Launch HN: Savvy (YC W20) – Give employees tax-free cash for health insurance
For example, employers could give employees $500 a month for health benefits, and an employee could opt for a $600 health insurance plan. Both the $500 employer contribution and the $100 employee contribution would be fully tax-free.
We (Suril and Kevin) both worked at our own families' small businesses and know first-hand the pain of figuring out health benefits for employees. Today, small employers in the U.S. that can afford to offer health insurance (most cannot) must work with a broker to pre-select 1 or 2 "one-size-fits-all" health plans for their employees. These are called small group health plans, and they come with some downsides.
Employers are in the difficult position of prying into their employees' (or co-founders') medical histories if they want to do a good job, and they take on an HR/benefits role that they may not want or have time for. Additionally, small group health plans come with restrictions — over 75% of employees must participate in the plan, employers must pay at least 50% of the premiums, and the company may need to be above a certain size (typically 2-5 employees).
These downsides, along with the cost of health insurance (more on that in a bit), mean that many small businesses simply don't offer health benefits to their employees. This is bad for employees because they then must pay for health insurance themselves with after-tax income. This effectively means their health insurance, which is already a substantial expense, is 25 - 40% more expensive. This also makes it harder for small employers to attract good employees.
We are only able to launch Savvy because of new regulation that went into effect this year (on Jan 1, 2020). The vehicle we are using to offer this kind of health benefit is called the Individual Coverage Health Reimbursement Arrangement (ICHRA). Outside of the industry, this new regulation has hardly received any attention, but we think it will be big.
Our backgrounds are in HR tech and fintech. While working on a different healthcare product a year ago, we saw the ICHRA regulation get finalized and felt that there was an opportunity to package this new benefits option into a full product that simplified health benefits for small employers.
The U.S. system of employer-provided healthcare, which started when wage freezes were put in place during WW2, is an anomaly among western countries. One of the biggest issues is that the buyer of health insurance (the employer) is not the consumer (the employee). This fundamentally misaligns incentives. Many small employers we speak with don't believe employers should be making this very personal decision for their employees. We agree.
We guide employers through picking a contribution amount (we show them how their contribution compares to health plan prices in their area) and manage the corresponding paperwork, compliance, and payroll adjustments. For employees, we provide an in-app marketplace with access to every individual health plan, as well as vision and dental options. Employees can speak with licensed brokers every step of the way. Because employees control how they allocate their funds, they can even use the money to pay for existing insurance plans, including COBRA from a previous employer.
Most of our revenue comes from flat per-head administrative fees. We make a small amount of money when employees buy insurance through our in-app store, but this hasn't been a focus for us so far since broker commissions are significantly lower for non...
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[ 0.28 ms ] story [ 305 ms ] threadNot to be a downer, but this feels like an offramp from our current system down to an even worse one, one where employers can now substantially cut back on employer contributions towards health insurance. It may be great for your success, but it just feels like it may prove to be a net-negative on US healthcare coverage generally because of the loss of collective bargaining by employers on behalf of employees, assuming the model takes off.
Pensions were an actual benefit to employees, largely subsidized by employers and taking into account various employment factors e.g. length of employment, salary, etc. With the advent of 401k, that expense was shifted almost entirely to the employee save for a remaining "match" benefit that the employer still covered.
Retirement and healthcare are two areas where people are generally unable to operate with sufficient foresight, opting for plans and financial decisions that make less long-term sense.
Hopefully you see my concern. It's not in your investors' best interest for you to cap out the size of businesses that can buy into your service, but (and this is me dreaming) if you re-charter as a public benefit corporation toward this end, you may successfully build a supportive grassroots coalition to drive you forward within your target market (small businesses).
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Beyond that, there might be value in your team offering collective-bargaining-aaS on behalf of your growing small business clients. That way you're extracting value not from employers/employees but from the insurance industry instead.
This is nice. Infinite power to you if you find success with this angle; I'd support it.
(The other dog whistle is "aligned incentives" where you subtly blame consumers of medical services for presumably squandering their insurers' money.)
This guideline is worth remembering in a case like this: "Please respond to the strongest plausible interpretation of what someone says, not a weaker one that's easier to criticize. Assume good faith."
https://news.ycombinator.com/newsguidelines.html
How so? Annuities are the best-understood financial instrument of all. Of course financial projections fail if the participant pool is too small (vide Philadelphia with the rotten industries at the core and office parks at the periphery), but that is a political decision and could be fixed.
Which is why they failed and almost every state and city government is in unstated debt via their underfunded defined benefit pensions.
It’s also easy to steal from pensions under the guise of plausible deniability so the mechanism itself is broken, the people 30 years into the future have no way of keeping the people 30 years in the past in check.
This applies to large organizations also, because they are made up of people. See the underfunded pension debt of basically all city and state governments in the US. And the countries cutting pension benefits and raising retirement ages.
Keeping the benefit costs opaque by tying it with employers is what allows these shenanigans to happen. I can tell my insurance company to reduce covered providers, adjust deductible and oop max and copays if I want to reduce their compensation. But the employee doesn’t know the numbers so they can’t figure out if I cut their pay or not.
By decoupling this and making all pay straight cash, it would give the employees a better position at the bargaining table. Price transparency is always good for the little guy.
> Maternity care and childbirth — services provided before and after your child is born — are essential health benefits. This means all qualified health plans inside and outside the Marketplace must cover them.
[1] https://www.healthcare.gov/what-if-im-pregnant-or-plan-to-ge...
I managed to avoid an exempt plan when BCBS screwed up my auto-pay. Ironically, I did that by leveraging a mistake I made when I first signed up for an ACA plan: I'd mis-entered my kids information, which screwed up the registration, and when I called for support to fix the problem the Marketplace team just created a new registration for me. After BCBS screwed up, we were able to use the original stale registration to enroll in a new plan. I got pretty lucky: the exempt plans retain the ability to DQ applicants for preexisting conditions, and while my family is healthy, my daughter had an unexplained seizure when she was 4 and is, for all intents and purposes, excluded from exempt plans.
The thing I think people don't know and really need to understand is that if you let your health insurance lapse, you can't simply pay up to reinstate it; you can only alter your insurance during qualifying events. That's because if you could lapse and then pay up later, lots of people would exploit that to avoid paying for insurance until they needed it, which defeats the purpose of insurance.
None of this has anything to do with your startup, of course.
I hate to sound mean, but I really hope that this business fails. I know people worked hard on this with an expectation of a financial return, but 68,000 people die every year because of this illusion of choice being exploited here, and if we can fix the system and eliminate the health insurance industry altogether we're all be better off.
The problem with ventures like this is that they claim to be healthcare companies, but their entire model is based around minimizing expenses and maximizing profits. Absolutely no emphasis is put on ensuring that human beings get the healthcare they need without going bankrupt - just that employers can pay as little as possible and insurance companies can get as many members as possible.
I feel bad saying this, but I'm inclined to agree. Part of the value prop with mid-large businesses subsidizing healthcare is the ability to bargain collectively. Individuals can't do this, and just paying that employer contribution to individual subscribers for them to find their own healthcare plan will result in net-negative benefits year over year.
The more I think about this, the more this startup concerns me.
Let's not have yet another predictable flamewar about U.S. healthcare. It will just turn into the same flamewar as the other flamewars, which is something we try in general to avoid on this site. Meanwhile there's something specific to discuss about this startup's particular model, regardless of where one stands on the brokenness of the overall system.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
Regrets if you view it as non-productive, but the comments are certainly intended to be (especially my latest one prior to this comment I'm posting now)
In most cases, an option like this is better than nothing, which the founder has already pointed out is a lot of their current base.
Right. And that's why I wish a startup like this would instead be focused on helping s-m businesses bargain for more rather than extract from less.
People eat at Popeye's and also at Whole Foods
No one bats an eye as long as both cars work as advertised and the food is edible.
When did it become mandatory for employers to pay for lmborghini-level service? ?
I understand there is frustration with the larger healthcare system. No question there are large, systemic challenges. We saw a problem that SMBs weren't offering health benefits, and felt like there was a solution to help them. That seemed preferable to waiting on the sidelines for a complete overhaul of US healthcare.
Healthcare is a HUMAN right, not a workers right or a "if you have enough money to pay for it" right.
Ideally, your customers and their employees shouldn't have to worry about this at all. You are just another middleman standing between human beings and their health.
I see no reason you should exist. You aren't innovating or making the world better. Clearly your purpose extends no further than to create profits for shareholders.
https://news.ycombinator.com/newsguidelines.html
This startup feels like a grift.
In the same way that I don't want to have to shop around for fire insurance in case my house is burning down, or look up water suppliers when I buy a home: I simply want the state apparatus to handle these sorts of details.
Especially when working in a very regulated field. Who knows if ICHRA will last, maybe the next administration will scrap it. Kinda like how under Obama they had the individual mandate but Trump ended it. However some states have added an individual mandate for state residents since the federal one was eliminated, like MA, NJ, VT, CA, RI and DC. But there's still going through the courts as this whole individual mandate thing might have been unconstitutional in the first place, so those states might end up dropping them at some point again.
Plus I know there's SaaS apps to handle payroll and some of them integrate health care options. Seems like people don't like messing with this sort of stuff, will buy an option they think is safe and easy to handle and move on to their actual product unless they hired HR people with experience in this area who can be dedicated to managing this stuff. Seems like when it comes to some of these tasks of running a startup, you need some adult supervision. Might be a good programmer but all the ins and outs this and related stuff can be a huge distraction.
I guess since they had a background in HR and stuff doing a startup like this would be a bit easier than say me trying to do this...
Then another big thing even if you have insurance, who knows if you end up actually using it for anything if something won't be covered and then you get a big surprised bill. I feel like the whole in-network and out of network thing is the biggest scams. Say you looked on Google for the best Doctor, Dentist, specialist, etc and found one you liked you got to check the book they send you to see who's covered. Then another thing is a hospital can be in network, but someone like the anesthesiologist is out of network. Then remember seeing someone got charged $10 for an individually wrapped cough drop, when you could of just bought an entire bag at the local pharmacy.
So seem's like picking a plan out of some options sounds better though.
Also wonder since the advice with employees if someone quits, they say disable all accounts. Wonder if companies still have like a separate account for HR since don't some companies offer a web portal for insurance, probably also COBRA would be in that portal. However some companies this is all pen and paper but digitizing things something to think about... Like someone I know that worked at a factory, all this stuff was a packet you'd fill out with pen and paper and turn it in to someone in the office area. But I'd imagine tech companies would want to digitize a lot of this, and for remote teams that makes even more sense.
To your point on employees quitting - one of the benefits of Savvy is that if you change jobs, your insurance can stay with you as it is no longer tied to your employer.
Sounds like other businesses are built around specific regulations too, like tax software so I guess it's probably common and adds value since not everyone reads or understands everything, and a ton of this sort of stuff is probably easy to screw up if you try and do it on your own without the right tools or people helping. So sounds like when things change they got to follow the news of new stuff, catch up and implement things.
However I'd think some of those software providers are used to changing things year to year. But also wouldn't surprise me if they have some sort of framework in place to make changes without rewriting code all the time. Sounds like a similar story with some of the big ERPs, seen a post on HN recently talking about how those can get messy too.
I guess similarly to if you build on top of Facebook or Apple though, things change when you don't own the platform but they seem to have much better APIs since (It seems a lot of gov stuff is still pen and paper), examples and documentation. Plus if you mess up your iPhone app, chances are they won't publish it and get delayed so less draconian.
https://www.healthcare.gov/glossary/minimum-essential-covera...
Seems like it’s complicating something that requires nearly zero paperwork already. Just cut a check and make sure it’s uniformly calculated across your workforce.
Are the marketplace plans substantially worse than the employee plans, or are there extra caveats that come along with QSEHRA, or was it something else?
Imagine if they didn’t? No employer under 50 employees would bother getting group coverage as they could get better coverage for less via the QSEHRA route.
I suspect that a lot of people alarmed by ACA costs are really just observing that their employers were subsidizing a lot of stuff for them. That's true! Employers who give you group coverage directly are usually giving you a shadow pay raise in the background to make the numbers look better!
But for startups, the difference between the individual market and the small group market probably aren't usually that big --- as you'd expect, since a small startup isn't really aggregating much risk.
For example, the first couple years of the ACA there were N vendors providing ACA plans materially similar to small group plans. Today, most of those vendors have abandoned the individual market. So the quality of plans/carriers available to ACA purchasers vs small groups is vastly different today.
In 2015 it was the case the $500 in the individual market was roughly equivalent to $500 in the small group market. Today, $500 (or $1000) spent in the individual market won't buy you the same coverage as $500 in the small group market.
Routine services were ok (I did splurge a bit to have low specialist and prescription copays). Dental was not affordable.
Going to a different job that took care of finding decent coverage options that fit the company and location made my life a lot easier and improved my quality of care and out of pocket expenses, while removing much of the stress in finding a healthcare provider that fit my needs and budget.
That's why I won't do it. It's too stressful, too expensive, and the quality of the plans are shit.
I really want to like you for taking a stab at solving this problem because it's a serious one for startups and small businesses, but I can't as long as you keep this approach. Shopping for insurance (even through a broker) is an extra layer of friction to the hiring/onboarding process and this needs to be removed.
In my experience, startups are bottlenecked by hiring more than anything today, and part of that is compensation/benefits. If you make it more difficult or more complex for startups to get people compensated and set up with benefits, they will decide to work somewhere else.
We try to streamline the experience as much as possible, and put in a lot of work building an interface that explains the plan details in-app.
And you always have the option to tell one of our brokers "None of these work for me, I want to make sure Dr. Smith is in my network, show me more options".
BTW costco quality also doesn't mean the absolute highest quality, just above average solid options plus using the volume to drive the affordability.
If an HSA plan worked for you, chances are you are young and healthy and don't realize what would happen to you financially if you needed regular healthcare service under these plans.
The key is you don’t pay for healthcare expenses with the HSA, but instead pay with after-tax funds and save the receipts. Later (many years later), you can take out the HSA money and spend it in retirement tax-free (up to the cumulative amount of medical receipts you’ve paid and accumulated).
Used this way, it’s a retirement account (one with hands-down the best tax treatment), not a health care savings/spending account. To get it you have to have a HDHP and cover the expenses along the way.
I would say this is inaccurate. They got burned by Congress allowing employer based groups to exist, therefore removing much of the healthy population from the insurance pools for the public (whose employers don’t offer insurance, or who aren’t employed). If everyone was dumped on healthcare.gov, there would be plenty of healthy lives to offset the sick lives for a viable insurance group. Maybe not in the smallest states, but it hasn’t made sense to me to separate insurance by state either.
Source: I spend >$30k each year on my family's HSA plan premiums and deductible, and I run the numbers on every option that has the network we need every year, and this really is as good as it gets.
Small groups can get large price increases if their members have serious health issues, and for them it can be cheaper to use us and get employees all the same tax savings, but buy on the individual market.
Yes, of course. Would any health plan charge the same premiums to cover only the sick and old as it would to cover only the young and healthy? No, but how is that relevant?
Although ICHRA is a baby step forward, it is optional. Employers can offer this but they aren't forced, it isn't illegal. We need healthcare to be completely detached from employment. Employers should still be able to contribute to the HSA (no need for separate HRA) just like they do to a SIMPLE/401K and employees can spend it on any medical expenses they want. The HSA is portable and gives people choice.
We also need to move to reference based pricing (1.2 * Medicare) instead of the payors negotiating with each health system. This also gets rid of "out-of-network" as that just doesn't matter. This also removes all the brokers and other rent seekers from the system.
The last thing we need is to stop treating healthcare like insurance. Insurance products are for unlikely catastrophic events. You are going to need a checkup each year and a flu shot and you'll get a sinus infection. These are known and expected events. Being able to pay for these out of HSA gives good savings and insurance can be used to treat things like cancer and hospitalization and knee replacements. Medicare could also be expanded slightly to automatically cover an annual physical and age based cancer screenings. Then health insurance is mostly a risk management construct and since you are likely to stay with your carrier, they are incentivized to get you healthy and lose weight. Today, payors don't want to push on wellness since your employer will switch carriers each year looking for savings and the new payor benefits.
It doesn't even have to be Medicare. Just give everyone a $100 voucher for a physical every year and let them take it to any licensed physician. Then there will be some who do it for the $100, others who charge $120 but maybe it's worth the extra $20 from your HSA because it's 3 miles out of your way instead of 30 (and has to charge more because real estate costs more there).
The way Medicare "negotiates" prices involves a lot of wrangling and distortion and politics. Vouchers solve the same problem while still allowing people to choose to pay a little more for something they find to be worth a little more.
Diversified risk doesn't reduce average costs, it only averages the cost across everybody. Doing this generally raises average costs significantly by making people insensitive to price, resulting in over-consumption, i.e. unnecessary tests and procedures. We already have this problem with employer-provided coverage, but covering more stuff makes it worse.
> plus minuscule administrative costs (compared to private insurance)
Most of the administrative cost of private insurance is related to investigating insurance fraud. Doctors and patients can still collude to claim procedures were done without actually doing them and then keep the money, so somebody still has to do that. Putting it in the police budget instead of the Medicare budget is an accounting difference. It doesn't actually save the money.
Also, the administrative costs of private insurance are only a small percentage of overall healthcare costs.
> price negotiation power
Passing a law that everybody has to pay taxes for an insurance program which then out-competes private insurance by having a taxpayer subsidy and becomes a monopsony is not "negotiating" prices. It's price controls. It allows Medicare to set whatever price they want because the provider's alternative is having no patients.
They can absolutely dictate lower prices that way, but then more providers go out of business. It's less profitable to make new drugs and new medical devices, so fewer companies do and we get fewer new drugs and new medical devices. Things that could have been cured then have to be treated. How much does that cost, in terms of both money and lives?
Also, how does it address the real causes of high healthcare costs, like the shortage of doctors (and medical residency slots), or the difficulty of getting generic medicines approved by the FDA without a patent holder to pay for the clinical trials, or the lack of price transparency that causes patients to choose providers without respect to cost differences?
> for the larger benefit of society?
How many programs claim to be "for the larger benefit of society" and then go on to be worse than the status quo?
Once upon a time it was easy to point to bread lines as an example of this not working. Today it's more subtle. First they regulate private industry in ways that produce inefficiency and reduce competition, then the effects of bad regulations are used as evidence that the market is broken and we need more regulations.
This insanity has to stop. I want to be able to get healthcare and pay the people providing it directly and know my costs up front. It's as simple as that when it comes to healthcare. As for "insurance", I don't want to go bankrupt if I get cancer. These are two separate issues. Insurance should not be required for healthcare.
Anyone can easily use healthcare.gov to find a plan appropriate to their needs. And you’re healthcare providers are not tied to your employer, in case you leave your job.
And any employer that doesn’t offer HSAs is really screwing their employees by not giving the option of the best investment vehicle available to Americans.
An additional benefit is your compensation gets more transparent, as you can easily see the dollar amount of the benefits you’re receiving prior to accepting job offer.
If you work for a large employer, you have benefits professionals who spend all year thinking about this - we work with small employers who don't have these kinds of resources and are happy to offload it onto us.
When I last had to do my own insurance, it was $2200/month for a high end, lowish deductible plan that covered my family. Choice is nice, but the costs are so high now that I'd rather have the lower negotiated rates with less choices.
Small group prices can, on average, be more or less competitive than the individual market, depending on geography. In recent years, the prices of both types of insurance have been trending towards similarity, but there is still substantial variation region-by-region.
What does that $2.2k number compare to?
10 years ago, I was paying $900/month for the same plan on my own.
https://www.irs.gov/affordable-care-act/form-w-2-reporting-o...
That's probably not too far from what you'd get with an employer except you're paying the whole cost instead of them. My middle of the road employer plan costs $1250 for me and my spouse (not counting dental and vision). I think family was $1700 or so. And sounds like you were aiming for a decently better plan than what I have.
$25-26k a year for a low deductible family plan seems about right. I have a HD plan through my company and it costs roughly that including my HSA contributions.
If this becomes a trend, we could see the individual ACA marketplace strengthened. Right now part of the problem is that they are missing a lot of the healthy people in the group market, which is partly why the big insurers have left the market - for example, the California exchange is missing UnitedHealthcare, Aetna, and so on.
Aetna, for example, left to spite the government for blocking its merger with Humana, and lied about it: http://money.cnn.com/2017/01/24/investing/aetna-obamacare-hu...
For example, can I offer $2000/mo to someone with three dependents and $500/mo to a single person?
ie, $500 per family member.
Will this be deducted from their paycheck or from my account? Where will that money come from if I deduct from their check? Do you integrate with Gusto?
I'm just not at all clear on the logistics of how the money moves from my company to their health insurance company and what the steps in between are, especially since they already have post-tax personal health plans.
To answer your question: The premiums will be deducted from your account, and any extra employee contribution would be deducted, tax-free, from the employees paycheck. We integrate with Gusto to set this up for you.
I am happy to walk you through the specifics: kev@gosavvy.com
Why not offer a free month. The lockin is automatic once they go through the process of setting things up.
The reason right now is that we work with outside experts to draft and review the legal plan documents for every customer that signs up. Because this is such a new thing we think it's worth spending extra to be sure we are buttoned up from a compliance standpoint. This has an upfront cost we need to cover. Once we bring this in-house we can think about the pricing differently.
A professional employment organization (PEO) is required to get group rates for health insurance as a small business. PEO's handle more than just health insurance; they can also handle 401k's, disability insurance and remove the need to register as a foreign corporation in each state that your employees live in. If anyone has recommendations here I would love to hear them.
https://www.dol.gov/general/topic/association-health-plans
We think other companies offering ICHRA services are a good thing. It's a new option that can help a lot of people, and more vendors will spread the word faster. Savvy works a little differently than the existing solutions.
Instead of a reimbursement-based approach, where employees pay insurance premiums themselves and submit them for reimbursement (like a business expense), we manage the payments for employees. This means the insurance bill is paid by the employer and any extra employee contribution is deducted from payroll. We do it this way so that the employee contribution is also tax-free.
We are also investing heavily in helping employees find the right plan. Behind the scenes our brokers are recommending plans for every employee, and we are building out tools that help employees do things like find a plan with a specific doctor or hospital in network.
If cost is the primary driver for your decision the important thing is to compare the PEO fees vs how much money you will save on the discounted insurance. We have helped a few companies do this analysis - On a pure cost basis, we are a better option for some, PEOs win for others. Feel free to reach out to hn@gosavvy.com if you want advice on your specific situation.
As others have mentioned, the high cost of individual (e.g. Marketplace) insurance is one obvious drawback that remains. Even with 1 non-owner employee you can get better rates through e.g. simplyinsured.com
However, the monthly recurring cost strikes me as high. The major emphasis seems to be on setting up and picking a plan; to be slightly cynical, is this just the SaaS-ifaction of what would otherwise be a one-time setup fee?
Would you prefer to pay a fixed, upfront fee?
Related, what happens if I decide to drop Savvy?
However this type of system I would probably be incentivized to get something for my $500 per month. So I would probably elect to get some additional coverage even just the bare minimum without going over. This has good and bad side effects, one is that now I cost the employer $500 per month while before I was 0, but at the same time it’s better for the health plan as an under-utilizer to keep the overall costs of the plan low.
Would ancillary plans be eligible such as dental or vision or is it limited to a Health plan?