Thatch, a startup aimed at transforming the health insurance experiences of employers and employees, raised $40 million in Series B round funding.
Index Ventures led funding, including participation from existing backers Andreessen Horowitz (A16Z), General Catalyst, Sempervirens, Peopletech Partners, The General Partnership, and New Investor ADP Ventures. In total, since its launch in October 2021, Sachu has raised $84.5 million in equity funding.
The San Francisco-based startup refused to reveal the new rating, but co-founder Adam Stevenson told TechCrunch it was about three times more than Series A (Thich raised $38 million in the Series A round led by General Catalyst in February 2024).
thatch Employers help provide employees with an individual coverage health rebate (ICHRA). ICHRA is a relatively new insurance option that is in effect in 2020.
So, what is the difference between ICHRA and HRA? A typical HRA only covers pocket medical costs such as treatments, braces, prescriptions, and more.
ICHRA also allows employers to use funds to cover individual health insurance.
“So imagine each employee receives $1,000 a month. One employee can purchase a Kaiser HMO plan for $800 a month and spend the remaining 200 months in treatment, while another employee may spend $1,000 a month on a unified PPO plan. Previously, HRAs could not pay insurance.
Thatch hosts a market that allows employees to choose from a variety of health insurance options, offering debit cards that allow them to use the rest of the balance. Employees use that budget via thatch to select the medical plan they want, including medical, dental, vision. If they have the remaining funds, they can use it to pay for the medical treatment. In Thatch, if an employee gets unhappy with one insurance company, they can switch, the founder said.
“We see that about 50% of our members have an average balance of about 250 months,” Ellis told TechCrunch. He added that these employees have the ability to use their extra balances to pay for things their health insurance doesn’t cover.
In the founder’s view, regulations are relatively new and there is plenty of room for innovation. For example, ICHRA employee classes said they would allow businesses to customize their health benefits by grouping employees based on factors such as work and geographic location. This flexibility allows employers to coordinate health plan delivery to different classes.
“It makes no sense for healthcare to depend on your employer,” said Stephenson, the company’s president. “As opposed to choosing the right profit for a team for one size, ICHRA instead allows businesses to give employees tax-free money to spend on healthcare in the best way.”
Thatch will partner with QuickBooks to allow companies to “embed and distribute ICHRAs directly” into their own products, Ellis said. This means that businesses using QuickBooks can easily set up ICHRA accounts for their employees. Thatch is in the process of building a similar product from ADP, which has not yet been released.
Stevenson refused to reveal revenue figures, but he said Thatch had onboarded “over 1,000 companies” over the past 18 months, with revenues eight times higher than last year. (The company began offering it in August 2023). Customers include Dave’s Hot Chicken, Jersey Microphone and People Tech Partners fragment.devferry health, and bonobos friends.
Healthcare meets Fintech
The experiences of the two founders are primarily in healthcare. Ellis began his career as a cancer researcher at MIT. He then founded a US sales team at clinical software startup Sophia Genetics before working on the software product team for Agilent Technologies, a large testing equipment company.
Stevenson spent four years at health insurance giant Humana and launched several bootstrap SaaS companies. He eventually landed in Stripe, where he began and led various customer engineering teams for seven years.
The pair said they found that doing ICHRA work was ultimately linked to solving fintech issues such as budget management, issuing funds, paying remission and follow-up, and handling arbitration. That’s why the company recruited employees from companies like Stripe, Rippling and Ramp to “create all the financial and operational infrastructure needed to abstract all the messiness of ICHRA.”
Thatch recently hired Gary Daniels, former CEO of United Healthcare’s Pacific Northwest division, as chief growth officer.
“He’s involved because he believes ICHRA is the future of employer-sponsored healthcare,” Stevenson told TechCrunch.
As of March, thatch had 72 employees.
Jahanvi Sardana, a partner at Index Ventures, likened the process of choosing a health plan: “trying to buy a home without knowing the price or details.”
“You’re passing on a limited set of options and the best hope,” she told TechCrunch.
Saldana believes Thatch is not only about his profits, but also about technology and payments.
She said: “Plan choices, payments, refunds – are designed around the end users, and such shifts do not happen by chance.
