Venture capital investors such as Index Ventures and Oak HC/FT are betting on startups including Thatch and Remodel Health that promise to usher in a new era of employer-sponsored health benefits, but the gambit faces steep challenges in a deeply entrenched group insurance market.
These companies, and health insurers such as Centene and Oscar Health, believe employers seeking relief from ever-rising healthcare costs will steer away from traditional health plans and instead offer workers pre-tax vouchers to purchase health insurance on the exchanges through what are known as individual coverage health reimbursement arrangements, or ICHRAs.
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To date, these startups and health insurance companies haven't made much headway. Last year, just 4% of employers that offer health benefits gave employees money to buy non-group plans such as ICHRAs, according to a survey by the healthcare research institution KFF. That’s down from 8% in 2023 and 11% in 2022.
Nevertheless, investors and companies fostering the nascent ICHRA market see reasons for optimism.
That starts with the unabated, decades-long rise in health benefit spending, said Jahanvi Sardana, a partner at Index Ventures. The venture capital firm participated in ICHRA administrator Thatch's $38 million Series A in September.