Elements Newsletter

Retiree Reimbursement Account Increase Announced!

Great News! The amount of the Retiree Reimbursement Account (RRA) that the Company offers as a way to help eligible retirees pay medical and dental premiums and out-of-pocket health care expenses is being increased.

For those eligible employees who retire on or after January 1, 2007, the Company is increasing the amount it will contribute to your Retiree Reimbursement Account as follows:

• $1,300 times your continuous years of service if you are single, and
• $2,500 times your continuous years of service if you are married.

Remember that your former parent company service is included if you transferred to CPChem on January 1, 2001. You may use the money in your account to buy medical and/or dental coverage from CPChem, or from private health care plans. You may also use it to pay eligible out-of-pocket health care expenses such as deductibles, copayments, coinsurance and other expenses that your medical and dental plans don't cover.

2007 Open Enrollment Coming Soon!

It's almost time for 2007 Open Enrollment — your opportunity to elect your benefits coverage for the coming year. During the October 23 – November 3 enrollment period, you'll have a chance to:

• Change your medical or dental coverage,
• Enroll in the Health Care and/or Dependent Care flexible spending accounts,
• Change your life, accident and/or long-term disability coverage, and
• Add, change or discontinue coverage for you and/or your dependents.

WHAT'S CHANGING FOR 2007?

CPChem has made a few changes to its benefit plan designs for the upcoming plan year. These changes respond directly to the Company's increasing costs for health care coverage — costs that make up a significant annual expense for CPChem. Here's a brief overview of what's new for 2007. More details will be provided in your 2007 Open Enrollment Guide:

• Contribution rates will increase for all plans.
• Core Plan deductibles, copayments and out-of-pocket maximums will increase as follows:

• Under the Core and Cost-Saver Plans, the payment schedule for prescription drugs will change as follows:
• 30-day supply
• Generic: $10 copayment or 15%, whichever is greater
• Retail Preferred Brand: $25 copayment or 20%, whichever is greater
• Retail Non-Preferred Brand: $45 copayment or 20%, whichever is greater
• 90-day supply
• Preferred Mail-Order Brand: $68 copayment
• Non-Preferred Mail-Order Brand: $115 copayment
• A new prescription drug $0 copayment program will be introduced.
• Statement of Health forms can be submitted online during the enrollment process.
• Retirees over age 65 will be offered medical coverage by AARP through United Health Care.

LOOK FOR YOUR 2007 OPEN ENROLLMENT PACKET

Be on the lookout for your 2007 Open Enrollment Packet, which will be mailed to your home some time the week of October 16, 2006. The packet outlines your coverage options under CPChem's benefit plans, offers more information on benefit plan changes for 2007 and provides details on enrolling online or over the phone through the Chevron Phillips Benefits Service Center.

Self-Insured Plans: A Shared Responsibility

In reading about your CPChem healthcare benefits, you might have come across the term "self-insured plan" and wondered what it meant. In this article, we'll take a look at self-insured health plans and examine why it's important that you take an active role in helping CPChem manage their costs.

WHAT IS A SELF-INSURED HEALTH PLAN?

With self-insured health plans (such as the CPChem Medical and Prescription Drug Plans), CPChem and its employees assume the financial risk for providing health care benefits to employees. Under this arrangement, we use Company funds and employee contributions to pay claims as they are incurred, rather than pay a fixed premium to an insurance carrier.

SELF-INSURED PLANS OFFER A NUMBER OF ADVANTAGES

They allow CPChem more flexibility to customize plans and programs to meet your needs and give us the freedom to contract with providers and provider networks directly. Because we don't pre-pay for coverage, we have greater control over the Company's cash flow and over any health plan reserves. And since we manage the plans ourselves, we reduce our overall administrative costs.

INCREASED ACCOUNTABILITY

There is, however, a trade-off that comes with these advantages. With self-insured plans, the Company and employees have increased accountability for managing plan costs. As a result, we must monitor our out-of-pocket costs carefully and make prudent decisions about the coverage we access. It's important for you to be aware of health care expenses, since the care you receive, and the cost of that care, have a direct impact on CPChem's bottom line and your annual premium cost.

You can help by being a responsible health care consumer — understanding your benefits, making informed decisions about your care and doing your best to avoid unnecessary procedures.

KEEPING YOU AND CPCHEM HEALTHY

While self-insured plans may take a little effort to manage, the extra time and attention can yield real benefits for you and CPChem. By working together to monitor plan costs, we can continue to offer quality, comprehensive health care coverage to you and your family, while protecting the Company's budget, which is great news for everyone.

Update on the Pension Protection Act

Recently, President Bush signed into law the Pension Protection Act of 2006 ("Act"). The nine hundred page Act is not only highly complex, but deals with a variety of pension matters.

Chevron Phillips Chemical is currently in the process of analyzing the Act, and expects there will also be additional guidance issued by the Internal Revenue Service and/or the U.S. Department of Labor, but it will not be forthcoming for several months. Therefore, it will still be some time before the Act's implications are better understood.

Many sections of the Act will probably have little impact on us. However, there is one provision which affects the CPChem Retirement Plan and we recognize that it could be a matter of significant concern to employees who are contemplating retirement soon. This provision changes the permitted interest rate used for calculating lump sum distributions. Previously, this rate was based on 30-year U.S. Treasury bond interest rates. Under the new Act, the interest rate would be based on corporate bonds.

No one, however, should feel compelled to make any retirement decisions now based on the Act's lump sum interest rate provision. It is not effective for distributions made prior to January 1, 2008, which is still over 1 1/2 years from now. Thus, it does not provide for a lump sum interest rate change for distributions made during the rest of this year and all of 2007.

Even beginning with 2008 distributions, the Act provides that corporate bond interest rates will be phased in by only 20% per year. For example, the applicable lump sum conversion interest rate for 2008 distributions would be determined on the basis of 80% of the applicable U.S. Treasury bond interest rate and 20% of the applicable corporate bond interest rate. The Act does not permit lump sum calculations to be based on 100% of the applicable corporate bond interest rate until distributions made in 2012 and thereafter — almost 5 1/2 years from now.

Therefore, the Act's effect on CPChem Retirement Plan lump sum calculations is not only delayed, but will also be gradually phased in once it becomes effective. When we fully understand the ramifications of the Act on the CPChem Retirement Plan lump-sum calculation, we will provide you with detailed information on how this could affect you, including examples, so we can all make an informed decision about our retirement options.

In the meantime, please remember that CPChem remains committed to maintaining a healthy, strong and well-funded Retirement Plan.

Earn a Quick 50 Bucks!

Just for completing a simple health assessment

Yes ... you heard us right! CPChem will deposit $50 into your 2007 Healthcare Flexible Spending Account (FSA) if you complete a simple health assessment questionnaire by November 30, 2006. And if your spouse completes a questionnaire too, that's an additional $50!

The questionnaire has been designed to assess your personal health needs and readiness to change certain health behaviors. The data will then be formulated into a confidential summary report that will be used by CPChem to:

• Determine the impact of employee health on its overall productivity, and
• Develop health care offerings to meet the specific needs of its employees.

The assessment takes roughly 15 to 20 minutes to complete and asks questions related to such things as your current lifestyle, family medical history, willingness to make lifestyle changes in order to improve your health and your personal health habits.

In addition to the $50 that will be deposited into your 2007 FSA, you will also receive a tailored health report and a personalized action plan with recommended healthy living programs based on your health needs.

To get started, simply visit www.simplestepslife.com, click on "Go" in the "First Time Users" box and enter your work email address (which would allow you to receive important communications from the Simple Steps program) or the Employers Access Code: CPCHEMWELL1 (case sensitive). All of the information you provide will be stored in a secure database and be kept completely confidential.

Health Assessments for the Whole Family

You, your spouse and your dependent children under 18 are all eligible to complete a health assessment and receive a tailored health report and personalized action plan. However, only you and your spouse are eligible for the $50 incentive.

What You Can Do to Control Health Care Costs!

We all have questions about why health care costs continue to rise at such alarming rates. And while the answers are sometimes complex, one main reason for these rising costs is that people are using a greater number of health care services than ever before ... and these services are carrying much heftier price tags!

CPChem is committed to doing what it takes to keep costs down while still providing employees with access to quality health care. But the simple fact is, we can't do it alone. It will take everyone working together — doctors, hospitals, drug companies, insurers, lawmakers, employers and individual "consumers" like you. It's important for each of us to do our part to help slow the increase in health care costs.

It may seem like you alone can't make a difference. But the truth is, there are six simple things you can do that will make a huge difference!

1. Buying Generic Drugs — Some Things You May Not KnowA brand-name drug is one that was produced under a patent that gives a company exclusive right to produce and sell it for a certain amount of years (allowing them to sell the drug at a higher price). After that patent expires, any company can make and sell that drug under a new generic name. A generic drug usually costs less than one-third the price of its brand-name equivalent and is just as effective. Generics must contain the same active ingredients and meet the exact same FDA standards as the originals. You can reduce your prescription costs by taking a few seconds to ask your doctor, before you leave your appointment, if a generic drug is available instead of a brand-name. Think of it this way — a generic suntan lotion offers the same SPF 30 protection as a brand name suntan lotion. The only difference — it costs a lot less!
2. Don't Be Intimidated — Ask QuestionsBefore you agree to have any medical, dental, or other health care procedure, make sure you understand why it's necessary. Find out what difference it will make in your treatment. Tests can be expensive and some carry health risks. Why risk it if it's not necessary? When you ask questions, make sure all your questions are answered. If your doctor uses terms in his or her answer that are unfamiliar to you, ask him or her to explain them in simple terms. After all, your doctor is working for you — and, as the boss, you have a right to know!
3. Use the Emergency Room for Emergencies Only Emergency rooms are designed for life-and-death situations — i.e., chest pains, severe shortness of breath, uncontrollable bleeding, severe burns, etc. If you go there with minor medical problems, you'll probably have a long wait and a more expensive bill than you were expecting. Most of the time, an ear infection, fevers and other irritating but "minor" ailments are best — and more quickly — treated in your doctor's office. Your doctor knows you and has your complete medical records. You'll receive more personalized care for a fraction of the price of an emergency room visit. And if your doctor isn't available, try an Urgent Care clinic. It usually costs the same as a doctor's visit.
4. Know your Health Insurance BenefitsUnderstanding what your health insurance plan covers can help reduce health care costs significantly. Your health benefits do not cover for every medical service, procedure, device or drug that a health care professional may decide to use. Before you go to the doctor or choose to have a medical procedure done, take a minute to check out your Employee Benefits Handbook (also available on www.benefitium.com) so you know what is covered and what might be additional money out of your pocket. After all, you wouldn't go to the closing on your new house without knowing how much it's going to cost you!
5. Take Care of YourselfThe most effective way to control your health care costs is to develop a healthy lifestyle that will prevent costly health problems. Eat a balanced diet, exercise regularly, and get plenty of sleep. In addition, take protective measures such as wearing a helmet while biking, your seatbelt in the car, and sunscreen when you're outside. Limit the amount of alcohol you drink and if you smoke, try to quit. Your good common sense will go a long way towards saving you money in the long run!
6. Follow Your Doctor's AdviceWhen your doctor prescribes a drug or suggests a special diet, you can help reduce your health care cost by simply following that advice. Ignoring it may result in higher health care costs later - when your ailment can't be treated by a simple prescription or diet anymore.

Express Scripts Announces its Step Therapy Program for Prescription Drugs

Beginning on January 1, 2007, CPChem is introducing the Express Scripts' Step Therapy program for people who take prescription drugs regularly for ongoing gastrointestinal disorders.

The program begins when you discuss your gastrointestinal medications with your doctor or pharmacist. Based on reviews of the many drugs that have been researched, tested and recommended by medical experts, the program provides one or more drugs to start with — your "first step." These drugs are not only effective; they're also generally less costly. First-step drugs are usually generic drugs and for gastrointestinal disorders the first step generic drug is Omeprazole. Your copayment for this first-step drug is the most affordable. If your path requires more steps or medications, then Step Therapy will move you along to the next step with the approval of your doctor.

HOW THE PROGRAM WORKS

When you submit a gastrointestinal prescription that is not for Omeprazole (the first-step drug), your pharmacist will tell you that your plan uses Step Therapy. If you would rather not pay the full price for the gastrointestinal drug prescribed, you or the pharmacist should contact your doctor to discuss the merits of — and any concerns about — changing your prescription to the first-step drug. Only your doctor can approve and change your prescription to a first-step drug.

Rigorously tested and proven to be effective by the U.S. Food and Drug Administration (FDA), generic alternatives treat the same medical conditions as expensive brand-name drugs. The difference: generic drugs cost less!

How the Step Therapy Program Was Designed

In response to increasing prescription drug costs, your Step Therapy Program was developed under the guidance and direction of independent, licensed doctors, pharmacists and other medical experts. Together with Express Scripts, they reviewed the most current research on thousands of prescription drugs. Then, they carefully chose the appropriate medications to be used for "first step" medications.

Introducing the $0 Copayment Program for Prescription Drugs

CPChem continually searches for ways to help employees save money on prescription drugs, while improving health outcomes. That's why we're excited about a new voluntary program — developed in conjunction with Express Scripts — to lower out-of-pocket costs for certain prescription drugs.

$0 Generic Copay is an opportunity to assist you, the patient, to move from targeted brand name drugs to generics. Beginning in the fourth quarter of 2006, Express Scripts will be sending a letter to patients who have filled prescriptions for certain brand name maintenance drugs within the last 120 days at a participating pharmacy (retail or mail order). The letter will encourage you to talk with your doctor about changing to a less expensive generic medication. If your physician approves a move from your current branded prescription to a generic equivalent you will pay $0 for up to six months. That's right; there is no cost to you! And after six months you continue to save by only being responsible for the regular generic copay.

If you receive a letter from Express Scripts, please talk with your doctor about the potential for making a change to a generic medication. It will provide you with the same effective drug treatment, but will save you money down the road.

How to Reduce Your Costs for Prescription Drugs

With millions of Americans taking one or more prescriptions on a daily basis, companies and consumers alike are searching for ways to reduce costs. And here's the good news ... cutting the cost of your prescription drugs is not difficult! You can do it by simply taking a more active role in your treatment. Here are some tips for reducing the prescription drug price tag

Use generic drugs
Generics contain the same active ingredient as their brand-name counterparts, making them just as safe and effective — plus they can provide as much as 60 percent in savings.

Following the "non-drug" route
Lifestyle changes can sometimes alleviate symptoms with no prescription drugs required. For example, reducing caffeine, alcohol and chocolate; avoiding tight-fitting clothing and quitting smoking can help reduce symptoms of heartburn, and are great (and free) alternatives to expensive medications.

Understand your prescription plan
Understanding how the plan works can save you money. Know what is and isn't covered, and how your out-of-pocket costs are structured.

Be aware of the condition you're in
Some conditions, such as colds and flu, can be treated more effectively with over-the-counter medications than with more expensive prescriptions.

Don't refill for refill's sake!
Some prescriptions may include multiple refills for a temporary condition. Having the option to refill does not necessarily mean you must do so!

Take advantage of free samples
If you're diagnosed with a new condition or prescribed a new therapy, ask your doctor about samples. Many doctors like to provide patients with drug samples in order to determine if any side effects will be experienced before the person goes to the expense of filling the prescription.

Two for one
It may be less expensive to take one 20 mg pill than two 10 mg pills for the same effect. Similarly, it may be cheaper to split a 100 mg tablet in two than to buy twice as many 50 mg tablets.

Keep your doctor informed
You should inform your doctor(s) of what your drug coverage includes, and even ask that it be included in your medical record. This will help doctors understand the portion of the prescription cost that you have to pay.

Use the company's mail-order service, through Express Scripts, for maintenance drugs
Express Scripts mail order pharmacy allows you to order up to a 90-day supply of long-term medicines you take for chronic conditions such as heart disease, diabetes, asthma, high blood pressure, etc. Mail order pharmacies are able to purchase their medicines in bulk, which means the cost saving is passed on to you.