Health benefits platform Thatch reaches $1B valuation as healthcare costs surge

Thatch, a platform that lowers healthcare costs for employers while expanding plan choices for workers, has raised $108 million at a $1 billion valuation from existing investors: The General Partnership, Index Ventures, General Catalyst, and Andreessen Horowitz.

The new fundraise comes 17 months after Thatch raised a $40 million Series B at a $410 million valuation, according to PitchBook.

That’s a remarkable valuation leap for a company that isn’t, at its core, an AI startup.

Thatch grew its annual recurring revenue about seven times, co-founder and CEO Chris Ellis told TechCrunch. Ellis co-founded Thatch in 2021 with former Stripe engineering exec Adam Stevenson (pictured left).

Two major forces are driving the startup’s growth. First, employer healthcare costs keep surging, with 2027 expenses projected to jump over 8% — the largest increase since 2003. At the same time, employees are increasingly eager to access new treatments like GLP-1 drugs (weight-loss and diabetes medications such as Ozempic and Wegovy), which traditional health plans rarely cover.

Thatch helps employers keep healthcare costs manageable by offering an individual plan marketplace through what’s known as an ICHRA (Individual Coverage Health Reimbursement Arrangement) — a model created by federal regulation in 2020 that lets companies fund employees’ own individual insurance plans instead of enrolling everyone in one company-wide plan.

Under ICHRAs, which recently rebranded as CHOICE, employers no longer have to negotiate traditional healthcare agreements with individual insurance carriers like Anthem or United Healthcare. Instead, companies set a fixed health budget for each worker, who can then use those pre-tax funds to choose among dozens of health, dental, and vision plans on Thatch’s marketplace. Thatch uses AI to recommend the optimal health plan for each employee’s specific needs. Those needing extensive care can supplement their allowance out of pocket for comprehensive coverage. Healthier workers, meanwhile, can opt for lower-cost plans and use the leftover funds via a Thatch debit card for other eligible health expenses like GLP-1s or an Oura Ring.

Ellis claims that this arrangement is a win-win for employers and workers.

“If [employees] don’t like their insurance, they can switch to another one,” he said. “It creates pressure on insurers to compete for better service, denying fewer claims because they want to keep you as a customer.”

The benefit to employers is that they no longer have to renegotiate with carriers annually, yet they can still provide the same level of coverage, often at a slightly lower cost, he said.

Thatch isn’t the only company taking advantage of the six-year-old regulation to offer employers an alternative to the traditional healthcare benefits model. Competitors include other startups such as Take Command, Remodel Health, and Zorro.

“People are waking up to this because of costs, but then they’re realizing this is a better, more efficient way to do it,” Ellis said.

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Marina Temkin is a venture capital and startups reporter at TechCrunch. Prior to joining TechCrunch, she wrote about VC for PitchBook and Venture Capital Journal. Earlier in her career, Marina was a financial analyst and earned a CFA charterholder designation.

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