Update: Continued Momentum in Employer Cost Containment

In September, we published a report titled The Rise of Cost Containment in Employer Healthcare. In our conversations since then, it has become clear that both the demand for hard-dollar cost containment solutions among employers and their brokers/consultants, and the demand for cost containment and related assets (TPAs, other benefit administrators) from PE investors, have never been greater. We are already seeing the makings of an extremely active year in cost containment and employer-funded healthcare broadly, with several sizeable deals closed or under LOI already this year, a handful in market, and more to come.

This update note reviews both the fundamental and market drivers for the sector. It also discusses some of the second-order questions about the best way to approach the sector that have emerged in our conversations with sponsors, strategics, brokers, and other stakeholders. We preview several emerging themes in benefit design that we expect to drive further innovation in cost containment strategies over the coming years. Based on our dialogue with carriers, brokers, and benefit administrators, we do not expect employers to find relief from severe cost pressures in the near term.

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