Employee Benefits & Third-Party Administrators

Market Overview: Employee Benefit Landscape

As of June 2026, employer benefit costs for private industry workers averaged $14.07 per hour worked, representing 30.0% of total compensation of $46.89 per hour, according to the U.S. Bureau of Labor Statistics.
Health insurance is the largest single benefit cost at $3.48 per hour (7.4% of total compensation), more than twice the cost of retirement and savings benefits ($1.57).
With 67% of covered workers now enrolled in self-funded plans (KFF 2025), employers increasingly rely on third-party administrators (TPAs) to manage claims, control costs and support compliance.
TPAs have expanded beyond claims processing into analytics, cost containment, pharmacy oversight, compliance support and digital member services.

In 2025, 67% of covered U.S. workers were enrolled in self-funded health plans, up from 44% in 1999, including 80% of covered workers at firms with 200+ employees (KFF).
Self-funding is moving down-market: 27% of covered workers at firms with 10-199 employees are self-funded, while 37% are enrolled in level-funded arrangements, which overlap with the self-funded category.
Average annual premiums reached $9,325 for single and $26,993 for family coverage in 2025 (+5% and +6% year-over-year), with employers funding 84% and 74%, respectively.
Rising costs and administrative complexity are driving greater employer reliance on TPAs for claims administration, cost containment and compliance.

PitchBook records 127 completed U.S. M&A and buyout transactions across payor services, TPAs and employee benefit services since January 2022.
Sponsor-backed buyers completed 88 of the 127 deals (69%), including 79 add-on acquisitions by PE-backed platforms, reflecting buy-and-build strategies across the sector.
Activity peaked at 33 deals in 2023 and totaled 23 in 2025, with 15 deals completed through Q3 2026.
Platform-scale transactions continue, including Stone Point and CPP Investments’ $7.0B secondary buyout of OneDigital (Dec. 2025).

Sources: PitchBook

As employers expand self-funded and voluntary benefit offerings, the complexity of benefits administration and the associated fiduciary expectations continue to increase.
On December 23, 2025, four ERISA class actions were filed against Community Health Systems, Labcorp, United Airlines and Allied Universal, along with their benefits consultants (Gallagher, WTW, Mercer and Lockton), alleging unmonitored broker commissions and loss ratios on accident, critical illness and hospital indemnity coverage.
Litigation has continued to broaden, with the September 2026 suit against Gallagher’s own employee plan marking the eighth reported case targeting voluntary benefit programs, per PSCA.
In parallel, the CAA 2026 PBM reforms (generally effective for plan years beginning on or after August 3, 2028) and prescription drug fiduciary suits are raising expectations around vendor oversight, compensation disclosure and documentation.
As a result, employers are placing greater emphasis on experienced TPAs and advisors to support compliance, transparency and effective plan management.

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