How are Smart Rates calculated?

Smart Rates is an ICHRA contribution strategy developed by StretchDollar. The goal of Smart Rates is to help employers offer a benefit allowance that takes into account an employee’s age and where they live.

Instead of giving every employee the exact same dollar amount (also known as flat rates), Smart Rates bases allowances on a proprietary age and geographic scaling contribution design that mirrors the way individual marketplace plans are priced. This allows employers to offer employees a percentage of a benchmark health plan regardless of their age and location.

For example, an employer would like to target 75% of a Gold plan. Each employee’s allowance amount is then calculated based on their age and zip code using our Smart Rate algorithm, creating an allowance amount that adjusts with the cost of premium. Benchmark tiers available in the portal include Bronze, Gold and Low/No Deductible strategies.

Why Smart Rates?

Health insurance premiums vary based on a person’s age and where they live. For example, a 28-year-old in Austin, Texas will likely have much lower health insurance costs than a 57-year-old in San Francisco, California. With a flat-dollar allowance, those employees would not receive the same level of support toward their premium costs.

Smart Rates helps solve this by adjusting allowances based on the cost of coverage in each employee’s area and their age. By choosing a percentage of a benchmark plan, employers can offer employees more equal buying power, regardless of where they live or how old they are.

Where can Smart Rates be applied?

Smart Rates can be applied to Full-Time and Salary employment groups.  At this time, only flat rates can be applied to Hourly and Part-Time groups.