Lively raises $27M to modernize the health savings account

With healthcare costs as the leading cause of bankruptcy, Lively's goal is to reduce that burden

Healthcare is the leading cause of bankruptcy in America, accounting for over two-thirds of all filings, with over 530,000 families are affected due to the high cost of care each year. One of the ways that people are trying to prevent this from happening to them is by opening a health savings account (HSA), a tax-advantaged account that is used to pay for current, or future, healthcare expenses.

These types of accounts are becoming increasingly popular; there are now over 26 million health savings accounts, holding $61.7 billion in assets, and that number is projected to be $88 billion by 2021. The problem is they are often outdated and have hidden fees attached to them.

Lively is a company that wants to take the HSA and make it work for the modern consumer by making them transparent, easily accessible and without fees. 

"HSAs aren’t new. In fact, they’ve been around for 15 years. The problem is that most incumbents provide another dumb bank account, along with their hidden fee schedules, not a solution that helps consumers engage with their healthcare dollars," Alex Cyriac, CEO and co-founder of Lively, told me.

"At Lively, we saw the promise of the HSA and modernized it by seamlessly melding technology and healthcare savings into one user-friendly, fee-free platform. We’re proud to work to increase Americans’ access to healthcare savings and are excited to be the fastest growing and top consumer-rated HSA available."

On Wednesday, the company announced a $27 million Series B round led by existing investor Costanoa Ventures, with participation from Ally Ventures, Liquid 2 Ventures, PJC, Teamworthy Ventures, Streamlined Ventures, and Y Combinator. This brings the company’s total funding to more than $40 million.

Lively was founded by Cyriac and Shobin Uralil after they both separately endured financial hardship due to mounting health costs.

"My mother was put on disability after a surgery went awry, requiring me to financially support my parents. When my mom mentioned she had stopped taking one of her medications because the co-pay increased to $100 per month, I did more research into their medical expenses and realized that my parents were spending $100 here, $200 there, etc. despite being on Medicare," said Cyriac.

"Meanwhile, Shobin was experiencing significant, unexpected healthcare costs after he and his wife had their first child. We did more research and were shocked by the out-of-pocket medical expenses in retirement. Our parents weren’t prepared for that, and neither were we. This personal experience led us to create a different kind of HSA designed to put more savings into families’ pockets."

Lively makes HSAs more affordable for its users by offering them services that include debit processing, which is powered by Visa, along with the ability for members to investment their HSA funds through TD Ameritrade. The company also provides healthcare deductible spend tracking, and zero fees for individuals and families, though employers who use Lively are charge $2.95 per employee, per month.

So far, the company says it has saved consumers more than $1 million in HSA fees. It currently has over $140 million of HSA assets on the platform and it expects to double its growth in just the next few months.

Lively is one of thousands providers of HSAs in America right now, many of which are banks and other financial institutions who mostly use a white-labeled third party software provider. The problem with this, Cyriac explained, is that "none of them are in true control of their solution and they have inherent costs that prevent them from putting the consumer first," leading to clunky products and hidden fees.

"In fact, certain providers make it difficult to get money out when you need it most," he said.

"HSAs have been around for a long time, but at Lively, we’ve done things differently. We have built our own record-keeping technology from the ground up and as such, we are not at the mercy of anyone else. We’re focused on building a contemporary, intuitive product around the consumer and their spending, saving, and investing needs."

The ideal customer for Lively, Cyriac told me, "is any American looking for long-term dependability when saving for healthcare."

"We service both consumer and employer accounts. Lively HSAs act as portable, investable savings accounts for anyone with a qualifying high deductible health plan. While other HSA providers are riddled with fees and make it difficult to access funds in times of need, Lively provides account holders with transparency and affordability." 

Lively will use the new funding to invest in its technology, to expand its consumer tools and to grow its team. 

"Broadly speaking, we will continue investing in solutions that make it easier for employers to administer their HSA, including additional integrations with Benefits Administration platforms, HRIS systems, and payroll providers," said Cyriac.

"We also will be investing to ensure that the consumer is getting the most out of their HSA, whether that be spending, saving, investing or anything in between. We have spent a long time building the underlying architecture that allows us to build consumer tools designed to make it easier for families to save for healthcare costs in retirement. We’ll be sharing much more of the details in the coming months."

Lively's long-term goal is to make it so that healthcare is no longer a financial liability for so many people. It's now estimated that each couple will spend $369,000 on healthcare costs in retirement, and Lively wants its HSA offering to help Americans prepare for these costs before those people run into trouble. 

"Healthcare costs before and after retirement are skyrocketing and Americans of all ages are unprepared. They are being forced to make difficult decisions about financial and physical well-being, something no one should be forced to choose between," Cyriac told me.

"At Lively, we believe in the power of financial stability. Success means we will continue to help Americans better afford their healthcare expenses in all stages of life. Our ultimate goal is simple: to help individuals and families build savings to live stable, happy and healthy lives now and into retirement, all without having to take money from their pockets. If we do everything we are setting out to do, we expect to be a meaningful part of every American’s life, even 100 years from now."