Lockheed Martin Works to Balance Rising Health Care Costs, Business Operations

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While you may have finalized your enrollment in health insurance coverage through Lockheed Martin for the 2014 year, we never consider our health insurance work “final.” We are continuously looking for ways to manage rising costs and prepare for the future requirements of the health care reform law.

The LM HealthWorks Plan, an Aetna PPO (preferred provider organization), is Lockheed Martin’s primary medical insurance plan. A PPO allows plan participants the freedom to choose the doctors and hospitals they want to visit. By choosing preferred providers in the plan’s network, participants pay lower fees, but out-of-network providers are still covered.

As a business, it is important to us that we achieve a balance between delivering comprehensive health and wellness resources, ensuring what we offer aligns with our industry peers and remaining cost competitive. Our health care costs affect our business: Ultimately the cost to provide health insurance and wellness programs is passed to our customers.

“Our company and country face increasing health care costs and the proactive, preventive benefits offered through Accelerating a Better You and our health care coverage are more important than ever,” said John Lucas, senior vice president, Human Resources and Communications, in an Oct. 9 memo.

Understanding the cost of health care has become increasing difficult as companies – both large and small – move to health plans that are tied to accounts, like the Lockheed Martin LM HealthWorks Plan HealthFund, which are used to offset out-of-pocket medical costs.

Standard copays may be easier for health consumers to comprehend, but employers have shifted to PPO plans that provide discounted rates for members and often have an account (like the HealthFund) that offsets the cost of the bill.

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The Breakdown

  • More than $1.2 billion: That’s how much Lockheed Martin pays to cover the majority of health coverage costs for about 320,000 employees, family members and retirees.
  • $11,457: What the average total health care costs nationwide per employee in 2012, according to Towers Watson/National Business Group on Health Employer Survey on Purchasing Value in Health Care.
  • $1,000: That’s the amount employees can earn toward their HealthFund each year.
  • $600: That’s how much an employee’s spouse or same-sex domestic partner can earn toward their Health Fund annually.
  • 34 percent: The average number of employees who roll over funds each year.
  • $400: The average amount those employees rollover into their HealthFund.

What’s Next for Health Care Reform and the Corporation
As aspects of Health Care Reform continue to roll out in the next several years, Lockheed Martin will continue to take steps to comply with the law. But the Corporation will also have to continue to manage increasing costs.

Total health care spending in the United States is expected to reach $4.8 trillion in 2021, up from $2.6 trillion in 2010 and $75 billion in 1970, according to a report from Aetna titled “The facts about rising health care costs.” In fact, health care spending will account for nearly 20 percent of gross domestic product – about one-fifth of the U.S. economy – by 2021.

Beginning in 2015, under the new health care reform law, at least one employer-offered plan must meet two requirements: minimum value and affordability.

To meet the minimum value requirement, the plan must pay for at least 60 percent of plan costs. The remaining costs are paid for by the covered individuals in the form of co-pays, deductibles, co-insurance and other cost-sharing features. On average, Lockheed Martin pays more than 80 percent of plan costs for employees.

To meet the affordability requirement, the cost of the plan for employee-only coverage must not exceed 9.5 percent of the employee’s household income.  It is Lockheed Martin’s intention to offer all eligible employees at least one medical plan that meets the “minimum value” and affordability standards. 

The “Cadillac Tax,” the most distant but significant  piece of legislation associated with Health Care Reform, will go into effect in 2018. Essentially, this 40 percent excise tax will be imposed on employer health plans, including retiree plans, with annual premiums exceeding the limits determined by health care reform regulations.

Lockheed Martin could pay millions in “Cadillac Taxes” starting in 2018 if plan changes are not made to avoid the excise tax. Most employers are taking steps now to avoid the excise tax in 2018 and beyond.

You can learn more about the LM HealthWorks plan at www.lmhwplan.com.

Find out more about health care reform through www.HealthCare.gov.