We are thrilled to announce our investment in VBA, a leader in cloud-based benefits administration software serving the entire payer ecosystem. We led a $156 million majority growth transaction in the Milwaukee-based company which is the largest technology deal in Wisconsin this year and represents another example of Spectrum Equity’s core belief that great businesses are everywhere.
As investors in high-growth, internet-enabled software and data companies serving all parts of the healthcare ecosystem, we have deep conviction that the evolution of connected software, data and analytics will continue to have a massive impact on healthcare today. This is certainly the case with VBA, which is transforming benefits administration through next-gen technology that automates core business functions across the entire payer landscape. We have deep conviction that VBA is well-positioned to scale and support a broad group of payers, including TPAs, health plans, and ancillary payers such as vision, dental, and life insurance plans.
There is a significant shift in the health insurance landscape with employers switching to self-insured plans driven in part by cost savings, transparency, and flexibility. According to the latest data from the U.S. Department of Labor, self-insured employer groups and member enrollments have surpassed fully insured, and the number of self-insured plans has grown by 26% YOY.
The growth in self-insured groups is driving many downstream complications for payers. With each self-insured group creating its own array of customized plans, plan management and administration has become increasingly complex. Payers, who rely on outdated technology and disparate homegrown solutions for plan design and administration, need highly-configurable, cloud-based technology to respond to the increasingly complexity of plan design and administration.
VBA fills this void. The company is transforming benefits administration through its CAPS and related engagement portals and analytics products. The platform acts as the core system of record for health plan creation and administration, claims processing and adjudication, billing, provider reimbursement, and more. VBA’s modern cloud-based stack is replacing available alternatives because it offers flexibility and customization, allowing payers to integrate with other point solutions to help drive efficiencies across all aspects of their value chain.
The opportunity to invest in VBA came about this past spring after several visits to the company’s headquarters just outside Milwaukee. We moved quickly in what we recognized as a truly unique business. Leveraging Spectrum’s network and experienced leaders throughout the diligence process, we were able to gain conviction supported by our experience with other payer facing solutions (Payer Compass, Ease) and our expertise in vertical market SaaS.
Across Spectrum’s portfolio, we’ve seen how quickly purpose-built SaaS solutions can gain market dominance. Within our healthcare portfolio, several companies such as Net Health and Passport Health have become dominant market players because their purpose-built technology automated core business functions, added efficiencies, and reduced costs. Within our broader portfolio, vertical market SaaS companies have become category-leaders – Verafin (acquired by Nasdaq), Tenstreet, and ITA Software (acquired by Google) – because their advanced technology quickly replaced cumbersome legacy systems and became essential software.
In today’s macro environment, VBA is in an enviable position to capitalize on multiple industry tailwinds, especially as we see a host of payer organizations looking for new, best-in-class solutions. We’re excited to back VBA President and CEO Michael Clayton and his team, and we look forward to supporting their growth initiatives across new product development, customer onboarding and implementation, and ongoing customer support to improve the VBA customer experience.
If you’d like to learn more about the company, read the press release about Spectrum’s partnership with VBA.