Virgin Pulse, HealthComp to merge in $3B deal aimed at improving employer health

Virgin Pulse and benefits administrator HealthComp are set to merge in a $3 billion deal that aims to drive lower costs and improve outcomes for employers.

The deal was first reported in The Wall Street Journal. Virgin Pulse is backed by Marlin Equity Partners and HealthComp is backed by New Mountain Capital, according to the report. New Mountain will hold a majority ownership of the new, combined company.

Marlin will maintain a minority stake, and the deal will also have backing from Blackstone and Morgan Health, the healthcare arm of banking giant JPMorgan Chase.

Bringing the companies together will create a tech-enabled platform that can develop novel benefit designs while leveraging artificial intelligence to track and improve outcomes, the companies said in an announcement Wednesday morning.

In an exclusive interview with Fierce Healthcare, Morgan Health CEO Dan Mendelson said the combined company aligns with its goals and that the focus in the more midsized employer market made the investment an attractive option.

"Together, it's a scale company that will be serving more than 20 million members and 1,000 self-insured employers," he said, "and, as a result, it has a lot of reach."

Virgin Pulse CEO Chris Michalak will lead the joint company, according to the announcement. The partners expect the deal to close in the fourth quarter of 2023.

The move is Morgan Health's sixth investment in its quest to drive greater value and quality in employer-sponsored care. Its previous investments comprise apree health—formed by joining Vera Whole Health and Castlight Health—Embold Health, Centivo, LetsGetChecked and Kindbody.

Mendelson said the combined Virgin Pulse and HealthComp offerings make sense for its portfolio as Virgin offers a front-end wellness option for employers while HealthComp's benefit administration services offer more of a traditional insurance product on the back end.

This provides an option for midsized employers looking for something different to offer their membership base, he said. And that combination makes it more interesting for Morgan Health, he said, rather than investing in just a third-party administrator.

"We're really about creating choice, but choice that's meaningful for employers so that they can they can actually take control of outcomes, affordability and equity," Mendelson said.