How to choose a benefits budget for your StretchDollar policy

While the admin stuff is easy with StretchDollar, there is a crucial step to decide when signing up — your monthly benefits budget. Or, another way to describe it — how much do you plan to give your employees each month for their health insurance premiums?

Let's walk through some questions you should consider when deciding on a budget and how to make the most out of your StretchDollar health benefits policy.

Budget planning

With StretchDollar, employers have more control over their benefits budget while also getting more flexibility. For example, employers may contribute the same amount to all employees or different amounts to different "categories" of workers. Let's put this into a scenario.

Fixed benefit across the board: Imagine you're the owner of a small software company with seven employees. Most of your employees work full-time and are salaried. You choose the most straightforward option: offering all salaried workers a fixed, equal benefit amount.

Different amounts: Let's consider another scenario. Imagine you're the owner of a bustling restaurant staffed by a mix of full-time and part-time workers. In this setting, you choose the second option: varying benefits. Your full-time employees (chefs and restaurant managers) will get a different pre-tax amount than your part-time employees.

In each scenario, some employees might accept the benefit, and others might waive it. We'll dig into why and what that means in another section.

Possible StretchDollar Benefits Customization:

●      Full-time vs part-time workers

●      Salary vs hourly workers

●      Employee only vs employee with dependents (i.e., employee + spouse, employee + child(ren), employee + family)

Employee only vs. Employee with Dependents

Since retaining your awesome employees is an important reason for offering StretchDollar benefits, you may consider adjustments for family coverage.

If you decide to scale your StretchDollar benefits based on your employees' family size, you can choose to split your benefit offering into four different groups:

  • Employee only - all your employees who won’t have to pay for anyone else’s health insurance
  • Employee + spouse - your married employees who are going to cover their spouse
  • Employee + children - this designation is typically used for single parents or parents who purchase insurance for their children (if a spouse is covered elsewhere)
  • Entire family - this is for the whole kit and caboodle (employee, spouse, and children)

How much more are family health plans?

A good rule of thumb is to figure that family health insurance plans (which include a spouse plus up to two children) cost about three times more than individual health care coverage. If that sounds complicated - don't worry, we can recommend a breakdown of funds, if you need some help.

What does individual health insurance cost?

Understanding your state's health insurance cost is an excellent place to start when setting your benefits budget.

Health insurance costs vary, sometimes dramatically, depending on where you live. We won't get too deep into the reasons for these price variations except to say that health care is local, and each state, and often each city within it, has its own healthcare climate, shaped by factors like cost of living, state regulations, and the health of the overall population. Costs also vary by age — an older adult will pay more than a younger adult based on the assumption that we tend to use and need more healthcare as we age.

Waive or accept?

While you are legally required to offer equal benefits to all employees of the same category, not all employees will choose to accept the benefit. Some may waive the pre-tax health benefit because they already have health insurance through a partner. Others may opt out if their total household income makes them eligible for large premium tax credits (that are more advantageous when compared to the StretchDollar health benefit.) 

How can employees "waiving" and "accepting" impact your budget?

The total benefit amount used each month (and therefore the amount you as the employer pays for) may be less than you budgeted if more people waived than you budgeted for. However, we recommend making the assumption that all your eligible employees will accept the benefit from a budgeting perspective so that you know what your maximum potential costs will be.  Keep in mind this may change if an employee's status changes. For example, if an employee loses health insurance through a partner, they have the ability to enroll in the StretchDollar health benefits and individual coverage through a qualifying life event even if it's after the 60-day enrollment window. 

Remember, with StretchDollar YOU get to define the budget for employees that is affordable for your small business and good for your people.

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