In a funding market obsessed with artificial intelligence, one of the latest companies to cross the billion-dollar mark is solving a far older problem: the spiralling price of workplace health insurance. Thatch, which helps companies hand employees a health budget instead of a single group plan, has more than doubled its valuation in under a year and a half.

The $108 million round came entirely from investors who already knew the business well: The General Partnership, Index Ventures, General Catalyst and Andreessen Horowitz all returned to write bigger cheques. When insiders lead a round at a sharply higher price, it usually signals that they have seen the numbers up close and like the trajectory.

And the trajectory is steep. The company's previous raise was a $40 million Series B that valued it at roughly $410 million. Seventeen months later, the valuation sits at $1 billion, backed by annual recurring revenue that has grown around sevenfold, according to co-founder and CEO Chris Ellis. For a benefits company that does not pitch itself primarily as an AI play, that kind of step-up is unusual.

Two pressures are pushing employers toward alternatives. The first is cost. Industry surveys expect employer health spending to climb by more than 8% next year, which would be the steepest annual increase since 2003. Finance teams that once accepted yearly premium hikes as unavoidable are now actively looking for a different structure.

The second is what employees want. Demand for newer treatments, especially GLP-1 medications used for weight loss and diabetes, is rising fast, yet many traditional group plans still refuse to pay for them. That gap leaves workers frustrated and employers stuck between rising premiums and unhappy staff.

Thatch is built on the Individual Coverage Health Reimbursement Arrangement, or ICHRA, a structure introduced by federal rules in 2020 and now being marketed under the name CHOICE. Rather than signing one company-wide contract with a large insurer, an employer sets aside a fixed, tax-advantaged amount for each person. Employees then use that money to pick their own coverage from a marketplace offering dozens of medical, dental and vision options, with AI-driven recommendations that match plans to individual needs.

The flexibility cuts both ways. Someone with significant medical needs can top up the allowance from their own pocket to buy richer coverage. A healthier employee can choose a cheaper plan and spend the remainder through a Thatch debit card on other qualifying items, from GLP-1 prescriptions to health wearables.

Thatch is far from alone in chasing this opportunity. Take Command, Remodel Health and Zorro are among the startups building on the same six-year-old rule to offer employers an escape from the traditional group model. Ellis's view is that cost is what first gets buyers to pay attention, but that many then stay because they find the approach simply works better. Whether that holds true at scale, across thousands of employers and millions of workers, is what this new capital will be used to prove.