Keaton Bedell is Co-Founder and CEO of Bridge. Bridge is the insurance billing infrastructure for virtual care companies building toward in-network, evidence-based care.
Per Employee Per Month, the beloved pricing model of the digital benefits era, is dying. It is survived by the employers it was built to serve. While the pricing model is resting in peace, the channel it was designed for is alive and well, and still in need of a healthy solution.
The practice of direct-to-employer contracting via a PEPM pricing model lived a long life. So let’s memorialize it.
In its infancy, this model maintained the existence of several chronic disease management vendors that typically focused on a specific cohort or disease state. It also kept alive a constellation of corporate wellness solutions whose portals and health screenings were aimed at benefitting the entire population.
Then came the first generation of digital health solutions, spearheaded by companies like Omada Health and Hinge Health. This is when PEPM grew strong and tall. It was also the beginning of the end. While Omada and Hinge built billion-dollar businesses on the back of this pricing model, they are also the last ones who ever will. They scaled before the channel saturated, before the fatal flaws sealed its fate.
It's easy to see why PEPM was beloved in its prime. For employers, it turned an unpredictable cost into a dependable line item. A fixed rate per employee per month lets a benefits leader budget without gambling on claim volume. For the vendors, the PEPM fee offered a recurring revenue stream that didn't swing with how many people actually used it. For HR, a new health benefit could sweeten a recruiting pitch. And early on, the incentives pointed the right way: paying per employee rewarded vendors for encouraging broad access to low-acuity care like telehealth, the kind that keeps small problems from snowballing into expensive ER and urgent care visits.