Health E-Commerce CEO On FSA And HSA Opportunities

No one likes to leave money on the table and that’s exactly why Jeremy Miller thought to start up Health E-Commerce, parent company to FSAstore.com and HSAstore.com.

At a previous stop, Miller took on role of setting up and administering the health savings and flexible spending accounts and quickly realized how little people knew about these kinds of accounts. “A lot of the communication came in the form of handouts and there were really no explanations on how to use the FSA or HSA. None of the retailers out there were really helping with product eligibility questions or anything around that,” he recalled.

His research revealed to him a startling discovery: people were forfeiting in the neighborhood of $400 million in not knowing how to use these funds. This made Miller realize there was a huge niche and an opportunity to start e-commerce sites where people could directly buy FSA and HSA-eligible products. Health E-Commerce recently added Well Deserved, a direct-to-consumer shopping site that aims to make wellness rewards shopping easier to its portfolio.

Miller spoke with Chief Executive about the healthcare industry’s ongoing challenge to controlling costs, competing with Amazon and more. Below are excerpts from this conversation.

What’s the big challenge in healthcare these days when it comes to controlling costs?

You hear a lot about cost transparency and health insurance and you don’t hear as much about FSAs and HSAs. Take FSAs, for instance, I mean the fact that there’s a 20% adoption rate…so everyone’s who’s offered an FSA, one in five people are taking advantage.

The total spent each year in flexible spending accounts, tax free, is at $24 billion, so we estimate, if one in five are adopting, there’s a good $90 billion of tax free money left on the table. So, aside from insurance costs rising, people could be putting away tax free dollars to spend on those expenses and they’re not. So that to me is a huge issue.

It’s the same with HSAs, right? A lot of people are getting into HSAs, they have a lot of great features, they’re a triple taxed savings account, you can put in tax free, you can grow your funds tax free, you can take them out for medical expenses, tax free. But there’s still three in five people that have this eligible plan that don’t use the HSA. So I think that there’s really an awareness question. There are 110 million who have access but don’t enroll. So those are some really large numbers and when you kind of add it up, it’s a pretty big waste.

Why is that happening? I think people view it as a sideline benefit. I think employers provide complex information about these type of accounts. I don’t think the retailers are really helping define what’s covered in the stores and online like we do, and even brands, we’re onboarding a hundred brands this year of different products that are covered, and some of these brands didn’t even know this is an option. Like, L’Oréal. They’re like, “What’s this?”

Is this educational aspect the biggest challenge that you guys face?

I think there are three challenges that we face. Yes, one of the biggest ones is making people aware. I think a lot of times people overlook these accounts, and I think just an awareness around what the benefits truly can be. I mean, when you actually add it up, right, you’re talking about FSA, you’re talking about HSA, you’re talking dependent care reimbursement up to $5,000 a year, and then also transportation, that all falls under the FSA category. And so that adds up. I mean that could be almost $10,000 a year in tax free savings.

So I think really making people aware of that I think is a big challenge and we’ve made some great strides into making people aware and using the site. And I think that that’s something that we’ll consistently try to do is make them aware and make it simple.

Another challenge is there’s not a lot of visibility into the products and services that are covered. And back in 2010, that really took a turn because half the products that were originally covered became only covered with prescription. And a lot of people are like, “Well, what does that mean?” People assume that all products now, all over-the-counter products needed a prescription, when it was only half. So, the 4,000 products we sell on our site, I’d say about 3,800 of them are fully eligible without any need for a script.

And I think the last challenge really is kind of “The Surge,” as we call it. As you know, these accounts have deadlines. I don’t know if you’ve dealt with a last minute deadline yourself but a large amount of these products, the FSA funds expire at the end of the year, or different periods, depending on your plan year. And so we actually have to kind of ramp up from going to like a typical day to a very, very large day. Sometimes we call ourselves as big as Amazon for a seasonal push.

And so the challenge is really kind of fill in the processes, having that same customer experience that our customers have come to enjoy and having that be the same when there’s a giant amount of traffic coming in that it is every other day. And so we’ve done a lot. I mean, one time a couple years ago, we underestimated inventory, we had to get a ton of inventory into our office to ship because the warehouse wouldn’t be able to take it. And so had to all chip in and start packing boxes and make it happen. We did. We’ve overcome a lot of the distribution challenges. We actually have our first exclusive warehouse that we launched November 1st in Kansas City to really tackle some of those surge challenges.

You’re in e-commerce. So in some respect you’re dealing with that 50,000-pound gorilla in Amazon. Obviously Amazon doesn’t take FSA but they do offer some of the products that you’re offering. So you are competing with them in that sense. So how do you compete with this 50,000-pound gorilla?

With any retailer, e-commerce or otherwise, you do hear a lot of people coming out and talking about it. I think what we’ve built in the last eight years is really a consumer experience and a customer that truly values our experience and the simplicity of being able to, like you said, use your card, have everything come out tax free, not have to deal with the headaches of paper reimbursement that you do if you walk into the store or even shop at other places online.

Our customer experience extends beyond selling products. We have 24/7 chat and support, which we use wisely because a lot of customers are still coming to us for complex compliance-related questions. We have a fully trained team of customer service professionals that are 24/7 that can answer a lot of those complex questions. We do provide value in the sense that the consumer is using their tax-free dollars on their debit card, so they’re really already kind of saving 40% on the dollar. Up to 40% on the dollar. And spending their funds.

And when they use the card, on our site, we have all the substantiation, you never need to submit the receipt, if you exhaust your funds, we’ll give you another form of payment that you can actually pay with a different form of credit card, or you can reduce products from your cart so you’re kind of maximizing that FSA/HSA dollar. And we’re doing that up till 12/31. So we are open 12/31, and we’re in New York City, we’re six blocks away from where the ball drops, and every year we’re in the office making sure each customer is getting their order in.

Some people wait till the ball drops. Until the last minute. And no one else does that. I mean, no one has all that substantiation like we do. No one else is knowledgeable to answer those questions and so if you go somewhere else, you’re kind of in a process. With us, you can use your FSA card on any product and that’s it. So I guess it tends to customer service and really kind of the focus that we have on the niche that none of the large players have including Amazon.

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