Thatch is a health benefits platform designed for the modern era. Read about how they are disrupting the health payments space with the help of Finch.
Thatch is a health benefits platform designed for the modern era. The company’s mission is to help startups provide their teams with personalized healthcare in under five minutes. Founded in 2021 by Chris Ellis and Adam Stevenson, the company has raised funding from top investors like a16z, General Catalyst, and Google Ventures.
“The way health benefits work today is very paternalistic,” said Chris Ellis, Co-Founder and CEO of Thatch. “Employers are forced to choose one pair of shoes and hope it fits every member of the team.”
Imagine that, after researching your options and polling your team, you decide to buy Nike runners in a size 10 in bulk. Soon after, someone comes to you and says they need a size 7. Another team member says they’d prefer Reeboks. Yet another employee wants hiking boots.
Picking a one-size-fits-all health benefits plan can be similarly frustrating for HR professionals and the employees they serve. To save money, employers must purchase group health insurance plans with standardized benefits, which often leaves employees with varying needs unsatisfied.
Group plans also don’t make it easy for employers. The onboarding and yearly enrollment processes often require them to manually move data between their HRIS, payroll, and benefits administration systems. When a new employee is hired, an existing employee departs, or another qualifying life event occurs, the employer must also manually make changes to the plan.
From the start, Chris and his team were obsessed with delivering an unparalleled customer experience. To build a health benefits platform that provided employees the control and flexibility they deserved, his team would need to leverage technology to deal with any corresponding complexity. “Choosing and managing health benefits is often a thankless job,” said Chris. “We are determined to remove the administrative burden.” In other words, they refused to burden the HR administrator with the tedious task of manually managing employee deductions. After all, these deductions were bound to vary from employee to employee and pay period to pay period.
“Choosing and managing health benefits is often a thankless job. We are determined to remove the administrative burden.”
For example, say all employees have a $500 monthly budget for healthcare. One employee chooses a $350 health insurance plan, leaving them with $150 each month to spend on out-of-pocket medical expenses. In January, they spend $167.25 leading to a $17.25 deduction. But, in February, the employee has no medical expenses, and so doesn’t pay any deduction.
Without automated deductions management, this data would need to be updated manually—for every employee, every pay period.
Making matters more complicated, every employee is different. Whereas one employee might choose a $350 health insurance plan, another might choose a $700 plan. That individual’s out-of-pocket expenses would be added on top of their monthly $200 deduction.
“Small businesses want to offer great benefits, but don’t have the bandwidth to deal with complexity,” said Chris. “They just want to know that your solution works and it can deliver the end result they’re looking for.”
To deliver on this vision, the Thatch team realized they would need to build integrations to each customer’s source of truth for deductions—their payroll system. Chris knew that wouldn’t be an easy feat.
“With the unbundling of payroll from benefits, we needed to achieve the same level of connectivity, accuracy, fidelity, and timeliness as our customers had become accustomed to,” Chris explained. “And we had to do that without ever being inside the payroll system—and without burdening our customers or their employees.”
Thatch’s founding team was left with two options:
By Chris’s estimation, in-house development would have meant hiring four additional employees across product, engineering, and business development at a cost of approximately $800,000 per year.
It would have taken at least a year to build the minimum number of integrations they would need to launch. Plus, they would probably have had to go to market with fewer integrations than desired. (After all, there are more than 5,700 payroll providers on the U.S. market, and the top 10 only account for 55% of employers.) In other words, if they chose this route, their near-term total addressable market would be limited.
Complicating matters was the fact that many payroll providers exclusively partner with businesses that already have shared customers. That created a chicken-or-egg problem for Thatch, which had yet to launch let alone acquire a sufficient number of customers to qualify.
From Chris’s perspective, the traditional path presented obstacles that were insurmountable for an early-stage startup. So, his team kicked off a search for a more realistic solution that provided plug-and-play employment integrations.
Beyond needing a faster and more cost-effective way to integrate with the industry’s most popular payroll providers, Thatch wanted a solution that could help their team automate the tedious process of writing deductions back to each employer’s payroll system.
They soon heard from another founder that they could leverage Finch’s unified employment API to unlock access to over 200 HRIS and payroll systems.
Chris and his team did their due diligence: They evaluated several competitors, but quickly realized Finch was the only solution that could satisfy their need to both read employee data and write deductions back to each employer’s payroll system. Finch also allowed them to reconcile their ledger, making sure all the dollars and cents added up in a compliant way.
What stood out, though, was the exceptional user experience Finch facilitated. By embedding Finch Connect into their onboarding flow, employers could give Thatch permission to both read and write back to their payroll system in under 30 seconds.
“Finch’s user interface and security standards met our high quality bar. We were confident that, by leveraging Finch, we’d be able to earn the trust of the employers we served.”
When it came time to implement Finch, Chris found the setup process to be seamless. As his team navigated its complex use case, the Finch team not only offered unwavering support but also contributed their unique expertise.
As a result, the Thatch team was also able to provide value-add services its customers never expected. For example, by reading whether an individual was still active within the organization, Thatch was able to notify customers when it came time to offboard employees from its benefits program.
“Finch is truly a strategic partner,” said Chris. “Together, we’re able to push the envelope on what’s possible. In fact, in the short time we’ve been working together, most or all of our product requests have been implemented.”
By leveraging Finch’s unified API, Chris estimates that his team saved $800,000 in payroll costs, got to market 10 months sooner, and captured 10X more revenue.
“The benefits of Finch were immediately obvious. We can easily spin up new payroll integrations and unlock new revenue opportunities without adding engineering headcount or building out a business development team.”
With the time and money the Thatch team saved, they were able to deliver on their commitment to their customers—building a product with a best-in-class user experience.
“We made a great decision by partnering with Finch,” said Chris. “I can’t imagine building our product any other way.”
Today, Thatch empowers small businesses to offer their employees personalized healthcare in just five minutes.
The process is simple for employers: They define a tax-free healthcare budget. Their employees choose a plan that suits their needs and then use any leftover money to pay for out-of-pocket expenses. Individuals can use their Thatch card to purchase anything from therapy sessions to fertility treatments to braces for their children.
By pooling the resources of many businesses together under the Thatch umbrella, they’re able to offer employers better health insurance plans at lower rates—benefits that are increasingly difficult for startups to access. In other words, Thatch helps small businesses offer big-company benefits.
When asked if he has any advice for the product and engineering leaders who are considering using Finch, Chris had this to say:
“Payroll integration shouldn’t be your core competency. Like Stripe for payments and Plaid for bank accounts, Finch is the best solution in its category. It would take you longer and cost you more to reinvent the wheel."