Thatch has raised $108 million in new funding at a $1 billion valuation as the health benefits platform scales its model of helping employers replace traditional group health plans with individual healthcare budgets. The financing came from The General Partnership, Index Ventures, General Catalyst and Andreessen Horowitz, with participation from ADP Ventures, Paychex, Eli Lilly and Company, Scale Venture Partners, QuantumLight, SemperVirens, Quiet Capital and Avid Ventures.
The new round follows a period of rapid growth for the San Francisco-based company. Thatch said revenue has increased nearly sevenfold during the past year, while more than 5,000 employers now use its platform.
Thatch is built around a different approach to employer-sponsored healthcare.
Rather than requiring a company to select one or a small number of group health plans for its entire workforce, employers using Thatch establish a defined healthcare budget for employees.
Employees can then use those tax-free dollars to select individual health insurance coverage based on their own doctors, prescriptions, family situation and coverage preferences.
Remaining funds can also be used for eligible healthcare expenses, including areas such as therapy and certain GLP-1-related costs.
The model is designed to give employers greater predictability over healthcare spending while shifting more of the purchasing decision to individual employees.
Thatch believes that approach addresses a structural problem in traditional employer health benefits: a plan selected around the needs of an average employee may not be a particularly good fit for many individuals within the workforce.
An employee managing a chronic condition may prioritize access to specific physicians or medications, while another employee may care more about premiums, deductibles or family coverage.
Thatch’s model allows those workers to make different choices while receiving their healthcare funding from the same employer.
The company sees rising healthcare costs as another driver of adoption.
Employers continue to face increasing benefits expenses, while employees can struggle to understand the true cost of their healthcare because purchasing decisions are often made through employer-selected plans.
Thatch argues that giving individuals control over a defined pool of healthcare dollars can introduce more price awareness into the system.
The company’s longer-term thesis extends beyond simply helping employees choose insurance.
Thatch wants to build infrastructure that makes healthcare behave more like other major consumer markets, where individuals have a budget, compare alternatives and decide how to allocate their spending.
The company believes artificial intelligence could eventually play an important role in that process.
Rather than requiring consumers to manually research insurance plans, doctors, appointments and costs, AI agents could eventually understand an individual’s health needs and available benefits, identify appropriate care and potentially help coordinate booking and payment.
Index Ventures Partner Jahanvi Sardana compared the opportunity with consumer transformations that occurred in retail, travel and investing, where technology increasingly shifted purchasing power toward individuals.
For Thatch, reaching that vision first requires building the financial and operational infrastructure connecting employers, employees, insurance companies, payroll systems and benefits platforms.
The company has integrated with major health insurance carriers and maintains distribution relationships with payroll and business software providers including ADP, Paychex, Gusto and QuickBooks.
Those partnerships can make it easier for employers to introduce Thatch without replacing the other systems they already use to manage payroll and benefits.
The participation of ADP Ventures and Paychex in the new financing also strengthens relationships with two major payroll and human capital management platforms.
Thatch’s strategy is to make the transition away from conventional group health plans operationally simple enough for employers of different sizes to adopt.
Instead of requiring companies to assemble multiple systems for employee eligibility, payroll deductions, insurance selection and reimbursement, Thatch provides a platform connecting those processes.
The company also sees its model as potentially giving employers more control over annual healthcare budgets.
Traditional group plans can expose companies to significant year-to-year premium increases.
A defined budget approach allows an employer to determine how much it intends to contribute while employees decide how those dollars should be allocated.
For workers, the potential benefit is greater personalization.
Employees can evaluate individual coverage against the healthcare services they actually expect to use rather than being limited to a companywide plan selected for the broader workforce.
Thatch’s nearly sevenfold revenue growth suggests that a growing number of employers are willing to experiment with that approach.
The company now serves more than 5,000 employers, creating a larger base through which it can expand its consumer-directed healthcare model.
The $108 million financing provides Thatch with additional capital to scale the platform, expand integrations and continue developing the infrastructure behind individualized employer health benefits.
At a $1 billion valuation, the financing also places the company among the more highly valued startups attempting to rethink how employers finance healthcare.
Thatch ultimately sees its opportunity as larger than benefits administration.
Its ambition is to change who controls healthcare purchasing decisions.
Instead of employers selecting the same plan for an entire workforce, Thatch wants companies to provide the money while giving individuals greater authority over how it is spent.
KEY QUOTES:
“For too long, healthcare has been the one major purchase in someone’s life they never actually got to make. Give people control over their own healthcare dollars, and the first thing they do is ask what something actually costs. That’s the behavior change this round is built to scale.”
Chris Ellis, Co-Founder and CEO of Thatch
“Every massive consumer market eventually gets rebuilt around the individual – Amazon did it for retail, Expedia for travel, Robinhood for investing. Thatch is doing it for healthcare. With AI, the end state is bigger than shopping: an agent that knows you, holds your wallet and can find, book and pay for the right care. The magic is that you stop navigating healthcare and start being taken care of.”
Jahanvi Sardana, Partner at Index Ventures
