Launch HN: Lively (YC W17) – 401(k) for Healthcare

[suralil]

Hi HN! I’m Shobin, co-founder at Lively (https://livelyme.com). Lively is a Health Savings Account platform for employers and individuals. If you are unfamiliar with an HSA, think of it as the 401(k) for healthcare. We are in the current batch at YC and are excited to share our offering with you.

Lively was born over a year ago with personal experiences that both Alex (my co-founder) and I experienced firsthand. The short story is that we were experiencing a lot more out-of-pocket medical expenses than we were prepared for. That is what propelled us to begin looking around and came across the health savings account. The HSA is a triple tax-advantaged account (in the US, so we're US-only) that allows you to contribute pre-tax dollars, invest your money and let it grow tax-free, and withdraw money tax-free so long as it is used for qualified medical expenses (at any point in the future). It has been an industry dominated by banks and other financial institutions and we saw an opportunity to enter it by focusing on user experience.

Alex and I are life-long friends and see this as an important problem to help solve. We are also happy to answer questions about our business, but also health savings accounts and high deductible health plans.

[koolba]

HSAs are great but I don't see the secret sauce here?

There's plenty of HSA providers out there that don't charge bogus fees. Most don't charge any monthly fee if you have more than $1000. The great ones also let you either invest in a pool of mutual funds or in self-directed brokerage accounts.

If Lively plans on going after lots of small accounts then I doubt they can break even, let alone be profitable. There's no money to had. Employers usually don't bother setting up HSA plans as there's no tax advantage for them (it's employee money going in) and it's one of the few accounts that you can set up yourself and claim a tax credit for after the fact.

I don't see any indication of investments or brokerage options. Is Lively's angle to make money on the interest rate spread? (i.e. lend on the money market but offer to customers close to 0% to pocket the difference).

[suralil]

Thanks for your thoughts! You are correct in that investment options are not available right now. We will be launching investment capabilities by the end of Q2.

We are focused on allowing our users to get the most out of their HSA. While we have released our minimal functionality for the time being, we will be adding products and services on top of this to make the process of spending your HSA dollars much more streamlined.

We have focused on streamlining the onboarding and administrative process for employers and attempted to remove the clunkiness we have seen elsewhere. It is definitely an ongoing project, but appreciate your thoughts and welcome any feedback as to how to improve the process and product!

[koolba]

How will you make money off non corporate accounts?

Why should an employer pay to set up an account when the employee can do it for free? Generally speaking, the employee is better off anyway because they're in full control. It's not like a 401k where the account custodian is holding the assets.

Are cash balances in the non investment funds interest bearing? What are the rates?

[suralil]

We think individuals who have HSAs should be able to save their money without incurring a monthly fee. So many of our own family and friends have told us about how they have a small balance in their HSA account but are getting charged $3, $4, $5, etc. a month just for having that account. We don’t think that’s right so we won’t charge individuals for their basic HSA. Once we have investments up at the end of Q2 and an individual chooses to invest, we’ll charge a nominal flat monthly fee for that.

Since the most people get their HSA through their employer, we’ve built our product in a way that employers can sign up and administer an HSA easily. Things like automatic payroll sync, on boarding in under 10 minutes, viewing the status of where employees are in the process, etc. are all things to reduce the burden of administering HSAs that employers currently experience. For employers who have greater than 10 enrolled employees, we charge $4/month/employee.

And regarding employers, employee contributions to an HSA through an employer's payroll are not subject to FICA taxes (social security & medicare) so when employees contribute to their HSA, the employer saves 7.65% since those contributions are not subject to FICA.

To your question about interest rates, yes we have them available on our website in the Individuals and Families page (in the middle under the white box): https://livelyme.com/individuals-and-families/.

[koolba]

> We think individuals who have HSAs should be able to save their money without incurring a monthly fee. So many of our own family and friends have told us about how they have a small balance in their HSA account but are getting charged $3, $4, $5, etc. a month just for having that account. We don’t think that’s right so we won’t charge individuals for their basic HSA.

There's plenty of zero cost options for HSA. If your friends and family are being charged monthly fees, they haven't done their homework. Five minutes of Googling "best hsa" finds a bunch of options.

> Once we have investments up at the end of Q2 and an individual chooses to invest, we’ll charge a nominal flat monthly fee for that.

That's pretty standard. From what I've seen it ranges from $0 to $1-$1.50/month.

> Since the most people get their HSA through their employer, we’ve built our product in a way that employers can sign up and administer an HSA easily. Things like automatic payroll sync, on boarding in under 10 minutes, viewing the status of where employees are in the process, etc. are all things to reduce the burden of administering HSAs that employers currently experience. For employers who have greater than 10 enrolled employees, we charge $4/month/employee.

I really wonder if most people get HSAs through their employers. Personally I don't know anyone that does. Everybody I know that has one set it up on their own. Plus you need a high deductible plan which is typically the purview of relatively healthy people getting insurance on their own.

Most people I know who have employer provided insurance have plans that would not qualify for an HSA due to lower deductibles or max out of pockets.

> And regarding employers, employee contributions to an HSA are not subject to FICA taxes (social security & medicare) so when employees contribute to their HSA, the employer saves 7.65% since those contributions are not subject to FICA.

Sure it'd be about $200 per HSA employee assuming they maxed out the contribution (after taking out the $4/month x 12 fee). That could definitely add up for a large org but again I don't think most people on employer plans are on HSAs anyway.

> To your question about interest rates, yes we have them available on our website in the Individuals and Families page (in the middle under the white box): https://livelyme.com/individuals-and-families/.

Ah I didn't see it at first. The font blends in with the background. For the curious:

>> Note: interest rates vary based on tiers of daily balances and are paid on the entire balance.Tier 1: 0.05% (APY of 0.05%) for daily balances less than or equal to $2,499.99. Tier 2: 0.15% (APY of 0.15%) for daily balances of $2,500.00 or more, but less than or equal to $4,999.99. Tier 3: 0.30% (APY of 0.30%) for daily balances of $5,000.00 or more, but less than or equal to $14,999.99. Tier 4: 0.55% (APY of 0.55%) for daily balances of $15,000.00 or more. The interest rates and annual percentage yields may change at any time. Interest will be compounded monthly and credited into your account monthly.

Honestly those are pretty bad. The top tier is only .55% and it starts with at a $15K balance. There's plenty of competitors that offer individual accounts with no fees and higher rates. As an example, Lake Michigan Credit Union[1] offers .5% for balances up to $5K, and 1% on anything above that.

Wish you guys the best on this endeavor but honestly I don't see anything special here. I don't see how this can be a going concern in the long run. There's just not enough money to be made and arguably your offering is worse than what's already out there. It's just packaged in a modern website. An informed consumer (at least on an individual basis) wouldn't sign up as there are better options from every angle.

[1]: https://www.lmcu.org/banking/savings/savings_hsa.aspx

[kc10]

>I really wonder if most people get HSAs through their employers. Personally I don't know anyone that does. Everybody I know that has one set it up on their own.

I have had all my HSA accounts through my employer, usually tied to my medical insurance (HDHP). Every time I switch employer or the insurance changes or the HSA provider changes, I consolidate the money from my older account to my new HSA account.

IMO I think lively is good for individuals as there is no fee (I know there are other providers with no monthly fee). But I wonder why would my employer use this service if my insurance provider offers linked HSA and auto-pay for the claims?

[justinzollars]

Health Savings Accounts depress me. Its a complete admission that we will never have Healthcare in America as a public benefit.

That said, I know I would realize tax savings by saving in an HSA. I refuse to do so because it acknowledges a position I do not agree with: that I should pay for overly expensive Healthcare

[try-perforate]

Politics aside, I think HSAs are great. Under a single payer system I would expect payroll taxes to be significantly higher (8-10%). You pay that every month even if you don't use it. In return you get free healthcare when you do use it.

With HSAs in America, you save an amount equal to your tax bracket on expenses up to the lesser of your deductible (if plan pays 100% post-deductible) or the maximum HSA contribution (3350 for singles). You only pay this when you need care. You can also use your HSA dollars for things like glasses, pregnancy tests, and teeth cleanings.

There's added incentive for employers to offer HSAs because it reduces their payroll tax as well.

Granted this is all given that you are eligible, can afford, and have health insurance. And that your provider will cover whatever treatment you're seeking.

However, given my plan, I pay about $60/mo after my healthy life plan savings. I can take the savings from that plan and look at my budget and afford to save $100/mo in my HSA. That's $500 "lost to insurance" each year and $1200 growing tax-free given I have no medical expenses (unlikely). Compare that to a single-payer system with ~8% payroll tax. Given I make $5000 a month, that's $400/mo or $4800/yr that's "lost to insurance" given that I have no medical expenses .

I'm not a great example because I'm young, privileged, and healthy. I'm interested in the economics of this whole thing though.

[lcw]

Define great. Obviously they only benefit, as you kind of noted, people with disposable income. I mean you aren't dropping money into an HSA if you are living paycheck to paycheck. Do you really think we should have health programs that only profit our affluent citizens?

[koolba]

Bah just think of it as a fancy 401k for people that have a better understanding of the tax code. From that angle you're an idiot if you don't take advantage of it.

[kc10]

Some companies offer HSA match for individuals who get HDHP+HSA. The insurance costs for these plans are much cheaper compared to low deductible plans.

So if you are a healthy person with predictable medical expenses and if your employer is contributing to your HSA and tax you save by contributing to your HSA, the HDHP+HSA might be cheaper compared to a traditional insurance.

[lojack]

My employer offers a high deductible plan and puts up to $750/yr into an HSA, no match required. This is cheaper for the organization, and often better than even a low deductible health plan for healthy people.

[vdnkh]

Neat, but what's with the notifications permission? Notifications are pretty intrusive and turned me off of your site - is there a good reason you need them?

[suralil]

Thanks for your comment. We wanted to give our users the ability to opt-into receiving information about HSA and other related topics as we move forward without necessarily signing up on day 1 (in case they are not ready to do so).

[mericsson]

How about offering a mailing list signup? Instant push notifications doesn't feel like the right medium for receiving info about HSA. Turned me off a bit as well.

[suralil]

Good call. We are in the process of fixing this right now so it doesn't show up. Will let you know as soon as this is fixed.

Edit: Ok removed the notifications. If you are still seeing it, please let us know. Thanks to both of you for pointing this out!

[vdnkh]

You're welcome!

[_jgvg]

Any plans to include features easing long-term management of HSAs?

For example, one popular way to hack your HSA is not requesting any reimbursements when the expenses happen, letting your cash grow tax-free for decades and then request reimbursements from the old receipts. Today this requires detailed record-keeping by the customer, it would be great if that was a feature:

- Request reimbursement

- Set timing (now or save for future)

- Add receipts/etc.

- Reimbursement is approved by HSA

- "Saved reimbursements" are stored/tracked for future use

- When it's time to withdraw, user selects amount ("I need $10k") and HSA creates a portfolio for withdrawal ("You'll get reimbursed for claims 23, 46 and 73 adding to $11,456")

[suralil]

Yes absolutely. This is something that is on our roadmap. generally speaking, certain powerful features of the HSA (as you pointed out) are not well understood by people. We want to build product to pull out the best features and highlight them. This is a great thought. Keep them coming!

[utnick]

Great idea, I think most people don't realize how great HSAs are. They are better than 401ks in almost every way besides the lower contribution limit.

Even if you are very healthy, the category of medical expenses you can use it for is very broad.

[mgkimsal]

used to be even broader - there was a time (pre aca) when I could pay for most OTC medications with HSA funds... not anymore. :(

[mericsson]

Great stuff!

"Were you surprised when you started getting charged a monthly fee for your HSA when you left your employer? Yeah, so were we!" -- this surprised a friend of mine. I sent this his way.

Any plans to offer investment options as part of the HSA?

[suralil]

I can't even tell you how "annoyed" we were when we got wind of this. It really is important to us to not charge individuals for the basic HSA. We will be coming out with investment capabilities at the end of Q2. Stay tuned for that. And for full transparency, since that is a premium feature, we will charge individuals for that ability, however our fees for that will be in-line with how the current industry prices it. If you don't want investment capabilities, your HSA is 100% free with us.

[mgkimsal]

And someone will, at some point, point out how 'annoyed' they are at your 'premium feature' fees, when vanguard has much much much lower fees, and most or all of the functionality you'll have developed. or... maybe your plan is to just acquired by vanguard? (I say this not as a vanguard user, but someone who is aware of just how low their fees are relative to most other places, though fidelity is catching up in a lot of areas).

[bgentry]

1. Do you support individual/non-employer accounts?

2. What are the investment options for the accounts? Can I put it into low-fee Vanguard index funds?

3. Can I roll over from an existing HSA provider, and if so, how painless do you make that?

[suralil]

1. Yes we absolutely do. You can sign-up as an individual. When you get to the sign-up screen, just click on the Individual Account.

2. We are going to be launching investment capabilities at the end of Q2. When we do this, you will have access to invest in low cost mutual funds, ETFs, but also straight stocks/bonds, etc. It will be a self-directed option.

3. Yes you can rollover! But be sure to ask your provider if there is a fee. We have found that often times HSA providers charge a nominal rollover/transfer fee. They vary so be sure to ask. Today, just send us an email to [e-mail] and we can walk you through that process. We just need some information from you, will fill out a form, send it to you for electronic signature, and we take care of the rest. We have plans to completely automate this process, but we haven't yet released that functionality. Stay tuned!

[clamprecht]

If you can offer Vanguard funds with no crazy fees, you will be extremely popular on bogleheads.org. There isn't a clear leader for HSAs for people who just want to invest their HSA money in Vanguard funds. There are some options, but they all have fees that seem unreasonable to me. Hopefully Vanguard will eventually just offer HSA accounts directly.

[mgkimsal]

> Hopefully Vanguard will eventually just offer HSA accounts directly

I thought they did already?

https://personal.vanguard.com/us/whatweoffer/overview/health...

[clamprecht]

Unfortunately they don't... at the bottom of that page it says, "The links to the HealthSavings Administrators and HealthEquity websites take you to sites outside vanguard.com. Vanguard is not responsible for the content of third-party websites."

[pbnjay]

I looked into getting a HSAs through my consulting LLC last year due to the tax benefits, but my current (day job) employer plan includes a mandatory HRA. From what I could find at the time, I wouldn't qualify for this, right? Do you have a list of qualifications somewhere easy to access? Also, what are the investments accessible to the plan? I'm not finding much details on your site.

[chimeracoder]

> I looked into getting a HSAs through my consulting LLC last year due to the tax benefits, but my current (day job) employer plan includes a mandatory HRA.

IANAL, but I'm pretty sure those are entirely orthogonal. You can have both an HRA and an HSA.

An HRA is exclusively employer-funded. An HSA is something you can enroll in if you have a high-deductible health plan. You can have an HSA through your employer or independently, and either you or your employer can contribute to your HSA, subject to the annual cap.

There is also the FSA, which is similar to an HSA, except the money expires at the end of each year. Confusingly, if you have an HSA, you can have an FSA, except then the FSA can only be used for a very small set of expenses, rather than the full range that FSAs otherwise allow.

[suralil]

We have tried to answer these questions and many more on our Learning Center. Feel free to check it out here: https://livelyme.com/hsa-faqs/

WRT investments, we will be launching those capabilities by the end of Q2. Stay tuned and feel free to drop us a note anytime about what you would be most interested in when it comes to investment capabilities.

[pbnjay]

> 3. Can’t have or be eligible to use a general purpose Flexible Spending Account (FSA).

Maybe this was it. My employer plan offers an FSA, so since I don't like throwing money away I guess I'm out of luck.

[chrisa]

Can a single member LLC sign up as an employer? Or are there minimum employee restrictions?

[suralil]

So long as you have a high deductible health plan, you can sign-up for an HSA, but there are some tax deductible rules that would apply. We have an FAQ in our Learning Center. The question is "Are employer contributions tax-deductible?".

[imosquera]

Question about the standard HSA, you say I can invest and withdraw with no penalties unlike a 401k. Is that true?

What are you guys doing to make it easier, specifically for small business to leverage your product?

[suralil]

Yes it is true! When we began looking into this over a year ago, we discovered how powerful of a utility the HSA can be. The rule is that your HSA dollars can be invested and earn interest completely tax free, so long as when you take your money out, it is used on qualified medical expenses. Assuming you use the money on qualified medical expenses, you can use that money tomorrow, next year, or 30 years from now. There is a lot more flexibility in that context. Worst case, you can invest and let your HSA dollars grow and when you retire (age 65 with the HSA), use the money for non-qualified expenses and just pay ordinary income taxes at that time - similar to the 401k.

We will be launching our investment capabilities at the end of Q2 so stay tuned for that.

With regards to what are we doing to make it easier: 1. We have designed our user experience to not need paperwork to get up and running. You (as the employer) and your employees can sign up in minutes - all online. 2. We have a Learning Center designed to help both employers and individuals about best practices, listed qualified medical expenses 3. Electronic receipt upload and categorization in case of an audit 4. For employers, we are automated with 9 different payroll companies taking the administrative burden off of the employer and onto us!

Those are just a few things, but we will be coming out with many more features that will help you as you grow!

[clamprecht]

The big limitation is you can only contribute $3350 per year (per person).

[suralil]

For 2017, the individual limit is $3,400 and for families it is $6,750. You are right that HSA accountholders are limited to these amounts as of today.

[DrSayre]

This seems awesome to me! Ive had a HSA qualifying health care plan for awhile now, but never really found a bank that had an account without having to pay a monthly fee. Good luck guys!

[suralil]

Thanks for well wishes!

[Faaak]

I get: "Your access to this site has been limited". "Reason: Access from your area has been temporarily limited for security reasons.".

[suralil]

Sorry! We are fixing this right now. Stay tuned. I will let you know as soon as it is fixed.

Edit: Should be fixed now. Please let us know if you continue to experience any issues!

[ll931110]

How does the fee and investment portfolio differ from the traditional HSA banks (e.g. Select Account)?

[suralil]

We haven't launched our investment capabilities yet. That will come at the end of Q2. For individuals, there is no fee for just having a Lively HSA account.

[akouri]

Happy to be a first customer, I hate the current non-transparent options out there!

[suralil]

We'd love to have you on board. When you do sign-up, let us know how we can improve our experience and offering!

[DrSayre]

The only odd thing for me was it got stuck at a loading screen when I was redirected to my account page. Other than that, I didnt have any problems.

Also it would be nice if Ally was a bank you could link directly with... but I understand if there is some technical issues that prevent certain banks from being able to link automatically.

[suralil]

Thanks for pointing it out. We have identified the issue and are fixing it now.

[iends]

Please add low cost index funds when you add investments. Preferably Vanguard.

[ellisv]

Looks interesting. I'll consider when investments are available.

[ebbv]

I am torn because you are probably hard working nice guys but I really hope we can move to universal health care and then your business would be obsolete. Best of luck.

[st3v3r]

So how do you solve the problem of someone getting sick or injured before their HSA has enough money in it? Cause that's the big downside of an HSA.

[suralil]

So long as you have established your HSA prior to incurring the expense, you would be able to reimburse yourself later for that expense. So for example, if you were to establish your HSA tomorrow and funded it with $1 and then the very next day you got sick or injured, you could pay for those services out-of-pocket and then reimburse yourself with your HSA dollars whenever you had enough money in it at some point in the future.

[melipone]

Hope that does not replace Medicare!

[Sanddancer]

No kidding. HSAs are great if you're healthy. Soon as you have a chronic condition or two where you need to see the doctor on a more than biannual basis, you see where they, and the rest of the insurance system really starts falling apart. A friend I have has several chronic illnesses and is on a pretty typical high deductible health insurance plan you get when you're making $15/hour. Because of this, she can't afford to get treatment for those chronic illnesses due to that several hundred dollar annual deductible just to get into the door. Seeing a doctor would help her greatly, but she's screwed because of the penny wise, pound foolish situation these kinds of plans offer.

In contrast, I'm on disability and on Medicare. Medicare means I pay $6/month for prescriptions which have a "retail" price of $2k, and my copays for regular, non-preventative, doctor visits are $10-$20. Even the doctor fee is because I'm using one not fully within the medicare system. This actually makes it possible to get treatment, even while seeing doctors who specialize in my various medical conditions. Thus I'm getting better, and don't have to balance treatment and finances.

[UncleMeat]

They are also worthless for the poor, who don't benefit from the reduced tax liability.

[numchucklee]

Move to france, they have really good health care as opposed to health insurance.