The Principal Financial Group Offers New Defined Contribution Health Care Options.

Business Editors & Health/Medical Writers

DES MOINES, Iowa--(BUSINESS WIRE)--May 21, 2002

The Principal Financial Group(R), a premier employee benefits provider and the nation's 401(k) leader, announces the availability of next generation health care options for its self-funded customers. Also known as defined contribution or self-directed health care, next generation options offer employers opportunities to effectively manage benefit costs by allowing members to actively participate in choosing health care providers and provide input on how their benefit dollars are spent.

"Members of traditional health care plans pay only a fraction of the true cost of their care in the form of co-payments and coinsurance, with the employer picking up most of the expense. Due to economic conditions and rising health care costs, some employers are finding that offering such traditional health benefits is just too costly," noted Jim Charling, vice president of the National Accounts division of The Principal(R).

"Next generation health care options provide these employers alternatives. By altering the way they provide benefits, employers have an opportunity to continue offering health care options and engage members in the purchase of their own care, without taking on such a fiscal responsibility," commented Charling.

Employers participating in next generation health care set their health plan strategy by electing plan design components that best suit their needs, and the needs of their employees. Potential design components include:

-- Preventive and routine care -- Benefit plan paying 100% of covered
preventive and routine care, up to a predetermined amount.

-- Health Care Account (HCA) -- The employer makes funds available to each
member by using a health care account. The HCA is used to reimburse members for
all covered health care expenses until funds are exhausted. Employers have the
option to allow HCA values to roll over year to year. Employers can also
continue to offer Flexible Spending Accounts (FSA). FSA dollars remain separate
from the HCA and have different requirements for reimbursement.

-- Catastrophic deductible -- Once members deplete their HCA funds, they must
satisfy an annual catastrophic deductible before the plan again begins to pay
for covered charges.

-- Catastrophic protection -- After satisfying the annual catastrophic
deductible, the benefit plan pays 100% of covered expenses up to a lifetime
maximum amount. Because this plan is self-funded, The Principal can offer
assistance in defining an employer's catastrophic costs. Specific and/or
aggregate excess loss insurance will continue to be available as with today's
traditional health plans.

Although the primary responsibility resides with the members, catastrophic plan design components are preserved to secure the health care cost protection that many need.

Employers can also select from several elected components, which provide flexibility to customize their specific benefit offerings. These elected components may supplement an existing plan, completely replace an employer's current health plan, or perform with self-funded medical, prescription drugs, dental and/or vision coverage. Employers can also select preventive and routine benefit amounts, HCA amounts, catastrophic deductibles and catastrophic prevention.

"Stressing prevention and self-education are key aspects to next generation healthcare. By encouraging members to take an active role in their own health and wellness purchasing decisions, employers can keep their benefit programs in place to meet the needs of their employees cost effectively," said Charling.

The Principal makes available to plan members Principal Health News(SM) (www.principal.com/principalhealthnews.com), an interactive source for personalized health and wellness information via such tools as a searchable medical library, self care information centers and Web calculators.

The Principal also offers a variety of Web tools via www.principal.com. By accessing the secured site, employers can manage their benefits by conducting such business as adding new members and making member changes, reviewing and printing billing statements and paying premiums via electronic funds transfer. Members can use the site to access a personal summary of their healthcare benefits, view provider directories, check FSA balances and email questions to The Principal.

The Principal announced a health care program for growing businesses earlier this month--Innovative Group Benefit Solutions. This program offers small to mid-sized companies lower premium options, higher deductibles and encourages the use of in-network providers and include increased cost sharing with members.

The Principal Financial Group(R) (The Principal (R))(1) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and mortgage banking through its diverse family of financial services companies. More employers choose the Principal Financial Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States(2). A member of the Fortune 500, the Principal Financial Group has $120.2 billion in assets under management(3) and serves some 13 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

(1) "The Principal Financial Group" and "The Principal" are registered trademarks of Principal Financial Services, Inc., a member of the Principal Financial Group.

(2) CFO Magazine, April/May 2001, based on total plans served in 2000 by insurance companies, banks and investment firms.

(3) As of March 31, 2002.