Over the past few years the cost of health care (medical/drugs/dental) at FPL has followed a nationwide trend by steadily climbing. Since 1998, the yearly cost of medical claims has increased from 9.5 million to 18.3 million in 2001. FPL is projecting a 25.2 cost for the Plans in 2002.

Currently the Plans are experiencing average monthly deficits of $630,000.00 between the premiums paid into the Plans and the monthly medical claims being paid out. This of course, is greatly impacting the reserve balances and monthly reserve ratios.

Per Paragraph 57 of the Memorandum of Agreement, the Company and Union have met on several occasions to discuss the declining reserves in the Bargaining Unit’s Medical and Dental Trust Funds and the impact to the Plans at the present rate of expense. The Company and their consultants from Deloitte and Touche have projected at the present rate; we would deplete the reserve by the first quarter of 2003.

After analyzing information we requested from the Company, our actuary presented the Union’s projection for the Plans to the Company, which significantly differed from their projection. One of the largest expenses to the Medical Plan is the amount of claims being paid to out-of network doctors at the in-network rate. During a meeting held today, the Union rejected the Company’s latest proposed Plan design changes which included higher co-payments, higher deductibles, and higher out of pocket expenses to the Membership but at the same time did little to nothing to significantly offset the current cost deficits. At this time, we are not sure what course of action will be necessary to resolve this, however, we will continue to explore different options that would keep the Plans solvent to lessen the impact to the Membership.

Whatever course of action is ultimately taken to lessen the impact, employer and employee contributions to the Medical Plans are going to increase. Fortunately since 1992 we have not had to raise the premiums this is unprecedented in today’s environment. Reasons for not having to raise the premiums were contributed to the gradual yearly increases in medical costs and managed care programs. However, over the past two years managed care programs have become far less effective, along with increased medical and prescription drug costs in this country skyrocketing into double digit percentage increases caused by the lack of attention to this issue by politicians at the State and Federal levels.

The parties have agreed to continue discussions. We will continue to communicate with our members to keep you informed on this very important issue.