Lively raises $4.2M as it adds investment capabilities for health savings accounts

Lively co-founder Shobin Uralil likes to describe the health savings account as the “401(k) for healthcare” — but that it’s woefully underused as an investment vehicle like a 401(k).

So instead of just relying on it as a way to pay for healthcare, Uralil and his co-founder Alex Cyriac set out to build a way to not only help people start up health savings accounts, but also help them consider them in the same vein as other kinds of investments. Today, Lively said it is adding investment capabilities with an integration with TD Ameritrade, which will be available to all Lively HSA holders. The hope is that Lively will introduce a kind of investment that’s been available to the traditional finance community, but in a more seamless way in order to continue growing into a one-stop shop for HSA.

“The beauty of the HSA, with an HSA you can access the money at any time if you’re using it for qualified medical expenses,” Uralil said. “The 401(k), if you access your money before retirement, you get dinged.  If you think about it, I would argue that if you are eligible to open an HSA you would want to max out your contribution before your 401k. It grows through investments tax-free just like a 401(k), but unlike that, you can access your HSA money at any time.”

To get all this done, Lively also said it has raised $4.2 million in financing from investors that include Transmedia Capital, Streamlined Ventures, Y Combinator, SV Angel, Kevin Durant and Rich Kleiman’s The Durant Company and a laundry list of others. (We’ll include said laundry list at the bottom of the post.)

“More and more people just can’t afford your traditional low-deductible HMO and PPO plans,” co-founder Shobin Uralil said. “As that happens, the increase and the rise in popularity of the HSA has also seen that trend. We talked to people and they kept saying, I feel like I’m getting nickel-and-dimed, I can’t get my money out when I need it most. [They would say] nobody seems to want to help me save for the future. That, coupled with our personal experiences, made us decide.”

Lively aims to give users the ability to open up a health savings account with a high deductible health plan, and make it easier to get that money in and out of the account to pay for deductibles. Lively boils down to two products: a tool for employers to give their employees health savings accounts and manage contributions and payroll; and an account for end-users that’s free to set up and get an HSA up and running. The most important part of the latter half, though, was ensuring that it was easy to get money out to pay for health care without any hassle, Cyriac said.

The most important part of the latter half, though, was ensuring that it was easy to get money out to pay for health care without any hassle, Cyriac said. The company offers a Lively-issued debit card — something not new to the market, he said — but also looks to ensure that users see refunds when they pay without using an explicit method required by a bank or even Lively. The aim is to help individuals feel like they are the account holder, and not their employer, even if they end up leaving their jobs or switching to new ones.

There are also some competitors in the area, such as HealthEquity, and other products owned by health insurers like United Healthcare. As health insurance costs become an increasingly big question going forward, optimizing a health savings account is going to be a big focus for some of these bigger players, Uralil said. But the hope is that the company will be able to outmaneuver them by creating a tool not only for the end user, but also employers and other organizations.

I think we’re looking at this as an end-to-end type of solution and experience,” Cyriac said. “If you look at the current industry, it’s kind of concentrated. It’s a space dominated by banks and other financial institutions. You have thousands of banks, credit unions, third-party admins. That represents the long-fragmented tail of providers in the space. Our goal is not only to transform the experience on the front-end, but it’s the streamline in ways that most providers aren’t thinking, but on the operational back-end.”

For those that got all the way to the bottom here, this is the full list of investors in Lively: Streamlined Ventures, Transmedia Capital, Y Combinator, SV Angel, PJC, The Durant Company, Liquid 2 Ventures, Haystack Partners, Paul Buchheit, Isaac Oates, Frederic Kerrest,  Jeff Epstein, and “others.”