Insurance is one of those things that always seems unnecessarily complicated. But Marshall Darr wants to make it easier for small businesses to provide insurance for their employees.
Enter StretchDollar, which launched this week in Illinois, Pennsylvania, Delaware and Colorado.
Before founding StretchDollar, Point Breeze-based Darr and his San Francisco-based cofounder Kaiza Molina worked for the company Decent that created affordable health insurance policies.
“What we always saw was, if you had fewer than 10 employees, a lot of these health insurance companies aren’t even interested in talking to you,” he told Technical.ly. “We’re using a new type of HRA to allow small employers to contribute pre-tax funding directly to employee-owned health plan premiums.”
Individual coverage health reimbursement arrangements, or ICHRAs, allow employers to contribute to employees’ individual health plans as an alternative to the more common group health plan coverage. Companies can customize insurance plans to fit their budget and StretchDollar is also a licensed brokerage and will match employees with insurance policies. There is no minimum contribution, Darr said.
Yes, StretchDollar is a tech company, according to its cofounder. In Greater Philadelphia — the original home of the insurance sector, as well as a professional group dedicated to growing Philly’s insurtech industry — it joins the ranks of insurance-minded fintech companies such as startup SnapRefund and the plethora of banking institutions in Wilmington.
“There’s a legal tech component in that we can take those inputs and generate custom policies, custom versions of these policies called ICHRAs and match what the employer wants to do,” Darr said. “We have some guardrails to make sure that they’re crossing affordability thresholds and remaining compliant on the legal side. And we also have the fintech component of our application, where we can move the money securely, compliantly, directly from the employer bank account to the employee bank accounts on that set interval.”
Darr and Molina started working on the company in March, and said they just made their first sale last week as part of a limited pilot.
The employee benefits space traditionally involves a sales process that takes multiple weeks. StretchDollar condenses that process into a shorter time frame with more flexibility, per Darr. In terms of clients, StretchDollar is targeting small businesses with less than 10 employees and charges companies $15 per employee per month.
“In my experience, those companies are often left with two bad options: Either they pay for some of the most expensive types of health insurance … or they do nothing at all,” Darr said. “We really see this as an in between option that can serve them a bit better.”
The company has also been fundraising, opening a pre-seed round in May and closing it in July after raising $1.6 million. This was Darr’s first experience fundraising, but he’s received tips and support from other founders in the Philly region. Precursor Ventures, Elefund, v1vc, Kindergarten Ventures and Westerly Ventures all contributed to this funding round. Darr expects the team will launch another funding round in early 2024.
StretchDollar currently has five employees, but Darr said some of this funding will go toward hiring. The money will also be used for state licensing and product formation. He said the company is on track to launch its full product on Oct. 15, and his goal is to have 1,000 users on StretchDollar’s platform by the end of this year.
Darr is from the West Coast, but moved to Philly in 2021 because his fiancee got a job at the Children’s Hospital of Philadelphia. He sees the allure for startups in the region; specifically, the convenient location to other cities such as DC and New York, the affordable cost of living and support from the startup community — such as Philly Startup Leaders, StartupBucks and local Chambers of Commerce — have all impressed him.
Looking forward, Darr is optimistic that StretchDollar’s methods will be the primary way small businesses will handle health insurance.
“I think within 10 years, we’ll have a million companies on the platform,” he said. “But the main goal is really helping more people find and use better coverage. And I think we have a real shot at making a big impact on that.”Sarah Huffman is a 2022-2023 corps member for Report for America, an initiative of The Groundtruth Project that pairs young journalists with local newsrooms. This position is supported by the Lenfest Institute for Journalism.