ICHRA 101: Exploring your options beyond group plans.

Marie Holmes: Alright, hey everyone, welcome! We're thrilled to have you here today. Thank you so much for taking your time out today to be with us.

Today we're going to be talking ICHRA, right? So, with so many employers just exploring new ways to structure their health benefits, there's just a lot of, like, curiosity around what an ICHRA is. But with that comes, like, a lot of confusion, so we're hoping to clear all of that up today with some of the experts in the space. So let's take a quick look at what we're going to be covering today, so let's walk through the agenda real fast.

So we're gonna start with the basics. So I'm gonna lean heavily on Thatch to do a quick overview of what an ICHRA is, how it works. So if you're new to this model, don't worry, we're gonna break, like, everything down. Then we'll talk about when ICHRA tends to make the most sense, and what kind of employers we're seeing here at NAVA, that are, you know, kind of transitioning towards the ICHRA model.

Next we'll walk through how NAVA approaches ICHRA, how we evaluate it as an option, what the process looks like, and how that feels, and then we'll wrap up with some next steps, what to consider if you're thinking about exploring an ICHRA further, and just what that might look like.

So, as we work through the session, feel free to drop any questions that come to mind in the Q&A. We'll try to jump through them as we go through, and we certainly will have some time at the end, for a more robust Q&A session.

So without further ado, I would like to introduce kind of the man of the hour, Mark Hubera, who is Head of Revenue at Thatch. Mark would love to use just, like, a formal intro to the crowd real quick, that would be awesome.

Mark Kubera: Yeah, absolutely. Thanks, Mary. So I'm Mark Gobert, head of revenue at Thatch. I've been with Thatch for, coming up on a year. I actually started my career as an insurance underwriter, so I was with Cigna Healthcare for a few years. learned, obviously, the ins and outs of rating and how insurance works, which was a great foundation. Got into the insurance carrier sales side of things for a few years as well, both with Cigna Healthcare. Very familiar with, kind of, newer funding types. At the time, Cigna was the only company that had the level funding product, which is pretty, pretty commonplace today. And then I also jumped into the technology space, and so for about the past 10 years of my career, I've been in the insurance and HR technology space with several different early-stage companies, you know, on the insurance side, on the broker side, on the payroll side, and then, obviously, all of that aligned really well with what we're doing at Thatch, so I've been here for just under a year.

Marie Holmes: Awesome. Thanks so much, Mark, I appreciate it. And I'm Marie Holmes, I'm a solutions consultant here at NAVA. So what that really means is I just get to work with HR leaders. And teams to cut through, kind of, the complexity of employee benefits, and inclusive of that is going to be ICRIS. So really, our goal here is to just make things easier for you, the HR teams, and your employees and their families that we support all day long.

So we'll do a quick NAVA overview. So for anyone who's not familiar with NAVA, we really are kind of like your modern benefits co-pilot. So what that means is kind of like 3 things and three pillars.

So, first we bring an AI-powered platform that makes benefits decisions easier and smarter and just much faster. We've reimagined the experience with our Nava HQ, where employees and HR teams can get guidance from not only software, but real experts like myself in the benefits space.

And then third, we stay engaged all year long, right? So, we offer ongoing support, not just you, the HR leaders, but also for the employees and their families, right? It's about giving you the tools, insights, and human touch to have, like, a modern, sustainable benefits program.

All right, so Mark, I'm gonna pass it off to you to run through the nuts and bolts of what an ICHRA is over the next 20, 30 minutes.

Mark Kubera: Awesome, thank you. So, obviously, you know, I know that there's probably a lot of different levels of knowledge and understanding of ICHRA. My goal for the next 20, 30 minutes is to get you a good understanding of a high level what it is, what are the benefits, why would you want to consider something like this, and what would the impact be of, you know, your business and your employees.

You know, kind of starting at a high level, when you think about the, you know, offering insurance, you know, I'm very confident that every employer and broker alike want to put together a benefits plan and generally offer great insurance. But the challenge is, with the market, that it's becoming more and more challenging to offer great benefits, it's becoming more difficult to not only manage the cost, but manage the access. You have, you know, now have introduction of narrow networks, different funding mechanisms. There's a lot of confusion, there's a lot of challenge. And at the end of the day, if we really distill it down. our goal is to offer good, comprehensive benefits to each employee, give them good access to that healthcare, to take care of themselves and their family. And so, the big challenge is, as, you know, the industry changes, and as our workforce changes, it's becoming harder and harder to actually do this well. Or it's becoming extremely expensive. And, you know, one of the biggest reasons is because This kind of one-size-fits-all approach. that may have worked, you know, a couple decades ago, doesn't really work today. With how businesses have changed, right? The, you know, number of different types of employees that you have, ranging in, you know, demographics, location, with a lot of remote work, you have employees now all over the country. You're not, you know, don't have employees, you know, all in a similar age group, all in a similar gender, all in a similar location.

So it makes it a lot harder to find out what is the right plan. You know, one of the things our CEO always says is, like, buying health benefits is kind of like going to Foot Locker and buying one pair of shoes of the same size and hoping that it meets the needs and fits every single employee's foot. It's going to be too big for some, it's going to be too small for others, and it might be just right for a few. And so, how do you select one plan from one carrier, or a couple plans from one carrier with one network and meet the needs of every single employee. You know, with just the way that the industry's going, that's near impossible. And so, with offering something like an ICHRA, it now gives you the ability to really open up the options that you can. So, it's a lot more
flexibility for the employer, and for the employees as well. And so.

You know, the first benefit is you're now starting to introduce choice to the employees. Within ICHRA, employees are actually allowed to pick the carrier that they want and the plan that they want from that carrier, so you're including a lot more choice. You know, for companies that are sometimes in, like, the Northern California area, you know, you have something like Kaiser, it's very hard to offer Kaiser and another plan. In any other geography, you really can't offer two carriers next to each other. So with something like ICHRA, you can now offer more carriers and more options.

The second component is you're no longer defining the benefit. You're no longer saying, we're going with United in this health plan, and here's your defined benefit. You're switching around and making a defined contribution. So, what you're saying is, here is the budget that the employee gets to go make that healthcare choice. So the advantage here is the fact that it's a lot more, you know, predictable. You know what your budget is as an organization. You know exactly what buying power you're giving the employees. It's a lot more predictable year over year, and it's a lot more manageable.

And the third area is it really allows you to tailor to specific team profiles. And so, you know, with the reality of remote work, employees being all over, you know, the U.S, I was talking to, you know, another client where the HR person said, you know, there's not even a way to categorize types of employees, right? Employees are having babies at 25 and at 40. And so, you know, how do you pick the right benefits plan that meets the needs of, you know, the 25-year-old and the 40-year-old, the person in Ohio and in California and in Florida, with a model like ICHRA, you are now able to accomplish that. And so, you know, one of the other things we wanted to talk about is why now? Why are we just talking about this now? Which gets into kind of the next slide here.

Because the ICHRA regulation, which stands for Individual Coverage Health Reimbursement Arrangement, is relatively new. So this launched in 2019, and this is what enabled the employers to, instead of offering just an insurance plan, they can offer a contribution or a stipend for the employees. So that's what made it actually legal to say, hey, I'm going to give my employees a dollar amount, they're gonna go purchase insurance on their own.

The second thing is around this, is that, you know, the individual market has been growing steadily over time. And so, you know, it started with the Obama administration, you know, opening up individual insurance to millions of Americans. The individual pool has now grown to over 25 million people in it. And so, when we talk about trying to manage and maintain costs for insurance.

If you're a smaller employer especially, there's a lot of different, you know, kind of funding mechanisms and types. People talk about maybe self-funding, they talk about PEOs, they talk about consortium plans or trusts. All of these things are ways to try to group multiple individuals together, or multiple companies together, for better buying power. There's no bigger buying power than 25 million people in a pool of insurance, and so, that means that you are also getting a lot more investment from the And so, you know, just a quick anecdotal story. When I was in between jobs in 2016, I went to the individual market to see if I could get a plan while I was unemployed. The plans were not great, they didn't cover a whole lot, and they were actually all pretty expensive. In today's world, that has definitely changed. The individual market has, you know, and we'll talk a little bit more about this later, but, you know, on average, we're seeing about 5 carriers and over 20 different plan options for each employee, and they're very much comparable in terms of the comprehensiveness of the benefits to traditional group plans. And so you've seen a big investment from carriers as well, which has built additional momentum, kind of behind the scenes, without a lot of people really realizing it. And then there is still bipartisan support from From the government as well. So there was, you know, some… there were some parts that were in the big, beautiful bill that were removed, that would have codified ICHRA under something called CHOICE. So it's not a negative that, that it didn't get put back in. It was removed, however, Congress is still, looking to potentially put some of those, you know, additional rules and regulations in place, which will just help continue to support and kind of codify this ICHRA law. And so, the good news is, it still has bipartisan support, it's still continuing to grow, there's still support from Congress as well, and they want to continue to expand it. Nothing has been repealed, nothing has been pulled back. If anything, there's continued momentum to help support small businesses because, you know, I think, you know, insurance carriers, brokers, clients, Congress, everybody alike. agree that we need to have more flexibility and more optionality for small businesses, and this is really a great way to accomplish that.

Jumping to the next slide here, the other big component of why this is continuing to build steam is because, as we kind of kicked off a little bit before, health insurance continues to go up year over year. Companies are continually challenged with, how do we balance this? Do we take on more costs ourselves? Do we shift some of that cost to our employees?

Do we reduce those benefits? And at… even with all of that management, year over year, brokers and clients alike are challenged with looking at this, satisfaction stays flat, if not declines year over year. So you're not seeing an improvement, even though your insurance costs might go up 15%, you're not seeing an improvement of 15% in your satisfaction, or additional care, things like that. it's becoming more and more challenging for clients and brokers to manage this. And so this is really where it leaves the door open for looking at things a different way, and looking for something, you know, kind of big to change. And that's really where Thatch will come in. And so I want to talk a little bit about how exactly this will work. So, jumping into the next slide here, so basically, as I mentioned before.

We want this to really look just like a group insurance plan, but instead of the employer picking a plan from a carrier and offering that plan to the employee, instead you're going to define a contribution. So you're going to set a dollar amount aside. And so, with Thatch, we help you walk through this completely. We have a complete platform, which I'll talk about as well, but in terms of compliance, in terms of insurance. that employees have the right coverage, have adequate access to care. We walk through all of that with you as well. But essentially, the first thing we're going to do is we're going to set a budget for each employee. Now, what that budget's going to be able to do is the employee's going to use that budget to purchase a health plan. So they'll be able to pick the health plan that they want. This becomes super powerful because they actually get to pick a plan that makes sense for them. And so, when we talk about kind of doing that benefits evaluation, is this coverage enough for everybody, right? That one-size-fits-all, is this shoe big enough for everybody to fit? And, well, if it is big enough for everybody, that means it's going to be probably too big for a lot of people as well. And so, if you think about those employees who maybe don't necessarily utilize that health plan a lot, being in the tech space for the last 10 years, being recruited a lot from other tech companies saying, hey. we have the best benefits. When I was, you know, in my late 20s, early 30s, I wasn't using my health plan at all. So they'd give me this Cadillac insurance plan, and I didn't use any of it. And so they might be paying $800, $900,000 a month for me to have that plan, and I maybe went to the doctor once. But if you gave me that $800, $900,000, and I could use that towards my benefits, now as an employee, I'm able to use that for a lot more.

And so, one first step is to pick that insurance policy, and then if I have money left over, in this example, the person has $750 in that budget, they buy a medical plan that's $500, they're gonna have $250 left over. They can use that towards other qualified expenses as well. So this could be, deductibles, co-pays, coinsurance, and then other health and wellness services, which we'll talk about. All for the same budget that you'd arguably be spending on a traditional group plan, so the perception for me as an employee is that I'm getting more benefits.

In addition, this means more options in terms of picking the right plan and the right carrier. So jumping to the next slide, we'll talk a little bit about, how many… oh, just one back, there we go, perfect. So on average, we see employees have access to 5 carriers and over 20 plan options. And so when you talk about making sure that each and every employee gets the exact benefits they want, this is incredibly impactful. And I will… I'll give you kind of a quick anecdote as well about how impactful this was. It didn't really make, … it didn't really click with me until I actually got to experience it live myself, so… In February, my wife was actually laid off from her job, and she had to join my benefits, and so, she was gonna join my benefits plan for May 1st, and she was 17 weeks pregnant at the time.

And so, what would normally be pretty stressful, my wife lost her job, she needs to join my benefits, actually was a great experience, because I had 5 different carriers I could choose from. And so, what I did was I made sure that I found the network that had the hospital that she wants to have the delivery in, that has the OB that she wants to go to, and that has the right benefits that cover the, you know, the pregnancy. And so, what's normally kind of something stressful was something that I was, like, actually very excited about, because I got to custom tailor the exact benefits from the exact carrier and the exact network that we wanted that met the needs of myself and my wife.

It's our first child, we're gonna be super stressed. I know coming October, when we have our little baby girl, we're gonna be stressed about a whole lot, but one less thing I have to worry about is the insurance. And the great thing is, because I'll have another qualifying event, if it so happens that there's a pediatrician that takes somebody else's insurance and doesn't take ours, I can make that switch again. And so I can really make my benefits work for me. And while I was on my own plan by myself.

I wasn't spending my entire allowance, so I was collecting, you know, a couple hundred dollars additional every single month that I can use towards other qualified expenses. And so, I know there's gonna be a lot of crazy things I'm gonna have to buy for the baby, and there's a lot of those that are actually covered as qualified medical expenses. And so, it's really impactful. And one of the other big questions that does come up is, like, hey, if I give my employees so many options.

Are they going to be confused and not want to do? And with Thatch, jumping to the next slide after this. … We actually, with our platform, we will help the employee make all of the healthcare decisions. And so, you know, our platform will, first of all, ingest their information so we'll know a little bit about that employee so we can get them enrolled. The employee will get a couple plan recommendations right at the gate, so our system will actually ask them, you know, do they plan on using the health plan? How much?

Do they have any expected procedures? They can also enter in their doctors that they go to, or doctors that they want to go to, and our system will actually do a network search for them. So it'll just start with recommending two plans. It'll recommend a plan based on their information and potential utilization, and it'll also have a lower cost option. In addition to those options, the employee can then click in and look at all of the other options. So even if the employee has 60-plus plans to look through, they're gonna start with only looking at 2, and then they'll be able to filter through based on network type, based on carrier, based on deductibles, so they can go and search for the plan they need, they can do side-by-side comparisons right within the technology. The great thing is, it's not just tech only. We still have people here that are willing and able to support, so if that employee's like, hey, I still want some one-on-one support, they can schedule some time with one of our licensed advisors. They'll actually do a screen share and walk through the options live with the employee as well. A lot of people will make this as a family decision, so if they need to go back and make this decision with their family, they could set up a time that works for them. They can, if it's early enough, they can usually schedule same day. If it's later that day, they'll usually find times the following day. So it's not a significant amount of wait time or back and forth. So they have all the technology they need, to assess and compare plans, but then they have that live support, as well if they need to make those recommendations.

Jumping to the next slide here. One other component that I mentioned is the employee's ability to manage their budget the way that they need it. What we have found is that if employers just… if employees just have a budget, and they can't save any of that money and use it towards anything else, they typically will maximize their insurance. They'll buy the most expensive plan they can get, just under their budget. If they… employees do have the ability to use their surplus dollars towards something else, we actually find that they skew towards lower plans. And this really means that more often than not, when we're trying to position a group health plan. we're most likely over-insuring or giving people way more coverage than they need. And so what happens with employees is, if I pick a plan that's right-sized for me, and I have $250 left over, I can use that towards my deductible, towards prescriptions, but Thatch is also the only company in this space that has our own marketplace.

And so where this comes in most often is we see employers, when they offer a group insurance plan, will often plug in, you know, one or two different point solutions to kind of fill the gaps and improve the benefits they're offering. One, that means that you need to understand what your employees need.

And not every employee needs the exact same point solution. Second, it's additional cost, additional complexity, and third, you don't even know how much employees are really going to engage in it. And so you want to invest your money where you know it's actually going to positively impact those employees. And so that's the great thing about the Thatch Marketplace, is you essentially get all of these point solutions, without any additional budget, without any additional complication, and each employee gets access to the exact points solution they want. So, it could be something through the Thatch Marketplace, something health and wellness related, you know, there's mental health, there's fitness related, weight management, we have a partnership with Hims and Hers. I know if you go through, like, prescription PBM, often some of those weight management drugs can be $1,500, $2,000 a month.

The Hims and hers partnership, I think it's about $160 a month. So, significant cost savings, for those employees that do need that, but then you as the employer don't need to decide, do we add some additional benefits for mental health, or do we offer something for weight loss? You can offer both for no additional budget, because employees can manage their budgets correctly, and personally. And so. you know, that's one of the biggest differentiators with Thatch, is our marketplace. And then I think the other thing, just to kind of tie the bow around this, is one of the biggest challenges that people think about is really the administration of all this, right? You're thinking about You know, hundreds of insurance policies and carriers and enrollments and payments.

Thatch automates 100% of this end-to-end through our platform, and so a big concern is really, how do I get every single employee enrolled? How do I ensure that they get access? How do I track, manage, bill all this? So our platform manages all of that end-to-end. We set up all of the enrollments for every employee. Your experience will be very similar to using a, you know, a benefits administration platform, you know, for your regular benefits. you know, instead of seeing the plans that you picked, because you selected one carrier, the employee sees all the options that are available. Our system will still go ahead and get them enrolled, our system will set up payment plans for each one, our system will handle all the billing, our system will handle the deductions where necessary. We integrate with, you know, hundreds of payroll vendors as well, and then our system also handles all the compliance, so ensuring that all the compliance documents are set up. you know, 1094, 1095C, all those filings. So, you know, it is an end-to-end benefits solution for, for the medical benefits, and then this, this marketplace is always also integrated, in, in through there as well.

And then, the final slide I wanted to just present to you guys is, you know, getting a better understanding of what this means, future state. And so, you know, one of the toughest parts about, you know, being an HR person, being a, you know, a C-suite executive, being an advisor slash broker to clients is. How sustainable is this, right? With the traditional group markets, it is a year-over-year thing. It's every 12 months, we gotta do that renewal, we gotta market, we gotta understand that. With something like ICHRA, it is more of a multi-year plan, right? Because we see a lot more sustainability in terms of the rates.

The reason is, because group insurance premiums have consistently risen, double-digit increases year over year, for, you know, the past 6 or 7 years, very consistently. Very, very seldomly, if ever, do you see group insurance rates staying flat or going down. There's always that consistent cost curve. With the individual market, it has been much different, though. A main reason is. a couple things. One, your group is no longer being rated as a group. So, if you are a group that does happen to have some large claimants or some higher utilization, you're no longer getting a renewal based on that. These are all individual plans in the individual market. The second reason is that the individual market is 25 million people and growing, and so that's a much, much bigger risk pool, so it really can … you know, kind of average those rates out. And the third thing is because, individual plans are all rated independently of one another. So even if I am an employee and I happen to have a plan that does go up, you know, 15-20%, it doesn't mean that every single plan that's offered to me has gone up. And so, what we often see is because employees have so many different plan options available. that managing costs year-over-year is much easier, and you can really put a 3-5 year plan of really how are we managing the contributions, are we contributing enough for employees to buy insurance? Do we want to invest any more than maybe to have additional qualifying expense dollars left over, and then monitoring, you know, what their access is to care versus having a renewal and having to make that decision of, do we reduce benefits?

Do we somehow increase our budget? Do we shift some of those costs, you know, from a cost comparison, cost share to the employees. Instead of that being kind of a rigid kind of reduction in benefits challenge year over year, we're now looking at this as how do we continue to improve, ensure that people have adequate access, just ensure that the allowance that we're giving each employee gives them all the correct buying power. So, it's much smarter spending, it's much more predictable, and it's much more flexible for your employees. And so, if your business is growing, if you're continuing to expand, this is also a great way because, again, you're now unlocking all of the regional carriers in every market where you have employees, so if you are expanding to a new state, we see it a lot with California-based companies. You get a California health plan, you're paying California rates everywhere, so that employee who's in Ohio, who should have, like, a $300 rate, is probably paying $500, $600 because that's the California rate.

With a plan like this, you're unlocking the local markets and the local rates, the local networks, and then giving employees, you know, better coverage, better access at better costs, and then more sustainable year over year. So, that is the high level. Appreciate you guys, running through this with me. I know there's gonna be plenty of questions we'll open up for Q&A, but wanted to pass it back over to Marie.

Marie Holmes: Awesome, thanks, Mark. That was great. I appreciate it so much. So I'll kind of round out the conversation with just sort of our approach here, at NAVA from, like, a consulting sort of strategic standpoint. So when does an ICHRA make sense, right? So, probably won't be a fit for every single employer out there, but there are absolute situations where it does make sense. So, first and foremost is you're facing a high renewal, potentially maybe for one year, or that's, like, a pain that you've felt year over year. So, potentially, you're… stuck in the small group market, you're kind of beholden to the filing rates, and you're seeing increases, or like Mark had mentioned, potentially have some tough claims experience that's just sitting on, you know, sitting in your experience year over year.

So this might be an awesome, awesome option if you're looking just for stability and kind of cost control management. Mark also touched on if you have a multi-state or remote workforce, so… Oftentimes we see, you know, perceived value of benefits varies across demographics and across the country and geographies. So again, this could be a really, really awesome solution if you are feeling that pain where just, you know, benefits aren't landing, yet you're still spending all this money on them.

If you hear from employees that they just want more choice, right? So, around the point solutions, just around the actual, you know, program offerings. Oftentimes, again, if you have a diverse workforce in different life stages, needs are gonna look very different, therefore wants are gonna look very, very different.

And then finally, organizations that are scaling quickly and just have to have a really, you know, more manageable budget and kind of just a known cost, and so really the only variable is how fast are we growing, not, you know, how that's going to impact our underwriting, how that's going to impact our premiums. So, always like to see this in a space for, you know, companies that are particularly growing pretty, pretty fast. Right, next one.

All right, so some questions to ask when you're evaluating an ICHRA, right? So, a lot of it is around, like, what is the problem that we're solving for, right? Is it a cost component entirely, right? Do we just need to know what our costs are going to be month to month, or year to year, and we really can't take this sort of hamster wheel year over year anymore? That might be the actual pain point. Is our workforce distributed, and we just are not meeting their needs right now? Are we seeing, you know, potential renewal volatility from year to year? and from a finance perspective, we just can't continue to maintain that model. Is our leadership open, potentially, to a new funding model, right? Switching from sort of the old-school traditional, you know, how we've always offered benefits historically. to a new funding model that is ICHRA, is a decision that, you know, a lot of stakeholders are going to have kind of an opinion on, so making sure that these conversations are brought up early and that the education is done early in the year to give us enough runway to be able to make this decision in the end.

And then do we have this support? Do we have the right partnerships, whether it be with Thatch or on your broker consulting side, right? This is not something that you want to do alone and kind of just fly by the seat of your pants on. This, again, this is an entirely new funding model, so having the right partners alongside you is going to be incredibly important and critical in how successful this rollout potentially could be for your employees.

So some next steps, kind of, around, if you want to assess an ICHRA, right? So, number one, this is not something that you should be going at alone as an HR professional, so I would lean very heavily on your broker or consultant to really steer that conversation. So, they should be asking discovery questions around your population, around your budget, right? Figuring out what those pain points and your priorities are to determine if ICHRA is the right… is the right option to explore.

Second, you want to, like, let's get all the numbers on paper, right? Let's do some modeling, understand what our defined contribution potentially would look like, how does that compare to what we're contributing to a more traditional health plan now? An employee choice perspective, the employee experience, right? There's a way to kind of, assess those sort of trade-offs and options.

I mentioned earlier, getting buy-in education from potentially finance and other leadership within an organization is going to be pretty critical. We are kind of taking an entirely new approach, potentially, with how we're offering benefits to employees. So starting those conversations early is going to be the slam dunk, and how we can get this done very effectively and smartly. And then finally, again, is, like, who is the partner that, you know, you want to work with in that space? You know, we've obviously believed very heavily in the Thatch software, and I think that their program is wonderful.

And I think they do it the right way, and so partnering with your consultant and the right partner on the ICHRA side is gonna be what makes this very successful for you in the end.

And then before we jump into the Q&A, I just want to plug quickly another webinar that we're going to be doing, next month. So, as some of you may unfortunately have already seen, 2026 renewals are shaping up to be a little bit, you know, just more difficult than we've seen historically. So we're really going to tackle that here along with Garner Health. So a couple of experts from NAVA, along with Garner.

Are going to be talking through what to expect of the 2026 renewal season, what are some of those drivers, you know, where are we seeing all this cost coming from, and how can we mitigate, and, you know, what levers can we pool?

In order to contain some of those costs. So it's going to be on September 4th, 1pm Eastern, 10 a.m. Pacific time, so I encourage you guys to check that out, if that's something that you're dealing with or just want to try to get ahead of before we walk into the renewal season.

So, with that, I'm going to open up the questions, if you give me one second.

Mark, this is a great question. So, is the employer contribution amount required to be exactly the same regardless of employee position? Can you offer, you know, different contributions by class, potentially by age? Just sort of what, you know, from a compliance standpoint, what options are available within that defined contribution sort of world?

Mark Kubera: Yeah, that's a great question, and so there's… there's definitely a little bit of nuance to this, because, you know, if you're a large group, company, define most states by 50, a couple states by 100 or more employees, because you've got to always make it fun, and have a couple outliers, but, you know, you're used to probably some composite rates, like you have a four-tier set of rates, here's what every employee only pays, and so on.

With the individual market, they're age and zip rated. And so, every employee is going to be paid, paid, charged a… based on their plan, based on what their age is, and then also what zip code that they're in. And so, you know, there are a couple different ways that we can do contributions. One is a flat dollar amount, where you could say every employee gets $500.

Now the challenge with that, obviously, is if you're a 50-year-old in California and your plan's $600, that $500 doesn't cover everything. But if you're a 22-year-old in maybe Ohio, where healthcare's a little bit less expensive, maybe that plan's only $250 or $300, and so that covers a whole lot more. And so you have, you know, that could be for the same level of coverage, and so you kind of create an inequity there, and so another way that we can do contributions is what we call a dynamic contribution. And so, again, don't need to overcomplicate things, because our system will calculate this, and we walk through this all with you, but essentially what we can do is we can pick a plan and say that we're going to fund the same contribution for that plan for everybody, and gives everybody the same buying power. So, let's just pick an average plan. Let's say it's a, you know, in the individual market, they go by metal tiers. you know, gold, bronze, and silver. And so it's just based on the level of coverage that it has. So let's just pick the median silver plan and say we're gonna contribute 100% of that cost to every employee. So that might be $500 for the employee in California, and that might only be $300 for the employee in Ohio. So they both have access to the same level of care. And so they can basically fund the same amount. even though they're only getting a dollar amount and we're not paying, we're not buying the plan for them, we're giving them the equal buying power. So they could both buy that Silver 50 plan, covered at 100%, if that's the plan that they want, or they could buy up and buy a more expensive plan, or buy down and buy a cheaper plan and have some money left over.

But it gives everybody equitable buying power to buy the same level of benefits. And so we walk through and determine, from a budget perspective. you know, what can the company afford? How much are you spending today? What does that budget look like? What does that allowance look like for each employee? Our system does all the calculations. And then it also goes into. understanding what is that level of care that they're getting, and how does that compare to where they're getting today. In terms of employee classes.

You… there… it does work a little bit differently with the ICHRA regulation than group insurance, so you can't do, like, management carve-outs. There is a… there are 11 different classes that you can carve people out. They're most commonly around, like, employment type, so full-time, part-time, hourly, salary, seasonal workers, things like that. You can also do it based on geography. So, let's say you had, you know, a subset of employees in a certain area, and you wanted to carve them out, and put them on ICHRA to give them more flexibility, you could do that as well. So, again, this is all part of the kind of comparison and the evaluation that we do, is help kind of understand what those needs are.

Marie Holmes: Awesome. Perfect. So just to clarify, there was just a follow-up question, to that, Mark. So, for the dynamic pricing, like, for the metal plan tier, an employee in Massachusetts and California would both get, like, the same contribution percentage, essentially, towards the… towards, let's say, the silver or bronze plan. Is that accurate? So, the actual dollar amount might look different depending on where the person lives. Is that accurate?

Mark Kubera: Yeah, exactly, because, like, if you think about the gold, gold, silver, and bronze, they… if we think about that, you basically stack rank the plans. Gold being the most coverage, you know, lowest bronze being the least amount of coverage. And so what we're doing with this dynamic amount, thing is we're picking, let's say, the middle silver plan, and we're saying we're gonna fund that for everybody. And so that might be… $500 for somebody in Massachusetts might be $700 for somebody else in California, but it's still that same metal level, and so what that means is they're all getting the same buying power, but it's also equalizing for the fact that certain people might be either older and getting a higher age rate, or they might be in a higher cost zip code, because they're right outside Stanford or something like that. So, it gives equal buying power for each employee, so they have the same… they can purchase the same level of benefits regardless of their age or their zip code.

Marie Holmes: Okay, alright, that's perfect. Switching gears to compliance, there are a couple of questions that came in sort of compliance-related. In your opinion, Mark, is it more complex from a compliance standpoint than a traditional group plan? Any sort of, like, new compliance considerations HR folks should be aware of, just, like, eyes wide open walking into this?

Because I know that's an area that thatch definitely heavily supports, but just to kind of level set and put that all out there.

Mark Kubera: Yeah, there's a lot of complexity behind the scenes, and it's kind of like, I kind of equate it to working with TurboTax, right? TurboTax, the front interface, super simple, easy to use. The back engine of it is actually extremely complex, and that's just kind of the name of the game with insurance. I think there's a couple things. One, if you just think about the infrastructure, you're setting up individual plans for every single employee.

So there's no longer a group contract, and so you have to enroll every single employee, and then we have to set up a payment plan for every single employee. And so, the first challenge around this is not necessarily fully compliance, but there is an element of compliance here in terms of ensuring that everybody has adequate access to insurance, that everybody's been given an opportunity to enroll, and that you're setting up the enrollments and the payments correctly.

And so, the cornerstone of Thatch is we're actually also, we consider ourselves a fintech company, so one of our co-founders came from Stripe, and the reason that that's so impactful is because the financial infrastructure of running something like this is very complex on the back end, and we're definitely the market leader, you know, and have, you know, a heads up, we're a little bit over 100 employees, and about half of those employees are on the engineering and product teams, ensuring that we're building the carrier connections, we have the financial infrastructure.

The second leads into the quoting and ensuring that there's compliance. So, all plans that Thatch offers are ACA compliant plans, so you'll never have a concern whether or not employee picked a plan that doesn't… is not compliant. The other is around when we quote, we need employee salaries because there is a regulation around ensuring that employees don't contribute more than a certain amount of their salary. And so. when the ACA came out, there was a regulation around, one, employers over 50 are required to offer insurance, and then the second is that that insurance that they offer has to be affordable, and so there are affordability calculations that you have to run. Our system runs all of those. We ingest all that data, and we assure that your plan is compliant. And then the final component is really around, compliance around, you know, the right documents, having your ICHRA plan document, have your POP125 document, COBRA compliance, ACA compliance. So our system handles all of those as well. You know, there isn't anything that's, like, glaringly, you know, wildly different from group insurance, other than the fact that you're not offering an actual group it's still compliant in the sense of you're still meeting the ACA regulations of offering a, you know, compliant, you know, insurance plan to your employees. The difference is we're just shifting and giving them the option to pick the plan that they want, as opposed to you doing the shopping and selecting it for it, but all the end-to-end compliance outside of that is handled through our platform.

Marie Holmes: Okay, alright, that's perfect. One question came in around just, like, implementation, and, like, is this… is this realistic for, let's say someone that's renewing January 1st to deploy now, right? Can we… can we go through that process? Is there enough time to do this? Kind of, what does implementation look like in that timeline?

Mark Kubera: Yeah, implementation is, you know, in short, totally enough, more than enough time for January 1, without a doubt. I think, you know, our platform itself.

We carve out about a week to set up, and that's, like, worst case scenario. Like, you can register for the account in literally 5 minutes as an employer, and then depending on your payroll, we'll determine how we connect with them. Certain ones we can connect and pull the information over, so that kind of depends on if that adds maybe a day or so. We connect with the company bank account. We use a software called Plaid that can auto-connect right away.

If we have to do the old-school ACH, they send a couple deposits, that takes about a day or two to turn around. So, you know, it can be as short as 48 hours, they actually set up the employer account. You know, we actually have some small businesses that are, like, under 5 employees that, you know, have never offered insurance and just come to our website and actually just sign up. And so, because, you know, they don't need any evaluation or any guidance. And so, our system is built to be as user-friendly as possible, and then it's about rolling out to the employees. And so, this is where we partner with, you know, we'd obviously partner with, you know, NAVA and, you know, and or the client, and talk about, you know, what type of enrollment meetings you want, what type of support do you need, how are we going to roll this out to the employees? It's not wildly different. They're still going in and picking a plan from an insurance carrier. The big difference is they now have way more options, so we want to be a little bit more open in terms of communicating that. But what we do is we work closely with the team to ensure that you know what's needed of you, we keep you on our timeline, we have implementation managers here, we have customer success teams, we have a bunch of support people here as well. We understand that even though we make it super easy, people still want that additional guidance and support. And so we usually put together about a 3-month plan. A lot of it is just preparation, right? When do you want to have your open enrollment meetings? There's not a whole lot of work, but when are we going to set up your account?

And then once we set up your account, when do we invite your employees? How long do you want to have that open enrollment window? What type of enrollment support do you need? And then we wrap it up. Once you get your final invoice and your final deductions report, we'll have a call with you to run through those two things to ensure you understand how to use the system, you know how to read your invoices, you know what billing looks like, and then we kind of hand over the keys there. So, full support.

Not a crazy amount of hours of investment in terms of setup. We have all the carrier connections and all the… that's really the tough part of it, is really setting up the backend, and we already have that infrastructure all built out.

Marie Holmes: Okay, so last question, it's my own, just out of curiosity, since, like, the employer isn't gonna have, let's say, you know, like, a contact, right, at the insurance company, because now there's… could be 10 in different insurance companies across the country, does Thatch play a role in, just say, like, my employee has a claims issue, I don't have, like, a direct contact to go to anymore, do we go to Thatch in those instances? How does that work? Just, you know, post-implementation, post… enrollment, all that kind of stuff. How does that… how does that experience work for employees and for the HR folks?

Mark Kubera: Yeah, the short answer is they definitely still… we have, come to Thatch. Like, we have a full support staff, and in fact, this is one of the transitional, items that we do bring up, is… You know, what usually kind of connects with a lot of people is transitioning from group insurance to something like an ICHRA is kind of like the transition from pension plans to 401Ks. So, pension plans used to be set up, managed, owned by the company, they knew the investments, they knew how much everybody was getting, they knew the accounts, everything like that. Switch over to 401Ks, my employer has no idea what I'm doing with my 401K and the investments, right? But employers… you know, had to get used to that transition, where they don't necessarily have all the answers to everything, you start empowering the employee to make the decisions for them. You know, because it's an individual plan, there are certain things that the employee will need to do to advocate for themselves.

There's certain things that even as the licensed agent managing and setting up the account, you still can't do because it's still technically an individual plan. But, with that being said, we still, want to make sure that we're supporting the employees 100%. So, we have a full support staff. When we actually encourage HR leaders to direct their employees to Thatch.

For a couple reasons. One, you no longer have to worry about, you know, all of the old details of something going on with an employee and, you know, asking a lot of questions. Two, you don't need to worry about being the expert of every single plan. But three, that employee now has somebody outside the company they can connect with when they have questions. You know, it's something very personal. You might have something, you know, maybe going on, maybe you have an issue that you're trying to get to the bottom of. You don't necessarily always feel super comfortable. sharing that with a coworker, even if it is HR, and so I think there's an additional layer of kind of support for the employees there that gives them somebody else to connect with. But, you know, if it's something that we can handle and guide and take care of ourselves, we'll definitely do that. If it's something that we need the employee to take some action, we'll give them the exact instructions on exactly what they would need to do.

Marie Holmes: Awesome. All right, so I think that is all we've got for today. Thank you again, Mark. I really appreciate, all the insights and your time, and thank you, everyone, for joining today. We'll give you back a couple minutes, of your afternoon. So, thanks so much.

Mark Kubera: Alright, thank you. Thank you all.

‍