Thatch Raises $40M to Revolutionize Employee Healthcare

Thatch Secures $40 Million in Series B Funding

Thatch, a company focused on redefining the health insurance experience for both employers and their workforces, has successfully completed a $40 million Series B funding round. This information was shared exclusively with TechCrunch.

Index Ventures spearheaded the investment, with contributions from existing investors including Andreessen Horowitz (a16z), General Catalyst, SemperVirens, PeopleTech Partners, The General Partnership, and the addition of new investor ADP Ventures. Since its establishment in October 2021, Thatch has accumulated a total of $84.5 million in equity funding.

Valuation and Company Growth

Although the San Francisco-based startup has not disclosed its current valuation, co-founder Adam Stevenson revealed to TechCrunch that it represents approximately three times the valuation achieved during its Series A funding.

Thatch facilitates employers in offering Individual Coverage Health Reimbursement Arrangements (ICHRA) to their employees. ICHRA is a relatively recent healthcare option, becoming effective in 2020.

Understanding ICHRA vs. HRA

What distinguishes an ICHRA from a traditional Health Reimbursement Arrangement (HRA)? A standard HRA typically covers out-of-pocket medical costs like therapy sessions, orthodontic treatments, and prescription medications.

The ICHRA expands this coverage to include individual health insurance premiums.

“Consider a scenario where each employee receives a monthly allowance of $1,000. One employee might opt for a Kaiser HMO plan costing $800 per month, utilizing the remaining $200 for therapy. Another employee could allocate the full $1,000 to a United PPO plan. Previously, HRAs were unable to contribute towards insurance costs,” explained CEO and co-founder Chris Ellis.

Thatch’s Platform and Employee Benefits

Thatch provides a marketplace where employees can select from a variety of health insurance plans. They also offer a debit card for managing remaining funds.

Employees utilize this allocated budget through Thatch to choose healthcare plans encompassing medical, dental, and vision coverage. Any unused funds can then be applied to treatment expenses. The founders emphasize that Thatch allows employees to switch insurance carriers if they become dissatisfied.

“Approximately 50% of our members retain an average monthly balance of around $250,” Ellis stated to TechCrunch. These employees can then use these funds for healthcare expenses not typically covered by insurance.

Innovation and Flexibility in Healthcare

The founders believe the relative novelty of the regulation presents significant opportunities for innovation. Stevenson highlighted that ICHRA employee classes enable businesses to customize health benefits by grouping employees based on criteria such as work hours or geographic location.

This flexibility allows employers to tailor health plan offerings to specific employee groups.

“Healthcare shouldn’t be tied to employment,” said Stevenson, who also serves as the company’s president. “ICHRA empowers businesses to provide their employees with tax-free funds to spend on healthcare in a manner that best suits their individual needs, moving away from a one-size-fits-all approach.”

Strategic Partnerships

Thatch has established a partnership with QuickBooks, enabling the company to “integrate and distribute ICHRA directly within” the QuickBooks platform. This allows companies using QuickBooks to easily establish ICHRA accounts for their employees.

A similar integration is currently under development for ADP, though it has not yet been launched.

Revenue Growth and Customer Base

While Stevenson did not disclose specific revenue figures, he confirmed that Thatch has onboarded “over a thousand companies” in the past 18 months and experienced an 8x year-over-year revenue increase. (The company’s offering was launched in August 2023).

Current customers include Dave’s Hot Chicken, Jersey Mike’s, PeopleTech Partners, Fragment.dev, Ferry Health, and Friends of Bonobos.

The Convergence of Healthcare and Financial Technology

The founding team behind this venture brings significant expertise from the healthcare sector. Ellis’s professional journey began with cancer research at MIT. Following this, he established and led the U.S. sales division at Sophia Genetics, a company specializing in clinical software.

Subsequently, he contributed to the software product development team at Agilent Technologies, a prominent manufacturer of testing equipment.

Stevenson’s background includes a four-year tenure at Humana, a leading health insurance provider. Alongside this, he independently launched several Software-as-a-Service (SaaS) businesses.

He later joined Stripe, where he spent seven years building and managing various customer engineering teams.

The founders identified that successful implementation of Individual Coverage Health Reimbursement Arrangements (ICHRA) hinges on resolving complex fintech challenges.

These challenges encompass budget management, fund disbursement, payment tracking, and claims adjudication.

To address these needs, the company strategically recruited personnel from organizations like Stripe, Rippling, and Ramp. This was done to construct a comprehensive financial and operational infrastructure capable of simplifying the complexities associated with ICHRA.

Recently, Thatch also welcomed Gary Daniels, formerly the CEO of UnitedHealthcare’s Pacific Northwest division, as its Chief Growth Officer.

Stevenson conveyed to TechCrunch that Daniels’ decision to join stems from a conviction that ICHRA represents the future of employer-provided healthcare.

As of March, Thatch’s team comprised 72 employees.

Jahanvi Sardana, a partner at Index Ventures, drew a parallel between selecting a health plan and purchasing a home without complete information.

“The current process often involves limited options and uncertainty,” she explained to TechCrunch.

“Thatch is transforming benefits administration into a contemporary marketplace – one that is transparent, tailored to individual needs, and centered around choice.

They aren’t simply refining the existing system; they are replacing it with a fundamentally improved alternative.

This type of change, once realized, will appear self-evident in retrospect.”

Sardana emphasizes that Thatch is addressing not only benefits-related issues but also underlying technology and payment complexities.

She stated: “The entire process – from plan selection to payments and reimbursements – is designed with the end-user in mind.

Such a shift isn’t accidental.

When leading companies actively seek out your product, even before formal outreach, it signals the creation of something truly innovative.”