Meeting people where they are is table stakes in healthcare. Industry leaders are continuously seeking ways to improve access to care across a range of modalities. That same drive to innovate is now reshaping employee assistance programs (EAPs), as employers look for new ways to support their workforce in living happier, healthier lives.
Historically a low-value and sleepy segment, employers are bolstering EAP offerings in several ways, especially for behavioral health, including adding more modalities to access therapy, expanding in-person counseling at worksites, and increasing the number of allowable sessions.
Despite these gains, there’s ample opportunity for improvement across behavioral health and other EAP services. Traditional EAP providers often have limited access, underutilized services, or outdated delivery models. This gap between need and capacity creates an opportunity for private capital firms to back innovative EAP solutions that can scale impact while delivering returns. Working with colleagues at Mercer, we estimate that a new segment in the space — high-value EAP — could unlock a market worth nearly $6 billion.
The evolving EAP market
Today’s EAPs generally fall into three distinct buckets: traditional, high-touch, and innovative.
Traditional EAPs focus on non-behavioral health services. For behavioral health support, these programs provide the basics like self-guided digital tools and access to a broad provider network. It’s a one-size-fits-all approach to matching employees with a care provider and access can take up to 10 days. The cost for employers is between $1 - $3 per employee per month (PEPM).
High touch-EAPs combine traditional offerings with lower-acuity behavioral health support through a semi-curated network. Employees get clinician-supported intake, improved network management, and faster access times. The cost is $2 - $4 PEPM.
Lastly, innovative EAPs put a premium on offering behavioral health support, including psychiatry via a curated or fully owned network of providers. They make greater use of technologies like mobile apps, text messaging, web portals, and more. Access is typically guaranteed in two business days, three days for in-person. The cost is $10 - $14 PEPM.
Investment opportunities on the rise
Growth has been robust across the EAP market, with 11% annual growth from 2020-2024, significantly outpacing overall medical inflation. While growth is expected to moderate, it will remain strong, with a 6% compound annual growth rate (CAGR) projected through 2029. Demand for expanded EAP services, particularly in high-touch and innovative segments, is anticipated to drive growth rates of nearly 15% and 10%, respectively.
Investors are taking notice. Valuations have soared for innovative EAPs like Modern Health at $1.2 billion and Spring Health at $3.3 billion. We’ve seen strategic investments from private equity such as Lightyear Capital's investment in CuraLinc. And there’s been significant merger and acquisition activity, including Centene’s $2.5 billion purchase of Magellan Health in 2022.
Introducing the high-value EAP
The draw of innovative platforms has created investment opportunities in a net new kind of product that targets the price gap between high-touch and pioneering models, while addressing the core needs of customers and employees: the high-value EAP.
These programs can offer a similar range of services as innovative EAPs, particularly in clinical psychiatry and medication management, but at a lower cost. By avoiding the best-in-class positioning, vendors can reduce provider-related costs but deliver high-quality services that meet holistic EAP requirements. High-value EAPs are likely to capture existing customers of innovative models, but most of the opportunity will come from high-touch or traditional models by addressing growing customer demand for expanded services. We estimate that the PEMP cost is between $5 and $10.
3 actionable steps for investors
Carving out a niche for higher-quality, lower-cost alternatives could create a $5 billion to $6 billion addressable market. Success for investors hinges on the ability to take existing EAP assets, efficiently enhance or reshape them to address core market needs and effectively communicate the value of these changes to the market.
We’ve identified three critical steps for private capital firms to follow:
- Provide capital to expand clinician networks, improve provider matching, and integrate psychiatry and medication management capabilities
- Integrate existing benefit assets or portfolio companies into EAPs to create a seamless member experience and meet employee expectations
- Invest in comprehensive marketing campaigns that communicate the value of high-value EAP offerings to employers and employees, fostering increased utilization
As employers level up on a smarter benefit stack, there is significant room for innovators who can deliver compelling and meaningful experiences at competitive price points. Investors who address this need will be able to capture out-sized share of a growing market without the need to build a net new product from the ground up.