Optimizing Wellness with HSAs: An Interview with Crates Health Founder

<p>hello everyone this is Cole from the American Journal of healthc care strategy I'm joined by a special guest a Founder Harvard MBA graduate with a huge amount of experience ankor anchor Ebanks please introduce yourself hi everyone uh I'm anchor Banks as Cole mentioned um I am a recent actually Dropout of of Harvard uh so I dropped out of Harvard to to found uh my current company that I'm working on which is crat Health um before my time in business school I worked as a product manager at Google where I helped lead YouTube Sports um and launched a new subscription product uh really enjoyed that but ultimately got bit by the entrepreneurial bug and uh went back to Business School uh really enjoyed that experience as well uh but when as I mentioned uh I got Pit by the bug so I I had to pursue it fulltime [Music] I'm really excited to talk about that uh dropping out as well I actually did not know that uh prior to you mentioning it and I'm actually excited to talk about that too because that can be a challenging decision I'm sure especially where you were admitted to you know Harvard Stanford and Wharton the three kind of best business schools in the world with Incredible outcomes and you me were talking about earlier you're a first generation college student right you're the first in your me to go to college uh what has that process been like for you yeah it's it's interesting um because when I tell people they have a similar reaction to you which is like oh it must have been a hard decision um but frankly it wasn't really um it actually felt like the only correct decision uh and typically I make my best decisions when I evaluate a wide variety of data and then I take a step back and say what what does my heart think and what does my gut feel um and I did that with this uh decision and it was uh undoubtedly the best decision for me uh specifically I was very ready to go uh from an entrepreneurial perspective uh other things uh related to business school felt more of like distractions um and I was ultimately optimizing for Learning and growth um and I felt uh working full-time out in San Francisco would would be the best Vector for growth for me so um yeah uh my mom wasn't uh particularly happy about it but obviously she supports me and whatever I do so uh I I went ahead and did it how far into the NBA program were you but when you decided to leave yeah uh so I completed one year um and then was uh working on my company over the summer um and got to a point where I was ready and excited so uh it was probably about Midsummer is when I ultimately made the decision but spent maybe five six weeks over the summer talking to a bunch of people alumni entrepreneurs Etc um and then uh coester a decision about Midsummer now I want to ask this about the the kind of alumni and just the network at Harvard it's usually really impactful for a lot of the students that go there do you feel like they've continued to support you even though you've left or has it been you know kind of a shunning experience what does what does that look like um no they they've definitely continued to support um so I operate in technology soft Ware entrepreneurship Etc um and in that space frankly I don't think people care um whether or not you finished uh and that was part of the calculus in my original decision um so I did specifically test that hypothesis before I decided to drop out like what what would it be like so I talked to other people that are dropped out um and ultimately it like people understand like you you have a a mission and vision um and obviously like Harvard can support that in some capacity but other scenarios May maybe um it's best if uh you toot the different route uh so I think most people that I've talked to are still very supportive um and obviously I was very lucky to actually go to school and meet most of my classmates um and have them built in my built into my network already because they know who I am they know what I stand for ETC so th those people will always support me in terms of the alumni they've also been highly supportive as well great I'm really happy to hear that that's awesome and so you talk about how you you kind of bit by this entrepreneurial you know bug a lot of people who are entrepreneurs know what that feels like what came first though was it the idea for crates Health that came first or was there an entrepreneurial spirit that you had beforehand yeah so um I've always had entrepreneural Spirit um just just based on my upbringing but then more specifically since I was 11 I've had some form of a business on the side so first business uh was a pretty classic one uh to support my video game habit I uh mowed people's lawn throughout my neighborhood uh built it into a little business of my my dad's friends Etc so um that was great um and I kind of carried that Spirit throughout um in terms of my professional career after uh graduating undergrad um it kind of veered away from uh entrepreneurship uh but I always knew I wanted to come back to it so I kind of thought of um those professional experiences as um uh some sort of preparation for it um and then ultimately when when I moved out to San Francisco um and really was deep into the entrepreneurial scene there I knew that I had to get back to it as quickly as possible uh so was kind of evaluating a wide variety of paths to entrepreneur entrepreneurship uh but then ultimately decided that I would use business school as kind of a platform to ideate figure out what I wanted to work on um and then jump into it uh face first so you left Google because you wanted to kind of get more into the entrepreneur environment and then that's why you decided to to start at at Harvard yeah exactly nice that makes a lot of sense and how was your time at Google do you feel like your past experiences whether it's at deloid or Google has that benefited you in terms of the experience where you are now yeah absolutely um specifically uh more so my time at Google um D learned kind of how to be a professional um I was a strategy consultant there so uh beyond that learned how to manage uh clients learned how to have high quality work deliverables learned how to um do really difficult problem solving learned how to tell stories in a corporate and business environment um I think those are kind of the core takeaways that I had from that experience uh then jumped over to Google and as I mentioned I was a product manager I was super lucky to have a great team uh really cool products and then more specifically to be able to work on things uh from zero to one right so I had experience um like literally creating products from nothing um which is precisely what entrepreneurship especially in the technology and software industry is so um that was a really formative experience for me um and Beyond um you know learning the skills it also gave me the confidence to help me understand that I knew exactly what to do as it relates to uh creating something from nothing very cool and so then you went to Harvard and then this idea came up when did this initial idea for crates Bubble Up and what what did that look like in its earliest form yeah I think I think I have to go back probably a decade or so um not that I was working on this idea specifically but um uh about a decade ago I I lost uh two of my grandparents to preventable chronic diseases um and for me that was a bit eye openening I never really thought a lot about helping West before that moment um and and when that happened uh I started to think about it every day uh and I became obsessed with personal health and wellness uh so much so that it became a a real part of my identity uh all my friends know me as kind of like a health the one is nut um and basically over time as I was uh you know continuing to progress from a professional perspective um realizing my interest in entrepreneurship I knew that I wanted to do something kind of at the intersection of Technology broadly and health Wellness uh specifically kind of in the realm of helping people live happier healthier lives through smarter life decisions um or healthier life decision specifically um so that's kind of the foundation right um then I went to business school um and I was exploring kind of a a variety of different ideas for something like nine months uh they were mostly in the AI space um and we built a variety of products uh didn't really get a ton of traction with those products products uh and then I came back to uh something that I've been doing for a while so uh and this now we're getting kind of to the origin St the true origin story of creates Health which was when I was leaving to business school um I was doing some financial planning um and I realized that I wasn't going to be able to support the5 $600 a month that I spent on my health and wellness practice without income while in business school so I basically went deep into all kinds of uh different financial planning scenarios Etc um and discovered that in fact many of the expenses that I had uh from a health oness perspective were HSA eligible so Health Savings Account eligible yeah um so as I dug into that I I basically reached out to my friends in the medical field and and tried to understand what I needed to do to ensure that I was compliant uh to be able to use my HSA account on all these expenses and the core of it is basically you need a letter of metap necessity that ties um you preventing managing or reversing a specific health condition to a specific health and lus product that you're using right so I have a long family history of uh diabetes and obesity uh so that is something that I'm specifically trying to prevent manage in Reverse uh and going to the gym as an example is something that directly that can be scientifically directly tied to preventing those those diseases so um that's kind of how it started I did that myself uh for the first you know 12 months of business school saved something like $2 to $3,000 on my on my practice uh um and then when I was in business school exploring a bunch of ideas I told a few friends about how I supported my relatively expensive health and wellness practice um and they immediately asked me to help help out and that was kind of the light bu moment where I realize like oh maybe there's something here maybe I can build this into kind of a software product um and that's what we've done that's really fascinating so your background as well is you have a degree in in accountancy as well right yeah I do which surprises me frankly you see you are good with the financial understanding of things so can you explain real quick what is the benefit of these FSA HSA uh accounts how do where is the savings coming from yeah so the savings is basically that you're able to use pre-tax dollars on these Wellness items right so uh maybe I I can put it in English terms uh imagine a scenario where I don't use my health savings account uh that means anchor gets paid his salary he has some money in his account he then goes and pays for his gym membership he pays 100 bucks all right so that's 100 bucks of my after tax dollars uh meaning that I already got taxed whatever my effective tax rate anywhere from 30 to 40% Etc um now imagine a different scenario where Anor is a Savvy uh consumer and he actually does use his uh health savings account in this scenario all of the money that you stick into your health savings account is pre-tax money meaning that they didn't tax you at your effective tax rate right so if you use money uh from that account you're basically saving whatever your effect effective tax rate is uh depending on what state you live in it could be anywhere from 30 to 40% right and does that include city state tax or is that just Federal uh federal state and and City yeah wow so I would I would be saving yeah like 30 30% so essentially we could look at it almost as taking 30% off whatever that that cost would be essentially right that's that's the precise way that I think about it because um uh yeah because like probably going to spend on some of these items anyways um but because they do have that kind of medical use case specifically um I've then able to use that you know 30 to 40% saving oh and so what is your what does crates exactly do to facilitate this you know what problems is it solving Yeah so basically um as I was mentioning before the core way uh to activate your health savings money um is in order to use it for these Wellness items um is you need a letter of medical necessity right the way that you get these letters of medical necessity day is a very difficult process basically you have to book a doctor's appointment with a primary care physician um you then have to go to them uh have a conversation with them discuss why you might want to use certain products to help you prevent certain diseases um and then you have to sit there and hope that your primary care physician is uh kind of a preventive Health focused phys which needless to say there are very few of those in the United States um so it's a really kind of honorous task and honorous process and basically what we've been able to do is postco they made a bunch of Regulation changes from a T Health perspective um which have enabled uh many more use cases uh of tella Health uh so what crates does is makes this process super simple so you come to our website uh you click the start saving button um we'll take you to an online Health survey uh you fill out a few questions maybe 30 seconds to a minute um we then uh once you submit that our medical team evaluates your results uh and then based on the results of that Health survey you could be eligible for um any number of our 185 uh Wellness Partners wow um and then from there uh once you're kind of in our product you're able to issue those letters of medical necessity that you're eligible for uh basically in real time and what are those you know 80 so Wellness Partners what what kind of things does that include yeah so um we basically have four categories of products um one is nutrition one is uh healthtech and wearables uh then saas and cold punches um and then I'm blinking on the fourth one uh and then Fitness uh so we already talked about gym membership is is like an example can you give me some other examples of how you or or I could use use this yeah so I can I can just describe how I use it specifically yeah um so on my wrist here is a whoop band um which is HSA eligible so I say 30 to 40% on on this specifically so the whole category of kind of fitness trackers are some products um I also do like uh sonas and cold plunges so an example is there's uh I'm here in Boston currently so I go to feminina son and cold punes houses that's also HSA eligible um you can use it for supplements uh so anything vitam vitamin D Etc um those can all be HSA eligible um and then uh yoga classes uh your various classes all these kinds of things can can be HSA eligible wow that's interesting so if I wanted to get you know a fitness class like you said I could essentially get that practically 30% off of what I would be normally paying yeah precisely yeah there's a yoga class right down the street that I go to that I get 30% off and then how many people have used this service so far yeah so we um just came out of beta uh where we had 50 beta users um and now we are super excited to kind of open it up to the world and on board many many more users uh we we really do think um this is kind of a huge unlock for many people um there's something like 35 million HSA accounts in the United States that number is growing by 10% a year uh those accounts have $150 billion dollars that fit in them and that mostly sit idle uh and obviously uh I'm sure most of the listeners are aware that there's kind of been this this very big kind of Trend in Wellness um with the my core thesis is basically like people are kind of waking up to the fact that the United States healthare system is pretty broken um and as a result of that they're taking their health into their own hands and the way that they do that are things like fitness trackers supplements blood testing Etc um so there just just massive growth in the wellness industry we also see massive growth in these HSA accounts uh but kind of the core thesis of our business and the vision for our our business is that these HSA accounts are the single most underutilized asset in all of personal finance and health and wellness um and the reason they're underutilized is because it's really difficult for people to understand what like the benefits of HS accounts um there's a recent survey that said only 3% of account holders fully understood their benefits right so there's this massive Gap in education um and we're basically building software to put all of this all of the utilization of these HSA accounts on autopilot yeah because I've I've never used it for that exact reason I don't want to just take my money and put in an account that I don't have any way of using right and I've read you know the articles on it right I mean I'm in the industry it's not like I don't know how but it seems too complicated and too much of a pain for me to me to use and so I guess my question is what's the cost to me to use a service like this yeah so we have uh three different subscription options um one is $35 um and that gives you access to one letter of medical necessity and then ultimately savings on one product we then have a three product plan for $89 annually uh that gives you access to three product uh three letters of medical necessity and then ultimately savings on three and then we have our um highest priced one which is $99 a year um and that gives you access to unlimited letters of medical necessity that you are eligible for wow so $99 less than $10 a month and I can get unlimited letters of of medical necessity yes uh so long as you're eligible for them um and just from like an economic perspective uh just to give you a few a few details from our recent beta is on average we've saved our customers $327 annually so they paid us 100 and they basically make $227 uh and and like I said I personally have saved um $3,000 using this that's what I was going to ask is is you said you spend $600 a month on your Wellness routine right yes and so that you know you're you're as you said you're kind of a self-described you know Wellness nut right is what you said so that's going you know you use it intensely $3,000 is is a lot right for someone who's really using these Services I can imagine that in urban areas right there's quite a few people who are going to use it to this level so you probably see quite a a bit of adoption that's going to be be coming pretty soon uh what was the feedback from the the beta users was it overall positive yeah it was overall positive um they found the product easy to use um particularly uh uh relative to some of our competitive products um because our premise is is basically uh that uh you can just use uh your personal credit cards um and all you need to do is upload a receipt to our platform and then we will automate the reimbursement process for you whereas um some competitors require you to have your HSA card which I've talked to hundreds of customers um and many of them have no idea even where their HSA card is uh many of them don't even know the login to their HSA account um so we've basically circumvented those problems by just building our own software platform making it super simple on of the user to utilize that money even if they don't know their login oh yeah no that's really cool and so I guess one of the other uh kind of final questions for you is where are you going from here what are some of the additional features and things that you're looking to do yeah um so we're pretty hyperfocused on growth at this point uh but from a product road map perspective we have a lot of really really exciting features and kind of new products that we're launching over time um one of the core ones is is basically we're building um an AI engine that will help identify all HSA eligible expenses in real time and it can manifest itself uh from a user perspective in a variety of different ways right so um we're probably going to be launching um like a wallet an HSA wallet uh so you might imagine on your browser you have uh a creates Health wallet um and as you're checking out at Amazon you'll get a little popup from us that says hey uh this sun screen or this item in your cart is HSA eligible one click ported into our platform and then we'll give you option for one click reimbursement um then we're also uh thinking about how to integrate uh people's personal credit cards uh into our platform so that we can automatically identify any HSA ult expenses that that come through your own personal credit cards so um basically uh again the core Vision uh for us is to put your HSA on autopilot so that you can fully utilize all the money that's in there that's really cool wow very nice and so uh thank you for giving us that that great overview I want to kind of go back and ask a couple personal questions here is what would you recommend you know because it seems like you've been so successful in this right you've actually been able to design a product that's been beta tested it's now gaining users what would you recommend to people who are earlier on in the process of starting a project or starting a company what recommendations do you have yeah I think um the first thing that popped to my mind is talk to as many potential users or users as you possibly can really really listen to them uh listen to their problems pain points Etc um and then try to kind of see the through line across all of those users and if you start to see a through line that means this is a problem that many users are facing and then from there obviously you can figure out how to design a product that they ultimately would love right um so that's the first thing talk to users second thing is just start doing like just go um like I have so many classmates of mine that say that they're interested in entrepreneurship uh that they want to start something um and they basically sit on their laptop and do research all day about the potential problem and that like um like I just don't know if that's the best path to actually kind of getting the wheels rolling so it it kind of relates to my first point which is go talk to people like go talk to users um and you'll start to be able to figure out what some of the real problems are um and then the third point which is somewhat related is just once you get started just keep going um it's going to be hard it's going to be growing uh but if you just keep powering through um you'll you'll start to see some success at some point hopefully um and at the very least uh you'll start to come to the realization that you should change your ideas or whatever it might be but just just keep chugging along and um you'll you'll start to figure it out over time you mentioned that when you were at uh Harvard you had been designing different products right that you had been testing out how many design you know did you go through and how did you prevent getting discouraged uh um so we built three different products um we've talked to probably 3 to 400 different potential users to discover problems um so it's it's a long arduous process um it can be discouraging I think frankly the way that I overcame it is I think because of my upbringing I'm just an eternal optimist um and I also knew going in that it's not it's not going to be easy um so I just knew that if I continue to put in the work I'm a huge believer in just putting in the word um that things would start to become a little bit more clear um and I would start to be able to get the wheels rolling uh so so for me it was just continuing to to believe that putting in the work will will lead to something I really appreciate that and and thank you for all your advice you know I remember in in our inba program design product design class we only had to interview 10 people the 400 sounds uh sounds incredible so thank you for sharing this I I think it sounds like an incredible product I'm going to go to the website now and check it out for my wife and I of course we're going to link it down in the description we encourage everyone to check it out uh and I honestly I'm gon to recommend it to some of my colleagues who have asked me what I do with the FSA HSA options and I said I know nothing about it so this is great and again thank you for spending a half hour with us yeah no problem um and I'll I'll share my personal email with you afterwards so if any if your colleagues have any questions I'm more than happy to help them out with that uh obviously feel free to spread the word about crates um as I mentioned or looking to grow and grow as quickly as possible so every little thing helps and I I really appreciate it absolutely we're going to share this on LinkedIn so I want to see that crace LinkedIn page get some followers from this so we're gonna link that page there and uh once again thank you and I hope uh people check out the site awesome thanks so much</p>