© 2007 AT&T Knowledge Ventures. All rights reserved. AT&T and the AT&T logo are trademarks of AT&T Knowledge Ventures. The Importance of Health Care at AT&T

Page 2 The U.S. spends more per capita on health care than most other developed countries; Americans spend more on health care than on housing, food or energy Although the rate of increase for health care costs has slowed somewhat, it is still one of the fastest-rising costs in America, outpacing the rate of inflation A September 2007 survey by the Kaiser Family Foundation found that health insurance premiums rose 6.1 percent in 2006, faster than inflation, which rose 2.6 percent A variety of factors, from technological advances to advertising, fuel Americans’ consumption of health care The State of Health Care in the U.S.

Page 3 U.S. Health Benefit Costs Source: Hewitt, Health Value Initiative, September 2007 Assumptions: Data based on large employers; based on medical, prescription, and administrative costs * projected National Average Annual Medical Cost Per Employee +15.5% +15.6% +13.2% +10.4% +8.5% +5.7% +8.9% Costs of providing health care rise every year

Page 4 AT&T’s Corporate Health Care Challenge Total Annual AT&T Health Care Expense AT&T provides health care coverage for 1.2 million people 714,000 Active employees and dependents 505,000 Retirees and dependents Large insured population adds to AT&T costs $5.5 billion

Page 5 AT&T Health Care Costs Compared to National Average AT&T employees use more health care than the national average 2006 Greater usage helps push AT&T costs above average *Average for employees covered by core bargained-for contract $9,108 $10,225 $9,041 National Annual Average Health Care Cost Per Person AT&T Bargained-For Annual Average Health Care Cost Per Person* AT&T Management Annual Average Heath Care Cost Per Person

Page 6 AT&T’s Health Care Objectives Maintain a healthy workforce and engage employees in behavior changes Offer high-quality, cost-effective health care coverage that is valued by AT&T employees and their families Target employee cost-sharing at market levels to allow AT&T to attract and retain talent Create greater employee and retiree involvement in controlling health care costs and making informed health care decisions

Page 7 Employee Contributions to Health Care AT&T employees' contributions well below market 75% of Americans pay more for healthcare than AT&T employees US Workforce Individual Coverage Family Coverage Source: For National Averages - Hewitt, Health Value Initiative, September 2007; For AT&T – JP Morgan -- Assumptions: Based on medical, prescription and administrative costs $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 25th Percentile 50th Percentile 75th Percentile AT&T Mgmt

Page 8 What AT&T Needs to Compete Globally Improved value from its health care investment – healthier, satisfied employees Lower, sustained, predictable costs More employee responsibility for making wise health care decisions and managing their care Improved employee awareness of health care costs and employer’s investment Administrative efficiency

Page 9 AT&T’s Efforts to Improve Cost and Enhance Quality Work closely with health plan providers to control costs and ensure performance Emphasize individual accountability and responsibility Employee access to information and tools Plan designs that promote informed decision-making Change plan design and contribution requirements Promote consumer-driven health plans Increase employee financial stake in decisions Improve quality, efficiency and effectiveness of care Care management programs Performance-based health care strategies, such as making data transparent to employees on doctor and hospital performance and pricing Improved prescription delivery Copy

Page 10 How AT&T Employees Can Assist in Managing Health Care Costs Focus on a healthy lifestyle Make informed decisions on health care Use available on-line tools and resources Keep out-of-pocket costs as low as possible: Choose the coverage plan that makes the most sense for you Use network providers and choose generic prescriptions

Page 11 AT&T’s Leadership Role in National Health Care Debate AT&T and the CWA have joined forces with the Better Health Care Together Coalition to pursue national health care policy changes AT&T is also active in working toward health care policy reform with a number of other national coalitions AT&T has joined a coalition of major employers in an initiative called Dossia, aimed at accelerating the development of electronic health records to improve the quality of health care and lower overall costs

Page 12 Health Care Summary AT&T continues to provide above-market health care coverage to its employees and retirees AT&T is leading the way with a consumer-driven approach to health care, which is helping control costs for the company, employees and retirees AT&T is out in front of the national health care dialogue Employees and retirees play an important individual role in controlling health care costs Copy

© 2007 AT&T Knowledge Ventures. All rights reserved. AT&T and the AT&T logo are trademarks of AT&T Knowledge Ventures. The Importance of Health Care at AT&T