Health insurers tap AI to tackle $570bn healthcare admin waste

…As Alaffia Health raises $55m to cut claims waste

Health insurers are seeking technology to curb soaring administrative costs estimated at $570 billion annually, as Alaffia Health says it has raised $55 million in a Series B funding round led by Transformation Capital, aimed at plugging the leak.

The financing, which included participation from existing investors FirstMark Capital, Tau Ventures and Twine Ventures, brings the company’s total capital raised to more than $73 million.

Health plans are facing mounting pressure from rising medical costs, tighter regulatory oversight and growing scrutiny over billing practices. Administrative waste remains one of the largest untapped opportunities for cost reduction in the U.S. healthcare system.

Founded in 2020 by siblings TJ Ademiluyi and Adun Akanni, Alaffia uses what it describes as agentic AI paired with clinician oversight to evaluate insurance claims against complete patient medical records.

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The company says its platform has delivered more than $120 million in savings for health plan clients and achieved average savings of over 20 percent on high-cost facility claims.

“Health plans are under immense pressure to reduce administrative costs and drive affordability for their members,” said TJ Ademiluyi, co-founder and chief executive officer, adding that the new funding will help expand the company’s team and AI capabilities.

Unlike traditional payment integrity vendors or AI-only automation tools, Alaffia’s platform is designed for payer environments that require traceability, configurability and clinical oversight. The company reports clinical fact extraction accuracy above 97 percent and offers both software-as-a-service and managed service models.

As part of the financing, Todd Cozzens, managing partner at Transformation Capital, joined Alaffia’s board. Cozzens said payment integrity remains one of the most untapped opportunities in healthcare, noting that reducing administrative waste could help lower overall healthcare costs for consumers.

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The new capital will be deployed across research and development, expansion of AI agents into new clinical and operational modalities, and scaling adoption among regional and national health plans. The company also plans to hire across engineering, product and growth teams.

Ademiluyi, who previously worked at Goldman Sachs before launching the company, said the startup’s mission is to reduce billing errors and administrative burden across the healthcare system.

With insurers increasingly turning to AI to manage operational complexity while avoiding compliance and provider-relations risks, Alaffia’s latest funding underscores growing investor confidence that carefully governed AI systems can deliver measurable savings in one of healthcare’s most cost-intensive functions.