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When Thatch hired its first employees in 2022, none of them were happy with the health insurance plan the startup picked out, according to its co-founder and CEO Chris Ellis. The solution became Thatch’s product today: a platform that helps employees find their own coverage, rather than having it chosen for them.
Thatch just raised $38 million to help employers take advantage of individual coverage health reimbursement arrangements (ICHRAs), a relatively new insurance option that allows companies to give their workers tax-free dollars to shop for their own health plan on the Affordable Care Act marketplace, as opposed to buying coverage as a group.
The Series A round was led by General Catalyst and Index Ventures. New investors SemperVirens and The General Partnership also chipped in, along with existing investors Andreessen Horowitz and Avid Ventures.
Thatch, launched in 2023, is among a number of venture-backed startups, including Take Command Health, Benefitbay, Venteur Health and StretchDollar, capitalizing on ICHRAs, which first became available in 2020 thanks to a Trump administration rule. Some insurers such as Oscar Health are also betting they can boost membership by creating health plans meant to attract people shopping with these arrangements.
Employers pay Thatch for its platform that simplifies the process of helping workers pick their own plans and allows employers to set a budget. It also recommends plans to workers based on their preferences and provides a chatbot to answer their questions.
Around 20% of Thatch customers are startups, including early-stage startups with busy founders who don’t want to spend time figuring out benefits, co-founder Adam Stevenson told Endpoints News in an interview. The other 80% are companies of all sizes. Thatch’s revenue is almost equally split between hundreds of small businesses, mid-market and enterprise companies, he said.
So far, US employers, which provide health coverage for more than 150 million employees, have been slow to ditch their group health plans and adopt ICHRA. The HRA Council estimates that more than 10,000 employers offer ICHRAs and other types of HRA plans, and more than 200,000 employees, excluding dependents, have coverage through the arrangements.
But Stevenson predicted that ICHRA adoption could look similar to other products that were once viewed as niche but have become popular, such as 401k retirement plans. With people changing jobs more frequently than in the past, it’s important that they don’t lose their health benefits in between, he added.
“When you talk about something that has such a profound impact, we expect to see a similar trajectory as some of these other truly kind of revolutionary regulations,” he said.
Ellis told Endpoints that Thatch expects to have over a thousand employers on its platform soon. The fresh funds will be used to meet that demand and hire a bigger team to serve new clients.