Perspectives

Employer-sponsored healthcare has long been the backbone of the U.S. system, covering more than 160 million Americans and representing over $1.4 trillion in annual spending. But today, that foundation is under strain. Costs are rising at the fastest pace in more than a decade, employees are often confused or disengaged with their benefits, and many digital health solutions are still nascent in their development and have yet to deliver concrete ROI. Employers are realizing that simply paying premiums is no longer enough. To meet the needs of their workforce and control costs, they must either step into a more active role as architects of health and wellbeing or make plans to exit benefit design.

This inflection point is underscored by the numbers. Over the past decade, employer health benefit costs have risen sharply. In 2024, the average per-employee cost for employer-sponsored health insurance reached $16,501, reflecting about 5 percent growth from the prior year. Looking ahead, costs are expected to continue rising, with projections of a 6.5 percent increase in 2026 even after accounting for cost-management strategies. At the same time, only about a quarter of employees actually use the benefits available to them, and just 10 percent engage with digital health solutions. For employers, this means billions of dollars are being invested without corresponding returns in health outcomes or cost reduction. The pressure is mounting to find new models that bend the cost curve, improve engagement, and deliver measurable value.

In response, employers are beginning to lean on three strategic levers that promise greater control and accountability:

1. Alternative plan designs including self-funding and defined-contribution models like ICHRAs, which are seeing adoption grow by more than 30 percent among larger employers.
2. Value-based care, where 83 percent of employers now cite care navigation as the key to improving quality, and where direct contracting with Centers of Excellence and bundled payments are gaining traction.
3. Pharmacy value management, with nearly 80 percent of employers conducting regular contract reviews and turning to transparent PBM models to combat the mounting costs of specialty drugs, particularly GLP-1s.

Together, these approaches are redefining the employer’s role from a passive payer to an active shaper of health outcomes and value.

Stakeholder Priorities & Implications in Employer Innovation

As employers push for new funding models, value-based care, and pharmacy transparency, the ripple effects are felt across the healthcare ecosystem. Consumers seek affordability and personalization, payers and health systems face pressure to prove outcomes, and brokers, PBMs, and digital health companies must demonstrate clear ROI. Each stakeholder has a role to play in shaping a more sustainable employer healthcare market.

• Health Plans: Health plans are under pressure to move beyond broad PPO networks and opaque contracting as employers demand predictability, transparency, and measurable outcomes. To stay competitive, plans must curate high-performance networks, integrate navigation tools, and adopt outcomes-based guarantees. Those that adapt can strengthen their role as trusted partners; those that do not risk being bypassed as employers pursue direct, accountable arrangements with providers.
• Health Systems: For health systems, the rise of direct-to-employer contracts and value-based models creates both opportunity and risk. Systems that can demonstrate strong analytics, offer bundled services in areas like musculoskeletal and maternity care, and guarantee outcomes will be well-positioned as preferred partners. Those that cannot prove measurable value face exclusion from high-performance networks, increasing churn, and erosion of traditional employer relationships.
• PBMs: Pharmacy spend is one of the fastest-growing pressures for employers, and PBMs are being pushed to respond with greater transparency and accountability. Employers increasingly expect full rebate pass-through, routine contract audits, and outcomes-based drug agreements, particularly for high-cost therapies like GLP-1s and biologics. PBMs that can align pricing with value and demonstrate measurable savings will strengthen their role, while those that continue opaque practices risk being displaced by transparent alternatives.
• Consumers: Employees want healthcare that is easier to understand, more affordable, and better aligned with their personal needs. As employers and vendors redesign benefits around navigation, transparency, and personalization, consumers stand to gain greater access, simpler experiences, and care that is more tailored to their circumstances.
• Digital Health Companies: Digital health vendors have become common in employer benefits, but many face skepticism as rising costs push employers to demand more than positive satisfaction scores. To stay relevant, companies must demonstrate rigorous outcomes data and measurable cost savings, while integrating seamlessly into employer workflows and broader benefit ecosystems. Those that can prove value and reduce fragmentation will thrive; those that cannot risk being cut as employers consolidate solutions.

“High-cost claimants, GLP-1s, and specialty drugs are what we see as the three top drivers of rising costs.” – Darcy Sementi, Healthcare Benefits Manager

Employer Innovation in Healthcare Landscape

The employer innovation market can be segmented into 7 categories across the three main strategic levers: Self-Funding Solutions, Employee Transitions, ICHRA, Care Navigation, Care Delivery, PBM Innovation, and Prescription Medication Management.

Alternative Plans ($5.0B): Employers are increasingly adopting alternative plan designs to regain control and predictability in healthcare spending. Self-funding remains a popular path, while defined-contribution models such as ICHRAs are gaining traction by fixing employer budgets and giving employees the flexibility to select ACA marketplace coverage. Take Command Health is a key player in this shift, helping employers implement tax-advantaged reimbursement models like ICHRAs while ensuring compliance, documentation, and employee decision support. By simplifying administration and expanding choice, these models offer a pathway to cost transparency and flexibility, though they also require thoughtful execution to manage complexity and mitigate risk.

Value-Based Care ($5.9B): As employers look to rein in rising costs while improving outcomes, value-based care models are gaining momentum. Direct contracting, bundled payments, and navigation tools are replacing broad PPO networks with curated, high-performance options that prioritize quality and accountability. Transcarent, a 7wire portfolio company, exemplifies this shift by uniting navigation, virtual care, pharmacy, and benefits guidance into a single platform. Its AI-powered WayFinding solution connects employees to the right care at the right time, delivering measurable savings and engagement for employers. By aligning incentives around outcomes rather than volume, value-based care models create opportunities for employers to drive both affordability and improved employee health.

Pharmacy Cost Management ($9.8B): Pharmacy spend, particularly around specialty drugs and GLP-1s, has become one of the most urgent challenges for employers. As costs accelerate, employers are demanding transparent PBM models, outcomes-based contracting, and innovative approaches to medication management. 7wire portfolio company 9amHealth is addressing this need by delivering integrated cardiometabolic care — including at-home labs, prescriptions, and ongoing support from a multidisciplinary team. By pairing clinical oversight with smart medication management, 9amHealth helps employers reduce unnecessary pharmacy spend while improving outcomes for employees managing chronic conditions. Pharmacy value management is no longer a side benefit; it is a strategic priority for employers seeking to realign costs with value.

“We’re looking at new ways we can impact the primary levers: clinical, plan design, and network optimization.” – Alicia Coronas, VP Employer Solutions Product & Marketing, Priority Health

Selected Case Studies

When helps employers manage the costly and often overlooked process of employee offboarding by guiding individuals into more affordable health coverage options. Instead of defaulting to COBRA, which can be prohibitively expensive, When streamlines transitions into ACA marketplace plans, improving access while reducing employer liability. The platform’s approach has demonstrated real impact, achieving an 83% conversion rate away from COBRA and generating average savings of over $5,000 per exiting employee. By aligning financial sustainability with an improved employee experience, When illustrates how innovative navigation tools can deliver measurable ROI for employers while expanding affordable coverage for individuals.

Zerigo Health, backed by 7wire Ventures, is transforming dermatologic care by shifting treatment for conditions like psoriasis, eczema, and vitiligo from costly specialty settings into the home. The company offers an FDA-cleared handheld phototherapy device paired with a mobile app, virtual provider visits, and dedicated care guides to support ongoing adherence. This model has achieved a 75% member adherence rate, critical for clinical outcomes, while delivering substantial cost savings — nearly $10,000 per member annually by reducing reliance on expensive biologic therapies. Zerigo illustrates how integrated, at-home solutions can align patient convenience with measurable value for employers and payers.

Memorial Hermann, a 7wire Strategic Limited Partner and one of the largest not-for-profit health systems in Texas, has partnered with Imagine Health to deliver employers a lower-cost, higher-value alternative to traditional PPO networks. The model provides direct access to Memorial Hermann’s extensive network alongside concierge navigation services that guide employees to the most effective care. Employers adopting this approach have realized 15–30% cost savings compared to PPO benchmarks, while employees benefit from a simplified, more coordinated care experience. This partnership demonstrates how health systems can position themselves as trusted anchors by offering employers measurable savings and quality outcomes.

Arkansas Blue Cross Blue Shield has introduced innovative level-funded plans designed for small and mid-sized employers, blending the flexibility of self-funding with the protection of stop-loss coverage. Their BlueAdvantage Level-Funded program offers predictable monthly payments, surplus sharing with employers, and integrated risk management, while embedding value-based care programs such as advanced primary care, virtual diabetes management, behavioral health, and oncology support. By combining financial predictability with clinical integration, Arkansas BCBS demonstrates how payers can tailor solutions for smaller groups that deliver cost savings, reduce volatility, and improve health outcomes.

7wire Ventures Predictions

1. Narrow, high-performance networks with outcomes guarantees will increasingly replace broad PPO networks as employers seek greater value from their healthcare spend. Rather than paying for access to expansive but inconsistent networks, employers will prioritize curated provider groups that can demonstrate measurable improvements in cost and quality. Advanced primary care models, Centers of Excellence, and bundled payments will form the backbone of these networks, delivering both predictability and better outcomes. As employers steer employees toward high-value care through navigation tools and benefit design incentives, health systems with strong data, proven results, and competitive bundled offerings will be well positioned for inclusion, while others risk exclusion and loss of market share.
2. Employer healthcare benefits will continue to unbundle, with services like pharmacy, behavioral health, and specialty therapeutics increasingly carved out from traditional plan designs. As costs climb and point solutions mature, employers are seeking specialized vendors that can deliver measurable value in high-cost categories rather than relying on one-size-fits-all networks. This trend will create opportunities for innovative solutions that integrate seamlessly with employer workflows while demonstrating clear ROI. For employees, unbundling can expand access to higher-quality, more personalized care, while for employers it offers tighter alignment between spending and outcomes.
3. Healthcare will become increasingly consumer-first as the employer checkbook loses dominance, and individuals take on more responsibility for their own coverage decisions. Employers shifting toward defined-contribution models like ICHRAs, combined with expanded ACA subsidies, will accelerate competition for the individual consumer. Solutions that succeed will be those that provide personalized, easy-to-navigate experiences, integrating benefits guidance, care delivery, and financial transparency. As employees become healthcare shoppers, digital health platforms and navigation tools that deliver convenience and clarity will gain adoption, reshaping how coverage and care are purchased and experienced.

Taken together, these shifts signal a fundamental redefinition of employer-sponsored healthcare. Narrow, high-performance networks will push accountability for outcomes, unbundling will allow specialized solutions to deliver targeted value, and consumer-first offerings will empower individuals with more choice and transparency than ever before. For employers, the challenge is to navigate this transformation with intention, selecting partners that can deliver measurable ROI while improving the health and experience of their workforce. For innovators, the opportunity is to build solutions that align with these priorities and prove their impact at scale. At 7wire Ventures, we believe this evolution represents not just the next chapter in employer healthcare, but a chance to create a more sustainable, equitable, and consumer-driven system for the future.