October 30, 2018 | Investment Themes

Bringing Health Savings Accounts to the Masses

Mark Selcow

Written by

Mark Selcow

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Lively consumer dashboard

A couple of years ago, I was working on business ideas in consumer health and chose a high-deductible health plan to see how my decisions would be impacted. My goal was to experience firsthand what it’s like to make care/cost trade-offs, and better understand how our health system arms consumers with information to enable those choices. I got a little unlucky that year, as I broke my wrist snowboarding and my daughter broke hers ice-skating. After those expenses, our annual costs were roughly neutral vs. my prior PPO plan because my deductible costs were offset by lower premiums. But, I got a tax break by funding an HSA account, which tilted things in favor of the high-deductible choice. No wonder so many people and their employers are selecting these plans now.

However, I did realize something else from my experience — it was scary to feel financially exposed and uninformed about how to manage my health costs. I felt the tools available to me were poor, and my HSA just sat there and did nothing except collect a monthly fee. I opened it reflexively with my existing consumer bank (a big one) and promptly ignored it. The login was separate, my HSA was an island, the education was weak, and I never carried my debit card with me. I never even invested my deposited funds to allow for them to grow.

I wasn’t alone in my HSA experience. Health Savings Accounts are now 14 years old, designed to offer tax savings, investment returns, and management of direct health expenses, with growth estimates for the end of 2019 at 28 million HSA accounts with $64B in assets under management. Health Savings Accounts broadly have support from Democrats and Republicans alike who aim to increase caps and access. By 2025, it’s expected the industry will hit $73B in AUM across 60M accounts despite offering a less-than-stellar consumer experience and extraneous monthly fees.

There had to be a better way. And fortunately, there is. I was introduced to Lively and tried migrating my account. They offered everything my bank did not: paperless fund transfer, snapping photos of my receipts with my cell phone, ability to easily invest my account — and all for free. At last, an innovator in this staid category.

We at Costanoa Ventures are very proud to announce our Series A investment in Lively. Lively has reimagined the HSA experience and built it around making it easy for customers to reap the benefits of Health Savings Accounts, unlike current banks that charge fees, make it difficult to use funds and do nothing to take advantage of the mobile phone. Lively’s full-featured HSA account (free to consumers — the industry’s first!) is world class in its user experience with a net promoter score of 75+, notable when HSAs offered by banks generally have negative to < 30 NPS.

Many people today discover and choose HSAs through employers, who offer them alongside high-deductible health plans. These employers in turn discover options through brokers, who are motivated to find innovative products that will reduce their clients’ health costs. We believe Lively is perfectly positioned for this buying dynamic. In addition to the employer market, a growing minority of consumers are educating themselves on high-deductible plans and choosing them, or are “rolling over” or consolidating HSAs when they leave jobs. Many of these people have become frustrated with sub-par product experiences from incumbent HSA banks and have been looking for something better. The Lively team has always been built for enterprise and their product is flexible and easy to understand for all users including large and small employers as well as individual HSA account owners. Seeing such strong product demand from retail consumers has been a key signal in market timing for the Lively team and its investors. Offering a better experience really does get rewarded in this market.

One of the qualities Costanoa looks for in startup founders is their ability to attract high-performing team members and create a culture that nurtures talent. Alex Cyriac and Shobin Uralil, Lively’s founders, have chosen to work on the health care cost and HSA adoption problem because they lived through it — needing it to be better and watching their family members suffer without adequate access to health care. They are people-centric, hardworking, high-integrity, intelligent and are surrounding themselves with a great team — recently bringing on Kirk Hoewisch as Head of Sales to further build out Lively’s B2B presence. Kirk previously founded HSA Bank, one of the nation’s largest incumbents. Their team is humble, mission-driven, ambitious and so capable. We are proud to be investors in Lively and this amazing team, and expect great things to come from them in empowering users to save while helping them better understand and pay for key health services.


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