A challenged healthcare system is driving demand for alternative health plan solutions from employers and employees alike, giving rise to businesses that specialize in innovative plan designs, member engagement tools, and cost containment technology.

This year’s SIIA Spring Forum shed light on the employer health sector’s evolution and its expanding set of investment opportunities. Below, senior professionals in our Healthcare & Life Sciences Group share what’s creating M&A momentum across the space and how investors can participate.

A Time for Innovation

Rising healthcare costs have frustrated employers for a long time. But now, more are questioning the lack of transparency and potential for misaligned incentives with the traditional healthcare insurance model. As a result, the market is poised for disruption and an unbundling of network-centric solutions, leading to rapid growth for independent, transparent, and member-focused options.

“To gain flexibility, control, and the ability to drive cost containment, employers are increasingly seeking innovative plan designs like self-insured, level-funded, and captive models as well as MERPs, HRAs, and ICHRAs,” says , a managing director. “These alternative plan designs enable the adoption of solutions like direct primary care, care navigation, reference-based pricing, and other cost containment strategies to deliver greater cost savings and an enhanced member experience.”

In fact, according to McKinsey’s 2024 Employer Health Benefits Survey, approximately two-thirds of respondents are looking to switch carriers within the next four years, likely to alternative plans.¹

Although all these approaches are unique, they share a common goal of improving access to quality care while helping employers better manage rising healthcare costs. “We are still in the early days of small and medium-sized employers moving to self-insured and independent health plans,” says Geoff Smith, a managing director. “Strong growth will continue across this ecosystem, with the most successful businesses offering employers a broader menu of options customized for their workforce.”

Meanwhile, forward-thinking employers and solutions providers are looking to add more data- and tech-driven products that help power transparency, incentives, and greater cost savings for employers. “A range of companies that utilize technology and AI to identify and engage with higher-risk patients, deliver patient integrity, and create better member experiences are expanding and seeing heightened investor interest,” says Cheairs Porter, a managing director.

Opportunity for Point Solution Consolidation

As companies unbundle from fully insured plans and ASO models, they are managing an increasing volume of point solutions that are key components of the benefits ecosystem.

“Employers are overwhelmed with their number of point solutions,” says Owens. “Because of this, we’re seeing more of these solutions consolidate, with recent examples being the acquisition of Accolade by Transcarent and the HealthComp and Virgin Pulse merger to form Personify.”

“Going forward, we expect greater point solution consolidation, with TPAs and direct-to-employer primary care entities being natural consolidation points,” he adds.

To further discuss employer health M&A opportunities, please contact our senior professionals.

1. https://www.mckinsey.org/industries/healthcare/our-insights/reimagining-us-employer-health-benefits-with-innovative-plan-designs