In a Nutshell: While many employers in the U.S. offer health care insurance coverage to their employees, unexpected out-of-pocket medical expenses still arise. These surprise costs can derail budgets and send people into debt. HealthEquity addresses these challenges by partnering with employers to offer Health Savings Accounts, Flexible Spending Accounts, and Health Reimbursement Arrangements to employees. These accounts provide a safety net for unexpected medical expenses, and the first option also provides a financially responsible way to invest money so it will be there when account holders need it most.
Health care insurance in the U.S. is often tied to employment. Employers offer health care insurance as part of their benefits packages not only to attract quality employees, but also to ensure their employees will be healthy and productive for the business.
But the health insurance system in the U.S. is complex and comes with plenty of pros and cons. On the plus side, many standard medical visits and procedures are covered once a deductible is met. That means people can count on being able to see a doctor regularly without their budget taking a big hit.
Conversely, life happens and unexpected medical situations arise that aren’t always covered by standard insurance policies. These unexpected expenses can throw precarious budgets into disarray.
In fact, about 40% of Americans would not be able to afford an unplanned cost of $400 without going into debt, according to a study by the Federal Reserve. And once debt takes hold, it can be difficult to escape.
Besides making it more challenging to pay regular bills, high levels of debt can lead to elevated mental and emotional stress and can contribute to added tensions in the household. Experts have also stated that the internalized stress from carrying debt can manifest in physical ailments as well.
HealthEquity is a company that helps people limit their medical debt through a variety of solutions, including Health Savings Accounts.
We recently spoke with HealthEquity Founder and Vice Chair Steve Neeleman to learn more about how the company empowers individuals to take care of their health and their money at the same time.
Identifying the Need to Help Cover Out-of-Pocket Health Care Costs
As with so many valuable products and services, the idea for HealthEquity came from a personal experience, and trying to find a better solution, Neeleman said.
“I was a young pre-med student, I was trying to finish my last year of college football, and my wife told me she was expecting our first baby. I was a little bit stressed — I was also getting ready for the MCAT,” he said. “I ended up with a bellyache, and I went to see a couple of doctors and they told me I just needed to relax a little bit, maybe take some antacid.”
Neeleman said that, thankfully, he didn’t have a serious illness, but after learning that his insurance claim was denied he said it once again made him feel sick for other reasons.
Neeleman learned that the claim was denied because the insurance company said he had a preexisting condition due to the fact that on his intake form, he wrote that he had stomach aches before in his life, he said. He was left owing the doctor $150, which for a struggling college student with a baby on the way was a lot of money.
The insurance company basically told Neeleman that if he had a problem with the denial, then he could sue them.
“I called the doctor and they said, ‘Let me tell you a little secret. The insurance companies only pay about half of what we bill anyway, so how long would it take you to pay $75?’” he said. So, Neeleman paid off the bill over the course of five months using he and his wife’s date night money.
“I felt so dang alone and unsupported, and it was like, there’s got to be a better solution for paying out-of-pocket costs,” he said.
This experience stuck with Neeleman and helped lead him down the path to starting HealthEquity.
“That was a big part of it, but also just supporting people through the process,” he said. “When we started HealthEquity the vision was to help people start saving money for their out-of-pocket healthcare costs through some sort of account.”
The Benefits of a Health Savings Account
Neeleman said HealthEquity has used a variety of accounts over the years, but the primary solutions for healthcare costs the company currently offers are Health Savings Accounts, Flexible Spending Accounts, and Health Reimbursement Arrangements.
At their core, these types of accounts provide a sound method for people to stash away funds for those unexpected medical expenses.
“An HSA paired with an HSA-qualified health plan empowers you to invest in your healthcare and create long-term savings,” according to the company. “HSAs cover thousands of qualified medical expenses, including doctor visits and over-the-counter medications.”
HSA holders can keep the money in their accounts year after year, even if they change employers or health plans. It also works like a second 401(k) retirement plan in many ways, according to HealthEquity.
Neeleman said HSAs also come with appealing tax advantages.
“The Health Savings Account has this unique feature where, when you put the money in, you do so tax-free. If you invest it or collect interest, it grows tax-free. And if you spend it on health care, It has benefits going out. So it has a kind of triple tax advantage,” he said.
And it’s easy to add money to an HSA by simply linking a bank account and making tax-deductible contributions at any time. Account holders also gain access to a HealthEquity debit card that allows them to pay a pharmacy or doctor’s office as they would with a credit card — no PIN required.
Flexible Spending Accounts are another valuable solution for many health- and money-minded consumers.
“An FSA empowers you to set aside pre-tax money from every paycheck to help pay for qualified medical expenses,” according to HealthEquity. “Choose a HealthEquity FSA and see how easy it is to spend and save like a pro.”
And Health Reimbursement Plans are a great way for companies to support employees.
“Take advantage of your employer-funded benefit. It’s essentially free money your organization gives you to pay for eligible expenses like deductibles, copays, and more,” according to the company.
Partnering with Employers to Empower Individuals to Take Control of Their Health-Related Finances
A large part of HealthEquity’s success comes from how it leverages its partnerships to empower people to connect their health and wealth.
“Technically, our business model is a B-to-B-to-C model,” Neeleman said. “So we work with over 100,000 employers nationally. We also work with 12 million consumers. The way it works is that we’ll typically go to an employer and tell them we have this suite of solutions for their people around benefits to save for healthcare for today and in the future.”
HealthEquity also tells potential partners about other products, including commuter benefits, an end-to-end COBRA solution, and well-being benefits.
“Built on two decades of innovation and industry leadership. Our solutions combine intuitive technology with remarkable service, enabling you to simplify the experience and empower your people to achieve more,” according to the company.
And HealthEquity provides a single-platform solution to managing these various products.
“Only HealthEquity delivers the integrated solutions you need to simplify benefits and truly impact people’s lives,” according to the company website. “Avoid the headaches and hassle associated with multiple vendors. Let HealthEquity manage everything end to end. We’ll help you unlock economies of scale and get bundled pricing you won’t find anywhere else.”
And HealthEquity never loses sight of what Neeleman envisioned when the company began — helping people.
“We care about your people. That’s why our approach is driven by a singular mission: To connect health and wealth,” according to the company. “We don’t just administer benefits — we empower you to change people’s lives.