Thatch raises $40 million to give employees greater control over their healthcare decisions.

Thatch, a new startup dedicated to improving the health insurance experience for both employers and employees, has raised $40 million in a Series B funding round, as reported. This round was led by Index Ventures, with participation from existing investors such as Andreessen Horowitz (a16z), General Catalyst, SemperVirens, PeopleTech Partners, and The General Partnership, as well as a new investor, ADP Ventures. Since its inception in October 2021, Thatch has successfully raised a total of $84.5 million in equity financing.

Although the San Francisco-based startup has not disclosed its new valuation, co-founder Adam Stevenson mentioned that it is approximately three times higher than its Series A round, where they raised $38 million, led by General Catalyst in February 2024. Thatch makes it easier for employers to offer their employees the Individual Coverage Health Reimbursement Arrangement (ICHRA), a relatively new insurance option implemented in 2020. Unlike a traditional HRA, which only covers medical expenses, the ICHRA allows employers to use funds to finance individual health insurance.

CEO and co-founder Chris Ellis explained that each employee could receive $1,000 a month; for instance, one might choose an HMO plan from Kaiser for $800 and allocate the remainder for therapy, while another could use the entire $1,000 for a PPO plan from United. Previously, HRAs could not allocate funds for health insurance.

Thatch provides a marketplace where employees can choose from various health insurance options, in addition to offering a debit card to use the remaining balance. This enables employees to select health plans that meet their needs, including medical, dental, and vision. If there is a remaining balance, they can use it for medical expenses not covered by insurance. The flexibility of the ICHRA allows employees to change insurance providers if they are not satisfied.

Stevenson highlighted that the ICHRA allows for innovation due to its recent regulation. For example, it enables companies to customize their health benefits by grouping employees into classes based on factors such as hours worked or geographical location, making it easier to tailor health plan offerings to different groups.

Additionally, Thatch has partnered with QuickBooks to integrate and distribute the ICHRA directly through its product, simplifying the account creation process for employees. They are also working on a similar offering for ADP, which has yet to be launched.

Although revenue figures have not been disclosed, it is said that Thatch has onboarded over a thousand companies in the past 18 months, experiencing eight-fold revenue growth compared to the previous year. Its clients include names like Dave’s Hot Chicken and Jersey Mike’s.

With the aim of addressing financial technology issues, the founders have recruited talent from companies such as Stripe and Rippling and recently hired Gary Daniels, former CEO of UnitedHealthcare in the Pacific Northwest, as their growth director.

Index Ventures partner Jahanvi Sardana compared selecting a health plan to "trying to buy a house without knowing the price or the details," emphasizing that Thatch transforms this process into a modern, transparent, and choice-driven marketplace. According to her, the company faces not only the challenge of benefits but also issues related to technology and payments, which represents a fundamental shift in the sector.