​Rising healthcare cost has officially taken over the conversation according to Lockton's 2026 US Benefits Survey

Cost pressure isn’t new. But the urgency behind finding solutions and not disrupting employees is causing some tension inside US companies.

This tension is stemming from groups that generally focus on different outcomes.

• HR is optimizing for: 
  • Talent attraction/retention 
  • Employee experience 
  • Compliance
• Finance is optimizing for: 
  • Cost predictability 
  • Margin protection 
  • Capital allocation discipline 

It’s important to remember that both are right. We’re just solving for different outcomes with the same dollars.

Managing rising costs is the primary decision-making driver 
Employers have always cared about cost. But 2026 marks a clear shift in how much.

• 54% of employers now say reducing cost is the top factor in benefits decision-making - up sharply from 38% just one year ago
• Meanwhile, talent attraction and retention has dropped to 19% as the top priority in decision making - down from 30% in last year's survey.

The trend that started last year is now a reordering of priorities.
And here’s where it gets more interesting:

• 81% of employers still say employee impact is a primary consideration

And so we end up with a balancing act - cut costs and  don’t upset employees.
That’s a constraint to strategy and implementation. As such, employers are increasingly asking for more help from their brokers and consultants.

Everyone’s Looking for Answers
You might expect that kind of pressure to drive bold action.
It hasn’t…yet.
Instead, the survey shows a market that’s experimenting:

• Employers are testing different cost-saving strategies, leaving no stone unturned
• Progressive approaches to specialty drug and chronic condition management as well as captive stop-loss arrangements are under serious consideration.
• No single approach has emerged as the clear path forward 
• Companies are taking the time to learn more about disruptive strategies such as ICHRAs, RBP and spousal exclusions.

In other words, organizations know they need to do something—but they’re still trying to figure out what works without creating too much disruption.
Another example shows up in network strategy:

• 94% of employers still offer broad national networks
• When narrow/high-performing networks are used, they’re often offered as an option

Bottom Line: Employers want savings and are not yet ready to force change.

Incrementalism Prevails
When zooming out, a consistent theme emerges - most employers are choosing incremental and progressive changes over structural, disruptive ones. For example,
Eligibility & Plan Design

• 23% apply spousal surcharges (up from 20% in 2025)
• 13% exclude spouses with access to other coverage (up from 9% in 2025)
• Almost 3% exclude spouses entirely (up 300% from 2025)

Pharmacy Strategy

• 67% still bundle pharmacy with medical plans
• 26% carve out specialty drugs from PBM
• 3% are requiring specialty onsite cost of care management

Affordability Efforts

• 59% offer lower-cost plan option
• Only 10% use income-based contributions 

These are real actions. They’re measured, limit disruption, avoid big tradeoffs and they tend to produce measured, incremental results.

Targeted Investments Continue
Despite rising cost pressure, employers are still investing in their people. While reducing costs is the top priority for survey respondents, it is not the only consideration. Notably, 17% of plan sponsors rank improving quality of care as their top priority.
Selectively, where the data, utilization and benchmarking justify investment, it’s happening.

• 73% say employee wellbeing programs remain a priority
• 63% offer enhanced EAPs for behavioral health support
• 24% of employers covered GLP-1s for weight-loss and another 24% are actively considering it if eligibility is coupled with a lifestyle management program.
• Advocacy and navigation services continue to grow year over year 

This is a shift toward targeted investment—focusing on areas tied to high-cost claims or meaningful uplift to employee experience.
What This Really Means for Employers
The headline isn’t just that costs are rising. It’s that the current pace of change doesn’t match the current level of pressure. That combination naturally leads to slower, more cautious decisions. And the risk is incremental action in a non-incremental environment.
The 2026 Lockton Survey makes clear that maintaining the status quo is no longer sustainable and the questions heading into 2027 become:

• Which plans and strategies have strong utilization and are showing value?
• Where are you willing to accept disruption?
• Which tradeoffs are worth it? For instance, would you accept an incremental 3% cost increase for a 1% reduction in turnover?
• How long can incremental change keep up with accelerating costs?

These are not easy conversations but they’re the ones this data is pointing toward.
Final Thoughts
While the 2026 survey doesn’t point to a single winning strategy, it does show that the US benefits market is in transition caught between:

• Financial reality
• Employee expectations
• And organizational hesitation

Since 2019, our integrated approach to Complex Claim Management, Medical Consulting & Stop-Loss Brokerage has resulted in

• $456M of verified claims expense reductions
• $186,000 average claim reduction per case 

and in 2024, 

• $80.4M of verified claims expense reductions
• 17,630 member cases reviewed

and more than $100M in 2025 so far...

CLICK BELOW to learn more about how our Complex Claim Management practice improves care and saves money  

• Loss Ratios Are Surging

Industry-wide stop loss premium now exceeds $40B, and loss ratios are up to 85%—well above the historical target of 75%, which itself is 10–15% higher than a decade ago. Carrier leaders are calling this “unsustainable,” and many expect a 3–5 year correction cycle. Carriers are reinsuring themselves at a higher rate than prior years signaling their concerns with risk, volatility and rising cost.

•  Capacity Is Up, But So Is Pressure

More capacity is creating a bookend effect. Employers with favorable experience are still seeing rate passes or decreases. On the flip side, employers with poorly performing experience are getting hit hard—resulting in as much as 300% year-over-year increase and initial renewals hitting rate caps.

• It May Not Be Textbook, But It Feels Hard

The textbook definition of a hard market are premium increases coupled with decreases in capacity and available terms. While it’s encouraging that capacity is growing, if you’re getting a steep rate increase or losing favorable terms, it feels hard…very hard.

What Does This Mean for Employers?

• Average Rate Increases Are Rising
  Carriers are targeting 22–29% increases across their blocks for 2026, up from 17–22% last year. For comparison, Lockton clients purchased at an average 12% across our $2B+ block last year. As a result, clients who hadn’t felt the pressure to take on more risk, so deductibles remained lower than market norms. To offset proposed increases, clients are reviewing deductibles using tools such as Monte Carlo to determine acceptable risk / cost levels.
• Renewal Timelines Are Compressed
  Carriers waited for September data to make underwriting decisions, which pushed the renewal timeline back by a full month over prior years’ experience. That’s putting pressure on our clients and consulting teams. Nine months of data (through September for January renewals) is now the norm, with very few exceptions. Early lock offers (before the 90-day mark) are now seeing premium loads of 7–12% because claims haven’t fully materialized. The delay in renewal and alternative proposals is a clear reflection of broader market uncertainty.

Other Trends We’re Tracking

• Fewer Rate Cap / No New Laser contracts are being made available.
• Claim denials are increasing, likely driving up E&O exposure.
• Carrier performance metrics are tightening underwriting behavior.
• Providers are using AI in managing complex cases and driving claims costs.
• Reimbursements are taking considerably longer creating cash flow burdens for plan sponsors​.

How Can Employers Navigate This Market?
We recommend several strategic solutions to help employers navigate the increasingly complex and costly stop loss renewal environment for 2026 and on a go forward basis.

Start the process earlier in 2026 We have seen a delay in renewals and proposals as carriers waited for September claims to firm up / finalize their proposals. Leverage reporting from your broker, consultants and carriers to start these conversations early in 2026 and create an ongoing cadence throughout the year. While the early lock options (if available) may carry premium loads, these options should be on the table along with those listed below.

​Increase Deductibles Strategically
Using data and actuarial tools, raising deductibles to manage premium costs and absorb manageable risk is a proven approach. Monte Carlo risk analysis helps clients determine the appropriate deductible level given risk tolerance, claims utilization, predictive analytics and other factors. In fact, deductibles are being increased at nearly twice the rate this year as compared to 2024. For example, one client had maintained a $200,000 specific deductible for 7 years. By raising the deductible to $350,000, they were able to save 40% in stop-loss premium and receive better terms. This trend is expected to continue as employers seek to balance cost containment with coverage.

Monitor and Track Claims
Using technology to track claims through not only financial benchmarks but clinical triggers that flag claims for review. Reporting and tracking on reviewed claims will reveal common issues such as

• Site of care alternatives
• Potential coding errors
• Aberrant pharmacy utilization

Major issues are generally infrequent but significant dollars are involved when identified. In addition, this reporting can project future costs as well as support more accurate underwriting and strengthens the employer’s position during renewal negotiations.

Use Predictive Modeling and Data Analytics
Leverage both internal and external resources for:

• Predictive modeling
• Historical large claimant analysis
• Premium benchmarking

This allows for earlier evaluation of renewal ratings and supports more informed negotiations with carriers.

Consider Alternative Risk Strategies
To mitigate the impact of high-cost claims, we are seeing increased adoption of:

• Captives: Risk transfer mechanisms that redirect underwriting surplus back in-house.
• Aggregating Specific Deductibles: This strategy helps protect against unexpected costs by accumulating claims across covered individuals rather than focusing on a single high-cost claimant.

​Press for Forward-Looking Underwriting
Given the rise of emerging treatments (e.g., gene therapies, orphan drugs), we emphasize the importance of underwriting models that account for future risk, not just historical claims data. This is especially critical as many high-cost therapies enter the market before they appear in claims history.

Use Clinical Team Support
Clinical teams (including MD and RN support) help evaluate high-cost claimant liability as well as assist with complex and unique clinical inquiries such as

• Support when needed during an appeal or denial process
• Consultation around the efficacy of emerging treatments
• Advice regarding protocols for cost management programs

Click here to Success Stories from Lockton's Clinical Teams 

​Streamline Premium Billing Procedures
Proof of eligibility, especially for COBRA and LOA, is under tighter review—leading to reimbursement delays stricter claims adjudication, and increased claims denial.  Streamlining processes for billing and collecting stop loss premiums for all third-party stop loss carriers​ provides benefits such as

• Timely premium payments to reduce claim denials or delays.
• Lower costs by having carriers quote premiums net of commissions and service fees, which may reduce premium taxes and overhead.
• Enhanced client experience through a payment portal offering real-time premium calculations, reminders, and secure ACH payments.

As employers are planning their 2026 benefits strategy, managing costs has overtaken attracting and retaining talent as the most important factor in decision making. 

Over the past several years, plan sponsors have faced a global pandemic, rising healthcare costs, economic uncertainty, shifting employee expectations and now rising tariffs / trade wars. While "attracting and retaining talent" has long been a key priority, the 2025 Lockton National Benefits Survey highlights a notable shift: "reducing costs" has now become the top factor in benefits decision-making.
​

Despite this shift, many plan sponsors have not yet taken significant steps to lower costs. While some are beginning to optimize their plans, most are prioritizing cost-management strategies that minimize disruption rather than implementing more impactful changes. The challenge lies in balancing the need to reduce costs with the pressure to meet employees’ expectations for benefits — plan sponsors remain cautious about changes that could disrupt their workforce or be seen as not meeting members’ perceived needs. Continuing to delay meaningful action, however, could make it more difficult to achieve cost savings, ultimately leading to tougher decisions down the line.

All of this is happening amid a growing spotlight on plan sponsors to meet their fiduciary responsibilities in managing benefits plans. As with retirement plans, employers have an opportunity to educate themselves on their fiduciary duties and take proactive steps to document how they are fulfilling these obligations.

Password for accessing the survey is Locktonbenefits2025

Snow, sleet, freezing rain made the drive up 89 from Boston to Hanover longer and more stressful than I’d planned. Make a plan and God laughs. The effort, however, was worth it for it was another great Tuck PEVC Conference.  Lockton was once again a sponsor. Bobby Steinsdorfer D’07 and I were in attendance as well as Mach Millett, our Alternative Investment Leader and CINO. Mach participated on the “Nuts & Bolts – The Broader Private Equity Ecosystem” panel.

The event kicked off with dinner at The Inn which included a fireside chat Marni Payne D’98, Managing Director at Berkshire Group and Professor Josh Lewis, Executive Advisor for Tuck CPEVC. Marni is focused on the consumer market in which it is hard to gain share of voice and share of eyeballs due to the fickleness of the changing consumer. They covered a wide swath of topics including fads vs. trends, best days and worst days in PE and what makes Berkshire Group different. I appreciated her discussion of alignment with the founder / management team as the formula for growth, scale and success. The business is not about “the chase” but focused on “the marriage”.

Pine at the Hanover Inn was busy after dinner, and I decided it was best for this 88 to hit the rack. It was a good decision as I was able to get in a 7.5 hike around campus before the event kicked off on Friday. Campus was quiet and beautiful with a fresh coat of snow. The Building & Grounds crew was clearing the ice at Occum Pond for some Winter Carnival skating and a handful of houses on Webster Ave. were forming the foundations of snow sculptures.

The day started with another fireside chat with Jeffrey Crisan D’95 and Jamie Havran T’25, Conference Co-Chair, & PE/VC Fellow. Once again, a wide range of topics was covered. Healthcare was the first discussed. Jeff feels that States as opposed to the Feds will be focusing on healthcare regulation over next 4 years. Mental health is an area of focus in healthcare fueled by HITECH, ACA, Mental Health Parity Act and demand accelerated through the pandemic. In technology, it’s best to think of the long-term benefits – think internet, SAS and now AI. He gave a wonderful illustration of evolving the podiatry business model into one that provides integrated care management to diabetes patients.

I attended several panels and a highlight was Energy & Climate featuring Jeph Shaw T’15, Sara Simonds T’03, James Socas, and Dave Russ - moderated by Jordan Swett, T’25. Some of the issues that resonated with me are

• Wind and solar are growing rapidly (90% cost reduction in solar)
• Most investments are going to red states (Texas is biggest renewable state)
• Family offices are looking for climate investments from a social lens
• Capital markets aren’t working efficiently for innovation investments like climate

Alas, I had Zoom call that ended my day at Tuck in the early afternoon. I did grab dinner at Murphy’s with some fellow Alums and then watched the Big Green beat Harvard in Men’s Hockey. All in all, a very successful day at Dartmouth.
​
Other Key Takeaways:

𝗦𝗲𝗰𝗼𝗻𝗱𝗮𝗿𝘆 𝗠𝗮𝗿𝗸𝗲𝘁 𝗚𝗿𝗼𝘄𝘁𝗵 - liquidity solutions are expanding, and LPs are leveraging the secondary market more strategically than ever.

𝗡𝗼 𝗧𝗼𝗹𝗲𝗿𝗮𝗻𝗰𝗲 𝗳𝗼𝗿 𝗗𝗼𝘄𝗻𝘀𝗶𝗱𝗲 𝗥𝗶𝘀𝗸 - with higher interest rates and economic uncertainty, firms are laser-focused on resilient deal structures and downside protection.

𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗥𝗮𝗶𝘀𝗶𝗻𝗴 𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 - differentiation is critical. Breaking through the noise in an era of information overload takes more than just a strong track record.

𝗣𝗼𝘀𝘁-𝗖𝗹𝗼𝘀𝗲 𝗩𝗮𝗹𝘂𝗲 𝗖𝗿𝗲𝗮𝘁𝗶𝗼𝗻 - the focus continues to shift from financial engineering to operational excellence, making real impact at the portfolio level.

𝗧𝗵𝗲 𝗣𝗼𝘄𝗲𝗿 𝗼𝗳 𝗦𝗮𝘆𝗶𝗻𝗴 𝗡𝗼 - disciplined investing isn't just about where capital is deployed; it's also about the deals and ideas that don't make the cut. Knowing when to pass is just as important as knowing when to commit.
​
Several Tuck students looking at careers in PE or VC asked me “Smitty, how does insurance fit in with Private Equity and Venture Capital?” In short, our business help clients through fund level insurance, transactional liability and insurance due diligence. Given firms’ exposure to a variety of risks across different industries, specialized insurance products are needed both at the fund level and the portfolio company level. Risk appetite and approach to insurance depend on factors like firm culture, past relationships, deal structures, leverage, and exit strategies – to name a few. So here’s a primer on the topic and where Lockton works.

A. Fund-Level Insurance Needs (Protecting the Firm & Executives)

• General Partner Liability Insurance (GP Liability): Protects the firm and its executives from lawsuits related to fund management, breaches of fiduciary duty, and investor disputes. Some firms are facing increased scrutiny from LPs and regulators.
• Directors & Officers (D&O) Insurance: Covers the firm’s executives against claims from LPs, regulators, or other stakeholders. LPs may demand this coverage before committing capital.
• Professional Indemnity (Errors & Omissions) Insurance: Protects against lawsuits arising from claims of mismanagement, negligence, or failure in investment strategies. LPs may also require this type of coverage.
• Reps & Warranties (R&W) Insurance: Used in M&A deals to cover breaches of reps and warranties made by sellers, reducing escrow requirements. Sometimes R&W allows deals to close faster and with less negotiation over escrows and indemnities.
• Cyber Liability Insurance: Protects against data breaches and cyberattacks affecting sensitive deal-related information. Firms handle sensitive financial and personal data, making them prime cyberattack targets.

B. Portfolio Company Insurance Needs (Protecting Acquired Businesses)

• Property & Casualty (P&C) Insurance: Covers physical assets, business interruption, and general liability. Some lenders and investors require P&C coverage as part of financing agreements.
• Management Liability (D&O, EPLI, Fiduciary): Covers executives of portfolio companies against lawsuits related to governance and employment practices.  These protections are becoming increasingly essential for retaining and attracting top executive talent.
• Cyber & Data Breach Insurance: Protects against financial, reputational and operational risks of cyberattacks. Data breaches are costly and operationally disruptive. Many portcos operate in sectors with sensitive data (e.g., healthcare, fintech).
• Workers’ Compensation & Employee Benefits Liability: Ensures compliance and protection against people-related risks. Workers’ Comp and Benefits (ACA) are not only legally required coverages but can assist in increasing productivity as well as talent attraction and retention.
• Trade Credit & Political Risk Insurance: Helps mitigate risks in global operations, especially in emerging markets. Important for global expansion and risk mitigation in emerging markets.

• Transactional Risk Insurance (e.g., Tax Liability, Contingent Liability) Covers unexpected tax assessments or legal liabilities discovered post-acquisition. Helps firms avoid costly surprises after closing deals.

C. Why Some Firms Look To Avoid Insurance

• Cost Considerations (“It costs too much”): Some firms may view insurance premiums as an unnecessary expense, preferring to self-insure. Your broker should be well versed in your business to market possible coverages to help you determine whether the protection is worth the cost. Also, self-insuring can be more expensive in the long run. Reps & Warranties insurance, for example, can reduce escrow needs and improve capital efficiency.
• Risk Tolerance (“We just don’t see the risk”): Some firms, usually those with well-diversified portfolios, may prefer retaining risk rather than paying for coverage. While it was Teddy Roosevelt that said, “Comparison is the thief of joy”, we have plenty of case studies of recent lawsuits, regulatory fines, or unexpected claims affecting firms that may help firms better see the risks.
• Alternative Risk Transfer Mechanisms: Firms may use captive insurance companies or structured finance solutions instead of traditional insurance. We have lots of expertise and dedicated teams to help assess whether a captive makes sense and then how to implement and operationalize the strategy.

Insurance, done properly, is an efficient use of capital and delivers ROI.
Insurance can a tool to unlock capital, facilitate exits, and reduce deal risks. Well-structured insurance programs make portfolio companies more attractive at exit.
Your broker should understand the specific risks of your portfolio industries (e.g., healthcare, manufacturing, tech) and offer customized solutions.

​The 2024 Lockton National Benefits Survey features responses from 1,611 employers across the U.S. The employers represent a variety of industries, group sizes and ownership structures. Their responses reflect their different philosophies on how to attract and retain talent while managing the cost of their health and welfare benefits. 

Here is the Insights Report

A class action lawsuit was just filed against drug manufacturer Johnson & Johnson (J&J) in its capacity as an employer and plan sponsor.

The suit alleges that J&J breached its fiduciary duties by not taking proper measures to ensure its plan costs were reasonable as well as failing to exercise prudence in selecting its pharmacy benefit manager (PBM) and agreeing to undesirable contract terms. Specifically, the suit accuses J&J of mismanaging its employees’ drug benefits, resulting in employees significantly overpaying for certain drugs. 
​
This lawsuit is an example of the recent uptick in impending lawsuits regarding compliance with recent transparency rules, reinforcing the need for ERISA fiduciary governance.

To help navigate these responsibilities, Lockton held webcast that walked through the key steps of proper fiduciary governance for employers. Click here for a replay of the webcast

We have also created a Fiduciary Governance Toolkit to help ensure clients are well-versed on and are meeting their fiduciary duties. You can request a copy of the kit by clicking the link.

The Lockton Fiduciary Governance Toolkit includes:

• A roadmap for establishing a health and welfare plan committee to formalize plan decision-making.
• A checklist of key plan administrative functions that welfare benefit plan fiduciaries are responsible for managing.
• Sample policies to address common and uncommon situations.
• Sample welfare plan governance committee minutes to illustrate how to document prudent fiduciary processes to avoid big headaches later.

If you have questions or would like to speak with one of Lockton's Compliance attorneys, please reach out at mmsmith@lockton.com or 617-840-4515

On February 15th, NEEBC orchestrated the region's first-ever employer focused Oncology Symposium, hosted at the Dana-Farber Cancer Institute in their Jimmy Fund Auditorium. The sold out event provided employers actionable insights to promote early detection and treatment, reduce oncology costs and how to best support employees, families and caregivers on their cancer journeys.

Leading experts discussed how organizations navigate the complex world of oncology care and focus on the ever-evolving world of oncology benefits:

• New innovations in cancer prevention and early detection
• How concordant care leads to better outcomes
• The impact of social determinants of health on cancer treatments and follow up care
• How to design a benefit plan to drive maximum value and managing costs 

​As cancer rates continue to rise, it’s important to remember that employees are increasingly concerned about cancer. This event was a learning opportunity for employers to increase understanding so that they can make a difference in cancer care for their workforce. 

Some of the survey feedback on the event was:

• “Took away both long-term goals and ideas, as well as immediate, actionable items.”
• “One of my top 3 NEEBC events ever!”
• “Important topic done within an excellent session.”
• “This was fantastic!”
• “Great speakers and moderators.”
• “Eye opening!”
• “The balance, variety of perspectives, and ‘art & science’ of it all was just wonderful.”
• “Excellent storytelling throughout.”
• “Extremely informative for employers on how to support employees’ needs and challenges.”
• “I literally didn’t want to leave.”

Some key takeaways for the Symposium are

The Critical Importance of Early Detection in Cancer Treatment
The discussion underscored the stark difference in survivability rates between early and late-stage cancer diagnoses, highlighting colon cancer as a case study where Stage 1 survival rates are at 91%, compared to only 13-14% for Stage 4. The panel noted that currently, only four types of cancers have approved and reliable screenings (colon, breast, cervical, and lung), leaving a significant gap as 72% of cancers do not have early detection tests. Further discussion centered on emerging technologies, like DNA-based blood and urine tests, that aim to fill this gap, offering hope for early detection across more types of cancer. The discussion around the FDA's breakthrough designation for Grail and the focus on high specificity to reduce false positives in testing are part of the efforts to improve early detection.

The Evolution of Cancer Care: From One-Size-Fits-All to Personalized Treatment
A significant shift over the past 30 years has occurred from essentially treating all cancer patients with the similar standardized protocols to recognizing and addressing the unique cancer journey of each patient. Advancements in precision medicine, integrated support such as AccessHope and leading technology testing such as Grail, are enabling more personalized treatment plans that consider the patient's age, comorbidities, and other characteristics. The integration of these advanced testing methods with patient care, including the provision of onsite testing and screening, reflects a broader trend towards a more tailored approach to cancer treatment. The importance of second opinions for accurate diagnosis and the role of employer support in promoting a culture of prevention and early detection could provide valuable insights into how cancer care is becoming more patient-centered was also discussed.
 
The Role of Employers and Communities in Supporting Cancer Care and Prevention
There are various ways employers and communities are stepping up to support cancer care and prevention. This includes promoting a culture of prevention through lifestyle changes, providing access to advanced screening technologies like Grail, and creating supportive environments for employees with cancer. The story of the City of Portland FD shared their proactive approach to bridging the gap between testing and insurance coverage including the story of Patient #51 whose lung cancer was discovered at an early stage, underwent lifesaving treatment and implemented life extending protocols. His story was a big morale lift and energized the firefighters to get tested. Elizabeth Arnold of Latham & Watkins talked about creating a culture of sharing and well-being within the workplace and how organizational and community support can make a significant difference in cancer care outcomes. It’s important to remove stigma, ensure broad access to resources, and the critical role of partnerships in enhancing cancer care and support systems.

Over the past few years, across Lockton’s clients, cancer has remained as a top health condition and leading cost driver holding the dubious distinction as the costliest condition since 2010. Some more sobering statistics

• The number of cancer claimants increased 39% from 2018 to 2021
• Due to delayed/missed screenings, we will likely see a 44% increase in new cancer diagnoses this year, including more late-stage cancers
• The top two categories (Malignant Neoplasm and Leukemia, Lymphoma, Multiple Myeloma) are responsible for 29% of total stop loss reimbursement in the past four years

Lockton has identified an opportunity to reduce excess cost and improve outcomes in highly complex clinical situations by opening access to world class subspecialists in niche areas to members in need on our clients’ health plans. Lockton has established streamlined direct referral relationships with some of the country's top institutions (including Dana-Farber) to facilitate reviews of cases where members appear to be having difficulty getting the right diagnoses and/or best-fit treatment recommendations
 
By establishing a Lockton-wide program, we can make these services available to clients across our book of business regardless of size and eliminate the need for client-specific contracts and processes.  The result is a reduction in diagnostic delays and the elimination of unnecessary testing and ineffective therapies.
 
About Dana-Farber Cancer Institute

• More than 50% of all oncology drugs have a contribution from a Dana-Farber researcher
• At any time, over 1,100 clinical trials are being run now including innovative cancer screens like Color, Grail and Galleri 
• Dana-Farber is only hospital in the Top 4 for Adult and Pediatric cancer treatment
• Across written second opinions performed by Dana-Farber, only 3% fully agree with care plans from local oncologists – 97% have some level of discordance with these local physicians

 
Direct Connect is a FREE program from Dana-Farber and will work to provide exceptional cancer care no matter your zip code (nationwide plus 130 countries) by offering your employees streamlined access to Dana-Farber’s world-class cancer care and early cancer detection and intervention services.
​
On June 20, 2023, Dana-Farber hosted Lockton as well as invited guests to learn about how we are partnering to better manage complex cancer cases. You can watch the event or read a summary here or click the image below.

The February sun was shining, temperatures in the mid-forties as I arrived at the Hanover Inn. Back in town for the 2024 Tuck Center for Private Equity and Venture Capital Conference. My midday arrival allowed me to take a few laps around Occum Pond and the campus. Sadly, most of the snow had melted and the prospects for Carnival ice sculptures were dim. I’m sure the students were ready to revel in their long winter weekend. I know I did “back in the day”.
​

We kicked off Friday with a fireside chat with Nancy Lotane T’92, Chief HR Officer & Managing Director at Bain Capital. An underlying current I heard throughout the conference was – people and Nancy drove that message home. She discussed

How did she get into Private Equity? She started her career in strategic consulting. Later when life happened and twins arrived, she turned to high impact internal roles that required less travel and more balance.

Where does she focus Day to Day? Nancy brings strategic consulting and business management tools to bear in HR. Bain Capital is focused on attracting, retaining and engaging talented people as well as managing growth. As COO of Private Equity business, she stated that people are at the center of investment strategy and they think about how all people have a life beyond work.

What does the Deal journey look like? Start with a theme (I’m seeing a theme about themes at PEVC), companies that meet that theme, go out and close the deal, realize the deal, operationalize the deal, optimize the deal.

What are roles in PE beyond “investing”? There are opportunities for well-rounded profiles as well as specialized roles (CFO, CHRO, CTO, etc.). Small and big firms need infrastructure, HR, finance, compliance, IT as firms get more sophisticated. There are entire ecosystems in supporting roles such legal, fundraising, consulting, transaction support, portfolio support to name a few.
​
She spends lots of time on Bain Capital’s culture. They assess recruits on analytical thinking, quantitative thinking, conceptual thinking (creative, open minded), leadership skills and communication skills. Mental health and wellbeing are priorities and not necessarily driven by the business. It’s being driven by demographics and work life balance. Work is a big % of peoples’ days and they strive to balance sprints with downtime. 

I then attended my first panel – Nuts and Bolts: The Broader PE Ecosystem with Paul Mahoney D’89, Brian Fleming (D’98 / T’08 and Kaitie Donovan T’13 moderated by Tobe Okpala T’24. Kaitie is with Mason Wells and they focus on the mid-market – manufacturers and business services with market tailwinds, competitive advantages and under managed parts of the firm. Paul discussed the PE investment lifecycle and how lawyers help client win deals, sometimes participating in auctions, debt financing and more. Brian commented on the due diligence process describing PE as the general contractor and a host of subcontractors depending on market size, segmentation, growth, competition etc. They agreed on the increasing importance of game planning to create value and not strictly transactional flow. Supporting service provider relationships are sticky and they look for firms that are detail oriented and provide proactive / relevant experiences.

​A Deep Dive on Energy & Climate was next up with Jeph Shaw T’15, Andrew Lackner (D’97 / TH’98) and April Salas, Executive Director, The Arthur L. Irving Institute for Energy and Society at Dartmouth moderated by Jordan Swett T’25. Overall investment in clean tech was $32B in 2023 down from $45B in 2022 and up from $1.2B in 2010. There is a need to deploy $33T in next 10 years to make the transition to cleaner tech. The Energy sector is largely risk adverse due to regulatory constraints and capital structures. De-risking through tax credits could bring more capital into the markets from risk averse capital sources.

During lunch, we were entreated to a lively discussion about AI from Drayton Wade T’23 and Graham Brooks T’02 moderated by Conference Chair Devin Casey T’24. I haven’t heard much about this “AI thing” and I surmise it’s kind of a big deal. In all seriousness, they covered the gamut from growth of ChatGPT, to current / planned use cases to predictions / projections. No technology has been adopted or evolved as quickly as ChatGPT. Large Language Model and AI bots will be near real-time soon. In November 2022, ChatGPT’s data lag was 14 months. When Chat GPT 4-Turbo was released in Nov. 2023, data lag was 6 months. How much longer before it is real-time? People prefer to “ask” rather than “search” – ChatGPT vs. Google, Amazon, Facebook, etc. and looking for the “answer” (narrowing / focusing) rather than “search results” (broadening / expanding).  SEO will be replaced by LMO – Language Model Optimization.
My day-to-day responsibilities caught up with me after lunch and I had to skip the 3rd panel.

​At 2:15, I was joined by my Lockton colleagues Tony Addino and Machua Millet for a discussion of Transaction Protection moderated by Nicolas Alvarez-Tolcheff T’24. We discussed the application of several effective transaction and financing facilitation insurance products such as Tax & Contingent Liability coverage as well as Representations and Warranties Insurance. For instance, Tax Insurance has been most often used to protect renewable energy tax credits and certain tax elections and qualifications. More recently, tax insurance has expanded to address a broad array of tax risks, including those identified during transactions and excluded from RWI policies, tax-free internal transactions, transfer pricing and valuations, and transferable tax credits.

Click here to see our latest - Lockton's Transactional Liability: Market Update 
 
Other issues we’re seeing in the PE market as it relates to risk management and insurance include…

• Cost Escalation and Budget Constraints
     - Private equity firms are grappling with the escalating costs of insurance coverage, impacting their ability to adhere to budgetary constraints. Finding a balance between comprehensive coverage and cost containment is a concern.
• Risk Management in Portfolio Companies
     - Ensuring that portfolio companies have robust risk management strategies and appropriate insurance coverage is important. Identifying potential gaps and aligning insurance programs with the specific risks faced by each portfolio entity can be a complex task.
• Due Diligence Challenges
     - During the due diligence phase, private equity firms sometimes encounter challenges in thoroughly assessing the existing insurance structures of target companies. This includes evaluating the adequacy of coverage, policy terms, and potential liabilities in areas like D&O, Cyber and more.
• Claims Management and Settlements
     - Efficient claims management is crucial for private equity firms, especially in handling claims across their portfolio. Streamlining the claims process and achieving favorable settlements are ongoing concerns for firms seeking to mitigate financial risks.
• Cybersecurity and Data Privacy
     - With the rising threat of cyberattacks, ensuring that PE firms and their portfolio companies have robust cybersecurity insurance coverage is a top priority. Private equity firms are increasingly focused on protecting sensitive data and managing the financial impact of potential breaches.
• Adaptation to Regulatory Changes
     - Navigating the ever-evolving regulatory landscape poses challenges for private equity firms. Staying abreast of changes in insurance regulations and ensuring compliance across diverse jurisdictions are critical aspects of risk management.

Walking back up Tuck Drive to The Inn, the sun was dropping in the west and we were in for a glorious Dartmouth sunset. Always energizing to be back in Hanover, meet new people and see some familiar faces. I already look forward to the 2025 conference.

Progressive time off and time away programs are increasingly used by employers as part of their talent strategies.

Key Findings from Lockton HR Trends Survey on Evolving Workplace Practices include...
⌛ Paid Parental Leave: More employers are now offering or enhancing paid parental leave programs, recognizing the benefits for both individuals and organizations.
⏳ PTO for Talent Acquisition: 82% of employers consider time off benefits as crucial when attracting and retaining top talent. Vacation/PTO ranks high on employees' priority lists.
⏲ Inclusion Challenges: Employers need to address caregiver support better, especially considering the aging population. For instance, many employees are unaware of health plan coverage for menopause symptoms.
⌛ Company-Wide Holiday Breaks: Companies are adopting company-wide shutdowns during holidays to give employees a "real break"
⏳ Floating Holidays: Nearly half of employers offer floating holidays to accommodate diverse employee observances and foster inclusion.
⏲ Modest Increase in Time Off Programs: 42% of employers made changes to their time off programs in the past year, with a focus on sustaining and investing in specific program areas.
⌛ Program Revision Reasons: The shift from pandemic response to strategic talent retention is driving program changes. Employers are now prioritizing competitive advantage, alignment with trends, and employee feedback.
⏳ Internal & External Factors: Employers consider a mix of internal and external factors when revising time off programs, with a balanced approach to program drivers.

For the full survey results, please email me - mmsmith@lockton.com