maintain its national reputation for achieving high targets for medical quality, patient safety, and patient satisfaction. A significant portion of the SWHP's officers' and key employees' total compensation is based on significant performance achievements. This strategy, known as the Performance Award Program, places a greater emphasis on the importance of the organization achieving targeted improvements in the areas of people, quality, patient satisfaction and financial stewardship, annually. Total executive compensation is part of an integrated talent management strategy developed by the Parent's Board of Trustees and its Compensation and Governance Committee (C&G Committee) to attract, motivate, and retain the best leadership resources for the organization. Executive compensation is determined pursuant to guidelines outlined in the intermediate sanction rules under IRC Section 4958 including taking steps to meet the rebuttable presumption of reasonableness under Treasury Regulation 53.4958-6, as summarized below. When making compensation decisions, the organization compares itself to similar-sized, and structured businesses including other integrated health care service systems and other similar-sized organizations, both locally and nationally. The Parent's Board of Trustees and C&G Committee, on behalf of the organization, work directly with an independent compensation expert(s) to identify reasonable and competitive market rates as well as provide an annual review of the total compensation of the organization's top management officials and key employees. The C&G Committee is made up of members of the Parent's Board of Trustees, who are independent, community volunteers. Guided by the information provided by the independent compensation expert(s), the C&G Committee approves and recommends to the Parent's Board of Trustees salary increases, earned incentives, and benefit offerings for the organization's President, other officers and/or key employees to be comparable to similar organizations for similar services and/or positions. Furthermore, the C&G Committee is charged with the responsibility of reviewing annually the major elements of the executive compensation program to assure designs remain consistent with the business needs, market practices, and compensation philosophy. As part of the decision making process, the C&G Committee will often meet in executive session to discuss and review recommendations made by the independent compensation expert(s). During the executive session no officer or key employee whose compensation is being reviewed is present during these discussions. All decisions are contemporaneously documented in the C&G Committee minutes which are timely reviewed and approved by the C&G Committee.”

“Process for making governing documents, conflict of interest policy, and financial statements available to the public: SWHP's articles of incorporation and amendments thereto are made available to the public by the filing of those documents with the Texas Secretary of State. Also, the organization's financial statements are available through the NAIC (National Association of Insurance Commissioners) and the Texas Department of Insurance upon request. The SWHP's other governing documents and conflicts of interest policy are not made available to the public.”

“Employees of certain Baylor Scott & White Health ("BSWH") affiliates located in central Texas are employed by Scott & White Memorial Hospital ("SWMH")(EIN: 74-1166904) or Scott & White Clinic ("SWC")(EIN: 74-2958277). This is done to achieve parity and consistency in compensation and benefits offered to employees and to reduce administration costs. Consistent with this practice, employee Forms W-2 are filed by SWMH or SWC. For financial reporting purposes, compensation, benefits and other employee costs are assigned to the BSWH entity for which services are rendered. Oversight of and responsibility for the activities of employees are vested in the board of directors and management of the BSWH entity to which such employees are assigned. All required employment forms have been filed by SWMH and SWC.”

“Subsidiary Earnings -3,459,463. Transfers to/from SWMH-Liability Reserve -243,438. Changes in unassigned surplus -336,901.”

“Disclosure Statement Related to Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, Filed on Behalf of the Taxpayer: In accordance with IRC Section 6038 and the constructive ownership rules of IRC Sections 958(a) and (b), the taxpayer is required to file Forms 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, with respect to certain controlled foreign corporations (CFCs) including Scott & White Assurance Ltd and Health Care Insurance Company of Texas, Ltd. These filing requirements are or will be satisfied through the filing of Forms 5471 for these CFCs by other U.S. taxpayers identified below who have the same filing requirement. Taxpayer Name: Scott & White Memorial Hospital Taxpayer Address: 2401 S. 31st Street Temple, TX 76508 Taxpayer Identification Number of U.S. tax return with which the Forms 5471 were or will be filed: 74-1166904 IRS Service Center where U.S. tax return was or will be filed: Ogden Taxpayer Name: Baylor Health Care System Taxpayer Address: 2001 Bryan Street Suite 2200 Dallas, TX 75201 Taxpayer Identification Number of U.S. tax return with which the Forms 5471 were or will be filed: 75-1812652 IRS Service Center where U.S. tax return was or will be filed: Ogden”