Over the past several years, digital mental health companies and virtual behavioral health providers have aggressively pursued contracts with employers and employee assistance programs (EAPs), positioning themselves as essential tools for improving workplace wellbeing and productivity. These “point solutions”—targeted digital platforms addressing specific mental health or behavioral health needs—once had an easy pitch: they offered accessibility, convenience, and the promise of improved employee wellness.
However, the market has evolved. Employers, now more experienced and data-savvy, are no longer content with basic engagement metrics or anecdotal success stories. The question has shifted from “Do employees like this program?” to “Is it truly improving outcomes—and is it worth the investment?”
Jason Richmond, vice president of sales solutions at Headspace Health, captured this transformation in an interview with Behavioral Health Business. “Employers have become much more interested in this space and want to provide solutions that bring value,” he said. “It’s no longer good enough to just have a benefit that people want to access or that you can see the utilization of. It’s about whether people are getting better from the participation they see.”
Headspace Health, a leading virtual behavioral health provider, embodies this shift. Formed in 2021 through the merger of Ginger and Headspace, the company was valued at more than $3 billion at the time and now offers a full continuum of behavioral health care—from mindfulness and meditation tools to therapy and psychiatric services. Richmond noted that satisfaction metrics, once the gold standard, are no longer sufficient. “Satisfaction isn’t always the final thing, either,” he said. “There’s a higher expectation from the purchaser than I think I’ve ever seen.”
A Heightened Focus on ROI
The change in expectations aligns with a broader shift in how employers approach health and wellness benefits. According to a recent WTW survey of 232 U.S. employers, representing over 3 million workers, mental health ranked as the top area of focus for healthcare vendor strategies in 2024. But alongside that prioritization comes increased financial scrutiny.
A striking 78% of employers in the WTW survey said they now require a clear return on investment from their virtual behavioral health providers. In a tightening economic climate where every expenditure is under review, behavioral health programs must demonstrate not only that employees are engaging with services, but that those services lead to measurable outcomes—such as reduced absenteeism, improved productivity, and lower healthcare costs.
Candace Richardson, principal at General Catalyst, which has invested in behavioral health companies like Eleanor Health, Elemy, Rippl, and SonderMind, told Behavioral Health Business that the bar is higher than ever. “I’m seeing a much higher bar for a two-year ROI,” she said.
Richardson also noted that current labor market trends have influenced these heightened expectations. “With the labor market being so tight [the last few years], there was a lot of emphasis on bringing in benefits that made employers competitive,” she said. “Now, as companies are reviewing their budgets and making tough decisions around reducing headcount, part of that process is figuring out: how are we spending on benefits, and are we getting the ROI that we need to see?”
This renewed focus on outcomes over optics has forced virtual behavioral health providers to rethink how they prove their value.
Moving Beyond the Per Member Per Month Model
For years, many digital health contracts were structured on a per member per month (PMPM) model, where employers paid a flat rate per eligible employee regardless of usage. While convenient, this model has fallen out of favor as employers seek greater accountability and transparency.
“Member engagement has historically been a hurdle,” Richmond said. The WTW survey echoed this sentiment, with 56% of employers citing low engagement as a key issue in managing mental health benefits.
Dr. Yusuf Sherwani, CEO of Quit Genius, a digital substance use disorder platform, said employers are now demanding performance-based payment models instead. “I’ve seen a tremendous, almost allergic reaction to … charging a set amount irrespective of engagement or outcomes,” he said.
Quit Genius, headquartered in New York, is one of the most prominent virtual behavioral health providers in this space. In 2021, the company raised 64 million in Series B funding, bringing its total to nearly 79 million. Over the summer, it made its full-risk payment model standard across all B2B contracts, meaning its revenue depends entirely on meeting predefined performance goals tied to engagement, clinical outcomes, and satisfaction.
This evolution marks a significant step toward value-based care, where virtual behavioral health providers are compensated for the quality—not just the quantity—of services delivered.
Data as the New Currency in Behavioral Health
As virtual behavioral health providers compete for employer contracts, one truth has become evident: data drives decisions. Employers want evidence, not promises. Yet, measuring success in behavioral health is far more complex than in physical health.
“I think we’re still in the early stages of figuring out what the right metrics are to show value,” Richmond said. “Behavioral health is a little bit less measurable at times than, say, musculoskeletal or diabetes.”
Headspace Health, for example, uses validated clinical tools like the Patient Health Questionnaire (PHQ) and Generalized Anxiety Disorder (GAD) assessments to track member progress. However, employers increasingly want to know how these clinical improvements translate into financial savings.
That’s where actuarial and medical-economics data come in. Richardson explained that while most virtual behavioral health providers already collect extensive user data, the next challenge is connecting those numbers to cost impact. “It is often bringing on people, whether it’s hiring or partnering with organizations, that can help them do that more actuarial, medical-economics data,” she said. “Most of them are collecting that data anyways, but taking that dataset and saying, ‘OK, this is how it impacts cost,’ is kind of on another level.”
Companies that can connect these dots—showing clear links between improved mental health and reduced healthcare spending—stand to gain a competitive edge.
The Growth of Value-Based Care Contracts
The push for transparency and measurable outcomes is also fueling a rise in value-based contracting across digital behavioral health. Virtual behavioral health providers like Headspace Health are embracing this model by regularly reporting progress to their customers and standing behind their data. “We actually report progress to our customers on a quarterly basis,” Richmond said. “It’s wanting to stand behind your program and results.”
Each contract varies, but the core principle remains consistent: payment is tied to performance. Providers must demonstrate improvements in engagement, clinical outcomes, and satisfaction, or risk losing revenue. Quit Genius’s full-risk model is a leading example, as it aligns the company’s incentives directly with employers’ goals.
This shift is not just a financial strategy—it represents a deeper alignment between healthcare outcomes and business value. By proving their efficacy, virtual behavioral health providers can move from being viewed as optional add-ons to essential components of an employer’s overall healthcare ecosystem.
Simplifying the Experience Through Integration
As digital health solutions proliferate, employers are grappling with a new challenge: too many options. Managing multiple vendors can lead to fragmented care, administrative complexity, and confusion among employees. To combat this, many organizations are turning to care navigation platforms like Accolade and Quantum Health to consolidate their benefits ecosystems.
Sherwani noted that partnerships with these navigation platforms can be valuable for point solution providers. “Otherwise, employers have to procure an exponentially higher number of solutions,” he said. “It just saves on the traditional legal and financial review and procurement process.”
At the same time, a new trend is emerging: a return to health plan partnerships. As Naomi Allen, CEO of Brightline, explained, employers are increasingly relying on their health plans to deliver integrated mental health solutions. “We’re seeing a swing back to employers saying, ‘My health plans have actually now gotten more innovative,’” Allen said. “They’re partnering with the Brightlines of the world. I can put together a really robust behavioral health stack in partnership with my plan.”
Founded in 2019, Brightline specializes in pediatric behavioral health and has raised nearly 220 million in capital. Employers are turning to pediatric partners to support employees’ children, recognizing that family wellbeing directly impacts workplace performance.
Employers Want Comprehensive, One-Stop Solutions
Today’s employers are seeking comprehensive, one-stop-shop behavioral health solutions that offer a continuum of care—from low-acuity support to specialized treatment. They want platforms that can meet employees where they are, regardless of condition severity or complexity.
“The ability to have a comprehensive solution will bring you to the top,” Richmond said. “Then I also think it’s about your outcomes. It’s about the ability to show that your solutions are actually delivering people better care, and that there’s value to the investment that the employer is making.”
When Headspace and Ginger merged to form Headspace Health, their goal was precisely that: to create a seamless platform spanning the entire behavioral health spectrum. A.J. Rice, managing director of equity research at Credit Suisse, told Behavioral Health Business that this integration reflects the future of behavioral care. “It’s being really sensitive to give people many ways to engage with the system,” he said. “And being mindful that, to the extent they progress and have more significant issues, you’re getting them engaged deeper into the continuum of care.”
Even if one point solution can’t meet every need, employers expect virtual behavioral health providers to address multiple conditions and ensure coordination across programs. As Sherwani observed, “We’re increasingly seeing the need for the programs that they procure to be addressing more than just a single condition.”
The Bottom Line
The digital behavioral health landscape is undergoing a fundamental transformation. Employers are no longer swayed by flashy engagement metrics or promises of satisfaction—they want proof. The companies that thrive in this new environment will be those that:
- Demonstrate measurable improvements in mental health outcomes.
- Translate those outcomes into quantifiable ROI.
- Offer comprehensive, integrated care solutions.
- Provide seamless user experiences through data-driven navigation.
- Embrace value-based care and shared-risk contracting models.
As Richmond from Headspace Health emphasized, the future belongs to virtual behavioral health providers who can show results, not just engagement. Employers are raising the bar—and the digital behavioral health companies that can meet it will lead the next evolution of workplace mental health care.
