First, let's review what we've already accomplished:

1. Rapid Inspection Process: We added a Rapid Inspection Process (RIP calls) to verify the customer's understanding of underwriting questions, in order to ensure we are accepting the proper risks based on health questions seen on the application.

2. Enhanced Underwriting: About 2 years ago, at the suggestion of our President's Council, UA introduced a new Medicare Supplement application with additional underwriting.

3. Excessive Outpatient Hospital Charges: After an intensive effort by UA and others, the government agreed to change the way Medicare coinsurance is calculated for outpatient hospital services. Previously, the patient always owed 20% of the total bill, while the percentage paid by Medicare had steadily dropped over the years until it averaged about 50% of the total bill. With the change, Medicare established set "approved" amounts for outpatient hospital services limiting the amount hospitals can receive for those services, and the percentages of those amounts paid by the patient and Medicare are gradually being shifted back to 80% by Medicare and 20% by the patient. This change is reducing our expenditure for outpatient hospital charges dramatically. Because of the positive impact seen from this change, further improvements in this area are also being pursued.

4. Revisions to Medigap Standardized Plans: The NAIC currently has a committee charged by Congress with the revision of several of the standardized Medicare Supplement plans. The committee will revise the Plans H, I, and J in order to reflect the recent addition of a prescription drug benefit to the core Medicare program. In addition, the committee will draft two new Plans, dubbed "K" and "L." Plans K and L are intended to promote cost-sharing between policyholders and insurance providers, most likely in the form of co-pays. The good news for UA Agents is Torchmark has a representative on the NAIC committee, who will be intimately involved in the committee's planning and proceedings. The current Plans' revisions and the two new Plans are expected to be available by the end of 2005.

5. UA Part A Deductible Waiver Program: Over the last several years, UA sought an opinion from the Office of Inspector General of the U.S. Department of Health and Human Services regarding our intended use of a preferred network as part of our Medicare Supplement health insurance policy. As previously announced, we received the favorable opinion we wanted.

United American is now contracting with Participating Hospital Networks to include its Medicare Supplement policyholders in the hospital network. Customers can continue to go to any Medicare approved hospital, preserving the freedom of choice they have always had; however, for customers choosing to go to a participating hospital, that hospital has agreed to waive all or part of the Medicare Part A Deductible, which is $876 for 2004. UA saves by not having to pay this deductible to the provider and passes along a portion of the savings to its policyholders.

In what ways do UA's policyholders benefit? The most immediate benefit is the share in savings. UA saves all or part of the Part A deductible that was waived by the hospital. After discharge from the hospital, the insured will receive a credit from UA that can be used to help pay their next premium payment. At this time, the credit is $100 (available where state approved, see pg. 2 for details) and this represents the policyholder's direct participation in the savings. UA's Part A Deductible Waiver program is applicable only to those customers on Plans B, C, D, F and G; Plan A will not be included because the Part A deductible is not a covered benefit under Plan A.

The best news is the long term effect this new program can have on UA's Med-Supp insurance premiums across the board. The primary benefit to the insureds under this program should be in the area of controlling rising health care costs which has a direct impact upon health insurance premiums. Savings gained by both the customer and UA have the potential to positively impact future Med-Supp premiums not only for those policyholders who select network hospitals (without increasing costs for those who do not), but for all UA policyholders.

In order for Agents to promote this program to their new business customers in any state, two things must happen. UA must first get advertising approval for the program for that specific state and secondly, obtain hospital networks in the state to provide services. After this occurs, we may then promote the Part A Waiver Program brochure and participating hospitals. As outlined below, 19 states have approved our advertising so far, with the 11 newest ones in the process of being released.

1. The 8 states where we have already released the Part A Waiver Program's advertising material are: FL, GA, IL, IN, MS, OK, SC and OH.

2. The 11 additional states where approved advertising will be released next week are: AL, AZ, DE, IA, MI, NE, NV, NM, UT, WV and WI.

Branch Office Supply will ship brochures to Branch Managers and GAs in each of these new states as approved.

The participating hospitals within approved advertising states may be seen on UAOnline. If your state is not yet reflected on this list, or if you do not see as many hospitals included as you would like in your state, please be patient. Intense action is underway to expand advertising approvals and hospital networks within each state. Approval has been a priority for every state. UA has two outside firms actively involved in signing up hospitals and may consider adding another firm to assist.

As each new state's approval is received, or new hospitals are added, these will be updated on UAOnline. We anticipate that only a few states may not approve the program for advertising.

These are very exciting changes! I suggest that the Agents in approved states immediately begin making lead marketing plans for our quickly-expanding Medicare Supplement sales opportunities! UA has always been a great value, and that value is being increased!