Flat Rate shipping offers three main settings that you need to use in order to achieve this. First is the 'Calculation Type', this is needs to be set to 'Per Item' because you want to calculate the shipping based on the number of items in the order.
Since you want the first item to cost 2.95 and all extra items 1 each, you need a way to distinguish the first item from the second, third, fourth etc. You can do this by setting 'Cost per order' to 1.95 and 'Default Cost' to 1.
Every order starts of with at least 1 item, this will add up to 2.95:
1 item: 1.95 'Cost per order' + 1 'Default Cost' = 2.95
2 items: 1.95 'Cost per order' + 2 'Default Cost' = 3.95
3 items: 1.95 'Cost per order' + 3 'Default Cost' = 4.95
etc.
That should work, right? :)