Thatch Secures $40M to Empower Employees with Enhanced Health Care Choices

Thatch is revolutionizing the health insurance landscape for both employers and employees. The innovative startup has successfully secured $40 million in a Series B funding round, as reported exclusively by TechCrunch. This substantial investment will further enhance Thatch’s mission to simplify and improve the health insurance experience.

Funding Details and Investor Support

Leading the funding round was Index Ventures, with participation from notable investors such as Andreessen Horowitz (a16z), General Catalyst, SemperVirens, PeopleTech Partners, and The General Partnership, along with new investor ADP Ventures. Since its inception in October 2021, Thatch has raised a total of $84.5 million in equity funding.

Valuation Insights

While specific valuation details remain undisclosed, co-founder Adam Stevenson indicated that Thatch’s valuation is approximately three times higher than its previous Series A round, which raised $38 million in February 2024.

Understanding Individual Coverage Health Reimbursement Arrangements (ICHRA)

Thatch specializes in enabling employers to offer Individual Coverage Health Reimbursement Arrangements (ICHRA) to their employees. This relatively new insurance option, launched in 2020, differs significantly from traditional Health Reimbursement Arrangements (HRAs).

Key Differences Between ICHRA and HRA

• HRA: Typically covers out-of-pocket medical expenses like therapy, braces, and prescriptions.
• ICHRA: Allows employers to allocate funds for individual medical insurance plans.

As CEO Chris Ellis explained, “Imagine each employee receives $1,000 a month. One might spend $800 on a Kaiser HMO plan and the remaining $200 on therapy, while another could use the full amount for a United PPO plan. HRAs previously couldn’t cover insurance costs.”

Marketplace and Flexibility for Employees

Thatch operates a marketplace where employees can select from various health insurance options. They also provide a debit card for spending any remaining balance, allowing employees to pay for medical, dental, and vision expenses. If funds remain, they can be utilized for treatments not covered by insurance. Notably, employees can switch insurance carriers if they become dissatisfied.

Ellis noted, “About 50% of members maintain an average balance of around $250 each month, which can be used for non-covered health expenses.”

Innovative Solutions and Partnerships

The founders believe there is ample opportunity for innovation in the ICHRA space. Employee classifications allow businesses to tailor health benefits based on factors like hours worked or geographical location, offering greater flexibility.

Stevenson emphasized, “It’s illogical for healthcare to depend on an employer. ICHRA empowers businesses to provide tax-free funds for employees to manage their healthcare needs.”

Strategic Collaborations

Thatch has formed a partnership with QuickBooks to integrate ICHRA accounts directly into their platform, simplifying setup for businesses. They are also working on a similar integration with ADP.

Growth and Future Prospects

While Stevenson did not disclose revenue figures, he mentioned that Thatch has onboarded over 1,000 companies in the past 18 months, with revenue increasing by 8x year-over-year. Notable customers include Dave’s Hot Chicken, Jersey Mike’s, and PeopleTech Partners.

Expert Leadership and Vision

Founders Ellis and Stevenson bring extensive backgrounds in healthcare and fintech to Thatch. Ellis previously worked as a cancer researcher at MIT, while Stevenson spent four years at Humana and led engineering teams at Stripe.

To bolster their growth, Thatch recently appointed Gary Daniels, former CEO of UnitedHealthcare’s Pacific Northwest division, as Chief Growth Officer. Stevenson stated, “He joins us because he believes ICHRA is the future of employer-sponsored healthcare.”

Conclusion

Thatch is redefining the health insurance model by making it more transparent, personalized, and user-friendly. According to Jahanvi Sardana, a partner at Index Ventures, “Thatch is not merely tweaking the system; they are fundamentally replacing it with something better.” With its innovative approach, Thatch is poised to transform how employees access and manage their health benefits.