Nov 14, 2024 · 27m · a16z
The Future of Health Insurance in a Work Remote World
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of a16z's 'Raising Health' podcast, hosts Julie Yoo and Jay Rughani speak with Thatch co-founders Chris Ellis and Adam Beckman about how Individual Coverage Health Reimbursement Arrangements (ICHRA) and modern fintech infrastructure are reshaping employee health insurance. They detail the transition from rigid, employer-tied group plans to flexible, portable defined-contribution benefits tailored for modern remote workforces.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The host as informed peer 3.3 Guest teaching 4.7 Guest disagreement 0.4 The host pushing back 1.0
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 25:40 Chris reframes skeptic premise on consumer healthcare shopping
When Jay brings up the common skeptic argument that consumers are poor healthcare shoppers, Chris directly reframes the premise by using an absurd Fiji flight booking analogy to demonstrate that bad tooling, not consumer capability, causes the problem.
Hardest push from the host ▶ 25:28 Jay challenges guest narrative with consumer shopping skepticismJay refuses to accept the optimistic consumer choice narrative without challenging it, explicitly pushing back with skeptic arguments about whether consumers can actually shop for healthcare effectively.
Biggest teaching moment ▶ 0:50 Chris explains accidental origins of employer-sponsored health insuranceChris provides a deep historical lesson detailing how WWII wage freezes and 1929 Blue Cross marketing moves accidentally created America's unique employer-sponsored health insurance system.
The host holds their own ▶ 12:12 Julie compares ICHRA adoption to historical Medicare Advantage and ACA curvesJulie demonstrates strong healthcare expertise by framing ICHRA's trajectory against decade-long historical adoption curves of Medicare Advantage and ACA marketplaces, showing deep industry familiarity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Title Sequence: Health Benefits 2.0 | 1 | 6 | 0 | 0 | Julie opens with an introductory framing question about historical factors leading to employer health insurance. Chris responds with an extensive history lesson on early 1900s out-of-pocket care, 1929 Blue Cross origins, and WWII wage freezes. | |
| Expanding the Target Market for Health Benefits | 3 | 4 | 0 | 0 | Julie notes healthcare buyer scale contrasts before asking about target customers. Adam and Chris detail Thatch's expansion beyond tech startups into trucking, solar, and clinics, along with job-lock statistics. | |
| Understanding ICHRA and the Shift to Defined Contribution | 5 | 4 | 0 | 0 | Julie actively synthesizes ICHRA mechanics, explaining how monolithic group plans limit remote workers compared to localized defined contributions. Chris validates her framing and expands on the 401(k) and HSA historical parallels. | |
| Solving the FinTech and Tooling Challenges of ICHRA | 4 | 4 | 2 | 3 | Jay challenges the hosts by highlighting rising insurance costs and asking directly if ICHRA is a silver bullet. Adam rejects the silver bullet framing, explaining that adoption has been limited by tooling gaps rather than policy flaws. | |
| Adoption Curves, Growth Vectors, and Carrier Dynamics | 6 | 4 | 0 | 2 | Julie demonstrates deep healthcare domain expertise by comparing ICHRA to decade-long adoption curves of Medicare Advantage and ACA, even adding 'Medicaid redeterminations' to complete Chris's carrier analysis. | |
| Ecosystem Integration and the HSA Adoption Blueprint | 2 | 5 | 0 | 0 | Julie asks about ecosystem integration requirements. Chris provides an educational breakdown of Treasury projections for HSA adoption, illustrating how multi-year broker and carrier alignment cycles apply to ICHRA. | |
| Regulatory Evolution, Subsidies, and Carrier Innovation | 2 | 5 | 0 | 0 | Julie prompts an analysis of policy risks and tailwinds. Chris delivers a detailed breakdown of Inflation Reduction Act subsidies, off-exchange mirror markets, and potential future turbocharged HSAs. | |
| Localized Competition and Unbundling Health Insurance | 3 | 6 | 0 | 0 | Jay asks about local market dynamics and price transparency. Chris educates the host on why no major health plan has been founded since before the internet and how ICHRA enables niche local insurgent carriers. | |
| Preventive Care, Direct-to-Consumer Pharmacy, and Consumer Tools | 4 | 4 | 2 | 4 | Jay presents a classic skeptic counter-argument asking if consumers are capable of shopping for healthcare. Chris reframes the question using a Fiji flight booking analogy to illustrate that current system friction, not consumer incompetence, is the issue. |
Statements from this episode (17)
Ellis: US employer healthcare system resulted from WWII wage freezes
“So, in 1929, we had our first employer-sponsored health plans with Blue Cross, and people forget. The first 10 years of it was like a super niche product that nobody used, and it wasn't actually until World War II, where you had a lot of the labor market going…”
Ellis: One in six Americans stays in a job to keep healthcare
“You have this situation today where, you know, one out of six Americans actually stays In a job they would otherwise leave for fear of losing their health care coverage.”
Beckman: ICHRA allows employers to offer tax-free healthcare allowances
“ICRA is a law that went into effect, ah, four years ago that makes it possible for the first time ever for employers to, instead of choosing all the benefits for their team, just give them tax-free dollars that they can spend the way that they want.”
Chris Ellis: Healthcare is shifting from defined benefit to defined contribution
“And so we're seeing signs that the same shift from defined benefit to defined contribution that we saw in retirement happening, happening here in, in healthcare.”
Rughani: Employer healthcare costs outpaced inflation over the last decade
“And if you look at the data, employer-sponsored healthcare is outpacing inflation over the last 10 years is rapidly increasing.”
Ellis: Employer health insurance market exceeds Medicare and ACA combined
“The employer market is larger than Medicare. It's larger than ACA combined. It's just the biggest market.”
Ellis: Medicare Advantage growth slowed to mid-single digits last year
“Medicare Advantage had mid-single-digit growth last year certainly the ACA is slowing down.”
Ellis: ICHRA will be health insurance's primary growth tailwind for 10 years
“And there's only one pocket of growth that is small today, but is seeing triple-digit growth year over year. That could be that next big secular tailwind for the next 10 years.”
Ellis: Treasury underestimated 10-year HSA adoption despite missing 4-year targets
“So the Department of the Treasury oversaw the implementation of HSAs, and I remember asking him four years in, okay, you had your government projections, like, how, how were they? Were they overestimates or underestimates? And he told me, oh yeah, we way overe…”
Ellis: Annual open enrollment cycles slow early adoption of new healthcare benefits
“And that because the buying cycle for these types of products is very annual around open enrollment. For that reason, it can really take multiple cycles before you start to hit that Kind of minimum viable level of adoption and awareness.”
Ellis: ICHRA is here to stay despite potential regulatory shifts
“Like I think IPRA is here to stay, but there are certainly things that you know, are coming that could affect could affect the business model and the market overall.”
Ellis: Enhanced IRA subsidies grew individual health market from 11M to 21M
“The government created these enhanced subsidies for the individual market that allowed individuals to take advantage of more and more government help to purchase individual plans, and this had the effect of both increasing the total participation from around 1…”
Ellis: Carriers launching insurance plans designed specifically for ICHRA
“Many of them for this coming year and the next year are already launching plans really only focused for the ECRO market.”
Ellis: On-exchange and off-exchange health markets may soon decouple
“And so we may see a decoupling of the on exchange and the off exchange markets quite soon.”
Ellis: Expanding individual health rails will make launching insurance startups easier
“When you play this forward, you know, 10, 2030 years, one of the things that gets us really excited is this idea That it will be a lot easier to start a health insurance company and to create a competitive product.”