Health benefits platform Thatch has reached a $1 billion valuation following a $108 million Series C funding round. The milestone arrives as U.S. employers face a sharp rise in healthcare expenditures and a significant federal push to transition company-sponsored insurance toward a “defined contribution” model.
The funding round was led by The General Partnership, Index Ventures, General Catalyst, and Andreessen Horowitz. Notably, the round also included strategic investments from Eli Lilly and Company and major payroll providers ADP Ventures and Paychex. The involvement of payroll giants suggests a growing industry effort to unbundle health benefits from traditional payroll packages, allowing for more flexible, portable insurance options.
Thatch’s growth—reporting a sevenfold revenue increase over the last 17 months—coincides with a major regulatory rebranding of individual health coverage. On September 3, 2026, the Centers for Medicare & Medicaid Services (CMS) and the Small Business Administration (SBA) officially rebranded Individual Coverage Health Reimbursement Arrangements (ICHRAs) as “CHOICE Arrangements” (Custom Health Option and Individual Care Expense).
Under this model, rather than selecting a single group plan for all staff, employers provide a set tax-free budget for employees to purchase individual plans on the open market.
The shift is largely driven by mounting financial pressure on corporate budgets. Thatch currently serves more than 5,000 employers, including national brands like Jersey Mike’s, Five Guys, and Orkin. These companies are navigating a landscape where employer healthcare costs are projected to increase by 6.5% to 10% in 2026.
Market analysts point to the surge in GLP-1 medications for weight loss as a primary driver of these rising premiums. By utilizing the CHOICE Arrangement framework, employers can cap their total healthcare liability at a fixed dollar amount, insulating the company budget from the volatile pricing of high-demand specialty drugs while still providing employees with access to those treatments through individual plans.
The participation of Eli Lilly as a strategic investor highlights the pharmaceutical industry’s interest in how individual insurance markets handle high-cost medications. As adoption of these models nearly doubled year-over-year—growing from roughly 6,600 to 12,700 participating employers—Thatch has positioned itself as the primary technology layer facilitating the transition between traditional group plans and individualized coverage.
