Lively, a Health Savings Account (HSA) launched by two young Indians, two years ago has become the latest success story crossing the $100 million mark in deposits.
The Forbes magazine last month featured Lively and its founders, Alex Cyriac, 36, and Shobin Uralil, 37, CEO and COO respectively.
Three years ago Cyriac found out that his mother was not taking all the required prescription drugs, because the co-pay under her Medicare drug plan had risen $200 a month. Cyriac insisted her taking it and was ready to pay for it.
The incident was an eye opener for him. With many others, he too thought that once Medicare starts at 65, one need not worry about medical costs. He was unaware of the co-pays and the many restrictions.
When he spoke about this with his friend Uralil, he too said his parents had not enrolled in any plan to face such an eventuality. He also mentioned how he had to spend a lot of money from his pocket during the birth of his son.
Both brainstormed about overcoming such difficulties and decided to set up Lively, a company to promote healthcare savings that meet Millennials’ expectations. HSAs were already there, but what made Lively unique was its low costs, transparency, and ease to manage online.
“Our vision is to help millions of Americans better afford their ongoing healthcare costs. Step one of that is allowing people to save for those expenses without being nickeled and dimed,” Uralil said.
“As healthcare costs continue to rise in America, we believe we can help protect American consumers by putting more money back in their pockets through content, data, artificial intelligence, education, and user experience. Our vision is to be the go-to brand that you think of when you consider the intersection of your healthcare and finances,” he noted.
In 2003, Congress had authorized HSAs as a tax-shelter to lure families. If you’re covered by an eligible high-deductible health plan, in 2019 you can contribute up to $3,500 for an individual or $7,000 for a family to an HSA, reducing your taxable income by that amount. HSA money is tax-free when withdrawn, provided it’s used to pay for medical, dental, vision or long-term care expenses.
Lively's Health Savings Account platform is an online-only platform where any US tax payer who is covered under an eligible High Deductible Health Plan can open an account online, connect a bank account, and make a tax deductible contribution into their account.
The money in the account can be used for qualified medical expenses over time. There is no deadline in which you have to use the money. If you don't use it by the end of the year, it just carries forward to the next year. The money is yours until you use it all or you die, in which case it gets passed along to your beneficiary.
You can invest and let your money grow for decades tax-free, so long as you, or a surviving spouse, eventually use it for medical expenses. Once you turn 65, you can withdraw money for nonmedical uses also, paying the same tax as you would on withdrawals from a pretax 401(k).
Forbes report noted that at the end of January, Americans held $60 billion in 26 million HSAs, an average of $2,300 per account. But it is only a fraction of those eligible to invest in HSA. While 26.1 million adults under age 65 now have health insurance plans with HSAs, another 57 million are still out of it. “We see a unique opportunity to offer a better consumer experience, with no hidden fees, so that we can capture a greater market share in a growing industry,” Uralil said.
Both Cyriac and Uralil had some previous experience about HSAs, their tax advantages and their drawbacks in practice. Cyriac, a computer engineer, had spent two years running operations at Justworks, a New York cloud-based payroll and benefits provider. Uralil, with an M.B.A. from MIT, was running operations at Boston-based Retroficiency, which sold software to monitor buildings’ energy efficiency. He oversaw company benefits, including an HSA, which, he says, had a terrible interface and forced participants to keep their savings in cash, Forbes noted. Most of the 2,600 HSA providers in the U.S. are small banks and credit unions that offer only savings accounts and CDs.
They decided they could do better with a digital-native product. In mid-2016, Cyriac quit his new job at payments company Worldpay in San Francisco and rented space at WeWork, becoming Lively’s CEO. Startup funds of $600,000 came from friends, a Worldpay executive, the founder of Justworks and PJC, a venture fund that had backed Retroficiency. Uralil held on to his day job longer, moving out to San Francisco in January 2017.
By March 2017, Cyriac and Uralil had Lively’s simplified HSA, with its exclusively online administration, up and running. By that October, they had added investment options through a brokerage account at TD Ameritrade and had an additional $3.5 million in funding from a group that included NBA star Kevin Durant. This past October, Lively raised $11 million to fund expansion. Its 28 employees now work in a loft space opposite San Francisco’s ballpark.
Most of the $100 million in HSA assets Lively has gathered so far has flowed in through word of mouth and online reviews, Forbes noted. Its website features videos, snippets of advice and a ‘no paper cuts’ boast.
The founders generated early buzz by offering basic individual HSAs for free—plus, later, $2.50 a month if you wanted a TD Ameritrade account. While just 13% of HSA assets are in individual plans, interest in them is strong among self-employed folks and job hoppers rolling over HSA accounts. Lively’s small business plan has attracted employers seeking to move benefits administration to the cloud.
The report also noted about the stiff competition in the field. Last November, Fidelity Investments added fee-free individual HSAs to its lineup of employer HSA plans. Lively responded by dropping its $2.50 a month charge for a TD Ameritrade account.
“Lively is doing great. We continue to scale our operations and our user base. We have account holders in all 50 states in the US including 3 US territories. Our team is about 30 people and growing fast,” Uralil said.
They faced many problems initially. Uralil pointed out them as: “1. To find a bank willing to partner with us so we could launch an HSA program in the way that we wanted to. 2. Raise initial capital to get the business off the ground and secure that bank contract 3. Hire early engineers.
“We have tens of thousands of users all across America who have accounts with Lively. Those users have more than $100 million of their HSA dollars on the Lively platform,” Uralil said.
Cyriac graduated from the University of Santa Barbara with a degree in Computer Science. Uralil graduated from Georgetown University with a degree in Business Administration and from MIT Sloan with an MBA.
Uralil lives outside of San Francisco, CA. Married to Jessica and they have 2 young children Jonathan Uralil (4) and Sara Uralil (8 months). Cyriac too lives outside of San Francisco. He is married to Jenita and they have a daughter: Alivia Cyria
