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The company targets younger people, eliminating fees and focusing on maximizing savings
Health Savings Accounts (HSAs) are relatively new, having only been introduced in 2004, but they have become very popular. By 2018, there were over 20 million people using them. The problem is that there are over $60 billion in these accounts, and a very small percentage, 11 percent, maximize their yearly contributions. Most of the accounts sit unused, taking out a monthly fee.
First Dollar wants to change the ways HSAs are done, making them easy to understand and eliminating those monthly fees.
"First Dollar is a healthcare ecosystem that combines an amazing, fee-free HSA with a marketplace where our members can get curated health care products and services at a great price," Jason Bornhorst, co-founder and CEO of First Dollar, told me.
The company, which came out of beta on Wednesday, also announced it has raised a seed funding round of $5 million led by Next Coast Ventures, with participation from Meridian Street Capital, former athenahealth CEO Jonathan Bush, Everlywell CEO Julia Cheek, Bright Health CTO Brian Gambs and Capital Factory.
The idea for First Dollar first came about when Bornhorst and co-founders Colin Anawaty sold a previous company to athenahealth, which handles medical billing for around 10 percent of the US.
"This experience gave us a front row seat to how the healthcare industry isn’t working for patients. Despite being available for 17 years, HSAs are wholly misunderstood and underutilized by Americans," said Bornhorst.
The typical user for First Dollar are Millennials and Gen Z, who are generally healthy, and who also typically spend more per year for more coverage than they need to. In addition to no monthly fees, First Dollar also stresses education on how to maximize savings.
"Users can transfer their existing HSA to First Dollar or create and fund a First Dollar HSA from scratch. Their First Dollar HSA gives them access to discounted health care products and services they can buy through First Dollar," Bornhorst explained.
The company's first focus area is drug discounts, through a partnership with RxSaver, a national drug discount program to help save its members up to 80 percent off their prescriptions. They receive this discount at their local pharmacy by showing the cashier a code from First Dollar.
The funding will be used to expand the company's 10 percent team by hiring more engineers and designers to scale the HSA offering. It will also be used to build new functionality for First Dollar’s platform.
"We are a venture-backed startup but are in no rush for an exit. We’re focused on delivering a great healthcare experience to people and we’ll keep doing that," said Bornhorst.
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