Choose an employee health budget
As an employer, you define a health budget, which is the amount of money you provide each employee to spend on their healthcare. This gives employees choice while keeping your costs predictable.
Thatch supports two health budget models: smart and flat. Under both strategies, employees may choose a plan that costs more than their health budget. When that is the case, Thatch calculates the employee's overage for each pay date so you can deduct the overage from their paycheck.
Thatch works directly with new employers to discuss benefits goals and set employee health budgets. We use your employee data to compliantly define employee classes, factoring in regional and demographic variation so your budget goes further while meeting ACA minimum contribution requirements.
Once you invite employees, your health budget strategy will remain the same until the end of the plan year.
Smart budget: equal purchasing power across ages and locations
Large employers, and those with employees who are geographically distributed, often use Thatch's smart budget strategy to give equal purchasing power to your employees. Thatch evaluates the cost of plans for each employee based on their age, location, and number of dependents. Using that data, Thatch works with you to determine how much coverage your health budget should provide.
As an example, you may wish to cover 100% of the premium cost for the average gold-tier plan for your employees, and 70% of the cost for their dependents. When your employees onboard to Thatch, Thatch calculates the health budget that allows them to fully cover the costs of the median gold plan for a self-only policy, and 70% of the additional premium costs if they add dependents.
Flat budget: one amount for everyone in a class
Smaller businesses, or those with limited geographical distribution and similarly aged employees, may prefer the flat health budget strategy. With a flat health budget, you can easily forecast costs and manage your budget.
With a flat budget, you designate a single dollar amount that every employee in the class receives, regardless of their age or where they live. You can also add flat dollar amounts for dependents.
For example, you might contribute $500 for each employee, plus $150 for a first dependent and $200 for each additional dependent, so a family of three would receive $850 total.
Flat health budgets are not ideal for businesses with employees in multiple regions or those with a wide range of ages, as they disadvantage older employees and those who live in more expensive areas.
Other decisions to make before you finalize your health budget
Along with choosing smart or flat health budgets for your employees, you may wish to consider additional strategies.
| Feature | Description |
|---|---|
| Dependent coverage | Do you want to offer additional funds to your employees' dependents? You can adjust your dependent contribution when setting your employee health budget. |
| Dental and vision | Will you offer dental and vision benefits through Thatch, or through a different benefits provider? This feature is off by default. |
You’ll be able to set dependent coverage when you choose your employee health budget in Thatch. For other considerations, the Thatch team is here to advise.
Unlike other types of HRAs, an ICHRA has no reimbursement limit. Employers can offer any amount in a tax-free monthly health budget for employees to purchase healthcare, provided they meet minimum contribution requirements under the ACA.
Rules Thatch enforces to keep your budget compliant
When choosing a strategy, there are important regulations that Thatch enforces so that your budget is compliant.
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3:1 Rule: All health budgets must follow the 3:1 rule, which states that the youngest employee may not receive less than one third the amount received by the oldest employee. Thatch ensures that all health budgets are compliant.
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Health budget changes: Once an employee has been offered a health budget, it is not possible to make changes to the health budget strategy during the plan year. During annual renewals for the following plan year, employers can renew their current strategy or work with Thatch to modify it.
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Minimum affordable contributions: Thatch provides tools to help you comply with your ACA affordability obligations.
Note that Applicable Large Employer (ALE) status — generally 50 or more full-time equivalent employees in the prior year — is what determines whether affordability is a compliance requirement rather than just a best practice.
Review the plans your employees will see
Review the medical plans included in your quote before finalizing your budget. Network availability, insurance companies, and pricing vary by market, which means employees may have very different options depending on where an employee lives. Reviewing the specific plans your employees will see allows you to confirm that they’re getting the benefits you intend to offer.
Evaluate your health budget for the next year
Each year, Thatch shares the projected cost increase of your current health budget structure based on preliminary rates filed by insurance companies, and publishes the final rates as they become available in the renewal dashboard. You can decide if you want to continue at the projected increase, keep costs the same, or pursue a new strategy. Thatch’s renewal dashboard will help you find the budget that works best for your company.