Daffodil Health raises $16.3M in funding to tackle $1 trillion in healthcare administrative waste with AI

Healthcare eats nearly one out of every five dollars in the U.S. economy. A staggering share of that money never touches a doctor, nurse, or patient. It gets absorbed by paperwork, repricing vendors, audit layers, and a maze of middlemen that few patients ever see.

Daffodil Health wants to rip that layer out.

The San Francisco–based AI startup announced it has raised $16.3 million in a Series A round, bringing its total raised to $20.9 million. The round was led by Flare Capital Partners, with participation from LRVHealth and returning investor Maverick Ventures. Individual backers include Scott Mingee, former CEO of Equian, which was acquired by Optum, and Jim Lacy, former president and COO of Collective Medical, later acquired by PointClickCare.

With $16.3M in Funding, AI Startup Daffodil Health Wants to Replace Opaque Claims Middlemen with AI-Powered Pricing

Daffodil is building an AI-first platform to modernize how U.S. health plans handle claims and pricing logic. Its focus is less glamorous than telehealth apps or AI diagnostics, yet the stakes are enormous. Administrative processes alone account for more than $1 trillion in annual healthcare spending. At the same time, 41% of Americans carry medical debt, 46% of adults skip care over cost concerns, and 58% of debt collections in the U.S. are tied to medical bills. Those numbers form the backdrop for Daffodil’s pitch.

For decades, claims infrastructure has relied on static pricing models and opaque, percentage-of-savings arrangements. Many payors outsource out-of-network repricing and payment integrity to third-party vendors whose incentives can conflict with cost containment. Reporting is delayed. Pricing logic sits in black boxes. Plan innovation stalls.

Daffodil’s approach flips that structure. Its SaaS platform allows health plans and third-party administrators to bring out-of-network repricing and payment integrity back in-house. Pricing benchmarks are transparent and adjustable in real time. The system works alongside existing core claims platforms, rather than forcing a full rip-and-replace.

“For too long, health plans have been unable to meaningfully address the healthcare cost crisis because they’ve been forced to pay high fees to middlemen whose incentives often make the problem worse,” said Navin Nagiah, CEO and co-founder of Daffodil Health, and former SVP of Products at MultiPlan/Claritev. “At Daffodil, we believe removing these low-value intermediaries from out-of-network repricing and payment integrity is the first step toward modernizing the archaic practices and systems that continue to drive up costs. By giving plans control over pricing logic and real visibility into claims, we’re striving for more transparent, auditable, and cost-effective benefit design across the board.”

The company says its customers have seen seven-figure improvements in plan margins. In one deployment, a payor partner saved roughly $4 million in the first year, driven solely by reductions in vendor fees before factoring in gains from improved pricing configuration and reporting.

Investors are betting that pressure from employers and regulators will accelerate demand for platforms that bring transparency into the claims layer. As benefit designs shift toward narrow and tiered networks, reference-based pricing, and dynamic copays, legacy systems struggle to keep up.

“Daffodil is redefining how health plans and TPAs modernize plan design, pricing, and claims infrastructure while helping payors capture more margin and deliver more member-centric experiences,” said Parth Desai, Partner at Flare Capital Partners. “With AI-native automation and auditability built in, Daffodil enables faster, defensible pricing and plan design decisions, at scale, that legacy incumbents and point solutions can’t match.”

Daffodil is positioning itself as an infrastructure for a new generation of cost-conscious health plans. Its pricing model avoids the traditional percentage-of-savings structure and instead relies on a SaaS approach with predictable costs. For payors, that shift is about more than software. It is about regaining control over pricing logic and visibility into compliance at a time when healthcare costs remain a political and economic flashpoint.

Healthcare may account for nearly 20% of the U.S. economy, yet much of that spending disappears into administrative layers patients never see. Daffodil is betting that cleaning up that back-end machinery will matter just as much as any breakthrough on the clinical side.