Medical Costs

March 2001

Memo to: Airborne Employees

From: Gene Rhodes, Corporate Director, Human Resources

Subject: Medical Costs

The cost of health care in the United States has been rising at an alarming rate. Just in the last two years alone, national health expenditures have risen 18.5%! This is not just a national problem; it is OUR problem. It affects you and it affects Airborne. I want you to be aware of the problem. That is why I am writing to you.

Airborne has been a very effective purchaser of health benefits with costs below the national average. Airborne’s efforts to control costs include introducing the PPO plan which discounts charges by approximately 33% a year, which helped offset rising cost by over $25 million annually. Airborne also renegotiated the contract with United Health Care this past year producing another offset of $1.4 million in administration fees. However despite these efforts, Airborne’s costs have been rapidly increasing right along with the national trend.

Why such dramatic increases? There are two main factors -- the rising cost of medical services (inflation) and increased use of services (utilization).

What Can Be Done?

Basically, you and I have a common enemy – rising health costs. Between now and open enrollment in November 2001, the Company will be exploring ways to control costs. During this period, Airborne will send you periodic memos that focus on specific problem areas of rising cost or utilization. The intent of the memos is to explain major problem areas and to enlist your help to minimize the costs.

As a consumer of health benefits, you can help lower costs through wise healthcare usage, especially by using a PPO network provider whenever possible. As we go through this process of assessment, we invite you to provide suggestions or ideas to your employee benefits department for consideration. You may e-mail your comments to abx.benefits@airborne.com or send written comments to ILN Benefits Dept. 2061B. Attn: Health Care Cost.

Thank You