Thatch, a platform that aims to reduce healthcare costs for employers while expanding plan choices for employees, has raised $108 million, achieving a valuation of $1 billion. The funding was provided by existing investors including The General Partnership, Index Ventures, General Catalyst, and Andreessen Horowitz. This funding round follows a $40 million Series B raised 17 months prior, which valued the company at $410 million, according to PitchBook.
Co-founder and CEO Chris Ellis stated that Thatch has increased its annual recurring revenue approximately seven times since its inception in 2021, alongside co-founder Adam Stevenson, a former engineering executive at Stripe.
The growth of Thatch is attributed to two main factors: rising employer healthcare costs, which are projected to increase by over 8% by 2027, and a growing employee demand for access to new treatments, such as GLP-1 drugs, which are often not covered by traditional health plans.
Thatch provides an individual plan marketplace through an Individual Coverage Health Reimbursement Arrangement (ICHRA), a model established by federal regulation in 2020. This allows companies to fund employees' individual insurance plans instead of using a single company-wide plan. Under the ICHRA model, employers set a fixed health budget for each employee, who can then select from various health, dental, and vision plans available on Thatch’s marketplace. Thatch employs AI technology to recommend health plans tailored to each employee's needs, allowing employees to use any remaining funds for other health-related expenses.
Ellis noted that this model benefits both employers and employees. He stated, "If [employees] don’t like their insurance, they can switch to another one. It creates pressure on insurers to compete for better service, denying fewer claims because they want to keep you as a customer."
Employers benefit from not having to renegotiate with insurance carriers annually while still providing comparable coverage, often at a reduced cost. Thatch faces competition from other startups leveraging the ICHRA model, including Take Command, Remodel Health, and Zorro.
Ellis commented on the growing awareness of this model, saying, "People are waking up to this because of costs, but then they’re realizing this is a better, more efficient way to do it."