ICHRA Growth Pushes Thatch to a $1 Billion Valuation

Thatch announced $108 million in new funding at a $1 billion valuation on Tuesday, and every dollar came from backers already on the cap table. Andreessen Horowitz, General Catalyst, Index Ventures and The General Partnership all wrote again. The company sells employers a way out of the single company-wide health plan, and more than 5,000 of them now use it.

If benefits renewal season makes your stomach drop, you are not unusual. Health coverage is often the second largest line on a small payroll and the one you understand least, so a round this size is worth understanding even if you never buy the product.

What Thatch Actually Sells

ICHRA stands for Individual Coverage Health Reimbursement Arrangement, a category a 2020 federal rule created and which was renamed CHOICE more recently. The shift it allows is simple. You stop buying one contract for everybody and start funding a per-person monthly allowance.

Each worker then spends those pre-tax dollars on an individual plan they pick themselves from a marketplace. Someone who wants broader coverage can add their own money on top. Someone who picks a cheaper plan can put the remainder toward other eligible expenses through a company card.

For the owner, the practical change is that annual carrier renegotiation disappears. Your benefits cost becomes a number you set rather than a number a carrier hands you in October.

The Cost Curve Pushing Owners to Look

Employer healthcare spending is forecast to rise more than 8% in 2027, which would be the steepest jump since 2003. That is the pressure driving interest, and it lands hardest on companies too small to have negotiating leverage.

Chris Ellis runs the business he launched five years ago alongside Adam Stevenson, previously an engineering leader at Stripe. Ellis told TechCrunch that owners arrive for the cost savings and stay because the administration gets simpler. Thatch is not alone in the category either. Take Command, Remodel Health and Zorro sell variations of the same idea.

Where a Small Team Gains and Where It Loses

The clearest gain is budget certainty. You decide the contribution, so the line stops moving on someone else’s schedule, which matters when every other cost is already unpredictable. Owners watching the small business optimism index slip know how much a fixed number is worth right now.

The second gain is fit. A 24-year-old developer and a 45-year-old operations lead rarely want the same plan, and a single group policy forces a compromise that satisfies neither.

The losses are real too. Employees now shop for coverage themselves, which is work they did not previously have to do, and some will find it stressful. You also give up whatever group rate your carrier offered, which occasionally is genuinely good. Recruiting can get harder as well, because candidates comparing offers understand a named group plan faster than they understand a monthly allowance.

Steps Before You Change Anything at Renewal

Pull your current total spend first, including the employer share, the administrative time and any broker fee. You need one honest number to compare against.

Then check what individual plans actually exist in the counties where your people live. This model depends entirely on local marketplace supply, and a team spread across rural areas may find thin options. The government maintains a plain-language overview of individual coverage HRAs that covers the eligibility rules.

Next, talk to your team before you decide. Benefits changes land like trust changes, and the same dynamic that makes return to office mandates backfire applies here. People forgive a change they helped shape.

Finally, price the switch against a slower hiring plan. If your headcount math is already tight, as the recent data on small business hiring suggests it is for many owners, a benefits change and a hiring push in the same quarter is a lot of moving pieces at once.

What Comes Next in This Category

Expect more money to arrive here. A seven-fold revenue increase in a category with four credible competitors usually pulls in more entrants, and that competition tends to favor buyers on price and product quality.

Watch for carriers responding as well. If enough small employers move to individual plans, insurers have reason to compete harder for those individual customers, which is the outcome the model is designed to produce.

Owner Questions About ICHRA

Can any size company use an ICHRA?

The arrangement is available to employers of any size, though the rules on how you group employees and set contribution amounts matter. Confirm the specifics with a benefits advisor before you commit.

Do employees pay tax on the allowance?

Contributions are made with pre-tax dollars when the arrangement is set up correctly. Correct setup is the operative part.

What happens to an employee who already has a plan?

They generally keep it and apply the allowance to it, provided the plan qualifies under the rules.

How long does a switch take?

Plan for a full renewal cycle rather than a few weeks, because employees need time to shop and enroll.