​Blue Shield of CA has a new PBM prescription for their 4.8M members – “flipping that (the current pharmacy supply chain) on its head.” according to CEO Paul Markovich.
 
The health insurer announced a move away from CVS as their PBM and is instead replacing it with multiple partners:

• CVS – will continue to be the pharmacy dispensing specialty medications
• Abarca – will be the claim adjudication platform
• Mark Cuban Cost Plus – will be responsible for the retail pharmacy network development and management
• Prime Therapeutics – will be responsible for rebates (Prime is part of Ascent GPO with Cigna/Express Scripts)
• Amazon Pharmacy – will be the mail order pharmacy

In a recent interview with The Wall Street Journal, Blue Shield's CEO, Paul Markovich, highlighted the challenges within the current pharmacy supply chain, characterizing it as a complex and opaque structure designed to maximize profits for its participants. “The current pharmacy supply chain is a forest of opacity and profit,” said Paul Markovich, Blue Shield’s chief executive officer “It is overwhelmingly complex, it is designed to maximize the earnings of the participants.” His company’s new setup, he said, will be “flipping that on its head.”

Blue Shield has unveiled a groundbreaking initiative that aims to bring greater transparency and efficiency to their pharmacy benefit management strategy.

Key highlights of Blue Shield's new setup include:

1. Diverse Partnership Approach: Blue Shield is diversifying its partners to manage different aspects of their pharmacy benefit management. The new partners include CVS for specialty medications, Abarca for claim adjudication, Mark Cuban Cost Plus for retail pharmacy network development, Prime Therapeutics for rebates, and Amazon Pharmacy for mail-order services.
2. Transparency and Cost Control: By breaking down the components of their pharmacy benefit management, Blue Shield intends to enhance transparency and provide insights into the cost structure of each part. This strategic move could potentially address the lack of visibility into cost breakdowns that often plague the traditional pharmacy supply chain.
3. Employer Implications: While this unique model might be challenging to replicate in its entirety for larger organizations, smaller Pharmacy Benefit Managers (PBMs) have been adopting similar approaches. Some employers have found success in outsourcing specific components of their pharmacy benefit management while retaining control over others. This decentralized approach often results in increased transparency and decreased conflicts of interest between the PBM and the plan sponsor.
4. Industry Watch: While Wall Street analysts are observing this transformation closely, it's yet to be seen if other large organizations will follow suit in the near term. Blue Shield's initiative will likely be scrutinized for its potential to deliver savings and operational efficiency while upending the status quo in the pharmacy supply chain.

Why would Blue CA move this direction?
By breaking apart the components, the new approach can provide more transparency into the cost of each part of the pharmacy benefit. Wall Street analysts don’t believe other large organizations will follow suit in the short term but will be watching closely to see if the new decentralized approach can be executed appropriately and is delivering on the projected savings.
 
What could this mean for employers?
It will be difficult for most employers to replicate this exact model. However, some smaller PBMs have taken the approach to outsource different components themselves. For example, they may own the adjudication platform but outsource the network, rebates, and specialty pharmacy. Some employers like this model as they believe the costs are more transparent and it reduces conflicts of interest between the PBM and the plan sponsor.
 
Lockton Pharmacy Point of View:
We are generally supportive of this approach and have implemented similar structures / components with some health plans clients. By breaking up the sole PBM, there is greater transparency for the cost associated with each component of the pharmacy benefit. Employers can select the best of each vendor to perform these functions. This strategy more likely to be effective for larger, more forward leaning groups. We don't see it working for smaller clients (at least not for right now).
 
Some operational questions

• Mark Cuban Cost Plus will need to build out a retail network that does not exist today. Currently they only have less than 10K pharmacies set up to take their discount card. Will members have adequate access in CA and nationwide?
• Will the member experience be impacted by the separation of these components and having to deal with multiple vendors?
• Will the obligation to pay fees to five vendors offset the drug cost savings that may ensue from more transparency?

 
Adam Fein wrote a great article on this move on his Drug Channels blog "A Reality Check on That Blue Shield of California Announcement"

Watch Part 1 and Part 2 of our videos to learn... 
​
What's Really Driving Employer Health Plan Costs?

• The reinsurance / stop-loss market is reactive and fractured. 0.6% of employees drive 35% of costs (1% = 1/3) “Purple Zebra Unicorns” show up as complex cases consistently across geographies, industries and employer sizes. 
• Life saving therapies and medications are remarkable. The insurance market is not set up for or can account for these longitudinal cases which can last decades and cost millions.  Reinsurance is grounded in covering unknown rather than known risks.

How to improve the cost and quality in complex cancer cases?

• Dana-Farber & Lockton want to help through the clinical journey and do more for “people swirling in the system” – 17% of referrals to Dana-Farber are misdiagnosed primarily due to incorrect reading of the pathology. Rereading of the pathology by Dana-Farber specialists closes this gap. 
• Population Health & Disease Management aren’t enough – we need a person level strategy to manage these claims / costs. Amazing new technologies for early detection and intervention (tests from companies such Galleri or Grail) are part of Dana-Farber’s early detection program. This program wants to disrupt the treatment model to prevent death and improve quality of life. “Future state is a proactive model”.

What makes Lockton's approach unique?

• Traditional monitoring of high cost claims like using a “50% report” (waiting for claims to reach 50% of a specific stop-loss level) are reactive and outdated. Through use of data, predictive analytics and outreach from clients, health plans and navigators, Lockton developed 5,900+ clinical and financial triggers and have performed more than 20,000 clinical reviews referring thousands of patients to high quality providers. The resulting savings for our employer clients is $342M to date and climbing. 

Other topics we discussed include;

• Cancer remains the costliest condition since 2010
• The number of cancer claimants increased 39% from 2018 to 2021
• Due to delayed/missed screenings, we may see up to 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
• Dana-Farber is only hospital in the Top 4 for Adult and Pediatric cancer treatment
• 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 
• Direct Connect is a FREE program from Dana-Farber and will work no matter your zip code (nationwide plus 130 countries)
• 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

​

According to the National Cancer Institute, 39.5% of men and women will be diagnosed with cancer at some point during their lifetimes.
​
The uptick in cancer rates nationwide is one of the reasons why Lockton partners with Dana-Farber to help manage access, treatment, patient / family support and costs of cancer.

On June 20th, we will present the details of how we're teaming up to fight cancer. Dana-Farber will review their employer focused programs and Lockton will lay out our Complex Claims / Centers of Distinction approach for self-funded companies.

Meeting will be held from 12:00 to 2:00pm. Lunch will be provided and a parking voucher will be available. A tour of Dana-Farber will take place following the meeting for those interested.
​
Location - 44 Binney St, Boston, Massachusetts  02115

Guests will learn about Dana-Farber's Direct Connect Program. Designed for employers, Dana-Farber Direct Connect is a free direct access and navigation program that improves access to our worldleading oncologists and specialized care.

Lockton will present our Complex Claims Specialty and Centers of Distinction for self-funded clients.  These services include 

• Purchasing Strength
• Claims Cost Reduction
• Claims Management

Lockton has established streamlined direct referral relationships with some of the country's top institutions including Dana-Farber, Cleveland Clinic and Mayo Clinic to facilitate reviews of cases where members appear to be having difficulty getting the right diagnoses and/or best-fit treatment recommendations.  

To learn more or register for our event, please email mmsmith@lockton.com

Mental health and emotional well-being were consistent themes throughout Lockton’s 2023 Global Benefits Forum hosted in San Diego. We kicked off Day 1 with a terrific keynote speaker, Eric Potterat, Ph.D., who addressed us on “Learned Excellence: The Key Performance Optimization Factors of High Performing Individuals and Teams”.  The key traits he presented (Grit, Mindset, Adversity Tolerance and Balance / Recovery) will help me.

Eric knows a thing or 2 about high performance having spent his career helping elite organizations—from the Navy SEALS to the World Series Champion Los Angeles Dodgers—develop the personal traits that drive elite performance.

Eric has also worked with hundreds of business executives, NASA, firefighting organizations, and world-class athletes from every sport, including gold medalist Nathan Chen and the U.S. Women’s Soccer team.

He began by asking us, “What is mental toughness?” It seems like a simple question—until we try to define it. He explained that even though we all know mental toughness when we see it (pictures of super achievers and heroes like Sully Sullenberger flashed on the screen), we can’t always explain what it is. Pressed to define it, most of us will describe mental toughness as poise under pressure, stress tolerance, or the ability to limit distractions and stay confident and composed. The reality is those are all end states. And with life now in a state of uncertainty, the question now becomes, how do we reach those end states and stay there? ​

The key traits shared by all high performers are Grit, Mindset, Adversity Tolerance, and Balance / Recovery For each trait, he explained the science and insights that make them such important differentiators and then synthesized the core of each trait with clear takeaways.

How to increase your Grit? “The foundation of becoming grittier is working outside of your comfort bubble.”  In other words, get comfortable being uncomfortable. When we identify true motivators, and determine our passions / purpose, we are orders of magnitude closer to meeting our goals. Key attributes include the ability to delay gratification as well as see setbacks as opportunities.
​
What does having a growth Mindset really look like? “The hallmark of elite performers is a thirst for useful feedback.” Carl Dweck defined for the world a Growth vs. Fixed Mindset. Folks with Growth Mindsets see challenges vs. threats and obstacles / setbacks as a chance to learn, stretch and grow. ​

​There is promising work and research being done regarding resilience accelerators including drinking tart cherry juice to promote deeper sleep and brain neuroplasticity, float / sensory deprivation tanks, metadata and physiology / surveillance apps and “forest bathing” i.e., go for a walk in nature.
Eric’s work is proprietary and he’s finishing an upcoming book covering the core aspects of elite performance and it is expected in early 2024. I can't wait to read it.

Back in Hanover on a textbook winter afternoon - flurries mixed with sleet and a balmy 27 degrees. I was back in town as Lockton sponsored the 2023 Tuck Center for Private Equity & Venture Capital Conference. And in keeping with my 2023 well-being routine, I headed across the Green for a loop around Occum Pond, up Webster Ave, stopped by Phi Delt and back to The Inn.
 
Here are my thoughts on the Conference with more details on the speakers, sessions and content below.

1. Uncertainty driven by war, geopolitical shifts, energy insecurity, inflation, interest rate hikes, recession (you know the rest) is causing a stockpile of cash (estimated $1T), increased due diligence, focus on investment fundamentals and a marked shift to secondaries (up to 50% of all deals in 2022)
2. Glimmers of optimism are shining based on economic cycles, a return to growth and the development, adoption, acceleration and integration of technologies (particularly AI, ChatGPT / Machine Learning)
3. Focus on people. Companies wanting to grow need to retain and develop their people as well as attract new talent. Again, hope rests in technology as one consultant put it “to keep up with the rocket ship pace of PE”

​ 
Thursday evening, we had cocktails, conversations and dinner at the Hanover Inn. Dune Thorne D’98 enthusiastically spoke about today’s PE environment and go forward issues.  She sees uncertainty (the main through theme for the event) as well as opportunities, is focused on DEI / ESG and states that returns from private investments are 6-8x higher than public returns. 
​
Friday morning, another lap around Occum (half walking / half skidding) was in store through the mystic morning Hanover fog. 

Jim Davidson kicked off the broader conference with his stories of how Silver Lake started and early wins even if the LPs weren’t immediately convinced (spoiler alert – they ended up very happy)
​His observations covered

• The PE model - raise $, acquire assets, optimize / build, get liquid (rinse and repeat)
• There’s a distinction between the transaction and supporting the business ongoing
• Scaled tech business still need to run like a business (not as a start-up) - optimize ROE, build recurring revenue
• See the world differently and always look for a better way (plus a great coat rack analogy)
• Silver Lake culture means no names on the front door. There’s a difference between being a partner vs an employee
• Be all in. You can never network enough. Build your own best self. Can’t do that WFH. Be part of a team
• Tech is going through a restructuring- very libertarian and carrying more social responsibility

 
It was now time for the conference’s first panel discussion, “The Decision to Sell: Continuation Funds & Long-Term Holds
 
GP led secondary/ continuation deals went from 10% to more than half in the last few years.  The continuation market is undercapitalized - big opportunity and high velocity in secondary deals
 
Some considerations and areas of focus for secondary funds

• Quality of the partner
• Quality of the asset
• Alignment of interests in the continuation

 
Ultimately, Private Equity wants to strategically transform a business into the potential of what could be - build something special
 
Shameless plugs

• Lockton’s latest whitepaper Representations & Warranties Insurance (RWI) in Secondaries Markets
• Overview of General Partnership Liability / Investment Management Insurance 
• Lockton M&A and Private Equity Support

We then had our first of 2 unstructured panel discussions where the group asked questions of ourselves and commented on a theme – ours was Implications of ChatGPT or other AI tools for the PEVC industry
 
To say our discussion was wide ranging would be an understatement. The net – the AI genie is out of the bottle with lots of concerns over control, bias and privacy. In advance of the panel, our Tuck student moderator had asked CHATGPT for what 9 topics we should discuss. We covered all 9 in 45 minutes.
​
Lunch was good. I downed a sandwich along with 3 Tuck students from Beijing, Hong Kong and Mumbai sharing stories of our backgrounds, ideas and times at Dartmouth / Tuck. I relayed my tale of delivering kegs through a raging Nor’Easter in Stinson’s F150.
 
My second break out panel was “Role of Consulting Firms for VCPE Firms and Portfolio Companies”
 
Lots of dry powder in the market - $1trillion estimate

• #1 issue for consulting firms is to recruit, retain and develop talent. Gaps in hiring or slowing of client work make it harder to recover and grow over

• #2 issue is to harness tech (invest in AI) to keep up with the rocket ship pace

 
I had to leave midway through the final panel “Investment Opportunities in Technology” but I was leaving the room, a panelist said twice “In Private Equity, the goal is to get rich slowly” (echoes of build something special)
 
Walking back up Tuck Drive to The Inn, the clouds started to part and we were in for a glorious Hanover sunset. A sign perhaps? Only time will tell.
 
Always energizing to be back in Hanover, meet new people (in-person) and see some familiar faces. I look forward to the 2024 conference.

All multinational companies face complex challenges to ensure that employees are protected, have access to care, and understand how to access and optimally use their employee benefits
 
Lockton's global benefits team in London created this document that includes the basics through current trends, usage statistics and strategies.
 
Inside you will find...

• Benefits Types by Prevalence
• Funding Options
• Internal & External Stakeholders
• Globally Mobile Employees
• Governance Examples
• New Country Entrance Strategies
• Reporting & Analytics Technology

​Click the image below for access to the presentation 

We are excited to welcome you to join us at our 2023 Global Benefits Forum hosted by Lockton People Solutions in San Diego, California on April 17 - 19!

This event is recognized as an experience unparalleled in the industry, bringing together Human Resources (HR) professionals from around the globe to network, share, and learn from fellow industry experts.

Click here to learn more and register
​

We'll hear from global experts (not Ron Burgundy...)

The Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL), the two federal agencies with primary jurisdiction over COBRA issues, have not issued any meaningful guidance on how COBRA applies to expatriates, inpatriates and third-country nationals (TCNs) on U.S. and foreign health plans. The scant guidance leaves many questions unanswered that we address in our whitepaper.

As the conflict involving Ukraine, Russia and Belarus progresses, a number of questions regarding its insurance, risk, regulatory, socioeconomic and geopolitical implications continue to arise for our clients. Lockton is closely monitoring this evolving situation and engaging with our business leaders globally to ensure we are providing clients with the best advice and guidance.

Here are the top issues in today's alert 

New law bars Russian insurers from transacting with insurers, reinsurers and brokers of or controlled by "unfriendly states".  US fits that category.
Broad sanctions against Russia complicate most insurance transactions (paying premiums, claims, binding coverage, etc.).  
Impact to organizations with operations in Ukraine and Russia (wheat, energy, minerals, etc.)
Currency devaluation effect on global insurance programs
Lockton's affiliations in Russia (Lockton does not do business with the Russian government or affiliated entities. Lockton does not and has never had a shared or owned interest in any broker intermediary in Russia.)

Not legal advice: Nothing in this alert should be construed as legal advice.  We recommend consultation with your own legal advisors and local / global rokers.

Many employers are concerned about by the situation in Ukraine as they strive to ensure the safety, health, welfare and well-being of employees in the region.  Global benefit professionals are facing several volatile issues related to the unfolding Russia-Ukraine conflict.

To support our HR colleagues, we are providing the information below concerning key considerations along with the attached Ukraine Client Alert.

Employee Well-being

• Supporting employees and dependents based in Ukraine is a top priority.  Many people have left the country as refugees while others have remained. Employers may want assist with basic needs including food, clothing, transportation, communications, healthcare, housing, cash, and legal assistance regarding immigration matters. Existing market providers like local brokers, employee assistance programs (EAPs), mobility vendors, law firms, payroll providers, and insurers in Ukraine and neighboring countries may be able to offer a broad range of support.
• Mental health related concerns are seeing an increased demand throughout Eastern Europe.  One choice is Workplace Options (WPO) that is offering enhanced EAP services for therapy (24/7) and can be set up within 3-5 days. 

Business Environment

• Disruptions to insurance and services are increasing in the impacted region will need to be closely monitored and managed
• The crisis has created problems related to issues such as health and risk protection coverage, pension fund investments, and a range of mobility concerns. Lockton recommends a coordinated approach across HR, risk, operations and legal/compliance teams to be a critical effective response.
• Sanctions are complex, far-reaching, and evolving. Benefit managers responsible for employee benefit insurance policies in Russia are advised to discuss the status of provider relationships, open/upcoming policies, and placements with their local broker, global advisors and legal teams. Some insurers are owned or controlled by financial institutions that are subject to sanctions.
• Some companies are exploring moving Ukrainian and Russian staff to other locations in Eastern Europe.   Given the broader payroll, tax, and benefit impacts we are recommending that clients considering this action seek legal and accounting advice prior to making a commitment.
• The global insurance market is evolving with respect to Russian operations.  For instance, Generali announced that they are pulling out of the Russian market and winding down their Europ Assistance business in Russia.

Payroll Concerns

• Ukrainian companies are continuing to process payroll as usual.
• Making payroll in Russia is becoming increasingly difficult due to Office of Foreign Assets Control (OFAC) and international bank sanctions.  Companies are not able to make deposits into or payments from impacted banks.  We are recommending that HR leaders speak with their payroll and accounting teams to understand the risk and how to address the employee impact (inability to pay rent, mortgages, or other expenses).  The general solution at this time is encouraging employees to change their banking institutions to a non-sanctioned bank.

Sanctions Impact on Employee Benefits

• Sanctions are complex, far-reaching, and evolving. Benefit managers responsible for employee benefit insurance policies in Russia are advised to discuss the status of provider relationships, open/upcoming policies, exclusions and placements with their local broker, global advisors and legal teams. 
• There are number of Russian carriers on the OFAC and Specially Designated Nationals (SDNs).  We recommend that companies vet their carriers through internal legal/compliance teams. Where the carrier is sanctioned, we are advising clients to seek internal legal guidance and to move the plan at their earliest opportunity.
• Lockton expects that OFAC will continue to designate additional individuals and entities as SDNs which will further curtail available insurance cover for risks in the region.  We are advising all HR leaders to continue to review their carriers in the event additional carriers should become sanctioned. 
• Premium payments cannot be made into or out of sanctioned banks.  We are reviewing the implications and how this will impact the policies, additional guidance will be forthcoming.  In the meantime, we are recommending HR leaders seek guidance from their local broker and internal legal team. 
• From a benefit standpoint, we understand that local policy claims are still being made to local Russian nationals. 
• Many insurance policies contain an act of war provision that triggers whether the act of war is declared or undeclared.  It is important to review their policies for this provision and discuss the implications with their local broker.
• In Russia, the policy may contain an exclusion due to death or injury while attending a protest. It is important to internally discuss how this issue would be addressed should an event arise.  Some companies are considering self-insuring this risk.
• Employees in Russia/Ukraine will not be covered under a BTA policy for evacuation as such activity may be deemed a transfer of the usual place of work by the carrier.  Any company thinking of removing employees from Russia [Russian national employees] should be making arrangements now. Also, BTA policies may or may not provide coverage after relocation.  This is an extremely hot topic among carriers.

 What’s next?

• Employers have recent experience in crisis management processes as a result of the COVID-19 pandemic and we recommend leveraging these lessons learned.
• Employers should start to plan such arrangements for their Ukrainian and other employees who are now working remotely away from their home country.  Employees will be seeking permanent or temporary employment in a new country.

• In order to avoid an abrupt loss of healthcare and other benefits, employers closing or suspending operations in Russia will need to consider how they can help their local employees. We are anticipating that this trend will increase over the coming days and weeks.  In other cases, the business may be maintaining their legal status, but conducting layoffs.  Given the employee impact we are recommending that HR leaders speak with internal stakeholders to understand their company’s plans.
• For workforces in Ukraine, Russia, and other affected countries, a range of social security issues will ultimately need to be considered and addressed. General employee health and well-being will require a proactive approach.
• Given the limited supply of clinicians in Eastern Europe, demand for healthcare will be high with constrained supply.  In addition, according to Our World in Data, only 35% of the Ukrainian population fully vaccinated for COVID-19, pandemic challenges, among other public health challenges, are likely to be aggravated.

As a result of this conflict, needs will emerge in the coming days, months, and perhaps even years. Ongoing monitoring, continued planning and collaboration across the enterprise will be critical to providing the support employees need now and in the future.  Lockton will continue to monitor and update these situations as they develop.

Not legal advice: Nothing in this alert should be construed as legal advice.