StretchDollar — Why We Invested
We are thrilled to welcome StretchDollar, which is making it easier for small businesses to afford healthcare for their employees, to the Springbank portfolio!
The backbone of the American economy is small business. Companies employing less than 500 people represent about 99% of all U.S. businesses and employ 46% of all Americans. And for all of the efficiencies that tech has brought to the payroll and benefits spaces, small businesses still face many burdens and inefficiencies — in particular around managing healthcare costs for employees. (Read more from our friend and advisor Halle Tecco here on how traditional employer-sponsored plans are failing small businesses.) Those costs are substantially higher than they were a decade ago, represent a growing percentage of total operating costs, and are only headed in one direction: up. By unlocking the ICHRA market for small businesses, StretchDollar can address this massive pain point with a solution that is stable and affordable for employers, while at the same time improves value-for-money and user experience for employees.
ICHRA stands for Individual Coverage Health Reimbursement Arrangement. An imperfect SAT-style analogy would be: ICHRA is to employer-sponsored health plans as 401k is to pension plans. ICHRA brings flexibility to employers by getting them out of the game of acting as a health insurer, allowing them to put the choice in the hands of their employees as to which plan type is best for them, and creating flexibility for employers to offer a set dollar amount each year with no minimum. No minimums also means that very small employers who offer nothing in terms of health care benefits today, might at least be able to afford to offer something in the future. In addition, by driving more employees to the individual market to shop for their own health plans, we may see more innovation in plan design in the individual markets which would be welcome. That’s one of the reasons why Oscar, one of the top 5 carriers offering individual plans in the ACA marketplace, just invested alongside us into StretchDollar. Oscar recently announced they will no longer renew their small business plans, doubling down on individual plans instead. Centene is making a similar bet, citing that they’re already seeing small group plans with five to 20 members migrate to the individual marketplace.
All of that said, innovating in insurance is….hard. That’s why we were so excited to meet Marshall and Kaiza who worked together at Gusto and Decent, and have a tremendous depth of understanding of the ins and outs of small businesses, health insurance, and self-service products. Our team spent months diving deep into the future of employer-sponsored health plans and once we met StretchDolllar’s founders and understood their vision for how the market would evolve, we were in. They are using their experience to build a distinctive distribution strategy, where these small businesses can become their own ICHRA administrators and fully integrate their employees and payroll. It has been an absolute pleasure to work with them so far — their expertise and their humility, their humor combined with their seriousness of purpose are inspiring. We are so excited for the road ahead. Let’s build.
