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Your Retiree Health Program

BELOW IS A COPY OF AN IMPORTANT LETTER SENT TO ALL RETIREES IN 2002

According to USA Today, only 37 percent of large corporations provided health care coverage to retirees in 2001. Con Edison recognizes how important your health care program is to you and continues to work with our providers to offer you access to a valuable benefit program. However, health care costs continue to rise nationwide. In 2001, retiree health care costs (medical and prescription drugs) increased by more than 18%, reaching a new high of more than $65 million. We expect that costs will continue to rise. As a result, we will revise some of the program features and limit the amount of company contributions to the Retiree Health Program.

Future Retiree Health Program Contributions

Participating retirees and surviving spouses are responsible for the full cost of the Retiree Health Program (medical and prescription). Although Con Edison is not obligated to contribute to the program, the company is currently paying approximately 80% of the total annual costs. After careful consideration of expenses, the company will limit the amount of any contribution it makes toward future health care and prescription drug costs.

There will be a transition period from 2002 to 2007 during which the company may contribute up to approximately 80% of health care costs. Retirees will pay for the remaining program costs above any company contribution.

Each year, beginning in 2008, if the company decides to contribute to the Retiree Health Program, the maximum amount will be the previous year’s contribution, plus a cost-of-living adjustment (COLA). The COLA may be as much as the adjustment in the prior year’s Consumer Price Index. Therefore, if program costs are projected to increase above the COLA, the company’s contribution will not be enough to cover the rise in the plan costs and your monthly contribution will be increased.

Here's How It Will Work

The following table provides three separate scenarios, assuming that in 2007:

  • The company decides to make contributions in 2008.
  • You are not Medicare-eligible and you contribute $150 per month toward your health care coverage (medical and prescription) or
  • You are Medicare-eligible and you contribute $70 per month (medical and prescription).
If the costs of the program are expected to increase in 2008 by 5% but the COLA to the company’s contribution is 3%, then your monthly contributions for 2008 will be increased as follows:

Monthly Contributions*
Not Medicare-Eligible
Monthly Contributions*
Medicare-Eligible
2007 2008 2007 2008
Retiree $150.00 $169.50 Retiree $70.00 $79.10
Company $600.00 $618.00 Company $280.00 $288.40
Total $750.00 $787.50 Total $350.00 $367.50
*These figures are used for illustrative purposes only.

In this example, the total monthly cost of the program for retirees who are not eligible for Medicare has increased by $37.50. Since the company decided to make a contribution, it would pay up to $18.00 of the $37.50 increase, and retirees would pay at least the remaining $19.50.

For Medicare-eligible retirees, the company would pay up to $8.40 of the $17.50 increase and retirees would pay at least $9.10. At the end of each year, the cost allocation between the company and retirees will be reviewed and may be adjusted.

If you are receiving a pension of $1,000 or less, your future Retiree Health Program contributions will be adjusted differently. Your monthly contributions will be periodically adjusted to cover the difference between total costs and the amount the company elects to contribute to the program. If your pension rises above $1,000, your contribution amount will be affected as described above.

Be a Smart Health Care Consumer

You can help decrease the cost of the program to you and the company by becoming an active and educated consumer of health care. Consumers spend thousands of dollars each year out of their own pockets for services that may not be necessary, and the plan pays for more expensive services when participants do not use network providers. It is important to become aware of the cost of health care and the various cost-efficient services offered to you under the plan. Using these services wisely will allow you to have access to valuable medical benefits at a lower cost than if you were to purchase them on your own.

Please Note

Although Con Edison currently sponsors the Retiree Health Program, this information does not alter the company’s rights to change or terminate the program at any time due to changes in laws governing employee benefit plans, the requirements of the Internal Revenue Code or theEmployee Retirement Income Security Act, or for any other reason. The company is not obligated to contribute any fixed amount or percentage of program costs.

We understand how much your benefits mean to you and we plan to continue to work with our service providers in an effort to provide you with access to quality health care benefits. If you have any questions, please call Employee Benefits at 1 (800)582-5056, Monday through Friday, from 8:30 a.m. to 5:15 p.m.


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