If you’ve ever started a business (or even thought seriously about starting a business), one of the first things you probably encountered is just terrible (an understatement, really) the options are when it comes to small business health insurance.
After several sales calls and hours reviewing options, you find out it’ll cost you about $1,000 per employee per month. And then they have the audacity to tell you that you’re one of the lucky ones because you qualified for anything at all.
You’re stuck between a rock and a hard place. You have to do something to attract and retain talent, but the existing options are a headache and almost impossible to afford.
The good news is it’s not in your head. The bad news is pretty much everything else about the current situation.
Small group health insurance rates are spiraling upwards.
Since 1999, group health insurance premiums are up nearly 400%.
It’s gotten so bad that the mathematically improbable has happened. For the first time, the individual marketplace in many major metro areas is priced substantially below group plans.
Odds are you would be better off just pooling some cash together and buying your plans on the individual exchange. Here’s just how extreme the gap is in Georgia. (Note: This is just the premiums for individual employees that are 30 years old so the gap realized is likely bigger.)
It’s gotten so bad that even major carriers are exiting the group space entirely.
The three mainstream ways that businesses get health insurance are by self funding, getting a level funded plan, or purchasing a fully insured plan. The vast majority of businesses get a fully insured plan but we just spent several paragraphs talking about how untenable that has become.
Here’s the problem with the other options:
Self funded plans
This is the cheapest way to handle your health insurance as a group. Companies like Google, Apple, etc. all do this. Essentially how this works is that the company pools a bunch of money and hires fancy consultants to custom construct a health plan just for their employees. Since they hold some of the risk, they save substantially on the premiums.
Why self funded plans don’t work for small businesses. You need a lot of employees, money, and expertise to pull it off which means it’s categorically unattainable for 95% of businesses in the US.
Level funded plans
These plans are individually underwritten. Each of your employees will have to submit a medical questionnaire in order to qualify. If they find you healthy enough, they’ll offer you pretty good rates.
Why level funded plans don’t work for small businesses. Since they have to underwrite each group individually, they tend to need a minimum employee number and those employees will need to be generally healthy for the business to qualify.
That effectively creates a situation where the most cost-conscious companies in the US only have access to the most expensive health insurance options:
Now, it’s important to contextualize this with the overarching structure of employment in America. We’re a Small Business based economy. That bottom left box above contains the vast majority of companies in America:
So yeah, this is a big problem. There is a solution, but no one is offering it to you — at least not until StretchDollar came to be.
A new lesser-known option for small business: ICHRA
In 2020 new government legislation was passed that ushered in a new form of HRA (Health Reimbursement Arrangement) called an ICHRA (Individual Coverage Health Reimbursement Arrangement). I’m so sorry for all these letters, but this is important.
ICHRAs allowed for uncapped, pre-tax employer contributions to employees’ healthcare expenses — provided the employees get their coverage through the individual exchange.
If that sounds complicated, it’s because it is. The people who were the first to bring ICHRAs to market gravitated towards large, primarily blue-collar businesses who used the new legislation to custom-build reimbursement arrangements to reduce their spend on benefits.
That was a mouthful. I’m sorry
So if it’s so great, why haven’t you heard of an ICHRA? In it’s simplest form, ICHRAs created a way for businesses to offer pre-tax money for their people to purchase plans cheaper than those available anywhere else.
The problem was, it is very easy to speak about them in their most complex form. Ultimately the thing standing between millions of Americans and more affordable health insurance for the past few years has largely been a messaging problem.
StretchDollar is changing that.
Savings (and sanity) through simplicity
Look, you’re running a business — you shouldn’t have to also become a health insurance expert to help your people. StretchDollar’s platform lets you set up a tax-free monthly stipend that your people can use to pay for their health insurance premiums, all within 10 minutes.
No qualifications to worry about, no health questionnaires, no participation requirements, no long drawn out sales processes. It really is that simple. Help your people without having to get into the nitty gritty of their health situation.