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The Company and Union along with our respective Actuaries have concluded discussions on the Medical and Dental premium increases and contribution levels for the Bargaining Unit and Company. Over the last couple of months there has been a complete review of the plans, an extensive cost analysis, audits of the plans and projections of claims based on medical, dental and prescription drug usage over the last several years as well as current medical cost trends within the industry. As a result and in accordance with Stipulation of Agreement, attached you will find the agreed upon contribution levels for both the Bargaining Unit employees and the Company that will go into effect January 1, 2003.

As previously communicated, we have seen the cost of medical, dental and prescription drugs more than double from what it was in 1999. In 1999, the combined total of claims paid out were $11.9 million, whereas in 2001, the combined total reached $20.9 million and is projected to reach at least $25 million this year. Unlike many other Unions throughout the country, we have been very fortunate in holding the line of not having to raise premiums for the last ten years. This was possible even without having to reduce benefit levels as proposed to us during the last two negotiations. However, due to this alarming trend of rising costs the reserve balances within our funds have fallen to a point where it becomes necessary to raise the contributions to keep the plans solvent for the Bargaining Unit as outlined Paragraph 57 of the Memorandum of Agreement.

Throughout the discussions and discovery period, our Actuary and the System Committee explored numerous options in plan design changes in an attempt to lessen the impact of the contribution increases. Options such as; higher deductibles, increased out of pocket expenses, increased co-pays and certain benefit changes, all of which were not significant enough in cost savings to the contribution levels. These options were discussed at the last Council Meeting by our Actuary and communicated back to the Committee as less than desirable by the Membership when reported on at Local Union Meetings throughout the state, therefore those options were not accepted by the Committee.

 As stated above, your benefit levels and plan design will remain unchanged, however the Company has notified the Union that beginning January 1, 2003, Cigna will be the administrator for all plans, which includes the Health Care PPO, Health Care POS, Health Care HMO, Prescription Drug, and Dental Plans. An explanation of each plan will be forthcoming during the open enrollment period. The Company and Cigna have also committed to increase the number of in-network physicians and hospitals for those areas that have traditionally been a problem for the Membership, which in the past has also driven plan costs up by having to pay higher out-of-network charges as if they were in-network.

As you well know, this issue of skyrocketing medical costs is a national crisis, one of which is in the news each and everyday in this country. It is one that must be dealt with by the politicians of this land at the local, state and federal levels if we are to see relief in the rising costs. We as members of our Union and citizens must seek out those politicians, who are willing to take this critical issue on, bring it to the forefront and do something about it. We must then turn out at the polls to vote them into office in the upcoming elections in November and then again in the Presidential race of 2004. Until this happens we will continue to be at the mercy of the doctors, hospitals, insurance companies, prescription drug companies and their very powerful lobbyists.

Fraternally,

B. K. Thompson

Business Manager