Tag Archives: aetna

The Industry Needs an Intervention

Leaders in the insurance industry, like many other industry executives, are seeking routes to profitable growth amid unprecedented economic, financial and regulatory change. No longer can companies pursue top-line growth for its own sake without adverse consequences or rely on cost cuts alone to boost margins. Today, companies must strike a strategic balance that will sustain profit growth and shareholder returns over the long term.

This is no easy trick, as tectonic forces unsettle the insurance industry — which is accustomed to measuring the pace of change in decades, not years or quarters. A business-as-usual approach falters in the face of quickly shifting customer needs, rising capital requirements, new regulatory burdens, low interest rates, disruptive technology, and new competitors.

Many companies aren’t getting the results they need from textbook moves such as fine-tuning marketing programs, updating products, enhancing customer-service systems or beefing up information technology. That’s because traditional operating levers for executing strategy simply weren’t designed for the challenges confronting insurers today. Strategic success now requires something more: a structural response. A company can’t adapt to 21st-century conditions without modernizing its 20th-century structures.

The key is for companies to realize that strategy equals structure. Strategy — the big and important ways that a company chooses to compete — must naturally and intrinsically weave in key operating model dimensions, including legal entity, tax positioning, capital deployment, organization and governance.

Finally, once strategy and structure are wed, companies must recognize the role of culture in making new structures work, and use their cultural strengths to promote the changes and ensure that they have staying power. Here’s how:

Responding to the Pressures

Rapid evolutionary change has rendered time-honored organizational structures ineffectual or obsolete in many cases. Before attempting to execute new strategies, insurance companies need to reevaluate every dimension of their operating model.

Structural inadequacies take many forms. Some companies lack the scale needed to generate profitable growth under new capital requirements. Others with siloed, hierarchical organizations lack the flexibility to respond quickly to market shifts. Poor technological capabilities often hamstring old-line insurers facing new digitally oriented rivals. And tax reform and regulation looms as a potential threat to profitability in certain business lines.

See also: Why Is Insurance Industry So Small?

In our work with insurers, we at Strategy&, PwC’s strategy consulting business, have seen certain common responses to these pressures. Their responses divide these companies into three groups:

  • The first group of companies have anticipated the effects of marketplace trends and made appropriate structural adjustments, clearing the way to profitable growth. For example, life insurer MetLife avoided costly regulatory mandates by selling registered broker distribution to MassMutual and spinning off its Brighthouse retail operations. Others, including Manulife and Sun Life, have made substantial acquisitions to consolidate scale positions.
  • The second group of companies have recognized the need for structural change, but have yet to carry it out. With plans made, or under discussion, these companies are waiting opportunistically for the right deal to come along.
  • A third group of companies, however, have hunkered down behind existing structures, making only minor tweaks and hoping to emerge from the storm without too much damage. For some, this is a rational choice because of constraints that leave them with little or no maneuvering room. In other cases, action is impeded by a company culture that reflexively rejects certain options.

Companies in the first two groups are giving themselves a chance to win. But the response of companies in the third group smacks of self-delusion in an age when strategy equals structure.

Time for Real Change

Without a doubt, many insurers work diligently and continually to improve their businesses across dimensions. They gather insights into consumer needs and behaviors, nurture unique capabilities to differentiate themselves from competitors, modernize products, update distribution strategies and embrace digitization in all its forms. These are all sound approaches, but they’re inadequate in addressing the unknown facing insurers today. Their belief that they will persist assumes a certain stability in underlying economic and market conditions that hasn’t been seen since the financial collapse nearly a decade ago.

Forces unleashed by that crash and its aftermath undermined the pillars of many insurance business models. We’ve seen years of only modest growth, with property/casualty insurers expanding at a 3% pace, and life insurers barely exceeding 1%.

The long stretch of sluggish global growth has put pressure on revenues and forced insurers to compete harder on price. Near-0% interest rates that have prevailed since the Great Recession are squeezing profit margins, especially in life insurance. On the regulatory front, tougher accounting rules are driving up costs while heavier capital requirements weigh down balance sheets and dilute returns.

Compounding these challenges are the potentially destabilizing effects of tax reform on earnings and growth. Taxes may actually rise for some insurers, an outcome that could force them to raise prices or find other ways to protect shareholder returns. In many cases, the benefits of falling tax rates may be diminished by the loss of deductions for affiliate premiums, limits on deductibility of life reserves, accelerated earnings recognition and a slowdown of deferred acquisition cost deductions.

Competitive dynamics are shifting, too, as expanding “pure play” asset managers such as Vanguard and Fidelity block growth avenues for insurers. Established companies and some new entrants are innovating and experimenting with disruptive distribution models. Others, including private equity firms, are looking to bend the cost curve through aggressive acquisition and sourcing strategies.

To be sure, some long-term trends could benefit certain insurers, or at least improve their risk profile. Longer life spans and the shift of responsibility for retirement funding to individuals may drive demand for annuities and other retirement products.

However, many companies are as unprepared to capitalize on these opportunities as they are to meet long-term challenges. Often the problem comes down to scale. Some insurers lack the resources to build new distribution platforms and customer service capabilities in growing markets such as asset management, group insurance, ancillary benefits and retirement plans. Although offering an individual product may be relatively easy for new market entrants, the difficulty and cost of establishing such platforms creates a desire for scale and increases pressure on smaller competitors.

Sometimes, the issue isn’t scale but a failure to respond quickly enough as conditions change. Buying habits are changing as consumers — particularly the younger cohorts — make more purchases online. Yet our research indicates that people still want some personal assistance with larger and more-complex transactions.

It takes investment and experimentation to find and refine the right business model for new marketplace realities. But some companies haven’t built the necessary assets and capabilities or adjusted to evolving distribution patterns and consumer behaviors.

The proper response to each challenge and opportunity will be different for every company, depending on its unique characteristics and circumstances. In virtually every case, the right solution will involve structural change.

Joining Strategy and Structure

As companies recognize that traditional approaches to annual planning, project funding and technology architecture may be hindering innovation and real-time responses to changing market conditions, many are rethinking and redesigning their core processes to facilitate change. Recent transactions in the sector show the range of structural options for companies that want to advance strategic goals in a changing marketplace. Below are some examples.

Exiting businesses. Sometimes, the best choice is to move out of harm’s way; companies can preserve margins by exiting businesses targeted for higher capital requirements or costly new accounting standards. MetLife’s Brighthouse spin-off bolstered its case for relief from designation as a “systemically important financial institution,” and the associated capital requirements. Exiting U.S. retail life insurance markets also enabled MetLife to focus on faster-growing businesses that are less vulnerable to rock-bottom interest rates. The Hartford recently announced the sale of Talcott Resolution to a group of investors, completing its exit from the life and annuity business.

Partnerships and acquisitions. When scale is an issue, the solution may lie outside the company or in new structural approaches. Some insurers form partnerships to expand distribution, diversify product portfolios or bolster capabilities. Companies also adjust their scale and capital structures through mergers, acquisitions and divestitures. Sun Life paid $975 million in 2016 for Assurant’s employee benefits business, filling gaps in its product portfolio and gaining scale to compete with larger rivals. MassMutual’s purchase of MetLife’s broker-dealer network in 2016 enlarged the MassMutual brokerage force by 70% and freed MetLife to pursue new distribution channels.

Expanding into new lines and geographies. New product lines offer another path to faster growth or fatter profit margins. Several insurers have moved into expanding markets with lower capital requirements, such as asset management. Voya, Sun Life and MassMutual have acquired or established third-party asset management units to capitalize on investment expertise they developed managing internal portfolios. The Hartford recently agreed to acquire Aetna’s U.S. group life and disability business, deepening and enhancing its group benefits distribution capabilities and accelerating digital technology plans. We also see companies establishing technology-focused subsidiaries such as Reinsurance Group of America’s (RGA’s) RGAx and AIG’s Blackboard.

Cutting costs. Some companies have moved aggressively to improve their cost structure. Insurers seeking greater financial flexibility have divested assets that require significant capital reserves. Aegon unleashed $700 million in capital by selling blocks of run-off annuity business to Wilton Re in 2017. An insurer that offloads its defined-benefit plan to another via pension-risk transfer frees up capital and eliminates continuing pension funding requirements. Other cost-saving moves focus on workforce expenses. In addition to rightsizing staff, such measures include relocating workers to low-cost areas or jurisdictions offering significant tax incentives. Prudential and Manulife slashed expenses by establishing overseas operating centers that take advantage of labor cost arbitrage, create global economies of scale and reduce taxes.

See also: Key Findings on the Insurance Industry

Transformation and Culture

Once companies have launched ambitious structural initiatives, they don’t always recognize the role of culture in making the new structures work. But this is a mistake.

Culture is a pattern of behaviors, norms and mind-sets that have grown up around existing organizational structures; the two (culture and structure) are tightly linked, and you can’t change one without affecting the other. No culture is all good or all bad. But certain cultural traits are more relevant to structural change than others.

Cultural attributes affect a company’s ability to make necessary changes. A company that is consensus-driven and focused on preventing problems before they arise may be indecisive and slow to act. These traits may cause it to wait too long and miss the optimal moment for a structural transformation. Other companies, by contrast, have a tradition of quickly seizing opportunities. When this trait is supported by other important characteristics — more single points of accountability, strong leadership and an aligned senior management team — it can foster the rapid decision making essential to structural change.

Culture also comes into play after executives decide to initiate structural change. Most employees have strong emotional connections to the culture — this source of pride, along with a clear and inspiring vision of the future, can motivate them to line up behind the change and can inspire collaboration across organizational boundaries to drive the transformation. Leaders at all levels can generate momentum by signaling the desired cultural shifts and embodying the new behaviors needed to execute structural change.

A new structure without a corresponding evolution of culture amounts to little more than a redesigned organization chart. Culture makes or breaks the new structure, influencing factors as diverse as resource allocation, governance and the ability to follow through on a vow to “change how work gets done.” It’s not uncommon for a company to expend tremendous effort and resources on a complete structural overhaul, only to see incompatible cultural norms thwart its strategic execution. For example, a new, streamlined operating model intended to accelerate decision making and foster cross-functional collaboration won’t take root in a culture that exalts hierarchy and encourages employees to focus on narrow functional priorities.

Culture also influences a company’s willingness to make the deep structural changes in time to avert a crisis. Those who wait until market conditions have undermined their operating model put themselves at a disadvantage. Nevertheless, few companies attempt structural change in “peacetime.”

Absent a crisis, cultural expectations often limit directors to a narrow role monitoring indicators such as growth and profitability, while management concentrates on achieving specific strategic objectives. Under this traditional allocation of responsibilities, emerging structural issues may not get enough attention. Successful companies, by contrast, continually reassess their structure in light of evolving market conditions. They understand that organizational structures aren’t permanent fixtures, but strategic choices to be reconsidered as circumstances and objectives change.

Capitalizing on Changes

Amid the confusion of today’s insurance industry, one thing is clear: Business as usual won’t deliver sustained, profitable growth. As powerful forces reshape markets, conventional tools for executing strategy are losing their effectiveness. Today’s challenges are not operational, but structural. Many insurers lack the scale, capabilities or efficiency to compete effectively as competition intensifies, regulatory burdens increase and financial pressures rise.

Winning companies are meeting structural challenges with structural solutions. Approaches vary from company to company. Some add scale or enhance capabilities, whereas others streamline cost structures or exit lagging business lines. With the right cultural support, these structural responses position a company to capitalize on industry changes that are confounding competitors.

You can find the article originally published on Strategy & Business.

This article was written by Bruce Brodie, Rutger von Post and Michael Mariani.

What CVS/Aetna Can Teach Insurers

In early December 2017, CVS Health entered an agreement to buy Aetna for approximately $69 billion. Not only would this acquisition be the largest health insurance deal on record, but it is also likely to change the face of the health insurance industry.

So what can we learn from it? Quite a bit.

What can the insurance distribution business learn from CVS?

Lesson 1: Perhaps the biggest lesson is that, rather than wasting your energies resisting change, it is wiser to put change to work for you. The specter of disruption and the trends underlying disintermediation can be your business’ greatest assets if you’re willing to adapt, work within the laws of economic physics and embrace customer-centricity

Lesson 2: The consumer and his/her omnichannel convenience needs to drive future-facing strategy. With this in mind, companies will need to work to better understand their customers and to tell apart their different customer types.

Lesson 3: Once that’s done, companies can identify which customer type — which unique market segment — is most important to their business and how that relationship can be strengthened and sustained.

Lesson 4: You may need to tweak or even somewhat redesign your product/service offering to better accommodate those clients best-served by the unique combination of your available and potential resources, expertise, technology and employees.

Lesson 5: In some cases, you’ll discern gaps in your offering that require you to invest in new technology or to recruit and train new employees to specialize in specific markets. You might even look at merging with or acquiring another firm that will strengthen, complement or supplement your offering and help you to meet the demands of tomorrow’s more sophisticated and demanding customers.

If all that sounds like a tall order, it’s because it is. You’ll have to use some elbow grease and put in the leg work. But there are also ways to make the work a little less daunting and give yourself an edge. Leveraging digital platforms and big data innovations, smart businesses are enabling highly efficient transactions that are both customized and scalable.

See also: Global Trend Map No. 9: Distribution  

Of course, there are also lessons aplenty to be taken not just for your business on a granular level but on a wider economic level. Consumers will no longer tolerate a supply chain that sees their vital products and services changing too many hands with too little added value. Today’s customers expect service providers to go out of their way to not just meet their demands but to anticipate their needs. This is especially true when it comes to services delivered by supply-side intermediaries.

This isn’t just the case for healthcare; it holds for all essential services. The insurance industry at large, and especially brokers and agents, besieged by the forces of disintermediation, can learn a lot from CVS.

When it comes to insurance intermediaries, that means keeping a finger on the pulse of the demand side of the industry, identifying transformational market forces and re-examining your business model to see how you can put those forces to work for you.

As demonstrated by CVS’s acquisition of Aetna, if you can streamline the delivery of your goods and services so that your presence is a benefit rather than a detriment to your customers, you’ll not just win the day but the morrow as well. The value proposition of an end-to-end, customized and data-driven experience is not unique to healthcare. In fact, that experience should be adopted as the guiding mantra and policy-shaping battle cry for insurance agencies and brokerages the world over.

Final thoughts

CVS is a giant in its industry, and it still had the humility and foresight to understand its predicament and prepare accordingly. It would have been much easier for the company to rest on its laurels and for the C-Suite to take solace in its strong earnings reports. It would have been easier, and it would also have been a mistake. You cannot ensure future success on the basis of past actions alone. Whether you realize it or not, if you work as an insurance intermediary, disruption is coming for you.

As Eric Andersen, CEO of Aon Benfield, bluntly declared in 2015, “The traditional broker chain… could collapse… as reinsurers, carriers and their brokers all look to move more closely to the ultimate client.”

Whether through M&A, joint ventures, a niche strategy or a technology-driven continuance strategy (or something else altogether), now’s the time to explore every possible avenue to improve your business’ market resilience. The underlying forces of change are sweeping through the insurance industry and compelling forward-thinking operations to act.

2017 clocked in with more than $20 billion worth of M&A deals. What’s more, the second half saw a 50% increase from the first. That’s remarkable.

At the same time, technological innovation is pushing forward at an equally rapid pace. Accenture reports that “Some 83% of insurance executives expect platform-based business models to become part of their growth strategy over the next three years.”

Either way, one thing remains clear: Insurance distribution businesses will need to adapt to a fast-changing environment to ensure that their value propositions remain viable in the face of uncertainty.

To survive, your business will need to deliver a more customer-centric and more end-to-end experience.

At the company level, this means having more support staff and specialists to provide not only quick and comprehensive but also innovative and customized solutions for problems that your customers might not yet even realize they have.

It’s here that smart technology can be the game changer.

First, it provides better integration and visibility across the entire organizational structure. Data points are collected and centralized on the account level through a number of input sources — including email correspondences, the client portal, broker/agent-entered data, public records, social media, telemetry devices, BI insights and more. This ensures that all relevant information is at the fingertips of the interested party — anywhere at any time. Information will no longer be siloed between departments, and it will be shared automatically. After all, it’s often these extra customer insights that can make a difference.

For example, any number of data points can speak to a new policy need or an opportunity for upselling or cross-selling. If that information is kept with, say, the marketing department and not shared with agents, a huge potential opportunity could be missed.

Of course, this streamlined system also needs to be monitored and managed in an intelligent, timely, appropriately granular and end-to-end way. Not every approach or idea is going to work, so agents and brokers will need to understand where they are seeing a return on investment and what needs refinement. Risk taking will be a required part of the business moving forward, but that risk can be mitigated with smart tracking and analytics.

See also: Distribution: About To Get Personal  

Today, consumer preferences are shifting, and this will only continue. Forward-minded insurance professionals know this and are working to build their businesses to dominate tomorrow’s industry landscape.

In fact, 84% of insurers report being increasingly pressed to reinvent themselves and evolve their businesses to survive and thrive in disruptive environments.

Companies need to be constantly thinking about how they can cater to a new generation of consumer, those who want one-stop shopping and value the ease of buying products and services above all else.

The agencies that are smartly leveraging technology to develop ways to make their customer experiences more personalized and convenient are going to succeed over the long run.

In other words, the CVS-Aetna deal is — at its core — about streamlining the supply and distribution of healthcare in a way that meets shifting consumer expectations and provides a more end-to-end, customized and data-driven service.

You can find the full paper here.

Empowering Health Through Blockchain

As the U.S. continues to wrestle with healthcare and how to provide insurance, the country seems to be in a state of flux; many individuals and employers alike question how they will ultimately be affected. Warren Buffett and Charlie Munger have identified healthcare as the biggest issue facing American businesses, and the National Federation of Independent Business ( NFIB) reports that the cost of health insurance is “the most severe” problem facing American small businesses today. The growth in healthcare costs has long been an issue in a monopolized industry controlled by the major health carriers (i.e. Blue Crosses, United, Cigna and Aetna).

The problem started spiraling out of control when insurance industry leaders, e.g. MetLife, converted from mutual company structures to stock company structures. When the best interests of the consumer become misaligned with the best interests of the service provider, we create a conflict of interest. After all, their fiduciary duty is to their shareholders, not their consumers.

The benefits system in the U.S. has been flawed for many years. It is plagued by a lack of transparency and leaves the employer powerless to fight increased premiums with each renewal, for what is most often their second largest expense next to payroll.

It’s time to collectively question the status quo and demand innovative solutions that leverage enhanced benefit plan design with emerging technology and contextual data. Business owners’ cost for healthcare should be directly correlated with the health risk and outcome of their employees. All aspects of plan design need to be transparent, and business owners and employees must own their healthcare data, so they can understand exactly what is driving costs and actually control their spending.

Viable solutions will come through companies like iXledger, a London-based blockchain insurtech start-up and collaborator with Gen Re that has partnered with online information hub Self Insurance Market to develop a marketplace for the growing self-insurance risk management sector. The marketplace leverages iXledger’s blockchain platform to navigate the complex, data-intensive processes of self-insurance, providing the visibility, workflow and resource management to receive cost-effective bids for appropriate services.

See also: What Blockchain Means (Part 2)  

The current group benefits market is primarily controlled and monopolized by the Blue Crosses, United, Cigna and Aetna (BUCAs), leading to diminishing provider networks, unclear benefits coverage and consistent premium increases over the last decade. American employees are unable to afford to participate in their own employer’s group medical plan. Aetna recently announced that it will not pay commissions to brokers on groups with fewer than 100 insured lives.

Technology alone is not the key to driving down the cost of healthcare and enhancing benefits. The famed health insurance unicorn Oscar has the technology, but only leveraging new tools with legacy processes is not going to yield significant returns. Disruption in healthcare requires a totally new approach, not just new technology to try to enhance the current, monopolized benefit plan offering.

Unfortunately, I believe Oscar will continue to lose to the BUCAs, unless it can quickly pivot. Oscar is currently losing roughly $1,750 per member, yet its last capital round provided for a $2.7 billion valuation with 120,000 insured lives, or $22,500 per member. Although Jeff Bezos and other technology leaders have defied all conventional means of valuation across the capital markets, an analysis into Oscar’s business has me a bit stifled. If you look at the member population, 48% of the New York enrollments in 2015 came from the ACA state exchange, who are often high-risk members. Perhaps that is why Oscar’s ratio of hospital costs to premiums earned was 75%, compared with 62% at UnitedHealthcare. The lack of capital relative to the BUCAs and Oscar’s existing member risk population will make it quite difficult to compete.

See also: Blockchain Technology and Insurance  

As Oscar shows, the solution to the health benefits crisis in the U.S. will not be driven with just new technology and enhanced analytics, but by integrating enhanced data and new technology, such as telemedicine, with innovative and enhanced benefit plan designs similar to what iXLedger is endeavoring to facilitate. The solution is a paradigm shift requiring new tools that compel new processes to put both employers and employees in control of their cost of healthcare while offering enhanced health benefits coverage.

3 Ways to Tame Healthcare M&A

The healthcare business is broken for consumers and taxpayers in America. And we can expect to see more mergers, acquisitions and large alliances in the coming months and years, all forming in the name of trying to control rising costs and taking better care of patients.

The question is: Will they?

Unfortunately, the answer usually is generally no. Let’s take a look at two recent headlines, starting with the CVS acquisition of Aetna.

While the CVS acquisition of Aetna makes financial sense for shareholders, the same cannot be said for consumers. CVS and Aetna, which individually represent severe conflicts of interest, together create an even larger systemic problem. American consumers need healthcare intermediaries to clearly represent the interests of either the patient or provider — they can’t do both.

Maybe we’re suffering from amnesia because we’ve forgotten why the Pharmacy Benefit Manager (PBM) industry exists in the first place. Years ago, insurers managed drugs themselves. However, the conflict of interest and the resulting price gouging was so bad that the PBM industry took off in the 1980s and became the de facto broker (intermediary) for the drug industry. Over the next three decades, the PBM industry “evolved,” and, today, the PBM business model looks worse than the insurance industry it once set out to fix. Considering the conflicted business models involved, it seems highly ironic that today’s largest PBM is buying one of the largest health plans. This was a bad idea 30 years ago, and it’s an even worse idea today.

See also: How Amazon Could Disrupt Care (Part 3)  

So why isn’t this going to control costs? Because it really is just a mechanism to switch roles from the “broker function” to that of the supplier. In this case, there is the added benefit that Aetna can get over the 85% Medical Loss Ratio (MLR) limitations by paying themselves as a supplier. All this does is further reduce choice, lock out competition and increase profitability for itself while increasing costs for purchasers.

Planning on larger mergers to control costs is a fool’s errand. Take a look at UnitedHealth Group (UHG), which owns UnitedHealthcare (UNH) and OptumRx. The company’s structure and scale is on par with a combined CVS and Aetna. UHG owns one of the largest health plan providers and one of the largest PBMs, and UHG continues to aggressively acquire other health care services companies.  Many corporate customers will tell you UNH is one of the most difficult insurers to work with because of restricted data sharing and lack of transparency. UNH also makes it nearly impossible to use services other than their own.  This is not a recipe to control costs, and it’s going to get worse because UHG recently announced the purchase of Davita’s Medical Group, which has hundreds of care facilities and about 30,000 affiliated physicians.

Another major issue with this acquisition is that it enables the combined entity to collect even more patient data and constrict its availability and use. CVS CEO Larry Merlo stated, “By integrating data across our enterprise assets and through the use of predictive analytics, we will create targeted interactions with patients to promote healthy behaviors and drive adherence, and this will further improve the quality of care for patients while also resulting in healthier outcomes.”  Mr. Merlo fails to acknowledge that the data the company integrates, uses for its benefit and sells for its profit is their customers’ data — to which the company claims ownership and restricts for others’ use. After the CVS-Aetna deal closes, restrictive data hoarding will stifle potential health benefits and further limit innovation opportunities.

Just a few weeks ago, another headline about an alliance forming to control rising costs captured our attention. Intermountain Healthcare, Ascension, SSM Health and Trinity Health announced they are joining forces to create a new generics drug company.

Again, on paper, the announcement seems like it could help control costs and benefit consumers. But taking a closer look at the match, the marketing value to the hospital chains has already vastly exceeded the cost reduction of the generic drugs in question as well as the pressure this places on big pharma by at least three or four orders of magnitude. Big Pharma isn’t in the generics business.

As egregious as the examples are that we keep talking about with Valeant and Turing, those are rounding errors in aggregate compared to the global sales of just one brand drug, Humira, which brought in $14 billion last year, alone.

Big Pharma is laughing all the way to the bank as the press keeps writing about how big a deal this is and how four hospital chains are going to change the landscape. These large monopolistic systems get the great publicity as they try to lay claim to the moral high ground. More importantly, we have, yet again, given providers of services (a.k.a hospital systems) who already have the reputation for marking up medicine such as Tylenol the power to mark up these new generics they will manufacture.

The most important announcement of the past few days is the one from Amazon, Berkshire-Hathaway and JP Morgan. While there are few concrete details, the message from the top is clear that these companies have decided to take matters into their own hands to control costs as all the intermediaries they have relied on haven’t delivered.

As those who represent consumers, benefits professionals have a crucial role to play as we continue to learn about more mergers, acquisitions and large alliances. As such, there are three things each of us as HR benefits professionals can do to help tame the M&A beast.

First, insist on transparency. This starts by making sure intermediaries (insurers and PBMs) never control supplier performance data. You should have the right to see whatever data you need about your suppliers — just as you would in any other industry. Stop working with intermediaries and suppliers that restrict or refuse to provide data. You should also require intermediaries to provide all supplier contracts they have in place. Trust, but verify.

See also: The PBM vs. the Drug Manufacturer  

Second, require your suppliers to pick a side — yours, or theirs, but not in between. You, not an intermediary, should be able to choose who provides services to you. You should never be penalized for choosing a supplier that isn’t your intermediary’s preferred choice.

Third, demand independence. Intermediaries must represent the company and customer interests. There’s an obvious conflict of interest when an intermediary also represents a seller of goods that constitutes a significant source of the intermediary’s revenue. Stop doing business with intermediaries who have such conflicts.

Congratulations to all the CVS and Aetna stockholders out there; there’s a big payday headed your way. Because one person’s profit is another person’s cost, expect the price of health care to increase in this brave new world.

However, in the long run, the rest of us are going to bet on the new Amazon/Berkshire-Hathaway/JP Morgan model from Bezos, Buffett and Dimon to lead the charge of purchasers taking control of their own destinies.

4 Tips to Build a Talented Bench

Winning teams — in sports, business and all areas of life — have deep benches.

Even if your company is fully staffed, taking your eye off the ball when it comes to recruiting is a sign of complacency, the kryptonite of success.

What if one of your stars decides to take another job? What if one of your top executives experiences an unexpected health crisis or family tragedy and decides to leave the company? Did you know that two-thirds of those reported to be misusing painkillers in the U.S. are currently employed and are thus susceptible to declining performance or medical leave?

More than ever before, companies must be ready to replace employees at a moment’s notice. The time it takes for you to fill a vacant position has increased. Glassdoor reports that, since 2009, interview processes have grown from 3.3 to 3.7 days, and data from DHI Hiring Indicators shows that the average job opening remained unfilled for 28.1 days on average in 2016, an increase from 19.3 days in 2001-03.

That is why it is critical for companies to build what is called a deep virtual bench. The world’s most innovative human resource leaders are vigilantly focused on recruiting 365 days a year.

See also: Is Talent the Best Defense?  

Having helped world-class companies recruit B2B sales executives for decades, I can offer four ways to build a strong virtual bench:

  1. Aggressively Target Passive Job Seekers: LinkedIn reports that 70% of the worldwide workforce is composed of passive candidates who aren’t pursuing new employment opportunities but may be open to listening. Passive recruiting is important because most high-performers are already gainfully employed. To effectively recruit passive B2B sales job seekers, you must have a great reputation within the industry; have a seamless and optimized application process (companies such as Netflix and Facebook allow you to apply with one click of the mouse); and consider using an outside recruiting company to maintain a safe distance and avoid being accused of poaching.
  2. Leverage Cutting-Edge Technology: Since implementing artificial intelligence into their recruiting process, Unilever saw the average time to hire an entry-level candidate reduced from four months to four weeks. Instead of visiting colleges, collecting resumes and arranging interviews, the company made the jobs known via social media and then partnered with an A.I. company to screen the applicants. This took place in 68 counties in 15 languages with 250,000 applicants from July 2016 to June 2017. Recruiters’ time spent reviewing applications decreased by 75%. LinkedIn also just recently announced TalentInsights, a new big data analytics product that enables HR leaders to delve more deeply into data for hiring. This helps employers identify which schools are graduating the most data scientists, engineers or history majors; helps analyze your recruitment patterns versus those of your competition; and provides information about growth of skills in certain areas of the country.
  3. Become an Employer of Choice: Glassdoor reported that 84% of employees would consider leaving their current jobs if offered another role with a company that had an excellent corporate reputation. Great candidates, millennials especially, value a commitment to employee wellness, sustainability and initiatives that cater to gender and diversity equality. Having a strong culture, values and clear company mission are critical to building a strong talent pipeline. Top companies such as Bain & Co., Google and Facebook offers perks such as free meals, onsite gyms, massages, free laundry services and generous parental leave. Given that Americans currently carry a record $1.4 trillion in student loan debt, student loan repayment assistance has become one of the hottest new benefits being offered by companies such as Fidelity and Aetna. The size of your company will dictate how many perks you can offer, but adoption of policies that are thoughtful toward employees will turn them into your biggest brand ambassadors. In addition to generating that organic positive publicity, submit applications for the “Best Places to Work” lists offered by most publications. These are now offered by most national publications as well as local business journals.
  4. Appeal to Diverse Candidates: To build a strong virtual bench, you must widen your search and appeal to candidates from different backgrounds. A PwC study found that 71% of survey respondents who implemented diversity practices reported that the programs were having a positive impact on the companies’ recruiting efforts. The previously mentioned Unilever case study resulted in their most diverse entry level class to date, including more nonwhite applicants and universities represented increasing to 2,600 from 840. To build your virtual bench, consider implementing diversity-friendly policies such as floating holidays. These allow people to take off for Good Friday, Yom Kippur or Ramadan or for a yoga retreat, if that is their preference.

See also: Secret to Finding Top Technology Talent  

Building your virtual bench 24 hours a day, seven days a week and 365 days a year will help position your company for success, including increased profitability and improved company reputation.