Retiree Rewards. The Motorola Post-Employment Health Benefits Plan and Medicare Part D. In this issue: Summer 2005.

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1 Retiree Rewards Summer 2005 In this issue: 2 3 Motorola and Medicare Part D 4 5 Choosing your best option 6 7 More resources to keep you informed 8 10 Keeping the RAC on track 11 Calculate your prescription costs 12 Prescription Drug Program update 1 The Motorola Post-Employment Health Benefits Plan and Medicare Part D You will be making an important health care choice in the upcoming months whether to elect prescription drug coverage under Medicare Part D or to continue your coverage under the Motorola Post- Employment Health Benefits Plan (the Plan ). The information provided in this newsletter is intended to explain Motorola s position on Medicare Part D, give you some background on Medicare Part D and provide resources to help you make the right decision.

2 2 Background As part of the Medicare Prescription Drug Improvement and Modernization Act of 2003, Medicare will undergo some significant changes in 2006 as it introduces an optional prescription drug benefit called Medicare Part D (think D for drugs). This new program is designed to reduce the amount Medicare beneficiaries pay for many prescription drugs. As you know, Motorola currently offers retirees over age 65 medical and prescription drug coverage under the Plan through the Motorola Medicare Share Plan ( Share Plan ) and the Motorola Medicare Supplement Plan ( Supplement Plan ). To encourage U.S. employers to continue offering retiree medical benefits, Medicare is offering to pay a subsidy to employers who provide retiree prescription drug coverage that is actuarially equivalent to the new Medicare Plan D benefit. Motorola will receive a subsidy payment based on those post-65 retirees and dependents age 65 and over who remain in the Plan. However, in order to receive this subsidy, the Plan s prescription drug coverage must qualify and be determined through actuarial evaluations to be of equal value to the program offered through Medicare Part D. Based on an analysis by the Plan s actuaries, we re pleased to announce that the Motorola post-65 prescription drug program is equal to if not better than what Medicare Part D will offer. To keep your current prescription coverage, do nothing.

3 The Basics of Medicare 3 Continuing Motorola s Prescription Drug Coverage for 2006 Motorola will continue to offer the prescription drug program through the Share Plan and Supplement Plan to Medicare-eligible retirees in The Medicare subsidy Motorola receives for each eligible participant who remains in the Plan will be used to offset the costs of the Share Plan and Supplement Plan coverage. Your contributions for 2006 will be confirmed in the fall issue of the Retiree Rewards newsletter. Each year we will evaluate whether to continue the Motorola prescription drug program or recommend that you enroll in Medicare Part D. No Action Required to KeepYour Motorola Plan Coverage With the introduction of Medicare Part D, you can now choose to remain in the Motorola Share Plan or Supplement Plan including coverage for prescription drugs or enroll in Medicare Part D. It s important to know that if you choose to enroll in Medicare Part D, you and all of your dependents will no longer be eligible for retiree health care coverage medical (including dental for those under age 65) and prescription drug through Motorola. Also, you will not be able to re-enroll in the Motorola Plan in the future under any circumstances. If you, as the Motorola retiree, decide to enroll in Part D, healthcare coverage for all your remaining dependents will also end regardless of their age including pre-65 dental coverage. Medicare is a health insurance program primarily for individuals age 65 and older that pays for a portion of some inpatient hospital and physician related medical costs. You re eligible for Medicare if you have paid into Social Security for at least 10 years, or if you are eligible to receive Social Security benefits on your spouse s earnings. As of January 1, 2006 Medicare will have four parts: Medicare Part A Think of it as hospital insurance. Part A covers inpatient hospital services, skilled nursing facility services, certain home health services and hospice care. Generally, it is available at no annual cost because it is financially supported by payroll taxes paid into the Social Security and Medicare system. Medicare Part B Think of it as medical insurance. Part B covers doctor services, outpatient hospital services, certain home health services, medical equipment and supplies, and other health services and supplies. The cost for 2005 is $78.20 per month per participant. Medicare Part C Known as Medicare Advantage, Part C refers to private Medicare plans that provide benefits covered under Part A and Part B (as well as Part D, starting in January). These plans are not directly provided by Medicare. Medicare Part D Medicare Part D is a new and entirely voluntary prescription drug benefit offered to Medicare beneficiaries who elect and pay the premiums for it. Part D benefits will be available starting January 1, 2006 through insurance companies and other private organizations that will negotiate discounts on drug prices.

4 4 Choosing the Best Option for You Here are a few items to consider as you determine which prescription drug program Motorola s or Medicare Part D best meets your needs: Your personal health care needs and your financial capabilities; The prescription drugs covered and the pharmacies you are allowed to use. You should compare the specific drugs covered, formularies and coinsurance of your Motorola retiree prescription drug coverage with those of the private insurers who will offer Medicare Part D. You can estimate your prescription drug costs under the Motorola plans using the estimator tool located at motorola.advancerx.com; The total amount of expenses you expect to pay out-of-pocket. For example, Medicare Part D covers no part of your expenses through a specified range of out-of-pocket costs. Benefit caps. The Motorola retiree prescription drug coverage maximum benefit is capped at $6,000 per year (excluding specialty medications obtained through Caremark Specialty Pharmacy Services). In the end, the decision is entirely yours. But remember, if you choose to enroll in Medicare Part D, you and all of your dependents will no longer be eligible for your retiree health care coverage medical (including dental for those under age 65) and prescription drug through Motorola. Also, you will not be able to re-enroll in the Motorola Plan in the future, under any circumstances. If you, as the Motorola retiree, decide to enroll in Part D, healthcare coverage for all your remaining dependents will also end regardless of their age including pre-65 dental coverage.

5 5 Your Motorola retiree prescription drug coverage is as good as or better than Medicare Part D. What You Can Expect to Pay Under Part D If you elect Part D coverage, you will pay a monthly premium estimated by the Centers for Medicare & Medicaid Services (CMS) to be about $37 per covered person in 2006, with expected increases up to $64.26 over the next eight years. You will also pay a share of the cost of your prescriptions. Here s a summary of how it works: You pay a deductible. In 2006, the deductible is $250. After you meet the $250 deductible, you pay coinsurance for each prescription. 25% for dollar amounts from $251 to $2, % for dollar amounts from $2,251 to $3,600. 5% (or a small copayment) for dollar amounts over $3,600. Your Part D out-of-pocket costs depend on which type of prescription drug plan you choose and what plans are available in your area; how many drugs you take; whether the drugs are covered on the plan s formulary (list of preferred drugs); what pharmacies you use and whether you qualify under the low-income or limited-asset programs. For more specific information about Medicare Part D, please visit the Medicare Web site at You Have the Opportunity to Enroll in Part D Each Year If the Share Plan, Supplement Plan or Medicare Part D changes in the future such that Medicare Part D becomes a better option, you ll have the opportunity to enroll in Medicare prescription drug coverage each year during the Medicare enrollment period. For 2006, there will be an extended enrollment period that begins November 15, 2005 and lasts through May 15, Starting in 2007, the enrollment period will be held from November 15 through December 31 each year.

6 6 More Information Is Coming Soon If you choose Medicare Part D, you will forfeit your entire Motorola retiree health care coverage. In the near future, you will begin seeing an increase in the number of advertisements and direct mail campaigns from private companies, such as AARP and private prescription drug providers (PDPs), promoting their prescription drug plans under Medicare Part D. These ads may seem compelling, and encourage you to enroll in Medicare Part D through one of their programs. Please remember that if you enroll in a Medicare Part D plan, you and your dependents will no longer be eligible for your current and future retiree health care coverage both medical (including dental for those under age 65) and prescription drug through Motorola. Motorola will also be providing you more ways to get information and answers to your questions regarding Medicare Part D, including its impact on your Motorola retiree medical benefits. Here s what s coming: Responses to Frequently Asked Questions Included with this newsletter is a document with answers to questions we anticipate you may have about Medicare Part D and its impact on Motorola s retiree health care plans. We encourage you to keep this document for reference. Teleconference Later this year, you ll have the opportunity to dial in and participate in a brief teleconference hosted by Motorola and cofacilitated by an expert on Medicare Part D. An invitation will be mailed to your home.

7 7 Other Information Resources In addition to the information that you will receive from Motorola, you may: Retiree Rewards Newsletter In October, we ll give you more information on your 2006 retiree health care plan in the fall issue of Retiree Rewards. Included with this fall newsletter will be a Notice of Creditable Coverage. This legally required document states that for most participants, Motorola s current post-65 prescription drug program is equal to if not better than the coverage offered through Medicare Part D. Audio Library You ll be able to dial in to a tollfree number featuring three audio recordings on how Medicare works, the basics of Medicare Plan D and Motorola s retiree prescription drug program. More information on the audio library will be forthcoming. Reminder Notices You ll receive additional notification in the mail reminding you that Motorola is continuing to offer prescription drug coverage and alerting you to what will happen to that coverage if you elect Medicare Part D. Visit the Medicare Web site at or call a Medicare customer service representative toll-free at MEDICARE ( ) if you have questions about how the Medicare system works and how it will add new prescription drug benefits. For TTY assistance, call Contact the Rewards Administration Center (RAC) for information about your current Share Plan or Supplement Plan coverage. Call , send an to rewards@motorola.com, or post a message at rac.motorola.com. Refer to the Medicare & You 2006 handbook, which Medicare will distribute to all beneficiaries in October Although Motorola currently intends to continue the Motorola Post-Employment Health Benefits Plan indefinitely, we reserve the right to alter any of the Plan provisions, to change the amount of contributions, or to terminate all or part of the Plan, as the company in its sole discretion deems necessary. Termination of coverage under the Plan will not prejudice any claims for benefits incurred before the date of such termination. Motorola will continue to offer prescription coverage in 2006.

8 8 Keeping the RAC on track Good things are happening at the Rewards Administration Center. And it s all in the name of improving your customer experience. Using your suggestions and survey feedback, Motorola and the Rewards Administration Center (RAC) designed an aggressive process improvement plan in 2004, to deliver the quality of service you deserve and expect. Claims processing time reached its lowest performance levels in early 2004 due to increased backlogs, systems issues, processing errors and poor documentation. We ve come a long way since then. Customer satisfaction ratings continue to climb. Cycle time has significantly decreased. Backlogs are well below target levels. While claims processing has improved, this is not enough to get us where we want to be. We know that if you are experiencing a claims issue, these improvements have little value. So our goal is to achieve complete satisfaction for every employee on every claim.

9 What we ve done The first step was defining the problems you were experiencing. We surveyed 2,000 Motorolans in January, asking for feedback. We conducted nine focus groups in early 2005 with nearly 500 employees and retirees at five locations. Four key issues emerged: 1. Issues take too long to resolve. 2. Customer service agents need better benefit plan knowledge. 3. Customer service agents need stronger language and communication skills. 4. Up-front transaction processing quality needs to be improved. Based on this feedback, here s what we decided to do: Phase 1 Improve the customer service experience by: Reducing issue resolution time. Training the customer service agents to fill knowledge gaps. Addressing the communication skills issue by rethinking our call center strategy and moving voice-based support to a location where service can be more effectively delivered. Phase 2 Deliver quality or get it right the first time. Focus on improving the upfront transaction processing quality, therefore reducing calls to Customer Service. Improvements have been made in this area, but more work is required. To tackle major issues, we introduced an escalation process last October to handle unresolved claims over 90 days old, if participants were threatened with collections, if reimbursement took longer than 30 days or if a provider refused service. You can still use the escalation process if needed. The best way is to call RAC Customer Service at or send an to rewards@motorola.com. Make sure you identify your issue as an escalation issue in the subject line. Where we are today To date, we have implemented the following: Every customer service agent has received at least five days of refresher training in the last three months. We re monitoring and auditing active calls to identify new issues and to ensure the agents receive prompt feedback when clarification is needed. To improve communication skills, training includes discussing how to handle common problems, the best way to address sensitive issues and how to solve problems in a non-confrontational manner. Agents learn how to better handle difficult situations resulting from an actual call. 9 New tools were introduced. Agents can now see If you have suggestions on how to improve communications or service at the RAC, send your comments to 1HRCOMM@motorola.com. Please type Improve the RAC in the subject line.your will be routed to the Customer Service Manager.

10 10 faxes within minutes of receipt and can confirm the fax was received. Faxes are then routed to the correct processing center within hours of receipt. This significantly decreases the problem of lost or misguided faxes. Transaction processing quality is moving in the right direction. Compared to last October, the number of issues related to apparent claims processing errors has decreased by 58%. Careful monitoring and retraining of claims processors have reduced the most common errors. Claims processing speed has improved substantially. In May 2004 there were more than 5,000 claims over 30 days old. Today, more than 50% of the claims received today are processed in less than five days. What s next Other improvements are coming, many based on your comments. In the area of transaction improvements, you will see a new online process to verify Full Time Student Status (FTSS) this fall. We understood your frustration with missed deadlines, unverified submissions or unclear instructions. The FTSS system will be available online in time for the start of the fall semester or quarter. We will be giving customer service agents a new quick guide to help answer common questions quickly and consistently, reducing cycle time. Developing communication skills will also continue. We want agents to focus on actions, take the extra step to get your answer and demonstrate concern for your issues. John Toland, manager of Motorola Customer Service, Rewards Administration Center, says to his agents, Nobody cares what you know until they know that you care. This has become the motto for every agent handling claims calls. And the #1 reason behind every action in the process improvement plan. Did you know Over 300,000 potential providers participate in the Humana/ChoiceCare network for the Health Advantage Plan and countless others are out-of-network. On the average, the RAC processes nearly 120,000 claims per month. Currently, the average number of claims over 30 days old is 18. In September 2004, the average was 957. Customer service representatives answer your questions and resolve issues but do not process claims.

11 Register to use the prescription drug cost estimator tool: 11 Go to motorola.advancerx.com. Click on New User Registration (center of home page). Enter member information requested. Click Continue button. Enter your address, password, hint question and answer. Click Continue button. If you have already registered: Go to motorola.advancerx.com. Type in address and password. Click on GO. To obtain drug history: Sign in and go to Manage Your Prescriptions. Select the Prescription Manager. For prescription history up to two years, select the pull-down option for the last 24 months.

12 NEWSBRIEFS Prescription Drug Program update Topical medications & coinsurance estimate Get an estimate for topical medications (gel, cream, ointment, etc.) at motorola.advancerx.com or when you call Caremark CAREMARK NEEDS THE FOLLOWING INFORMATION TO PROVIDE AN ESTIMATE: Total quantity prescribed. Number of units prescribed (gm, ml, cc, oz., pints, etc.). Total days supply (may vary slightly based on individual use). Some medications require prior approval before the program will cover it. You can find the prior authorization drug list at motorola.com/benefits/usretiree or at motorola.advancerx.com Retail prescription drug refills require new prescriptions after 90 days Under Motorola s prescription drug program, you may fill one 30-day prescription plus two 30-day refills at a retail pharmacy. Once you have reached the 90-day limit, you must fill your medication through the Caremark Mail Service Pharmacy. This is especially important for maintenance medications or those used on a long-term basis. Effective April 1, 2005, the retail refill limit applied to all medications, including new prescriptions received every 90 days for the same drug in the same strength. In other words, the plan will only cover a prescription for 90 days at a retail location. You will then have to submit subsequent new prescriptions for the same medication to the Caremark Mail Service Pharmacy. The only exception is prescriptions for antibiotics. ADVANTAGES TO USING THE CAREMARK MAIL SERVICE PHARMACY: Free standard shipping. Added convenience of home delivery for up to a 90-day supply. Personal service with a toll-free, 24-hour hotline to speak with a registered pharmacist about any questions or concerns. Excellent quality through confidential, tamper-resistant and temperature-controlled packaging. Refills available 24/7 via Internet and by phone. For more information on the prescription drug program, including the mandatory mail-order requirement, contact Caremark customer care at , visit motorola.advancerx.com or consult your 2005 U.S. Retiree Benefits Book. Certain medications that are required by law to have a new prescription written for each refill (such as controlled substances and antibiotic medication) are not subject to this requirement. Motorola, Inc E. Algonquin Road Schaumburg, Illinois U.S.A Published by Motorola Human Resources and Motorola Internal Communications. This newsletter only summarizes Motorola s rewards programs. The respective plan documents govern your rights. You should rely on the information contained herein only as a general summary of some of the features of the plans. In the event of any difference between the information contained herein and the plan documents, the plan documents will supersede this newsletter. Motorola reserves the sole right at any time to amend, modify or terminate one or more of the plans described in this newsletter. Motorola is an Equal Opportunity/Affirmative Action Employer. MOTOROLA and the Stylized M Logo are registered in the US Patent & Trademark Office. All other product or service names are the property of their respective owners. Motorola, Inc.,