As a parent of a child with autism, I often feel alone. You're in therapy all the time, or you're on the phone advocating with doctor's offices or insurances. And it can become hard to relate to friends because they're talking about soccer practice and dance rehearsals and their easy vacation that they just took, and we don't really know that life. Autism for us has not only been very stressful, but it's also been an incredible financial strain on our family. I feel like our bank account is always somewhere around zero, feeling inadequate because I can't pay for this treatment that I want. I can't pay to take my son to this specialist. It's kind of always been, you know, where is the money coming from? How are we going to pay for this? But it's been really great to have the HealthEquity HSA.
The amount is just automatically deducted out of my paycheck. My employer contributes to that amount. It carries over every year. We wouldn't be able to see those specialty healthcare providers and pay for those supplements and those alternative approaches if it wasn't for the HealthEquity HSA. It just gives us that flexibility to get him the care that has shown to be beneficial. He's not so tense, so anxious all the time that we can actually have more of those moments where he's smiling at me and we're laughing. Those are just gold. I think he's here to be a connector. He's here to shine light. He's here to love. I think he can teach the world so much. Our HealthEquity HSA has been a nice system and removal of something for me that I have to worry about. I frankly don't know what I would do without it.
20 years ago, the HealthEquity journey began above a garage. It was kind of like this. There were only five of us back then. When we got together, a lot of people thought we were crazy, thinking that we could change healthcare in America by empowering people to connect health and wealth. But we really believed in that mission. We always did. You know, even though we had ups and downs, we would always think about Remarkable Purple Service.
And I remember one time when we got our first customer, someone said, "When do you answer the phones?" And I looked down at these pagers on my hip, and I was in my scrubs, and I said, "We're going to answer the phones whenever people need us." And so that started this culture of Remarkable Purple Service, knowing that whenever people needed us, we would be there for them.
So I think I first met Steve back in 2000. He was still practicing medicine in Tucson, Arizona. Then in 2002, we really started working in earnest on health savings accounts. We were just fortunate to be able to have that legislation introduced at the end of 2002 and have it signed into law one year later and the impact that that's had on so many families. Come back now, 20 years later, and join HealthEquity as an executive and to lead the Government Affairs program and to create a new opportunity for more Americans to have tax-advantaged accounts to save for healthcare is just an awesome opportunity. I'm really excited about it.
To be a part of the advocacy in Government Affairs, now Public Policy, was pretty incredible. Never thought that I ever would want to leave product compliance. Started hearing about something we can do to advance our agenda. HSAs hadn't changed since they were enacted. There's a huge population of disadvantaged out there that we could actually support by advancing our priorities. So I'm very excited to be a part of that. I can't wait till we get it across the finish line. I'm very happy to be doing this with you.
When I first met Steve Neeleman, like a lot of people who meet Steve, I was captivated by his energy for the mission of connecting health and wealth. And then visiting the then small HealthEquity team at its original office, you could see that wasn't just Steve. It was a team of people who were super energized about doing this. And later on, I joined the company and then came full circle when we collectively acquired WageWorks, a company my wife and I had founded back in 1999, 2000. Just been an incredible opportunity to pursue a mission that matters.
You know, joining HealthEquity as part of the Further acquisition back in November, what really excites me is just the alignment of the mission that Further had and the mission of HealthEquity.
Coming to HealthEquity via acquisition, you know, some of the things that I'm most excited about for the future are just to be able to work more closely with the HealthEquity teams and deeper integration and collaboration. Really excited for that.
Steve called me nearly two decades ago, inviting me to be part of this mission. I'll never forget the passion in his voice for the mission. Connecting health and wealth for millions of Americans matters to me. It turns out it matters the same for a lot of others as well.
What's really remarkable to me is what started out as just a vision that somebody had in their garage has grown into an empire, an entire army of people that are activating thousands of employers through nearly 200 partnerships to bring better healthcare options and independence to millions of employees across the nation.
Our success or failure is 100% tied to how our partnerships go.
You know, partnerships are extremely important to us as we realize we can't do it all. We look to companies like HealthEquity and others to provide that expertise, but we also want them to share in our values.
We really felt that HealthEquity would be the best partner for us. Our experience in how they've managed projects and the team that would have been partnering with us.
Between, you know, HealthEquity and WageWorks, which is kind of when we jumped on with the commuter benefit as well, it really allowed us to find a partner that did really well.
Yeah, it's been great. Great to work with you guys.
We've spent the last few years at HealthEquity bringing an incredibly talented team together. We talk about bringing technology together and integration and all of that, but the biggest piece is bringing the team together.
Yeah, I've been here at HealthEquity for 16 years now. I have to tell you that from day one, the secret to HealthEquity's success of being remarkable has always been our people.
Ever since I started at HealthEquity, I knew that the culture and the purpose of what we do to change healthcare in this country and to help people save and spend was a really important thing.
I honestly feel like I don't know any team members at HealthEquity who don't care about the members. We all care. We all are willing to help because we want people's lives to be better.
We are so grateful for our 120,000 employer clients and hundreds of health plan and other partners for helping us become the number one HSA provider in the country. But it's more important than that. Thank you for helping us connect health and wealth for millions of Americans. We know there are still millions of American families that have not had this opportunity. We will continue with you on this journey.
I think being on a budget is fun and seeing that you're saving money is really fun.
He's on my back all day, every day. He, like, takes all of our monthly spending and divides it by how many days are in the month. And then that's our daily budget.
It's a complicated algorithm.
Yeah.
We're $80 under budget this month. We could celebrate. I was first introduced to HealthEquity from my mom. Initially, she got me all excited about IRAs and Roth IRAs. She then introduced me to HSAs, and I thought that was even cooler than the Roth IRAs. One thing I really liked about the HSA was that the money that I put in was tax-free, but also the money that I gained from the investment was tax-free when I took it out. And that was really important to me because we were going to use that money pretty soon for the birth of our first child.
Every year, we just maxed out our HSA until we had enough, and then we felt comfortable to have our child.
It was fun to put money into the HSA. It was fun to see the investments grow. It gave us more flexibility and comfort in buying the things that we needed for our children.
Once that was set aside, we could, like, relax more and be excited to have a baby and bring her home.
We weren't as worried about the financial side of it.
We have 2 girls, 3 and 1. Their names are Lennon and Gigi.
Which one do you like more? I love giving them their first experience at something. I just made an igloo for my daughter in the backyard. With all the snow this year, we've got a track in the backyard where we sled. I've been teaching her how to snowboard this year, which has been really fun.
The one-year-old's just learning how to walk, so she's safe for now.
When I am saving money and putting it in a place, the first place I think about is putting that money into the HSA. I like riding my bike because it's fun. I like rock climbing because it's fun. I think, weirdly enough, budgeting and saving for retirement is fun when you find these little tricks to make it fun.
6, take 1, Mark. Give it your first name.
Okay. My name's Shaylee.
Go for it.
Faced a lot of pretty amazing phone calls in my career at HealthEquity.
I had a mom call in at 11:30 P.M. who, her son had just been in a car accident. She wasn't able to get a hold of her insurance company. She had an HSA, which meant that I was able to tell her that she would be able to use funds from next year to pay off the expense that she was incurring with her son and that she would be able to, she wouldn't have to be stressed about trying to find that money in their budget because they didn't have it and they weren't going to have it. I had just found out I was 20 weeks pregnant, and I had just found out that my little boy was going to be born with club feet. I didn't want to work that day, but I decided to.
I think it was one of my first phone calls, and it was a dad that had a daughter pass, and he was closing her account. He just said, you know, just be grateful, you know, for the time that you have with the people you love. It really just changed my perspective that day. We were able to just help each other out in this situation.
She called me and told me that she had about 24 hours to live, and the only thing she wanted to do was to take care of all of this stuff so her children didn't have to deal with it after she passed. And I had the privilege to be able to do that for her, to give her a little bit more peace before her time came. Anymore, and I'd be crying, guys. Sorry.
Working with the people at HealthEquity has been the best job that I could ever hope for. I hope I never work anywhere else because it's fantastic.
I love helping members navigate through those really hard, challenging times.
Being able to support our members, to improve their lives, to meet them at this intersection of health and wealth and help them through their crisis, I love it.
As a parent of a child with autism, I often feel alone. You're in therapy all the time, or you're on the phone advocating with doctors' offices or insurances. It can become hard to relate to friends because they're talking about soccer practice and dance rehearsals and their easy vacation that they just took. We don't really know that life. Autism for us has not only been very stressful, but it's also been an incredible financial strain on our family. I feel like our bank account is always somewhere around zero. Feeling inadequate because I can't pay for this treatment that I want. I can't pay to take my son to this specialist. It's kind of always been, you know, where is the money coming from? How are we going to pay for this? It's been really great to have the HealthEquity HSA.
The amount is just automatically deducted out of my paycheck. My employer contributes to that amount. It carries over every year. We wouldn't be able to see those specialty healthcare providers and pay for those supplements and those alternative approaches if it wasn't for the HealthEquity HSA. It just gives us that flexibility to get him the care that has shown to be beneficial. He's not so tense, so anxious all the time that we can actually have more of those moments where he's smiling at me and we're laughing. Those are just gold. I think he's here to be a connector. He's here to shine light. He's here to love. I think he can teach the world so much. Our HealthEquity HSA has been a nice system and removal of something for me that I have to worry about. I, frankly, don't know what I would do without it.
20 years ago, the HealthEquity journey began above a garage. It was kind of like this. There were only five of us back then. When we got together, a lot of people thought we were crazy, thinking that we could change healthcare in America by empowering people to connect health and wealth. But we really believed in that mission. We always did. You know, even though we had ups and downs, we would always think about Remarkable Purple Service.
I remember one time when we got our first customer, someone said, "When do you answer the phones?" And I looked down at these pagers on my hip, and I was in my scrubs, and I said, "We're going to answer the phones whenever people need us." And so that started this culture of Remarkable Purple Service, knowing that whenever people needed us, we would be there for them.
So I think I first met Steve back in 2000. He was still practicing medicine in Tucson, Arizona. Then in 2002, we really started working in earnest on Health Savings Accounts. We were just fortunate to be able to have that legislation introduced at the end of 2002 and have it signed into law one year later and the impact that that's had on so many families. Come back now, 20 years later, and join HealthEquity as an executive and to lead the Government Affairs program and to create a new opportunity for more Americans to have tax-advantaged accounts to save for healthcare is just an awesome opportunity. I'm really excited about it.
To be a part of the advocacy in Government Affairs, now public policy, was pretty incredible. Never thought that I ever would want to leave product compliance. Started hearing about something we can do to advance our agenda. HSAs hadn't changed since they were enacted. There's a huge population of disadvantaged out there that we could actually support by advancing our priorities. So I'm very excited to be a part of that, and I can't wait till we get it across the finish line. I'm very happy to be doing this with you.
When I first met Steve Neeleman, like a lot of people who meet Steve, I was captivated by his energy for the mission of connecting health and wealth. And then visiting the then small HealthEquity team at its original office, you could see that wasn't just Steve. It was a team of people who were super energized about doing this. And later on, I joined the company and then came full circle when we collectively acquired WageWorks, a company my wife and I had founded back in 1999, 2000. Just been an incredible opportunity to pursue a mission that matters.
You know, joining HealthEquity as part of the Further acquisition back in November, what really excites me is just the alignment of the mission that Further had and the mission of HealthEquity.
Coming to HealthEquity via acquisition, you know, some of the things that I'm most excited about for the future are just to be able to work more closely with the HealthEquity teams and deeper integration and collaboration.
Perfect.
I'm really excited for that.
Hello, everyone. Welcome to HealthEquity.
Steve called me nearly two decades ago, inviting me to be part of this.
Kind of a 5-minute warning so you can get in here and find your seats. Please make sure you get some coffee, juices, food. You're welcome to do that throughout the time today, but just I kind of want to make sure everybody knows we're about ready to get started. 5 more minutes.
Five more minutes until we finish out our interviews. Five more minutes.
Hey.
I'm sure. How are you guys?
To millions of employees across the nation.
Our success or failure is 100% tied to how our partnerships go.
You know, partnerships are extremely important to us as we realize we can't do it all. We look to companies like HealthEquity and others to provide that expertise, but we also want them to share in our values.
We really felt that HealthEquity would be the best partner for us. Our experience in how they've managed projects and the team that would have been partnering with us.
Between, you know, HealthEquity and WageWorks, which is kind of when we jumped on with the commuter benefit as well, it really allowed us to find a partner that did really well.
Yeah, it's been great. Great to work with you guys.
We've spent the last few years at HealthEquity bringing an incredibly talented team together. And we talk about bringing technology together and integration and all of that, but the biggest piece is bringing the team together.
Yeah, I've been here at HealthEquity for 16 years now. I have to tell you that from day one, the secret to HealthEquity's success of being remarkable has always been our people.
Ever since I started at HealthEquity, I knew that the culture and the purpose of what we do to change healthcare in this country and to help people save and spend was a really important thing.
I honestly feel like I don't know any team members at HealthEquity who don't care about the members. We all care. We all are willing to help because we want people's lives to be better.
We are so grateful for our 120,000 employer clients and hundreds of health plan and other partners for helping us become the number one HSA provider in the country. But it's more important than that. Thank you for helping us connect health and wealth for millions of Americans. We know there are still millions of American families that have not had this opportunity. We will continue with you on this journey.
I think being on a budget is fun and seeing that you're saving money is really fun.
He's on my back all day, every day. He, like, takes all of our monthly spending and divides it by how many days are in the month. And then that's our daily budget.
It's a complicated algorithm.
Yeah.
We're $80 under budget this month. We could celebrate. I was first introduced to HealthEquity from my mom. Initially, she got me all excited about IRAs and Roth IRAs. She then introduced me to HSAs, and I thought that was even cooler than the Roth IRAs. One thing I really liked about the HSA was that the money that I put in was tax-free, but also the money that I gained from the investment was tax-free when I took it out. And that was really important to me because we were going to use that money pretty soon for the birth of our first child.
Every year, we just maxed out our HSA until we had enough, and then we felt comfortable to have our child.
It was fun to put money into the HSA. It was fun to see the investments grow. It gave us more flexibility and comfort in buying the things that we needed for our children.
Once that was set aside, we could, like, relax more and be excited to have a baby and bring her home.
We weren't as worried about the financial side of it.
We have 2 girls, 3 and 1. Their names are Lennon and Gigi.
Which one do you like more? I love giving them their first experience at something. I just made an igloo for my daughter in the backyard. With all the snow this year, we've got a track in the backyard where we sled. I've been teaching her how to snowboard this year, which has been really fun.
The 1-year-old's just learning how to walk, so she's safe for now.
When I am saving money and putting it in a place, the first place I think about is putting that money into the HSA. I like riding my bike because it's fun. I like rock climbing because it's fun. I think, weirdly enough, budgeting and saving for retirement is fun when you find these little tricks to make it fun.
Ready?
I'm ready.
Can you get set up here on tables? Come sit up here.
No, no, no.
Sit up here.
Neeleman, by the table.
Yes. Come sit up here. Please don't get my suit up here.
Sit up here.
All right. Ready for me? You up quicker? Yep. You ready to go? Yes. That was the avoid look. That was the avoid look. No, I'm good. I'm ready. You know I'm with what you're supposed to do. I'm ready for you.
All right. I think it is 8:30 A.M. I think it is time to get going on our show here. So thank you all for coming. For those of you who don't know me, and I don't think there's many, but I'm Richard Putnam. I do investor relations for HealthEquity. And we are so pleased to have you with us here today. Before I turn over the mic, I've got a couple of housekeeping items. Food, restrooms are all down this aisle. Restrooms are on the left-hand side. Food's on the right-hand side. And also, we have you'll see a number of HealthEquity people around. Those with the purple lanyards are here to help you find where to go. So if you're looking for a restroom, looking for food, if you want a diet soda, whatever you want, they're here to help you with that.
Those with the white lanyards are here to answer questions about the company and are happy to answer anything that you might ask them. They may tell you, "No," no, they won't say no comment. But they might say, "Go ask Richard that question, and I'm happy to see if I can answer it for you." All right. The last thing is we need to make sure. Our Safe Harbor language, our comments and responses to your question today reflect management's view as of today, February 22nd, 2024, and will contain forward-looking statements as defined by the SEC, including predictions, expectations, estimates, or other information that might be considered forward-looking. We encourage you to review the risk factors detailed in our latest annual report on Form 10-K and any subsequent periodic reports. With that, I am going to turn the mic over to Mr. Jon Kessler.
Thank you, Richard. So you'll be pleased to hear that I'm going to be brief. First of all, I think I'm wearing the same sweater. First of all, genuinely, thank you for joining us here on the Wasatch Front. This office today is sort of more of a conference center, but it's a beautiful one. And it's been made more welcoming, more beautiful, more purple in the value sense by the team that has worked on this. And so Richard mentioned the groups that folks who are in purple lanyards and what I'd want you to understand, those of you who are our guests today, that we don't have an event planning staff. We have one event planner, Tanya Gaines. She's awesome.
So when you see people who've done the work to make this happen or go to the experience upstairs, you know, the regular jobs don't stop, but people have put their time into this. And I genuinely, as I kind of drove up earlier in the week and saw what was going on, felt humbled at all the work. So I think what there may be many, but I hope you join me in a round of applause and thanks for all these folks. So last night, we announced results of what we around here call our growth season. And those included record numbers for our fourth quarter of new HSAs, of HSA growth on net, record asset growth, all organic. And heck, even CDB has managed to squeak out a positive number. Yay. And I really couldn't be prouder of what the team delivered, how it delivered this year.
I'm sure we'll talk about that. But you already know that because you read it already. What we're really here to talk about is the future. This is where I've gone off script, and Tia has no idea what to do. 10 years ago, well, as I think most folks here know, we do not do investor days often. This will be our, I guess, our third. 10 years ago, we laid out a goal. We laid out a goal publicly to you around the growth of profitability and revenue. We did that to try and build some credibility that this was a trustworthy public company. Over the course of 3 years, the team nailed that goal. Then 5 years ago, just before COVID, we all met in New York. NASDAQ gave us a free room. It's very nice of them.
Thank you, NASDAQ, if you're here or listening. We laid out a second goal. We said we were going to focus on market share growth. Parenthetically, we're still focused on market share growth. But at the time, we said that we would deliver outsized market growth every year. We laid out the strategy to do that. Again, the team nailed it. Today or, I guess, last night, we announced another long-term goal, which I think reflects the maturation of the company and our ability to walk and chew gum at the same time, which is while we will continue to take market share year after year after year, we've also announced that over the course of the next three years, we intend to double. I'm not supposed to say non-GAAP EPS. I'm supposed to say how am I supposed to say it? Net income?
Some magic words that mean non-GAAP EPS. Non-GAAP net income per share. I think that's what Michael Newton, who's somewhere in this room, has instructed me to say. And the number that we that is our headline EPS that you are all used to seeing. And we're going to do that while at the same time growing and at the same time investing very heavily in building the people of our future, the technology of our future, the products of our future. And you're going to see that today. And I am confident that the team can do this, not just because this is now the first what's our guidance? 990-995? Let's call it first billion-dollar HSA a billion-dollar company in consumer empowerment in healthcare.
I'm confident in it, not just because the team has delivered over and over again, but I'm particularly confident in it because the reason that the team is doing this is the same reason that we've been working all along. And that comes back to see, it worked. That comes. I'm back on script now. It's okay. That comes back to. She's looking at me like, "It's not okay." You know, it comes back to the mission of the organization. And what is so incredible about this company is over the course of the 15 years that I've been here and the seven or eight before, the company's basic mission is unchanged. And it is exactly these words. And the other night, we had a teammate event where Steve was running around as Steve will.
And he had these, you know, the purple $5 bills, you know, with the little purple. And if you could say the mission right and say our values right, you got a purple five. I got one. I got one of the purple fives. And so I'm confident because people know why they're doing what they're doing here. They don't have to guess about what leadership believes, what the board believes. And ultimately, I think what you all believe. I understand we all understand that everyone is here, you know, to—we all have—we all got to make a buck. We all have to support our families. But we all get this is America. We get choices about what we do. They have consequences. We get choices.
The fact that you have chosen to kind of partner with us, I might say, if I can be so bold, on this ride is, I hope you feel good about it. We feel incredibly humbled about it. As you're going to see today, we're going to continue working on this. We're going to continue at this. We're going to continue empowering consumers because we truly believe and we know when you listen to the calls we talk to every day, you listen to what comes through in chats, you look at the data that you'll see some of today, right? We know that we are helping save and improve lives in our own kind of modest way. Today, here's how it's going to go. This is the last you'll hear from me until the Q&A. Yay.
We're going to have a brief discussion about kind of the market opportunity and our place in it. That's going to be led by Tia. She's going to click her own slides, I think. It's probably wise. Then you're going to hear from a number of our other leaders talking about each of the three pillars of our strategy moving forward. First, to deliver remarkable experience. In this company, we talk about remarkable. Historically, we talked about remarkable service. Today, it's about remarkable experience because we have the technology, the know-how, and the platform to deliver remarkable experience. Second, deepening partnerships. From a business perspective, the crown jewel of this company is also deeply embedded in its values.
And that's that we will partner with anyone who will, like, even talk to us if that partnership helps us reach more Americans, helping them connect health and wealth, helping empower them as consumers. So leg two is about deepening our partnerships. And then lastly, driving meaningful outcomes for our members. And I don't just mean financial outcomes. I mean also health outcomes, welfare and wellness outcomes, and so forth. And you'll hear a little about that too. And then once we've got you good and softened up, the finance team will do its thing. And then Steve and I and others will return for Q&A. So that's the plan. And with that, I want to introduce Tia Padia. Where are you, Tia? There you are.
Here.
Tia is our Chief Marketing Officer. She is incredible. She's wearing different clothes. She has two outfits, clearly, at least.
I have more than one. More than one sweater.
Take it away.
Thank you, Jon. All right. Thank you, everybody. Thank you so much for being here and spending your time with us. This has really been a pleasure to plan for you and to think about this event. And here we are today. So as Jon mentioned, I am Tia Padia. I'm the Executive Vice President and Chief Marketing Officer when I'm not Jon's clicker. I've been leading our marketing, and that includes our brand, communications, and some go-to-market functions for the past 2.5 years. And I bring about 2 decades of largely financial services experience in the areas of marketing, product, sales, and go-to-market functions. A little bit about why I joined HealthEquity, which you'll hear. And all of the presenters will start off a little bit about their story and what this place means to them.
But for me, I joined HealthEquity because of its empowering commitment to help every family regardless of their financial situation. I come from very humble beginnings and have seen the power and the impact of improving financial literacy, giving workers tools, and the kind of difference that that can make in a family's future. So today, my portion of the conversation is also short, not as short as Jon's. But it's my privilege to outline our long-range view of what success means to her and also the strategy that we have to help HealthEquity achieve all of that. As Jon mentioned, HealthEquity's mission is to save and improve lives by empowering healthcare consumers. And Jon does and Steve does walk around giving out purple fives to anybody who can recite that. So thankfully, our CEO can. Our catalyst for that empowerment is an integrated HSA.
It's a personal, portable, tax-advantaged health account that is intelligently connected to the member's healthcare benefits ecosystem. A little bit of exciting stuff. I'm so excited I get to present this slide. But those of you who saw our release last month will recognize some of this. Last year marked the 20th anniversary of HSAs, and the accounts have been a success story for American healthcare. Today, there's about 35 million HSAs with just over about $100 billion in HSA assets. And we believe that 30% of families with commercial health insurance do have an HSA at this moment. We also had Jon mentioned, we released our sales results from last year. And we're very excited to share that we opened 949,000 new HSAs, and that is an account growth of 700,000 HSAs for this year.
Based on what Devenir projected for account growth this year, we believe that's about 33% of the market share. So we have a plan, right? When we think about how we're growing our accounts today and how that's coming together for us, we're going to have our presenters outline our strategy for how all of that will come together for us. But that's rooted in the core of who we are and how we've always grown. So it's not a massive departure from there. Our mission is the same. Our purpose is the same. And ultimately, our goal is to make 401(k) HSAs just as popular as 401(k)s by the year 2030, which is something that you'll hear from us. So how do we do that? The presenters will go into this in more detail, but I'm going to outline our growth strategy for you here just very briefly.
When we talk about growth, we think about it as three Ds. You'll hear us talking about our three Ds. So the first one is our deepened partnerships. As Jon mentioned, this is our crown jewel. This is about how we're using advanced technology to connect and extend what we believe is our competitive advantage of an intelligent, connected ecosystem with over 200 partnerships. The key business outcomes associated with this deepened partnerships, one, in the way that we talk about it internally, is that it drives new logo growth. It also supports. It's the underlying current behind all of the experiences that we develop and is what enables those remarkable experiences and the great outcomes that we talk about later. It also powers sales and marketing productivity because we get leverage from these partners as well as we go to market together.
Steve Lindsay and Eli Rosner are going to talk about this one in a lot more detail. I know that's an area that you're going to be really interested in hearing about. The second pillar is about delivering remarkable experiences. People know us for remarkable service. We talk about purple service. We talk about our values and how we're rooted in really being available for people and helping each individual in the way that they need to be served. This delivering remarkable experience is an extension on that service. It's taking it into the future. It's digitizing and scaling what used to be back in the day one-on-one interactions and bringing those to scale in a way that's intelligent and connected in a way that consumers expect to be interacting with an organization today.
When we think about the key business outcomes that are associated with remarkable experiences, this one, of course, is you'll see a lot of discussion around margin expansion. So there's a very obvious example here. And I've heard many people talk about our expedited claims, for instance. We're making things easier and faster for people, and that also brings down our cost to serve. But it's more than reducing cost of serve. Delivering remarkable experiences is creating delightful experiences. It's improving customer satisfaction. It's increasing utilization. And when our members are using their services, they're also adding account balances, and they're using their cards. And so this is a really special one for us in that it's really getting at the heart of who we are and our service and expanding that into new ways. The third pillar and final one is about driving member outcomes.
As you can tell, I'm having a hard time deciding which one is my favorite one to highlight because they're so great. So the driving member outcomes is one that's really the core of why we're here to begin with. We're here to make a difference in people's lives. We're here to improve their financial outcomes, to improve their healthcare outcomes. And this is the pillar that's really thinking about how do we do that in the future. This one also has a lot more of our aspirational development that I know you'll all be excited to hear about later from Shuki, our head of innovation. When we think about these driving member outcomes, though, and we think about the application for our business outcomes, it is about volume growth. This is us attracting new members to our services. It's about delighting them.
We're increasing our satisfaction, our retention, our cross-sell. That's at the member level. That extends into the client level as well. When you learn about employers, it's that employers are most happy when their employees are happy. We make things easy for their employees. We've delighted them already. Delivering these remarkable experiences and driving the member outcomes are things that have an accelerating effect on our client loyalty, our client cross-sell. Because our partnerships want to have happy clients, we delight our clients. We grow through our partnerships as well. Each one of these pillars is very connected here today. You'll hear more about these driving member outcomes and seeing what that looks like for us in the future as well. As you can see, our growth pillars are distinct.
It's hard to separate them, though, because they feed off of each other. They accelerate each other. Everything from building a remarkable experience, which drives our partnerships and delivers those outcomes that we're looking for. One note, you heard me mention that all of our presenters today will share aspects of our products. So you'll see product demonstrations throughout our presentations today. Those product demonstrations reflect a spectrum of readiness. So there's many product demonstrations that you're going to see that are already out in market. Some of them are coming very soon, or they might be in a pilot phase right now. And some of them are a little bit more aspirational. So as the presenters are presenting, they will help you. They'll indicate so you can understand which is which. But we're just so excited to have you here. Thank you so much for coming.
With that, Steve Lindsay and Eli Rosner are going to join me up on stage and talk about deepening partnerships. Thank you.
Click Logistics. Here we go. Hi, everyone. I'm Steve Lindsay, also known as the other Steve, little Steve, the second Steve. I'm the Executive Vice President of Sales and Relationship Management and have been at HealthEquity for 18 years now. My main area of focus is on account growth. I've also been obsessed over market share growth for the last 18 years. So yes, I'm very excited about the results that were just announced last night and then again by Tia here now. It's a lot of work by a lot of people. We've achieved a lot of milestones over the years. I'm proud of those. It takes a whole team to do it.
As I've reflected on that and look back, it's funny now to think back many years ago, back in the early years when our big, hairy, audacious goal was hitting 10,000 HSAs and $2 million in total sales. A lot's changed since then. Eli, what do you think about that BHAG from 18 years ago?
Well, the numbers speak for themselves. So I guess great progress and the company is in a state of great momentum. So I'm Eli Rosner. I'm the Chief Technology Officer of the company. Steve has been here 18 years. I've been here seven quarters. So I think I'm going to have to change the unit of measure two years. Next month is going to be two years. And Jon said he's going to be here for two years. My team is accountable for delivering all the products and the solutions that Steve's team and others are delivering to our customers. Back to you, Steve.
Thanks, Eli. Okay. So you've heard from Jon and Tia about the opportunity ahead of us to accelerate growth amid a growing market. Eli and I hope to bring to life some of what we mean when you hear us talk about deepening partnerships. Deepening partnerships is about how we use our competitive advantage of our smart, integrated ecosystem and more than 200 network partners to drive new logo win rates, unit growth, retention, and profitability. It's founded on a win-win commitment, the premise being that as partners, we can win bigger together than alone by creating more value together. Consider this. Our health plan partners value retention and growth. Several of our Blue Health Plan partners revealed that clients with an integrated HealthEquity HSA have higher retention rates than those who don't.
Given that potential impact, you can imagine the natural motivation that a health plan has to engage their sales and account management teams to integrate existing and new clients with HealthEquity. It goes beyond health plans, too. You'll hear another example later today in which we grow 401(k) contributions while also growing HSA contributions with one of our partners, Vanguard. You can see the value equation kind of coming together, right? Measurable economic value for our partner while driving account growth at HealthEquity. And not to mention, member and client value increases as well along the way. It's a win-win. It's why we have sales teams from health plans, 401(k) administrators, referral and reseller partners, and others selling and passing leads to HealthEquity consistently. It creates this virtuous cycle of growth that has led us now to serve more than 15 million customers.
That number's grown every year I've been here. And as that number grows, our value grows alongside it. The more customers we serve, the more our partners want to work with us. And the more clients they bring to us, the more clients that we serve, the greater economic value to us and to our partners. And that's the beauty of our model. Today, three out of four of our sales come through a partner channel. Having a partner that wants to help us sell and retain business now, that's music to my ears. But it hasn't always been that way. The consumer-directed benefits market has shifted over the years. I'd call out three trends that have driven the success we're enjoying now through our partner channels, our customers' buying patterns, and our ability to capitalize on them.
First, many health plans and other partners have shifted to a partner CDB distribution model, forgoing in-house or white-labeled solutions due to their inability to scale and innovate at the rate of competitors. Last year, we re-onboarded three distribution partners that we believe will drive long-term growth. They've introduced us to many client opportunities and have already produced 45,000 new health savings accounts. Partners drive new client sales, which continue producing new accounts and assets over time. For example, one of our Blues partners, Arizona, has been a health plan partner with us since 2009. They decided to bring an in-house solution to market a few years back but have since decided to terminate that relationship, that solution, and focus on growing together with HealthEquity. We have a mutually beneficial relationship today that allows Arizona to focus on their core business while trusting us to take care of their CDBs.
This partnership represents about 45,000 accounts across 800 employers. The next trend is the growing comfort and expectation of data sharing for ease of use within a controlled and secure data environment. Members, clients, brokers, and others have this expectation but see different applications of this capability. As consumers, we all expect interactions to be easy, personalized, even seamless. For example, an employer offers incentives for healthy living. A member accessing preventative care or hitting their monthly step count goal target receives a contribution into their HSA. Claims, wearables, and HRIS integration all make this incentive program seamless for the member and effective for driving the employer's desired outcomes. The third trend is the increasing number of partners associated with each deal. Historically, new clients were driven by integrated health plans and brokers. Today, we're seeing an increased demand for multi-partner integrations.
Brokers favor CDB providers capable of integrating with their preferred partners as it allows the broker to differentiate their program and grow. In the mid and enterprise segments, we see demand for multi-partner, multi-platform integrations. It's driven by the value members and clients receive from multiple integrated partners. Across all segments, more partners associated with a deal gives us a better chance of winning and retaining because the associated members and clients receive greater value. We call these multi-threaded deals. Consider a member affiliated with an employer tied to both an integrated health plan and an integrated 401(k) plan. The member will receive educational support, nudges, from both providers that drive contributions into both the 401(k) and the HSA. We've seen firsthand the power of these integrations to drive member contributions into the retirement plan and into the health savings account.
And the positive effects of HSAs on retirement readiness have been broadly reported. HealthEquity has invested significantly in boosting our data security and privacy and added many tech and policy controls to ensure proper data usage. In return, our partners have been increasing the breadth of data, the frequency of data exchange, and even the types of partners exchanging data. For HealthEquity, it's creating more value for our partners while driving better member outcomes. When we consider how much data exchange is occurring and how many partners will be sharing data, employers and partners want to work with someone they trust or at least someone who they trust trusts. And as much as it pains me as the sales guy to say this, but that trust is not going to come from a sales cold call. They rely on their partners, including brokers, to guide and recommend those they trust.
Their partners rely on us to stay trustworthy. The last win-loss study that we concluded at the end of our enterprise selling season confirmed this. Nearly 80% of our employers surveyed said that their broker influenced their decision a lot or completely. That's typical. It's common to see that most clients have already done their research either on their own or through their brokers before ever engaging with us in a sale. According to Gartner, buyers complete 70% of the sales journey before wanting to talk to a sales rep. 75% of B2B buyers prefer an entirely rep-free experience. We believe that our historical success proves that our partner growth strategy works. The trust generated and shared via partners will continue to be a key to our growth.
Eli will speak more to investments we're making to deepen trust and inspire vision on what can be together with our partners. It suggests that the partner growth strategy will continue to drive growth. We've also learned along the way and have seen some new opportunities. Like, what if we expanded the type of partners that we integrate with? And what if every family in America could be attached to one or even better, many of our partners? Imagine the value we can provide to members and clients if all benefits were fully integrated with each other and seamlessly into the lives of our members. To make this a reality, we intend on selling more CDB-related products to more customers via more partners than ever before. That's why in the past couple of years, we've made a concerted effort to grow the number and type of partnerships that we have.
It's also why we continue to digitize how we go to market alongside them. The digital selling model helps us scale to sell more, faster, and meets many of our customers right where they are with regard to their buying preferences. It demands a standardized experience, one that allows the partner to know just what to expect with transparency all along the way. These are all necessary components for scaling our sales and relationships to bring more to market faster, profitably. One example of this transformation is illustrated by our broker portal and small group digital sales model. Today, brokers drive more than half of our small group sales. They demand more information faster. They want to know what their clients are experiencing, which enhancements are coming when, and they want to be able to buy digitally.
We're improving our broker portal so that brokers can self-serve information related to our product enhancements and access material needed to position HealthEquity's services on our behalf to track their clients' progress and, in the future, even open accounts directly for their clients. This type of innovation allows us to scale our growth through partners, increasing unit sales growth while also serving broader markets. The small and micro markets would be inaccessible without the scale that we get by working through our partners. The last thing I'll point to is a trend of our own devices. It's our management's ability to see the road ahead, anticipate customer needs, and innovate. Before I hand the mic over to Eli, I just want to share this longtimer's view of just how impressed I am with Eli and his team.
It's really remarkable to see the contribution that they're making at accelerating growth that we've experienced historically by infusing technology and innovation into our robust partner-leveraged growth model to make it even better. Eli?
Thank you, Steve. So what Steve is outlining in terms of our ecosystems and partnerships is really critical to our success because we're transitioning to play a more central role in the ecosystem of healthcare, to become a benefits hub. Our objectives are really simple. We want to deliver more value to the clients and the members faster and in a seamless manner. So let's dive a little bit and see how we actually got here. Our current capabilities enable this transformation due to strategic investment that we cultivated over time. Two key factors distinguish us from the competitors. First, we're committed to integrating into our customers' ecosystem. And second, we actively incorporate external innovations, and we bring them in. So not all the innovation is coming from within HealthEquity. Some of it is coming from our partners. And that's really important because we're giving our customers some flexibility.
You put those two features together. This provides a competitive edge that is sustainable by giving our partners incentives to deepen the partnership with us and pursue joint market opportunities. So the implementation of this strategy provides a sustainable competitive advantage to the company, but it requires deep trust, capital investment, and deep technical expertise, we believe, makes it really difficult to emulate by our competitors. The benefits are significant when you get there. Firstly, it reduces the time that it takes to integrate and the cost as well. Secondly, it expedites innovation to market. You will see more solutions here enabling us to deliver more value to our clients and members. However, reaching this point wasn't instantaneous. It required a strategic and deliberate capital allocation model over time and an unrelenting commitment to data privacy and security.
Over the past five years, we've shifted our technology capital allocation towards building and doing capabilities. Initially, resources were allocated towards building systems to acquire companies and integrating them into our ecosystem. Knowing that M&A is going to continue to be an integral part of our strategy, we focused on building systems that enable integration. Now, we've transitioned, as you see on the chart, our focus more towards innovation and enhancing our product capabilities. Today, our investment focus leans heavily towards growth and innovation, fostering a competitive edge that's difficult and challenging to emulate. We're well on our way towards enabling this strategy growth. Let's dive deeper into the three investment areas that you see on the screen. First and foremost, privacy and data security, essential to any company that's entrusted with customers' data, especially around finance and healthcare. Second, it's a unified data hub.
So we've built a unified data hub harnessing the power of the public cloud that's running in the cloud. And some of the solutions you're going to see later today actually use this data platform. You'll see expedited claims from Kamesh. You're going to see Performance Analyzer from Shuki. They're all leveraging this data hub that we have built and is running today in Azure. And we've implemented the connective tissue. It's a real-time, standardized, and bidirectional API connectivity, which is the focal point of our discussion today. If you think about data as the cargo that's been transferred between software programs, API is the vehicle that takes them from one place to another. It's the connective tissue. So I'm sure that some of you think, "Well, if we had a technology buzzword, bingo card, we'd be yelling bingo." But that's not the point.
The point is that it's on everybody's lips: APIs, cloud, generative AI. Everybody's looking into that. We, as a company, when you see the solutions coming later on in the samples, we have jumped on it. We've taken things in 90 days from concept to production. Shuki is going to talk more about that. Before I double-click on the APIs, I do want to talk a little bit about data because we've made a deliberate strategic investment in building data. Let me go to this slide. At the top of the slide, we're talking about the difference between a closed and an open ecosystem. It's a big difference. In an open ecosystem, HealthEquity, we connect to our customers, and we connect with them organically. We don't force them to come to us. We go to them with standard connectivity.
So we can accelerate this connectivity between us and every partner and create a bigger value for everybody in the loop. Another benefit is that the customer has flexibility to change any of the providers in our open model. We can help the customer have more control and freedom to work and do more, and they can choose different partners. So we have different solutions for the same capabilities, but they have the optionality and the flexibility to choose the partner they want to work with. It wasn't possible overnight. Part of our evolution from being a service provider to providing education is to what we're doing now, delivering remarkable experiences. How it's possible is reflected here in our evolution. Collaborating with our partners, we're moving from basic data sharing with partners to establishing a bidirectional data exchange.
What this achieves—you've heard the ease of use from Steve, and that's what we're getting by doing that—this evolution allows us to enrich our data by integrating data from other sources. It's a wealth of information that we're exchanging with our partners, and we're enhancing the value proposition of the combined data hub that we're creating. We believe this capability is truly transformative. It's empowering us to anticipate needs, make informed decisions, be prescriptive, and provide personalized recommendations that we're all used to get: what is the next best action? This capability is available within our products and creates partner value by delivering relevant advice in context. One of the cases of this capability can be observed in a partnership that we have with a leading health plan partner. Blue Cross Blue Shield of Massachusetts created BlueFit.
It's a consumer health plan to provide comprehensive coverage through a digital experience. BlueFit is designed around HSA, and it rewards members by making progress on health, wellness, and financial literacy goals. We reported this program to investors in 2022, and we've continued to see growth. At this point today, it's reported that 95% of the subscribers have earned an incentive. In the upcoming sessions, you're going to witness more of the power of leveraging cloud capabilities alongside AI, generative AI, machine learning, with APIs serving as the connective tissue facilitating those data exchanges. In those sessions, we'll demonstrate our commitment to delivering a remarkable experience and driving member outcome. However, let's zoom on the APIs because it serves as the primary catalyst, the vehicle that drives all this data between our partners. We're designing our API infrastructure to scale and facilitate bidirectional (that's new) and real-time connectivity. It's a big deal.
The approach culminates in the creation of a data hub. It's a repository merging HealthEquity data and rich data from various partners. It provides unparalleled access to rich data using the APIs. We've been on this journey towards advanced capabilities for quite some time now. Along the way, we've strengthened our competitive position and enhanced our ability to collaborate with partners to expand distribution, close product gaps, and create revenue-generating opportunities. Here's an example of potential integration with an insurance partner. Consider the scenario of a member who has a supplemental insurance policy alongside their workplace benefit. The member is hospitalized due to an accident. They're absolutely focused on the situation at hand, which leaves other areas that are unintended, including how to administer the claim and so forth.
HealthEquity will be able to assist both the member and the insurance company by reminding members of their benefits, or even better, submitting the claims on the member's behalf automatically to the provider right at the point where they need it, in context. HealthEquity identifies eligible claim activity, and we help by passing that digital version of the claim and a proof of qualified claim so that our partner can process it electronically. The ultimate outcome is that the member receives timely contextual information and assistance. For an insurance partner, it enhances the value proposition and the services and reduces processing time. And for HealthEquity, we participate in the transaction, revenue-generating opportunity. This is a true win-win-win situation. As Steve highlighted earlier, our partners seek a strategic ally who's capable of alleviating their burdens, reducing costs, and providing them a competitive advantage.
Historically, we delivered this through manual processes and human-led partnerships, which is a common approach around the providers that we have today. To easily integrate into our partners' ecosystem, we've developed standard connectors, standard connectors, and we're launching them throughout this year for HealthEquity so we can easily integrate at a fraction of the time and the cost. These connectors are readily available out of the box, and they serve as standardized interfaces for all the ecosystem participants. That is how we will scale and strengthen and acquire more partnerships. Here's an example about a payroll provider. Today, we're on the marketplace Platinum partner of that specific payroll provider, and you can find our solution on their app store. We're in the process of developing integration with that payroll provider so that mutual clients can connect and share data with their platform.
Those new data connectors can help us continue to grow through the partnerships and deliver greater value to our shared clients, but much more in a most cost-efficient and in a timely manner. We believe that our connectors will drastically shorten the integration cycle time and reduce costs associated with onboardings. Numbers matter. Using a standard approach, integrating a partner like I mentioned, like an existing payroll provider, could cost between $2,000 to 4,000. Now, however, with the connectors that we're building, we can slash over 70% of that cost and reduce the cost and the cycle time of the integration. In tangible terms, we're integrating roughly 200 employers every year just through a payroll provider. We're seeing double GDP growth this year-over-year. This translates to $ millions in savings for HealthEquity.
Those integrations alone are yielding more than $500,000 a year in savings. But it's only one type of integration. We're doing many of those. This example demonstrates the value prop and underscores one of our dual competitive advantages. Let me emphasize the real-time connectivity, which is a big deal. It's a pivotal aspect of our strategy, of the API strategy. Real-time connectivity means that we can provide recommendations and insights precisely when our customers require them within the relevant context. For instance, imagine a member in a store seeking to determine if the insurance he has covers a medical device or checking the status of a claim before making a significant purchase, getting information right there and then. In short, we're transitioning from receiving information from partners like claims and eligibility in a batch mode, on a weekly, on a monthly basis, to instantaneous data exchange.
This ensures that members grappling with real-life scenarios have access to critical information when they need it, empowering them to make informed decisions on the spot. Let me conclude by emphasizing the key takeaways. Firstly, we believe our investments create a competitive advantage. Constructing a real-time API platform with robust security measures and the capacity to scale to millions of transactions daily demands extensive expertise and capital investment. We're well on our way to completing both, positioning us uniquely in the market, creating a sustaining competitive edge. Secondly, our innovations in the ecosystem yield tangible economic benefits, including reduced data exchange costs, expedited provider payments, enhanced visibility into cost control mechanisms, and swift access to funds for provider payments, amongst the rest. These benefits resonate strongly with health plans, employers, and members alike.
For HealthEquity, these investments manifest in two key financial outcomes: A, driving unit sales growth and enhancing the customer value through the expanded distribution of our offering and reaching the experience for the user base; and two, decreasing the cost of serving accounts, thus optimizing operational efficiency and enhancing service delivery. Thank you very much for listening. Thank you.
Thank you, Eli and Steve. We appreciate it. We have a few minutes now for some questions from the audience. Greg has got his hand up first.
Good morning. Greg Peters with Raymond James. Thank you very much for your presentations. Two questions. One, first for you, Steve. You said in the broker portal, 55% of small group sales are running through brokers. I s there some sort of advantage you have inside of that broker portal versus some of your peers, or is there a way to engender yourself so the brokers are more inclined to promote your products versus the competitors? And then I have a follow-up question for Eli.
I don't know that we're given.
Steve, you want to talk a little bit about the broker portal?
Yeah. Yeah. So I think that 55% of our small group sales are coming through brokers. It's not so much that they're coming through the broker portal as much as they're coming through brokers. We're innovating around the broker portal to make it even better and differentiated to the point that kind of you're headed toward. Today, however, we differentiate ourselves through the integrated health plan partnerships that we have. In a lot of cases, health plans work with kind of their favorite brokers. Brokers know their favorite health plans. And as a result, that combination, that kind of triumvirate of an integrated HealthEquity HSA, relationships that we've built now over decades with brokers is a lot of what differentiates us, in addition to then just a longstanding track record of service that they appreciate, transparency along the way.
Oops. You shut my mic off, I thought. They like to do that to me. Eli, I was trying to follow along. You gave an example of the 70% cost savings with the one customer, the 500,000. I feel like there's a lot of intense competition for selling your products into small employers. And I'm just trying to take that example and see how it manifests itself in win rates for you guys because I feel like your peers, your competitors are offering other discounts to get the win. So maybe help bridge the gap for me on that. Does that make sense?
You have a comment, Richard? Because we were talking about cutting 70% of the cost, not giving discounts. Is that what you're referring to?
Yeah. The 70%.
70%. So the point I mentioned probably didn't do a great job was that by using the standardized connectors and the API that we've created, we're slashing 70% of the cost that it costs to integrate to an employer. And as a matter of fact, to your point, for small employers, that's a really, really big deal. It's a bigger deal than for the bigger employers who have more of an IT power and so forth.
Thanks, Eli. Next question from Scott. Scott Schoenhaus from KeyBanc.
Steve, you mentioned that three-quarters of your sales currently come through partner channels. Can you give us a sense of where that was maybe a year ago, two years ago, and where your target is? Is this a 100% target for you guys?
Great question. Our partner growth model has been producing at rates where it's hovered between kind of these 2/3 and a little bit more than 75%, but around that same area. We like that. We think that's a right spot because there is this combination of not only selling with and through partners, but there are a lot of opportunities to sell direct as well. So I think it's part of the strength of our sales force, their experience, their networking, relationships. It does enable sales even beyond what we sell through partners. One of the things that our partners appreciate is that kind of that chutzpah, that proactive approach to selling. Because of our integrated relationships and partnerships, when we sell direct, what we're typically doing is bringing that client into an integrated health plan relationship or other partner relationship that we have.
It's just another element of the win-win relationship and value prop that we've got with partners.
Thanks, Steve. Next question from Mark.
Good morning. Mark Marcon from Baird. Steve, question for you. Just in terms of the network partnerships, how many what sort of growth have you had in terms of the number of network partners? If you went back three years ago, four years ago, was it 100? Was it 120? Then can you also break down roughly what percentage of the partners are insurance brokers versus health plans versus payroll processors? Just any sort of distinction in terms of the types of partners that you have. And most importantly, since it's a big competitive advantage that you've highlighted, where do you think your competitors stand in terms of the number of their network partners?
Yeah. Great question. Richard.
Those are all great questions. Sorry. I'm doing so much that I can't remember.
Yeah. Richard, keep me honest. The three questions, my limit's like one and a half, so I'll do my best here to remember. First, looking back, our partnerships have grown over the years, for sure. As I look back, we had less years ago than we have today, for sure. I think Jon, Steve, Darcy, Jim have kind of reported on that generally. But I think where I would focus is probably your next question, right, and kind of around that, which is what's the nature of those partnerships? So it's kind of the breakdown. And generally speaking, we look for partners. Our strategy in building partnerships is primarily on which partners are going to help us drive more accounts and more assets fastest because there's a win-win opportunity there.
Secondarily, it's how do we extend the value to our existing clients and prospective customers by partnering with others to add in capabilities that, again, are going to differentiate our offering in a way that still drives growth, both in accounts and assets. To that end, I think the differentiation between partners is potentially less relevant. But to answer your question, certainly, the majority of our partnerships are health plan partnerships. Our payroll partnerships and record keeper partnerships, some of the others that we've mentioned, as a percentage of the total, are lesser than health plans and growing.
Okay. I think we got time for one more question. Stephanie, you're going to have to wait because we got one question back here with Sean.
Yeah. Thanks, Sean Dodge, RBC. Steve, what are the economics like on a partner sale versus something that you all would kind of develop internally? Is there a big difference? And I guess is that not the right way to think about it because going through partners is giving you access to sales that you may not otherwise be able to get?
I mean, I think you're right, Sean, thanks for that. I think you're going in the right direction, right? That's how we think about it as well. So certainly, I mean, if you break it down as a sales guy does, right, in terms of qualified lead gen flow, amount of time that I'm spending on creating the opportunity and closing it, if I've got the help of a partner who has an established relationship of trust recommending HealthEquity, my velocity is going to be much higher, my probability of winning, and frankly, retaining that business is much higher. So I think there's a preference generally to work with and through our partners for that reason.
Great. Stephanie, one last question.
I'm actually out of the chat here. Am I allowed to talk?
Yeah. One last question. Jon, you got to bring up.
They cut the mic off.
Okay. It's very rare that I get to see a head of sales and a head of tech on stage. I wanted to hear.
We actually like each other, by the way. That's like, "Ooh.
I don't know, Steve. He doesn't look like your friend.
He's not a hugger. I am.
Okay. So little Steve, first question. How much are you seeing improved win rates or are you leading in your sales process with, "Look at these integration capabilities. Look at the bidirectional APIs and data"? And Eli, when you are going through some of your innovation spend and you're looking at where you want to take the platform, how much of that is informed by what Steve is telling you from his clients' asks versus you kind of going it alone and predicting what they want?
Sure. So maybe I'll start and then you go?
Sure.
It's easy. So we have in the three years that I've been here, I'm sure the company has done it well before, but we have doubled down on our efforts to listen to the market, gathering the voice of the customer. For example, we've created a client advisory board. We had the inaugural meeting late last year, and we had one just yesterday. And that serves as a significant voice of the customers. We learn. We get feedback. Those are roughly 20 of our largest clients. Second of all, we've established a 90-day innovation process that we collaborate with our clients. So together, we get together for a few days. We do a design thinking session, and we choose an idea to convert on. And then we go, and through 90 days, we deliver a product to market.
When you see the expedited claims, it was done by getting feedback from Angelique's team, who was going to talk to you, as well as several of our customers. Our roadmap is heavily influenced by listening to what Steve's bringing from the market in, as well, obviously, as our market capabilities and market research.
Thank you. You're going to.
I mean, she asked me a question. I was going to try to respond, so.
All right. Real quick.
Yeah. Quickly. Along the same line, so what do we lead with was, in essence, the question. What do we lead with as a sale? Do we lead with an integrated partnership or what? And typically, what we do is we'll lead with an element of the three Ds that Jon described. But as Eli described, we're going to listen to the customer. We gather a lot of insights from customers and then cater our message to them very specifically and kind of personalize it for them about what's going to matter most and how we can help bring that to bear in a differentiated way.
Thank you both. Steve and Eli, let's give them a little round of applause. We're grateful for them. They'll be around all day today. So if you want to corner them with some other questions, you're more than welcome to. Now we're going to talk about delivering remarkable experiences with Angelic and Kamesh.
Morning, everyone. Thanks so much for joining us today. I am Angelic Hill. I'm the Executive Vice President of Operations here at HealthEquity. That means I lead our contact centers for all of our customer types, partners, large accounts, small accounts, member services, implementations, as well as our back office operations. I've had the pleasure of being here now for approaching 14 years at HealthEquity. I'm joined by my friend Kamesh.
Hello, everyone. This is Kamesh Tumsi. I am SVP and head of product at HealthEquity. So my team of product managers, general managers, and I are responsible for product strategy, vision, digital experiences, and ultimately, the P&Ls of all our product lines. So with over 25 years of experience in product, mostly focused on tech and fintech, I'm truly excited to lead some of the product transformation here.
Great. Thanks, Kamesh. So you just heard from Steve and Eli how integrated partnerships increase sales velocity and customer value. Now we'll discuss how these integrated partnerships fuel remarkable experiences that delight our customers, drive down servicing costs, and open new revenue sources. Remarkable service has been at our core since the very beginning. It's one of the reasons I joined this company. We've evolved from providing a one-to-one service interaction to education at scale to where we are now, which is providing and supporting a full digital experience. Slide. No, not slide. Other slide. Notes for Angelic, please. Throw me a bone. Or I can continue my comedy routine. Awesome. And back. This is a fun game. Today's experience aligns with how customers engage. They expect mobile-first experiences and real-time insights to power their decisions. For our members, it means more opportunities to self-service on the go.
And for us, it reduces cost to serve, supports new account growth and client retention, as well as cross-sell. We talk a lot about what's changed in the last 5 years, and we've seen tremendous growth of our business, shifting consumer demands, and new technologies. Together, these have made it both necessary and possible to accelerate digital transformations. What this means to you is that the service we delivered in the past is now digital, and that delivers greater customer and shareholder value. HealthEquity has tripled revenues the last 5 years, and we expect to continue growing revenue. In a traditional call center, you have a one-to-one model, and there's a much more linear relationship between customers acquired and service cost. The shift to a one-to-many model allowed us to use our economies of scale to improve the marginal profit of each account by both increasing revenue and decreasing costs.
So first, let's talk about costs. As you know, service expense continues to be our single largest cost of revenue at roughly 84% of our total costs. We are a profitable business, but there's definitely opportunity to improve. Each year, you see late Q4 and early Q1 erode the year's gains due to increased member and client activity during our peak or growth season. It's also when we get the most accounts. So it makes complete sense, right? My team hears me refer to this as the cost bubble. What we need to do as an organization is continue to pop this bubble to spread out the costs and improve our overall margins. When we double-click on these service expenses, you'll see that member service expense is about 22% of the service cost line item. We've made some advances in this area in the past three years.
First, moving to remote workforce allowed us to reduce staffing costs. We also began automating high-volume transactions. Once we completed the WageWorks platform integrations, we had greater capacity to invest in digital experiences. Our customers immediately loved it. Who wouldn't? Because this is how we, as consumers ourselves, expect to engage in our lives as is. Here's an example of self-help tools driving member satisfaction while reducing costs. We, of course, track trends in the way that our members are using our portals and navigating through there. We build self-guided portal walkthroughs to help them move through that process with key interactions. We study what they search for and develop prompts to address their unanswered questions and help them get the most out of their accounts. Today, we see 69% of our members engaging with these self-help tools in the portal.
Similarly, we expanded our chat program over the years from being human-led to bot-driven and soon to be AI bot-driven. Our chat programs effectively answer roughly 50% of inquiries that otherwise would have gone to a live agent. Self-help is a win for everyone all the way around, right? Customers get what they want when they want it, and we get to lower service costs by deflecting agent interactions. Now let's talk about revenue. What's really cool here is that you've heard me talk about efforts to minimize the seasonal open enrollment growth volume. But what we're really doing is building service leverage. Channels that previously only delivered service are now driving revenue. For example, those same self-help portals that I just mentioned helped drive the education that drove $1.5 billion into our early Enhanced Rates adoption. Those same chat experiences deflecting calls are helping members drive contributions.
The call capacity we freed up in our small business client service team is now allowing us to cross-sell through our service agents. Today, our experience spans many customer interaction channels, drives customer satisfaction, and expands the value of each customer. Let me show you an example of how this comes together in our future experience. So if you watch the screen here, what you're seeing is we have a member who's at the dentist office. She swiped her card, and it got declined. So she's calling the call center, trying to pay her bill. But we've sent her a text saying, "Hey, Susie Q, we can see that your card isn't activated. Let's get that activated right now." We activate it, and she's able to swipe her card. The next example here is our ability to provide qualified medical expense education.
You'd be surprised how many account holders of all of our accounts do not understand what they can use these accounts for. It's very high inquiry type. So our ability to deliver that up, as well as direct them, you'll see, to the HSA Store or the FSA Store, also helps turn that into a revenue opportunity at the same time. So as you can see, using digital tools allows us to immediately serve our members' needs, make it easy to work with us, and create new value for them in ways they didn't really imagine. There you go, Kamesh.
Thanks, Angelic. So being here for a little over a year, it's really fun to see the transformation, right? And to Angelic's point, we have the benefit of the perfect confluence of a number of things coming together, right? So rising customer expectations, maturing technologies, strong cash flow, and the ability for us to invest and innovate. The first example that I'm going to talk about is digital card issuance. Digital card issuance is a great example where HealthEquity meets the customer's demands and their rising expectations. But at the same time, we're able to reduce the cost of card issuance. Today's consumers literally demand everything on the go, instant gratification. They don't want to be weighed down by the weight of plastic or card. They want everything in this device, right? Over the last years, we've also seen consumers consolidate all their payments into fewer cards.
They've also increased the use of digital wallet to make those payments. This last year at HealthEquity, we began moving customers with multiple cards onto a single Stacked Card that has enhanced security through a chip and also advanced intelligence. We are able to identify which account to use for which specific type of transaction, right? Whether the member is at the commuter line trying to buy a transit ticket or whether they are checking out some medicines at the pharmacy store, the card is the same card, but it has the intelligence to figure out which account to withdraw the funds from. Later this year, we expect all of this functionality through that single Stacked Card to be available through the digital wallet that's all on the phone.
Digital issuance is beneficial not just for the consumers in terms of providing a seamless experience on the go, but for HealthEquity, it also reduces the cost. Now, how is this offering from HealthEquity different from what's out there in the marketplace? Number one, it has this integrated multi-product suite all available on a single Stacked Card with enhanced security. Number two, later this year, we will add the support for members to request a card digitally. So that helps us solve one of the biggest friction points for new members and new enrollees because they don't want to wait for physical plastic before they can start spending. And competitors have portions of this experience, right? But no single competitor really has everything that HealthEquity offers, including instant issuance that we will be soon offering.
Now, speaking of integrated products, right, let's talk about flexible spending accounts for a moment. The instant access and the ability to access the FSA account on the go is extremely important for FSA members because they access their accounts much more frequently, and they're mostly on the go when they want to try to access their account. And two of the biggest pain points we've heard from FSA members is, one, they really simply forget to re-enroll, right? And two, they end up leaving unused funds on the table at the end of the year. Now, as a result of this, FSA account holders churn more than the HSA account holders. But what we've done here is we've used the power of education and payment integration with some online stores to really solve both the problems. First, let's talk about the power of education.
So in the most recent enrollment year, just using basic education, basic reminders, and really reminding members the value of FSA, we were able to increase the re-enrollment rates by about 8 percentage points from 68 to 76. Now, the second pain point, our integration with online stores like FSA Store, as shown here, makes it really easy for our members to actually purchase FSA-eligible items through literally a few clicks, right? So as you can see here, all the member does is click on a link, add the items in the FSA Store, and then we actually integrate by providing the payment details, the shipping address, the name on all the other details. So literally, somebody can actually complete the entire checkout process in a few clicks. So this is not just a great consumer experience. It addresses their pain point.
But for us, it opens up a very, very strong incremental revenue line. Now, we are not stopping here, right? We are now addressing one of the biggest pain points that members have with their FSA accounts. This is the whole process of reimbursement, right? So the whole process of submitting receipts and getting reimbursed and waiting for that is the biggest friction point with FSA members. And this whole reimbursement process also drives a significant amount of cost related to processing and answering calls related to claim status. We are piloting an AI-driven product where we are completely automating this reimbursement and substantiation process. And I'll show you a quick demo of that. So here, what you can see is a member at the grocery store shopping for a couple of items, right? So in this case, they are shopping for eyedrops and some grocery.
Once the purchase is complete, the members quickly submit. All they have to do is take a picture of the receipt. You can see the two items here. One is the eyedrops, which is eligible. The other one is not an eligible FSA item, which is a grocery item. All they do is click the picture, submit a receipt. Using AI technology, OCR, and other API integration, what we are able to do is not only fill in the claim but also figure out which items are eligible, right? The entire claim submission process and substantiation process is done by a few clicks. This process greatly improves the experience but also reduces friction and also drives down the cost for us related to claims processing and constantly answering calls related to claim status.
Again, the key theme here is win-win-win for all of us. We've shared a few handful experiences now that impact the member. Angelic is going to share similar examples on how it impacts the client experience.
Great. Thanks so much. That's right, Kamesh. We talked about members. And we also have clients that we're serving, right? So working with clients over the years has taught me that the best way to improve the client experience is to make things easy for their employees, right? We've talked about that. No one wants the noise coming into the people team office. But we've also been working on modernizing the client experience for several years. I'll share two recent examples where we focused on high-volume, peak-season activities and how we used data science and journey mapping to identify the best way to automate and proactively anticipate what needs to happen in a better fashion. So doing this serves us very well, right? It helps us manage the costs with staffing our peak times, reduces turnaround times, and improves client satisfaction and retention rates.
Our HRA and COBRA renewal automation projects improved renewals while also reducing costs in our call center, our implementation teams, and our client services teams. Each year for January, which is our main renewal month, we process about 3,600 clients who have many, many plans underneath each of them for each year. About 82% of that renewal volume comes in within an eight-week window. It's very fun. As you might expect, there's a lot of challenges with that. Volume spikes, attrition becomes risky, and some customers might want to throw in pricing renegotiation, which adds more time and process. Last year, we fully automated the process for HRA renewals. We made a slight improvement in renewal rates and retention and reduced processing time by 40%. You can see a little bit of what this looks like here. But basically, we proactively reach out, automatically process a lot.
The goal is to have everyone set up for members with cards in hand, cards funded, and no need to call to ask us about, "Where's my money?" We employed a similar process to COBRA. We made annual health plan rate renewals for COBRA clients seamless with a slick new tool versus what was a very clunky spreadsheet. This significantly decreased turnaround time for processing all of the eligible rates to the carriers. We saw about 80% of our COBRA clients that provide us rates using the renewal tool during the 2023 season, which, again, reduces phone calls when we're getting things done in a few days instead of a few weeks.
Thanks, Angelic. Standardizing the onboarding and renewal process is a first step towards automating our entire experience. Our eventual goal is for clients to manage the entire account opening, onboarding, implementation, reporting in a complete self-serve manner, right? Again, you've heard the broker portal that Steve and Eli mentioned is a huge first step towards that process. In addition to actually easing the account opening, the broker portal reduces the friction in the ongoing servicing, in the implementation process. For example, one of the biggest requests we get from brokers is for custom reporting and dashboards and metrics. Using the broker portal, it's extremely easy because they just log in, and they can self-serve with all their requests. There are many, many more such examples of how we are using partner integrations, APIs, the power of data to provide a seamless experience.
I'm happy to share more examples in our Q&A. In summary, we are and we plan to be the number one HSA provider in the market using the power of data, partner integrations, APIs, digital experiences. We plan to improve the client and member experience, reduce the cost to serve, increase margin, and open up new revenue sources as well as create a lot of customer value. Thank you.
Thank you. Thank you, Kamesh and Angelic. We have a few minutes. Oh, Greg, you're putting your hand up first again. All right. Well, we'll go over here to Glenn first.
Oh, yeah. Thanks. Glenn Santangelo from Jefferies. It certainly seems like the company is investing in a lot of tools to improve that client experience and lower costs. And it sounds like it's clearly getting traction. But as a group, how much visibility do you have into Optum and Fidelity and what your competitors are doing? And what do you hear from your broker partners in terms of how your competitors are sort of responding to the changes that you're making? Thanks.
Are you guys working in?
What's Fidelity and UnitedHealth are doing?
Yeah. I mean, absolutely. I think having that outside in view, whether it's coming from clients or having an eye on the customer competitors, is definitely a part of our roadmap planning process. I think there's definitely some of the things that we are doing are first to market. I don't know if there's a specific integrated broker portal the way we are envisioning, right, and whether it's reducing our cost through Claims AI. I can tell you we are among the first ones to do that. And we also talked about the instant digital access card. I don't think anybody has that full integrated product suite and the instant digital issuance that we will have. So definitely a lot of examples where we are first to market. But obviously, we don't know all the specific details of all the tools that all our competitors have.
OK. Greg?
OK. Greg Peters, Raymond James, good morning. Angelic, in your presentation, you mentioned bots and AI bots. Where are you in deploying that technology? And what kind of cost savings do you think it can deliver to the company over time?
Yeah. So one of the things that I have been very excited about this year is late last year, we put together a multi-year service technology roadmap. We've brought in talent in our IT department to help support that, folks with experience deploying this, particularly in the service center but also into areas of robotic automation. So we are in the process right now. We have a number of enhancements coming out this year, such as natural language IVR. And you mentioned the chat. The chat's been highly effective. We've really curated the content. We have a very high CSAT. So we see lots of opportunity. And I know that there's many, many layers to it. But I expect to see an acceleration of this really kicking off this year and over the next several years with this roadmap. Lots of opportunity.
Thank you. Any other questions? Oh, Allen.
Allen Lutz, B of A . I guess one for either of you. What % of CDH consumers have downloaded the HealthEquity app? I know a lot just get the debit card, and then that's the only way they use HealthEquity. But I'm curious, has the use of the HealthEquity app increased over the past couple of years? And then what % of members have a digital card today? Thanks.
So I'll take that. We know a very high percent of our users use digital means to interact with us, right? Predominantly, we have a much higher penetration on the web side of things. One of the things that we are heavily investing on is the mobile side. So I would say roughly 60% to 70% of all active accounts are accessed digitally. It may not necessarily be through the mobile app. But that's what we are trying to get to increase adoption as well. So a lot of adoption on the web portal. To your second question on the digital card, we don't have a digital card live today, as I said. We have a Stacked Card with all the accounts that we just released. And very soon this year, we'll enable members to access that same card digitally through their digital wallet.
Now, that sets up the foundation for us to actually be able to not even offer plastic cards for those members who are very savvy and who can actually just get by with a digital card, and they can add it to the wallet. And that's coming soon.
Thanks, Kamesh. Next question from George.
Hey. Thanks, guys. Quick one. George Hill at Deutsche Bank. Just, it's interesting as you put the digital app into people's hands, like the phone-based app versus the card. It gives you the ability to stack a lot of other functionality on top of just the transaction processing capability. I guess could you spend a minute talking about, excuse me, how do you envision the future of the app? And what are the most attractive pieces of functionality, both from a customer service perspective and, I'd say, from a data utilization, maybe even a VBC perspective, that you can kind of stack in and load into the app as you increase and engage with beneficiaries digitally?
They want the product roadmap, Kamesh.
That's right.
That's the short answer to the question. Yes.
Yeah. I think we've shared a couple of examples, right? So once you have more and more people using the app, then you can really take the power of the mobile app, things like the camera, the location, the notifications, right, which is not easily native to a web or a desktop computer. So one example that I showed was just with two clicks, you can add items to the cart. The payment information is integrated. And then you buy FSA-eligible items without even providing your payment credentials, without even providing your shipping address because that's all integrated.
So we think when we have a pretty large base of members, right, 15+ million members or accounts, right, you're absolutely right, a lot of opportunity to provide those value-added services as we increase engagement and at the same time reduce cost because then notifications, reminders, right, they all become much, much more actionable. And it reduces a phone call.
Yeah. Our next question from Stephanie. And then we'll come back. You went first last time.
Are you just going to play us off of each other?
Yes.
All right.
I'm going up on the same wavelength.
So I mean, this is probably more reflective that I'm a difficult person than anything else. But I ended up getting multiple HealthEquity cards issued to me over the past few months when I was starting my new shop. And it made me think that because they're chip cards, they're probably pretty expensive for you guys to keep shipping out to me. So what percentage of your cost structure involves shipping out those cards or printing out those different ways or having humans available to onboard new cards and approve of them? And where are we in the roadmap of maybe getting rid of that part of the cost structure as you go to that digital card?
Yeah. I'll take that. So you heard me mention about our service costs, right? 83% and 22% roughly is the actual member services cost. Well, plastics, paper that we mail, those are the things, for example, sitting in the remainder of that 83%. The team members, you talked about, we need to ship them. Well, we have to have people set up the client in the system. And that's part of the automation I talked about with the HRA renewals. A card is getting assigned at that time with the right eligible expenses and branding and things of that nature. So those all fall into all those other bodies and humans as well as those hard costs, COBRA mailings, all of that resides in those service costs to give you an idea of where that sits. And we were really excited to get those chip cards out.
There's value in them. They mitigate and help prevent fraud, which is not a rampant issue by any means but is still a cost that we have to manage to. And it allows us to continue to get other, it's also a contactless card. So there'll be some conversion processes. We did the first platform. The second one is coming. And then that's when we kind of light up the race, if you will, to getting to a point where, as Kamesh said, we're not going to automatically ship a plastic, right, because a lot of people are going to prefer to have it electronically and have access to their dollars within a few days of being onboarded here and not have to wait for that plastic.
So that's coming when we talk about the instant issuance further down the line after we get the mobile wallets rolled out and finish our conversion of all of our platforms over to a single processor. So around the corner.
Thanks, everyone.
Angelic, our next question and maybe last question before we take a little break is from Sean.
Thanks. You talked about the transitioning from bots to AI bots. What does the AI kind of bring incrementally? Is it just there was so much variation in how people were asking questions that a lot of the bot chats kind of defaulted to a human? And this solves that? Or is it just kind of open up a much broader range of, I don't know, answers and capabilities?
Sure. So our chat journey started with old-school Jane Doe sitting here one-to-one answering your response. And what we invested in over the last probably about 12-18 months pretty heavily is curating the content. And we track the quality of the CSAT and the comments from the members. Was this the information you expected? And as we layer AI onto that, our ability to most accurately respond to that question and deflect an actual call will only continue to improve. We've been tracking that to understand the success of our chat. I don't know about you, but sometimes I get really frustrated as a consumer with chat. And I personally did not want to have that experience for our members.
We found by really watching how their members are commenting about, "Did we answer the question?" and having a human right now curating that content, we can move into AI helping curate that content. We'll continue to watch our call deflection rates, ideally continue well, I guess deflection, we want that to go up. But we're seeing the benefit of the investment by a human. And we're going to layer AI on that and just be able to expand. We also, as an aside, I'll say we have launched we're about to launch across all of our client platforms. We now have client chat, which also is going very well. So we'll be layering the AI across all of those chat platforms.
Thank you, Angelic and Kamesh. One more round of applause for them. Thank you. We're going to take a little bit of a break. There's some food and drinks and sodas back there. We also have more over here. I also want to have you take a few minutes and go up to see the immersive experience if you haven't had a chance to do that yet. We'll try and be back here at 8:00 P.M. after the hour. All right? Thank you.
Family is something that is dear to my heart. Family is where we all belong and where we grow together.
Oh, no. No, no, no, no, no. Can we sit down and eat?
My life is really chaotic. A lot of times, it's unpredictable with three little kids. With the chaos, I have to be really flexible.
Not blue, not pink.
When it comes to choosing health care for my family, we try to look at and see what our family actually needs and make sure that we're strategizing and picking the right plan for us.
I need to make an appointment for my daughter.
The HealthEquity HSA makes life easier for me because it's health care savings that I can just set aside and not think about. It just builds up over time. We use it for any sort of well visits, any sort of dental visits. The HSA has provided me with a lot of different options and flexibility for things that insurance doesn't always cover. It's just a big part of helping us feel secure with our health care as well as our financial situation. With having three girls, my husband and I really want a boy. So with my HSA funds having rolled over year after year, we built up enough that we felt comfortable being able to use what we have in our HSA for IVF and to help us complete our family so that my little girls can have a little brother having the HSA.
It's a huge blessing for me.
People don't know about their health care benefits. Some people don't understand them. A lot of people don't understand them. Being able to bring clarity to the members is something that I love doing.
Oh, inspiring to help the members? Oh, it gives me such a good feeling. When a member calls in, this may be their first time that they've ever called in. And if they get me, I want that to be the most positive experience they can ever have. So that way, if they ever do have to call back in again, they will be able to trust the next person that they talked to.
Health care isn't 9:00 A.M. to 5:00 P.M. I need to be available. My teammates need to be available 24/7. If they have a question, and I can help them with that question at midnight or at 2:00 A.M., it's going to make their health care experience a lot better.
My favorite part of it has to be surrounded by people who believe in the same thing that I believe in. Being able to support our members, to improve their lives, to meet them at this intersection of health and wealth and help them through their crisis, I love it. Thank you for calling Member Service. This is Drew. How can I help you out today? Because my father did pass away from colon cancer, and it's hereditary, I have to get screened every five years. But having that HSA, I can plan for that. I'm not much of a risk taker. I like to put money aside. Planning and preparing for medical costs is imperative. The HealthEquity HSA provides peace of mind that the money's there. You don't put things off. You don't say, "Well, we can't do that today.
What is saved for that?" One of my favorite things about the HSA account is the fact that the funds that you contribute, they're going into your account before tax. Best case scenario, you don't use it all, but you don't lose it. It carries forward to the following year. And it can continue to grow as an investment vehicle. Contributing to the HSA makes us feel secure. And I think that really helps me be the best that I can be, right? Worry about things I should be worrying about, taking care of myself, taking care of my family, and making memories with my family. On March 18th, 2021, my 7-year-old son was in a terrible ski accident. Growing up, I remember the struggles that my parents had, whether it was finding food, clothing, health care for us. It was a big worry when I was a kid.
In raising our kids, we've had some unexpected challenges. We have a son who was diagnosed on the autism spectrum.
The journey of HealthEquity began with a mission to bring humanity back to health care. When I was a little boy, I told my mom I wanted to become a doctor. I was eight years old. She never let me forget it. I went through school. I went through undergrad. I kept thinking I wanted to become a doctor. I was studying for the MCAT. That's the admissions test for medical school. I ended up with a terrible belly ache one day. I went to the student health doctor. He sent me downtown to meet with a gastroenterologist. The gastroenterologist said, "I think you're just a little stressed. You need to relax a little bit." That was okay.
I was glad it wasn't something worse than that until I got the bill from the gastroenterologist that the insurance company had denied. They said I had a preexisting condition. I felt so alone. I didn't know who to turn to. At that moment, I thought to myself, "Someday, I'm going to start a company that can help people like me never have to go through what I did." As I finished medical school, I decided I wanted to be a surgeon. I love surgery because you can really help people. Now, you're typically helping one person at a time. What I learned was that a lot of my patients did not have money to pay for their out-of-pocket medical costs.
We said, "How can we help people pay for their out-of-pocket expenses?" Then we heard about a law that was being considered in Washington, D.C. that would allow for health savings accounts. We got on a plane. We met with the legislators. We educated them on the power of this health savings account. Lo and behold, after our efforts, the law was passed at the end of 2003.
We'd had a great day skiing with our family. My husband and our two sons decided to do one more run. I was tired, wanted to wait at the bottom. I kept waiting and waiting. They never came back down. My phone rang. As soon as I answered it, I could hear our son crying and screaming in the background. They thought that his leg was possibly broken, but it was a really serious injury. That was the only thing that we knew. We brought him to the first hospital. He was in the emergency room. They did the first X-ray. We could tell the break was really bad. The doctors presented some options to us. They could either take him by ambulance to a bigger hospital a couple of hours away, or we could life-flight him up to a children's hospital.
They stepped out to give us some time to decide what I wanted to do. I weighed the pros and cons of all of the different choices, and at the same time, had the realization that there was a significant financial impact that we were looking at with whatever choice we made as well.
We're good? There we go. All right. We need you, everybody, to come sit down. We're ready to start talking about driving member outcomes. For driving member outcomes, we have Shuki and Kelly. You guys want to come on up? Oh, Shuki's leaving. That's not a good sign. Shuki, we need you here. All right. There he is. He disappears on one side and shows up on the other. All right. So let's go ahead and jump in. Everybody, you might want to grab your seats real quick because we're starting.
Hello. I am Kelly Koster. And I'm not going to do that again. I'm Kelly Koster. And I'm the Senior Director of Product Marketing and Sales Enablement. So I have the pleasure of bringing all these amazing experiences that you're seeing here today to market, researching industry and competitive intelligence, and equipping our sales team for success. I've been here at HealthEquity for six years now. I got here via Luum, the commuter company that HealthEquity acquired almost three years ago.
Hello, everyone. Hello? Can you hear me? Yeah. Good. So hello, everyone. My name is Shuki Licht. I'm the VP for Innovation and Head of Technology here at HealthEquity. I recently joined HealthEquity about nine months ago. I came from Finastra, one of the largest think tanks in the world, leading the AI technology and being the chief innovation officer there. People always ask me, "What is innovation? What do you mean by say you're the head of innovation?" It depends really on the company that you are working for. Here at HealthEquity, we come with three things that describe our innovation. First is applied innovation, how we can take very fast idea to product and concept to cash. We are doing that in 90 days.
One of the examples that Kamesh shared with you is the Claims AI, how we can use AI technology to improve the member experience and get reimbursement and claim processing in a few minutes instead of a few days. The second pillar of innovation is about collaboration and co-innovate, how we can co-innovate and co-create new value, a new solution into the market with our clients, partners, members, whoever is part of our partnership. An example that I'm going to show today is about transparency. We talked about it yesterday with the people from the Congress, how we can use transparency and getting different data sources from other providers to give a better solution to our members and increase our assets.
The third one is igniting innovation, how we can not just innovate in the product but also help the marketing, sales, and, of course, supporting by legal, privacy, and security to bring and ignite innovation across the organization. We want to have purple that innovates.
Thank you, Shuki. Yes, you do keep us very busy. Today, Shuki and I are talking about driving member outcomes. This strategic pillar is especially meaningful to me because it's at the heart of who we are. It's one of the top three reasons that our clients choose to work with us. Driving member outcomes is about leveraging connectivity and technology to deliver real-time, actionable insights to members that empower better health and financial decisions. For our members, those outcomes can be greater HSA-eligible plan enrollment, higher contributions and investing, and on the health side, accessing preventative care and taking their medications. We believe that these outcomes produce durable financial benefits in new unit growth, increasing customer value, and driving asset accumulation while accelerating the other aspects of our integrated partnerships, including new logo sales and client retention.
Let's start with a simple example to illustrate the power of member outcomes to get us warmed up. Then we'll build on that. A well-known e-commerce company knew that its HSA benefit had the potential to boost benefits affordability both for the company and for their employees. It was not getting much traction. To drive better results, they partnered with us to modernize their plan design, including a competitive seed. First, they reduced their HSA plan premiums by $25 per paycheck. Then they added a default employee HSA contribution of $25 per paycheck, therefore tapping into behavioral economics while adding no financial burden to their employees. The results? 95% of their HSA members are contributing. They're making better health decisions. And they're reporting high satisfaction rates, all of this while costing the company 11% less than those members that are enrolled in their PPO plan.
What's even better is they use the savings that they realized from their HSA plan to further invest in wellness and health benefits for their employees. There is real value here for members to take action, for employers to promote our services, and societal impact as well. The good news is that there is a path to driving action. Here at HealthEquity, we have observed the power of member education to drive positive financial actions, which translates into accounts and assets for HealthEquity. First, clients opting into our annual open enrollment education this year saw an 11% lift in enrollment results. Second, our onboarding educational programs are effective at driving new contributors and increasing contribution amounts for those who are already contributing. Third, our educational series that's related to savings, investing, and Enhanced Rates has driven strong custodial assets and investment adoption.
We're continuing to improve these educational programs to extend their reach and, in the future, to make them even more impactful by using AI and the power of our real-time connections to empower members to take the next best action. When we think about how we deliver the same type of value at scale and hyper-personalized, it's important to consider what's happening in the market to focus our efforts and to create the greatest value. As a former educator, it pains me to say this, but education will only take us so far. The real leverage comes from making it really easy for members and from how the employers design their benefits plans. A well-designed benefits portfolio will improve financial resilience. It will drive down employees' health care costs and support retirement readiness.
As you saw in that prior case study, employers use HSA-eligible plans and HSA contribution levers to drive down their overall costs while improving quality and access to care. We're seeing more of this type of scenario, which may be largely attributed to two major trends. We will discuss how capitalizing on each of these trends improves member outcomes while also creating opportunity to drive financial value to HealthEquity. The first trend is affordable, comprehensive benefits. It is no secret that consumers today are battling a higher cost of living and struggling to pay for their basic living expenses, let alone save for the future. 401(k) record keepers report that the top reason for early withdrawals and emergency loans is to cover medical expenses. And what's more, most consumers are strained to cover even a $400 unexpected expense.
As a result, there's a growing use of third-party medical credit cards to cover these expenses, and some with interest rates as high as 27%. Employers believe that they're responsible for solving these issues, as do their employees, which is a challenge. Employers are faced with a more challenging benefit situation than ever before. Employees demand more benefits. The cost of benefits is at an all-time high. The cost of labor continues to soar. More companies are seeking a bespoke combination of benefits that addresses very specific needs of their employee populations. They have to do so at a manageable cost. Employers go about this by improving financial literacy and designing benefits and incentives to encourage healthy financial habits.
By connecting into the employer's ecosystem, we can help bring these solutions together for the employer and their workers and support overall benefits utilization and the incentives that are attached to them. How might we help employers maximize the utility of their entire benefits suite while keeping costs low? How might we incent employees to take positive health and financial actions and improve outcomes and drive down overall plan costs? To you.
Thank you, Kelly. These are very good questions. We have an opportunity to help employers drive down their overall plan costs while helping individual members make better, personalized decisions. We heard from our client advisory board just yesterday. This is the top priority for them. We will do that using AI to produce a prescriptive recommendation at the member level. And then we will push this recommendation through our system. For example, a customer decided they would like to improve the financial resilience of their new retired population. I appreciate it if you can move to the next one.
If only we're just doing live demo.
Yeah. I apologize.
Wait. You're going backwards. You need to go back.
Yeah. Here.
No. That's forwards. Yeah.
Don't try and do it again.
Come back. Try again.
OK. I apologize. Today, we provide recommendations based on benchmarking data and our own collective expertise. Soon, we will begin scaling this reporting capability to provide greater insight and recommendations to the customer on demand, along with a mechanism for the customer to act on them using HealthEquity systems. In the future, we plan to use AI for generative benefits design to recommend an optimal plan design to address customer needs. Particularly speaking, this new retired population needs to set up a savings vehicle, maximize their contribution, and begin investing. All of these behaviors drive positive outcomes for the member. They also help the employer reach their objective for driving financial resilience. For us, they mean new accounts and assets grow. Let me show you how this will look like in our Employer Analyzer.
Thanks, Shuki. Before we jump into the actual demo, I just want to take a moment to say that we understand the importance of maintaining rigorous data privacy governance. We're committed to continuing to invest in both the technology and the processes to support data security, consumer privacy, and responsible AI use.
This is really important to call out. We are working very heavily with the data governance, privacy, and compliance team. We have built a control to align HealthEquity to industry data standards and comply with applicable regulation. So let's keep it in mind when we dive here. Now, let's start the demo. Here, what you see on the screen are four things. One, I'm going to show you a dashboard with segment-specific insights. Second one, recommended action with estimated impact. Third, ability to deploy action directly within the tool. Fourth, post-campaign analysis and benchmarking. First, what we see is a dashboard that shows different KPIs that are relevant to these clients. For example, we can see the average investment balance. We can see, for example, that in the last three months, we have an increase of 10% of the investment.
Second, we are using machine learning to try to segment our members from investor to saver to spender and also to unengaged. It's very uncommon to see such a high level of unengaged beta members. The machine learning identifies that almost 30% for this client, the members are unengaged. This is something that I want to show you later how we can improve. This information, we can start to realize, to take an insight, and to understand what the action that we need. Another area that we are sharing with these clients are different ways to see how the trend is going through the year. As you can see, there are different ways to see the spenders and the savers. One of the things that we see here from an insight perspective is there are lots of activities and expenses in the fall and in the summer.
It's something that it will be hard for the members to catch up later in the year. This is something that the clients need to take an action on right now. We are showing more and more KPIs that are showing trends about enrollment per year, last year. All this information is helping the members and the clients to be more optimized on things that they are doing. We are not stopping here. This is not our competitive advantage. Let me show you where our competitive advantage is. We are using machine learning and AI to try scoring and clustering in more deep things about our members, from health care affordability, from cost saving, from benefits literacy, and workplace wellness. All these things are generated by AI to give a different score that no one else is measuring today in the market.
We are the first company that has tried these numbers to go with. I see there are very low numbers about affordability. Let's jump in and see what is going on and what's happening here. As you can see in the screen, there are four types of reasons why we got such a low affordability. The first one is recent spend. What it means. We are using machine learning to predict what will be the next expenses and spending by the members. We are using what are historical data. As you imagine, all this data is going through our system. We try to figure out what will be the spend in the coming months. As you can see, 66% of the AI recognizes that we will have members that will struggle to pay their expenses. This is a very big number compared to people that have a better security.
When we go to deductible, the situation is much worse. We have more than 80% of the members that will struggle to pay if the case is that they need to go to now or going to other places. This is something that we need to do something with. Think about it. You have in your deductible like $3,000. People don't have enough money in their HSA to pay that. The AI starts to give recommendations. Using generative AI, we recommend to the clients what they need to do, what are the changes that they need to do, and what are the actions. They click and see different ways to help them, maybe to increase the match, maybe to start to send campaign management to the members to do things right now, not to wait for the end of the year. It's a real-time, bidirectional insight and action.
We click Next Steps. The system also gives the client a way to see if we will take this action, what will happen. We see that if we will take the action that the AI recommends, we can grow by 10% of our population. The generative AI generates a very nice email, better than what I can generate. We can use this email. The client can use it, change it, make it more personalized, and just take an action. The campaign is sending for the specific population, both of the actions. We got Congratulations, the HSA campaign. Everything is good. What the system also gives us, as you can see here, is what happens with our campaigns. You start to see how the campaigns are starting to influence your members, how these campaigns are starting to get your things better and better moving future.
So we are not just looking back at what happens from inside. We are taking the action. We are recommending the action. And we also can see from A/B testing if this recommendation works. And then it starts to be a very interactive tool for the members. The last thing that I want to show you and again, I have like six hours. So I will stop here is that I'm going to talk about benchmarking. One of the top one things that we heard from our clients, they want to compare themselves to others, other clients in their category, in their industry. We're using machine learning to try to use hundreds of attributes to compare me as a client to others in my group. Why? Because I want to be in the top performer. In this case, yeah, I have the same balance for investment.
So my members have the same investment. But take a look at that. In my peer group, 12% are investing, only 7% on my side. So the balance is good. But the investment is by far. There are lots of things for me to improve. And this is something that the clients pay today for consulting, pay today for yearly review. We are giving them in real time, giving them right now benchmarking on the fly. And then you can start comparing more and more things. And as I mentioned, you can go again and again and go more and more deep. This is something that I'm very, very excited about. I need to continue. OK. Oh, I'm sorry. All of these things are possible because of the Deep Trust Partners due to the announcement you heard about from Eli and Kamesh. Why is it so special?
And why is it so unique to HealthEquity? First, we have the power of the ecosystem. The second is the size and the scale of our business. This is why I'm so believing in this company, about the scale and the size that we can start to introduce this tool. And on one side, we have clients that will start to continue to give us more information. And we can give them insight. On the other side, we are engaged with almost 16 million or 15 million members. So we can, in real time, start to have this conversation with them and change their life. Using this tool, we can help influence better overall plan design for the employer and also acquire employers to target a specific population to drive the outcomes they are looking for. And as we stated earlier, these outcomes are generally aligned with ours.
It's better usage for health savings accounts. It's, of course, keeping more money in the account and investing assets so they can grow over time.
Thank you, Shuki. This is a really cool tool. We just shared a more extensive demo with the client advisory board yesterday and received great feedback on how it empowers benefits administrators to optimize their overall plan design, stay competitive, and find cost-saving opportunities. They also saw how it could help them improve overall utilization and produce board and executive-level materials to secure and defend funding. We shared a couple of other capabilities with the client advisory board to address the affordability gap as well. First is an example of an ecosystem partner that we're bringing to members to address health care costs and the acute financial strain of an unexpected expense. We're partnering with a provider of Health Payment Accounts that allows employees to access a zero-interest credit line for medical expenses and pay it back seamlessly through payroll deductions.
This allows members to access care when they need it without incurring high credit expenses or impacting their credit score. The benefit to us is that because it is offered through a partner, we are not taking on any of the credit risk. We're still offering greater value to our clients and opening a new fee-based revenue stream. This concept was well received by our client advisory board to address the financial risk of lower-wage earners adopting an HSA-eligible plan. It was highly recommended by one of our client advisory board members, who happens to actually be here in the audience with us today, waving back there, for being a safety net for their employees. The second example is already in market and being used by employers to drive positive actions across their benefits offerings. It's well known that preventative care drives down overall health care costs.
Many employers want to incent positive health behaviors. A common example is for HealthEquity to connect an HSA to a wellness program and make deposits for things like exercise and accessing preventative care. Our own HealthEquity plan does this for us. It's called CDH Change. And our team members can earn dollars for their HSA through healthy behaviors. And some people are very, very competitive about it. Employers desire a seamless experience for their employees. The second trend that we'll talk about today is intelligent spending. It's a confluence of consumerism, the need for affordability, and legislation. The rising cost of health care is coupled with higher costs of living, squeezing families to cover even the most basic care. And the issue is compounded by the fact that health care is the only industry where consumers contract for goods and services without ever knowing the price.
There is huge price variability among providers. Congress recognized the risk and consumer impact and passed a bill that helps consumers know the cost of a covered item or service before receiving care. Nearly three-quarters of employers say that finding more transparency in PBM pricing and contracting is a priority. 58% say that they want to see additional reporting and better provider quality measurement standards. This has opened a huge opportunity for consumers to price compare before committing to care and for plans to drive down overall health care plan costs. Our challenge is, how might we empower consumers to make well-informed health care decisions, including quality of care, access, and pricing, and ultimately drive down the cost of health care?
Yeah, this is a real challenge, the transparency. I can talk about myself personally. A few years ago, I found an issue in my heart. Every year, I need to go to an MRI. Believe it or not, every time, I found a different price of how much it costs an MRI, and sometimes in the same location. When I joined HealthEquity with the team, we started to think, hey, is there a better way to understand the price upfront? How much do I overspend on health? Then we started to understand. We heard this also in Congress. It's not something that I'm just struggling with. It's the entire community and all the members of ours in the United States. So we went and built a solution. We call it Intelligent Spending. You can see that on the screen.
What Intelligent Spending is doing is one important thing. It educates the members on how much they overspend. As you can see on the screen, the system using AI technology identified that these members have already overspent like $2,500 just in the last eight months. As a personal, as I mentioned, this is not weird numbers. This is the actual numbers. What the members can do through the mobile for HealthEquity, if you can click, I appreciate it, to start the video, is that he can see this information, again, coming from the campaign that I showed you from the Employer Analyzer. He got it specific. He can click on that and see what are the reasons for this opportunity. He would like to learn and educate. He clicks on this button.
He starts to get receipt by receipt, claim by claim, what are the reasons and where he can improve. You can see things like this persona went to out-of-network instead of in-network. So we are talking about how to help them maximize the benefits. They go to urgent care instead of going to telemedicine. We found that 80% of the population likes to go first to instead of first to go to telemedicine, urgent care. They go immediately to see how much they overspend, and also ways to improve pricing. So once we educate the members and they start to get this campaign, we add another tool that we call a price comparison. This is the place that the members start to change their behaviors. They can click, for example, MRI. By the way, this is not my MRI. But it's identical. I click on the zip code.
I live in Alpharetta, Georgia. I'm getting, in real time, all the prices that I can find for this specific MRI. Again, you see different prices. I can search by distance, price, quality of the service. I just scroll in very just going for $190. But believe me, if I start to scroll, you will start to see on the $1,000 level. This is a moment for overspending, education, and also taking action in real time. We are looking across the claim data. We learned that a significant portion of the population and I just mentioned it. Over to you, Kelly.
Thank you, Shuki. Some very exciting innovation on the horizon for HealthEquity to continue to drive member outcomes. To connect some dots from prior conversations today, the trends you heard about from Steve and Eli about the increased number of partners willing to integrate with us and the type of data that they exchange, these are creating the opportunities for these new member capabilities. Ensuring that we have strong data and privacy controls, both through technology and internal policies and procedures, is vital to maintaining our partners' trust. These investments are worth it to us because deepening the power of our connected ecosystem is critical to driving member outcomes and vice versa. It's creating a durable competitive advantage for us while unlocking financial growth.
We accelerate our go-to-market by bringing others' products and services to our members, as is the case with the Health Payment Account example that I shared earlier. This provides faster member and client value and accelerates our revenue. We drive new accounts and asset growth through traditional tools such as employee education and more impactful tools like the Performance Analyzer, which enables employers to optimize plan design and target actions. We expose the financial value of an HSA-eligible plan and health savings to both employers and their employees. In the future, we expand revenue and value to our customers when we bring these new services to market. We increase the customer lifetime value over time. The personalized recommendations drive contributions and assets into the program. The investment integrations drive long-term account growth. Thank you for your time today. We are proud of our efforts to drive member outcomes.
We're excited for the innovation ahead to empower consumers to make better health and financial decisions.
Thank you.
Appreciate it. Very good. We've got time for maybe three or four more questions. The hand goes up.
It feels a little weird to not give that to Greg for the first question, right?
So when I think about this dashboard that you guys have created, it looks a lot like when ADP and Paychex started to go and get a dashboard introduced a few years ago. They got a much higher level of engagement with their clients. It became something that, instead of checking once a quarter, they would check once a day, once a week. Same thing, I think, about that transparency tool. You're probably checking the app a lot more if you have that. What are you planning on doing with those eyeball times?
It's part of our strategy to increase the share of the wallet, to make sure that we are building. By the way, just to give you, I don't want to get to numbers. But one of the aha moments for me was when we started to talk with all our partners, et cetera. Partners love our solution because they saw much better engagement, like 20 times more engagement on our solution, if it's the web portal or the digital, mobile, et cetera, through our system. We believe that this kind of solution will not just improve and give the drive outcomes that are super important, transparency and health, and et cetera, but also helping to have a better engagement than you had. Then think about the infinity loop: more partners, more solution, more solution, more engagement. We can start to grow and grow about our story.
This is where I believe, in the end of the day, we will find ourselves growing and growing with more solutions. I think one thing is I came from small startups when I was young. One of the challenges that we had there is that we don't have any clients. We haven't had any chance to understand what the market needs. I think what's special here at HealthEquity, because we have so many amazing clients, they are just telling us on a daily basis what they need. We see their members are calling to our service and tell us, this is our problem. So we know exactly what they need. And we know exactly how to select which fintechs or health tech can help us to help them and bring this into their engagement cycle.
Thank you, Shuki. Are there questions? You guys did such a great job. They don't dare ask anymore. Oh, Allen's got one, though.
Really down on the questions, for sure.
As it relates to the price transparency tool, do you have access to all network rates in there? I'm curious. What coverage ratio do you have there? Just curious if that's 100%, if there's some payers that aren't opting in? Just curious what you're seeing there? Thanks.
We are today engaged with several partners. If it's fine, I will not mention the name. Each one of them has a different cover. The cover is very high. We are very sensitive about the quality of the data and the privacy and the security. This is where we are standing now, just to make sure that security and privacy and everything is in place. For your question, we see a very high cover. Don't tell anyone. I'm using this tool for my own because it's not yet in production. I'm using it for my own personal needs. It seems very accurate compared to what I was thinking about. There are things to improve there. Once we will assure about the quality and, as I mentioned, privacy and security, we will take it to production.
Thank you. Shall we end? To give Shuki and Kelly a big round of applause? Thank you very much. Appreciate it. Now, for the guys that you've been pestering with questions for many, many years, well, they're kind of new. But anyway, the finance team is about ready to come up. I'm going to turn the time over to Jim Lucania, our CFO, if he's ready.
No sound yet? There we go. All right. All right. Hi, everybody. I think most of you know me by now. Jim Lucania, CFO of HealthEquity. Just want to make a couple of quick introductions to two key members of the finance team. Then I'll come back at the end and tie everything together, as the finance team usually does. So I'm going to introduce you to Danny Hurst, who's our corporate controller. And Abhinav Dendukuri is our corporate treasurer. Danny is going to take a few minutes to walk through an upcoming change in our income statement presentation that should give you a little more clarity to the components of revenue and expenses that have and that don't have any exposure to market interest rates.
So these reporting changes are a second deposit on our commitment to provide you with as much transparency and clarity as possible, to model the business performance using the core drivers, which are accounts, custodial assets, and custodial yield. Then Abhinav is going to walk you through the roll forward of our HSA Cash Maturity Schedule that I know many of you love, that we unveiled last month in San Francisco. And he'll provide some more details around the Enhanced Rates product. And in the interest of time, we'll hold all the Q&A till the end. So make a note of your questions so we can discuss them after the presentations. So take it away, Danny.
Thanks, Jim. Hey, everyone. My name is Danny Hurst. I am the corporate controller. I joined HealthEquity 10 years ago. And I've been the controller for the last 3 years.
As you look at how we plan for financial success and reporting that success to you, we believe we can provide a bit more clarity. To that end, we are shifting certain components of our revenue reporting lines and associated costs to serve with a small change in allocation of overhead expenses for our upcoming fiscal year 2024 earnings release and Form 10-K. I need to go back one, actually. As you know, we describe our revenue in three buckets: custodial, service, and interchange. Custodial revenue is a combination of revenue generated through interest earned on custodial cash and record keeping and investment advisory service fees earned from members with invested assets on our platform. Key drivers for the investment advisory and record keeping fees are the number of investor accounts and balances in those accounts.
The majority of custodial revenue is driven by the yield earned on HSA Cash and client-held funds. Service revenue generally captures everything else, including charges per account, service charges per account, and transaction-related fees. Interchange revenue reflects the fees generated through members spending on our platform. We separately report interchange revenue in its own line because of the relative magnitude of this revenue stream. The drivers for service and interchange revenue are primarily the number of accounts on our platform, whether they be HSAs or CDBs. When we report earnings next month, we will modify custodial revenue to include only revenue generated by the yield on HSA Cash and client-held funds. We will combine the record keeping and investment advisory service fees into service revenue.
With the added disclosure of our HSA Cash Maturity Schedule and the more granular reporting of yield-dependent custodial revenue, you should now be able to more easily and precisely model the portion of our revenue that is correlated to market interest rates and the portions that are not. We have provided a bridge for you in this slide to show how FY23 was reported under the historical classifications to the updated classifications. The cost of revenue associated with these changes, including record keeping and investment advisory costs, will be included, too, as part of service costs. The change in reporting. Let's see. I got to get one more on my talk track. And then on this final slide, I have provided the historical recast of the what's right here? Of the last two years. There we go.
For the updated trend just for trend analysis, to give you what the last two years would have been under the new format. All right. Most of the prior presentation sessions today, including the client advisory board, experiential component upstairs, have focused on the drivers of service and interchange revenue, growing partners, clients, and member accounts. Abhinav is now going to discuss the drivers and reporting of our custodial revenue. Abhinav, over to you.
Thank you, Danny. Like Tia, I have a couple of jackets myself, thanks to the higher interest rates. Hello, everyone. I'm Abhinav Dendukuri, corporate treasurer for HealthEquity. I've been with HealthEquity for about a year now. I had the privilege of meeting the HealthEquity team for the first time when I was negotiating one of the insurance partner agreements, which is now part of our Enhanced Rates program. Since joining the company, we have doubled our Enhanced Rates program capacity by adding three new insurance partners. I'm also super excited about the robust pipeline of large, high-quality insurance companies that are waiting to partner with HealthEquity. Last month, we unveiled this Cash Maturity Schedule. Today, we rolled that forward to the end of the fiscal year. Let me note a few important things on this slide for you.
First and foremost, as we mentioned yesterday, we ended the fiscal year with $15 billion in HSA total cash assets. Remember, these do not include the BenefitWallet assets that are expected to fund later this year. Second, you get the first look into the fiscal year 2028 deposits. It's a pretty typical year of deposits for us. You'll also continue to see the Beyond bucket grow as lion's share of BenefitWallet assets and our new account growth spurs the Enhanced Rates program. Last but not the least, under most economists' forward curve expectations, fiscal year 2025, 2026, and 2027 maturing yields are well below the new money rates that we expect for these maturing deposits. Let's double-click into each of these in the context of overall custodial cash management.
But first, let me share with you why we're so excited about the Enhanced Rates program. Enhanced Rates has been and will continue to reduce our variable rates exposure, improve the stability of our custodial yields, and increase the overall custodial yields itself across multiple business cycles. Let's dive deeper into each of these. First, our insurance partners allow us to make daily cash inflows and outflows. Unlike Basic Rates, where we have variable rate contracts to manage daily liquidity, insurance partners allow us to have implicit liquidity in our contracts. The result of that is we're able to reduce the variable rates exposure that we have in our Basic Rates program of about 10% down to 0% in Enhanced Rates. Second, with Enhanced Rates, we have improved stability of our custodial yields through extension of duration and through the implicit repricing mechanism that exists in these contracts.
With Enhanced Rates, we've extended out the duration to approximately 4.5 years compared to 2.5 years for our Basic Rates contracts. The term commitment remains around the 5-year mark. But while Basic Rates reprices at the end of the repricing at the end of the term, which is typically 5 years, Enhanced Rates spreads this out by repricing 10% each year. The result of this is improved custodial yields. And this is shown even in our backtesting regression analysis, where we observe lower standard deviations of expected returns for our Enhanced Rates program. And lastly, with Enhanced Rates, we expect higher highs and even higher lows. The average Basic Rates custodial yields are approximately Treasuries plus 10 basis points. Compare that to where Enhanced Rates' average custodial yields are. And you see about Treasuries plus approximately 75 basis points.
These are some of the reasons why Enhanced Rates is now our flagship custodial cash program and has grown to over 30% of our total HSA Cash deposits. Most of this growth has come from two sources: new accounts opened on our platform and acquired accounts from portfolio acquisitions. Beginning later this fiscal year, we will begin transferring HSA Cash in maturing Basic Rates contracts into Enhanced Rates unless the member in these contracts affirmatively opts to remain in Basic Rates. With this new initiative and continued tailwinds from our account growth and new acquisitions, such as BenefitWallet, we expect to see a mixed shift of about 10% from Basic Rates into Enhanced Rates for the next three fiscal years.
In closing, with the new Cash Maturity Schedule, our forward guidance to you around our overall custodial yield and our mixed expectations between Basic Rates and Enhanced Rates, we're providing you with tools and transparency to better understand and value our custodial revenues. Now, back to Jim.
Thanks. Thanks, Joel.
Can you hear me? All right. There we go. Thanks both to Danny and to Abhinav. So you've seen a lot. You've heard a lot. Hopefully, you learned a lot today. So I'm going to kick off the Q&A session with the first big question. No, I'm going to ask the first question. As a shareholder, what's in this for me? So as Jon noted at the very beginning of today's sessions, HealthEquity's demonstrated track record of calling our shot and then executing. So the team's given you many tools today to understand our growth levers, measure the success of our mission, and model our future financial performance.
So I'm going to share with you how I think about these tools and the multiple paths that they provide us to achieve our multi-year objectives, which really boil down to just one thing: in its increasing shareholder value. So first, we'll get some housekeeping out of the way. As you saw in the press release from last night and as we summarized here, we're increasing our guidance for fiscal 2024, which ended three weeks ago. We're raising both the bottom end and the top end of the ranges. Second, we're affirming the previously provided initial outlook for fiscal 2025. We expect to provide more detailed guidance when we finish our 2024 audit and report earnings next month. Now, finally, for what many of you've been waiting for, some new information from finance.
We're excited to share a three-year goal of doubling our non-GAAP net income per share over the next three fiscal years. These are the factors that we believe will help us achieve this goal. First, you heard Abhinav provide more detail around what we've been sharing for some time, that we expect the laddered custodial strategy and continued migration of HSA Cash to Enhanced Rates will provide at least three more years of rising average yields on our HSA Cash, assuming today's forward curve. We believe that these rising yields, along with continued growth in accounts and balances, will drive material increases in custodial revenue, dropping to income at relatively strong margins. The realignment of our P&L that Danny walked through now isolates custodial revenue as the only income statement line with a material long-term correlation to outside market interest rates, namely five-year Treasuries as our benchmark.
Factoring in our HSA Cash Maturity table, you should now have all the tools to model our custodial revenue into the future more precisely based on each of your respective long-term views on neutral rates. So next, we'll discuss the other two revenue lines. Interchange revenue is highly correlated to our overall account growth. So we assume that both our member spending behaviors and unit economics will remain relatively stable. So interchange revenue should vary primarily with our continued ability to grow new accounts. Service revenue growth is also driven by total account growth. In recent years, this volume growth opportunity has been partially offset by a decline in average service revenue per account. So as we've discussed in the past, an opportunity to earn higher custodial yields adds to some market pressures to reduce our per-member service fees.
While we believe this pressure will continue, we're aiming to bend the curve in this decline over our three-year period. You heard from my colleagues a number of new product enhancements designed both to strengthen our leadership position in our marketplaces but also to enhance opportunities for new service revenue streams. Finally, on service cost, our objective hasn't really changed in this area. We aim each year to reduce our unit cost to serve an account while still delivering purple service, remarkable experiences to our members, clients, and partners. In the past, we achieved these goals through traditional process re-engineering, scaling, utilizing our outsourced service partners where it makes sense, managing our people costs to the best of our abilities in the Lean Six Sigma sense of just seeking continuous improvement. Sometimes, we got it right. Sometimes, we missed the mark.
The mission remains the same. Unit costs have been coming down. They must continue to come down. With the changing preferences of our clients and our members, new technology advancements in the marketplace, and the early returns of the stepped-up technology investments redeployed from merger integration activities, we're thinking about continuous improvement in new ways. We're redefining purple service in new ways, utilizing chat, increasing member and client self-service capabilities online and through mobile, driving electronic communication over paper, increasing straight-through processing, overall process times, utilizing both traditional robotic process automation and increasingly through AI tools. We're leveraging stacked cards and soon mobile wallet to eliminate more plastic and postage and paper. Most of these enhancements have the benefits of improving our member satisfaction scores, reducing call volumes in our service centers, and manual interventions in our back office operations, ergo reducing service cost.
So we're attacking the same problems with new tools and meeting our customers where they are today and not where they were in the past. So boiling it down to brass tacks, as you've seen, we have multiple tools and pathways to achieve the three-year goal to double Non-GAAP Net Income per share. Can we tell you precisely how we're going to get there? Of course, not. But we believe we'll continue growing our top line in the low double digits. And we'll continue expanding our margins.
Thank you.
Thank you.
Abhinav, Danny. Appreciate it. George had his hand up first. You guys are going to be on the hot seat here. I think there's a lot of people that want to ask you some questions here.
You brought a bunch of Wall Street people here, Rich. And you're surprised when they want to ask the CFO questions. Jim, George Hill from DB, thanks again. I think I'm probably going to ask the number one question that most people in my seat are going to ask, which is, I can't model as fast as you could walk through the slides. But to the degree to which you can, can you break down the key assumptions and deconstruct the long-term growth algorithm for us a little bit? You talked about the low double digit top line growth. I assume that the assumptions around membership growth have not changed. You kind of gave us the map on the cash that gets replaced so we can model kind of what looks like the easy comp on yields. You talked about expense leverage.
I guess two things you didn't get to are below the line and inorganic. And is there any contribution that we should expect there? And again, as it relates to the big moving pieces in the growth algorithm to which you can frame many of those up with numbers, would be great.
Sure. Yes. No, I will not build your model for you on the stage here. But.
I was just going to say that that was a better question than Greg ever has come up with. That was a 15-part question. So that was very well done, George.
No. But fair starting point. We've not talked about the line items below. So obviously, yes, included in that number is our upcoming or previously announced acquisition of BenefitWallet. We expect those assets will start to come over later this quarter and into the next quarter. So those, yes, are factored in. And then I think we've spoken over the last couple of quarters about where we feel the sales and marketing line. We feel like we're in a good spot as a percentage of revenue. So yeah, I think those lines will continue to grow. But I think we feel like that's in a really good place. And then as we've also talked about on the technology line and development line, that we've sort of reached the high point as a percentage of revenue.
And what you're going to more see is redeployment of those dollars from merger integration to the tech and dev line. So you'll see a little shifting of the P&L. And then obviously, the merger integration line, which has come down quite significantly, will, we've still got a little bit of work to do on the Further migration. But you'll continue to see that line come down. Yeah. And then so no, no material market shifts. As you see, we'll see when the Devenir report comes out. The last one said the market's adding 2 million HSAs a year. We've added 700,000 in our last year. We'll see if that 2 million assumption was a little light or not in the next few months. But no, we've not really assumed any massive curve bending.
That we're just going to continue to keep winning more than our fair share to allow us to step into that goal of hitting 30% share.
Just no material inorganic in those assets?
No, not beyond the acquisition that we discussed. Yeah.
Hey, Jim. Thanks for doing this. Appreciate the clarity. One thing that a lot of investors have been asking me about, and I'm wondering if you could shed some light on, is just a little bit more about the mechanics with regards to the enhanced yield product, just in terms of the cash comes in from the investors or from the account holders on this date, how does it end up getting deployed with these insurance partners? How do you have that flexibility? How long are those periods of flexibility? What are some of the considerations that would be a structural change that we should think about? And then the 10% that you said that gets redeployed per year, is that per contract? Or how does that work?
Yeah. So I'll start with that one maybe first, right? So the objective we talked about is getting to 30% for this last fiscal year of the HSA cash in enhanced rates. So that's what we're refreshing. We're trying to get to 60% in the next three years. So 10%, 10%, 10%, is it going to be perfectly 10%, 10%, 10%? Probably not. But that's the objective. But to the first question, we have an algorithm that invests clients' cash. So we're not directing every dollar in, right, sort of eliminating this self-dealing, right, choosing the highest rate. That's not what we do, right? The algorithm deploys cash coming in. And members are attached to one financial institution or another. So what Abhinav was referring to is when if you are attached to bank XYZ, that contract is maturing.
What we're trying to do is move at that maturity, your dollars, into enhanced rates. So I threw sort of a negative consent concept. If you want to stay in the bank rates, you click the button and say, "No, I want to stay in the bank product." So the bank product is never going to go away, right? It's still going to remain a large part of our portfolio. It's just going to become a smaller percentage of the portfolio going forward. So yeah, it's up to Abhinav and his team to manage the total liquidity available in each of those pools so that we can manage the shift from bank to the insurance wrap product.
Greg Peters is next.
Oh, hey, Jim. Thank you. I like how they put the finance team up. And they only give us 10 minutes for Q&A. I know. But I think everyone here has dozens of questions to ask of you. I'll just focus on one. So in your comments, you talked about bending the curve for service revenue growth. So if you look over the history of HealthEquity, one of the metrics that we sort of track is just service revenue growth per account. And one of the features that becomes apparent is that trend has been down. So tell us why you're going to be able to bend that curve, especially with elevated interest rates and the fact that your competitors are going to be pushing service costs down to their customers.
Yeah. So I think two factors. So one, clearly, is that pricing pressure of unit revenue to a customer actually lower, right? And that is especially the case in HSA land, as, of course, we are earning more on the custodial line. The other part of that, average revenue per customer, is a big mix shift, right, toward HSA away from CDB. CDB is a higher service revenue per account product. It just is. And the main revenue stream of the CDB products is on the service line, very little relative custodial revenue in those products. So you're seeing the combination of the headline pricing pressure in HSA and the double of we're mixing more towards HSA, bringing that average down. And so really how we're going to bend it is through these new products and services that can add new revenue streams.
And then the final piece being, we're no longer declining in the CDB. As Jon said right in the beginning, we eked out a gain there. So bending that curve and growing the CDBs mixes up the average revenue per account.
Hi, Scott Schoenhaus from KeyBanc. Back to Enhanced Rates. I think you mentioned that you have a large pipeline from large insurance partners. As you execute on that pipeline and get more large insurance partners, what does that do to that premium that you guys denoted? Does it change the average premium higher? Does it skew it higher?
Yeah. So again, that's the sort of bilateral negotiation. So where we go in that area is dependence on our ability to negotiate a strong deal with the next insurance provider that joins the stable. Yeah. And certainly, if that number changes, then you'll hear about it and see it. But that's sort of where we're blending out today and how we model the business.
Hi, Jim. This is Jack Wallace with Guggenheim Securities. How should we be thinking about your exposure to the front end of the curve over the next couple of years, right? The enhanced products give you some flexibility. But the front end is still elevated relative to the five-year. I believe you historically have had about $500 million of cash exposed to the front end. How does that wind down? Has it already wound down? Just kind of help us walk through that. And.
Yeah. I'd say it's probably already in a good place. I think we were $500 million or so at Q3. And we're $700 million of HSA cash is where it stands today. So I think it will probably fluctuate around period to period because we're in this migration of we have to manage the bank liquidity and the insurance wrapped liquidity to get those migration timings right. So it will certainly fluctuate. And then the client-held fund side, that number you see on the balance sheet, that fluctuates quarter to quarter as well. So there's not going to be no exposure. But as the insurance or the enhanced rate product grows, there's less need to have that overnight liquidity bucket.
Thank you. Dan Smith.
Hi. Stan Berenshteyn in Wells Fargo. Question on the credit product. I think you said there's no balance sheet risk with it. It's being offered through a third party. How is it monetized? Can you just walk us through that?
Yeah. There'll be a rev share component for activating and usage.
Thank you. Jim. I know you didn't talk about inorganic as part of the strategy. But it has historically been a pretty big part of how we've been amassing share. And when I look at the top names in the different account holders, there's not as many large, chunky transactions left that you guys can do. Is there a lower limit to what you'd be willing to spend management time on for portfolio M&A?
What do you mean by the lower limit?
Is it one of those things where a smaller book of portfolios just be less attractive that you guys would rather just invest more organically?
No, I see what you mean. No, I think we view that the small ball acquisitions, I view as sort of semi-organic growth, right? That's part of the growth strategy, whether I'm paying the acquisition price, I view that as a commission payment that, unfortunately, Stephen's team don't get. The other side gets for having built that HSA portfolio. So no, absolutely, right? I think we'll be focused on continuing to bring in smaller blocks. Obviously, fiscal 2024, we acquired nothing, which was an unusual year. And we're getting done a big deal this year. But no, it will absolutely be part of the strategy.
We have time for one more question. Anybody? All right, then. Hey, Jim. Just following up on the enhanced rate product. I mean, you sort of highlighted in your slide, it's an extra 65 basis points above the bank product. Obviously, your members are going to want something for adopting that product. How does that extra 65 basis points get split between you and ultimately the customer? Because I think Jon has sort of also made the case that moving into enhanced rates would reduce the volatility around the movement in interest rates. But I would guess that that product is also vulnerable to volatility of interest rates. So I'm just trying to triangulate all those things so I can think about how it might impact the yield going forward.
Yeah. Yeah. No. So we certainly do share a bit of that back to the member, right? So I mean, you can see it in our results that the custodial cost line or BIPs paid to members increases a little bit as we mix toward Enhanced Rates. So they're certainly sharing a piece of the upside there. And yeah, sensitivity to rates. So both our bank rate product and our Enhanced Rates product, that T+10 and T+75, it's the same T that we're talking about there, 5-year Treasury. So yeah, as 5-year Treasuries move, both of them move up and down together. But in Enhanced Rates, in the regression testing and the backdating analysis that the team did before making this big push into the product, we've seen Enhanced Rates perform better through multiple cycles.
Or I should say this insurance-wrapped product perform better than bank deposits in these cycles. And that's why we're comfortable that we'll have higher highs and higher lows through the next business cycles.
Thank you, Jim. Let's give everybody a round of applause. Danny, Abhinav, Jim. Jim is not going away. He's going to come back up there. But he's going to be joined by Jon and Steve. So while we get that set up, we're going to take a quick lunch break. Lunch is down here. Hit the immersive experience. In your box, in your little gift box, there's also some AirPods that you'll be able to go and click on some QR codes and listen to some additional stuff. So make sure you're picking that up and take it with you. We'll try and get back here by a few minutes before noon, all right? Thank you.
I think being on a budget is fun. Seeing that you're saving money is really fun.
He's on my back all day, every day. He takes all of our monthly spending and divides it by how many days are in the month. Then that's our daily budget.
It's a complicated algorithm.
Yeah.
We're $80 under budget this month. We could celebrate. I was first introduced to HealthEquity from my mom. Initially, she got me all excited about IRAs and Roth IRAs. She then introduced me to HSAs. And I thought that was even cooler than the Roth IRAs. One thing I really liked about the HSA was that the money that I put in was tax-free. But also, the money that I gained from the investment was tax-free when I took it out. And that was really important to me because we were going to use that money pretty soon for the birth of our first child.
Every year, we just maxed out our HSA until we had enough. And then we felt comfortable to have our child.
It was fun to put money into the HSA. It was fun to see the investments grow. It gave us more flexibility and comfort in buying the things that we needed for our children.
Once that was set aside, we could relax more and be excited to have a baby and bring her home.
We weren't as worried about the financial side of it.
We have 2 girls, 3 and 1. Their names are Lennon and Gigi.
Which one do you like more?
I love giving them their first experience at something. I just made an igloo for my daughter in the backyard. With all the snow this year, we've got a track in the backyard where we sled. I've been teaching her how to snowboard this year, which has been really fun.
The one-year-old's just learning how to walk. She's safe for now.
When I am saving money and putting it in a place, the first place I think about is putting that money into the HSA. I like riding my bike because it's fun. I like rock climbing because it's fun. I think, weirdly enough, budgeting and saving for retirement is fun when you find these little tricks to make it fun.
6, take 1, Mark.
Okay. My name's Shaylee.
Go for it.
I faced a lot of pretty amazing phone calls in my career at HealthEquity.
I had a mom call in at 11:30 P.M. whose son had just been in a car accident. She wasn't able to get a hold of her insurance company. But she had an HSA, which meant that I was able to tell her that she would be able to use funds from next year to pay off the expense that she was incurring with her son and that she wouldn't have to be stressed about trying to find that money in their budget because they didn't have it. They weren't going to have it. I had just found out I was 20 weeks pregnant. I had just found out that my little boy was going to be born with club feet. I didn't want to work that day. But I decided to.
I think it was one of my first phone calls. It was a dad that had a daughter pass. He was closing her account. He just said, "Just be grateful for the time that you have with the people you love." It really just changed my perspective that day. We were able to just help each other out in this situation.
She called me and told me that she had about 24 hours to live. The only thing she wanted to do was to take care of all of this stuff so her children didn't have to deal with it after she passed. I had the privilege to be able to do that for her, to give her a little bit more peace before her time came anymore. I'd be crying, guys. Sorry.
Working with the people at HealthEquity has been the best job that I could ever hope for. I hope I never work anywhere else because it's fantastic.
I love helping members navigate through those really hard, challenging times.
Being able to support our members, to improve their lives, to meet them at this intersection of health and wealth and help them through their crisis, I love it.
As a parent of a child with autism, I often feel alone. You're in therapy all the time. Or you're on the phone advocating with doctors' offices or insurances. And it can become hard to relate to friends because they're talking about soccer practice and dance rehearsals and their easy vacation that they just took. And we don't really know that life. Autism, for us, has not only been very stressful, but it's also been an incredible financial strain on our family. I feel like our bank account is always somewhere around zero. Feeling inadequate because I can't pay for this treatment that I want. I can't pay to take my son to this specialist. It's kind of always been, "Where is the money coming from? How are we going to pay for this?" But it's been really great to have the HealthEquity HSA.
The amount is just automatically deducted out of my paycheck. My employer contributes to that amount. It carries over every year. We wouldn't be able to see those specialty health care providers and pay for those supplements and those alternative approaches if it wasn't for the HealthEquity HSA. It just gives us that flexibility to get him the care that has shown to be beneficial. He's not so tense, so anxious all the time that we can actually have more of those moments where he's smiling at me and we're laughing. Those are just gold. I think he's here to be a connector. He's here to shine light. He's here to love. I think he can teach the world so much. Our HealthEquity HSA has been a nice system and removal of something for me that I have to worry about.
I, frankly, don't know what I would do without it.
20 years ago, the HealthEquity journey began above a garage. It was kind of like this. There were only five of us back then. When we got together, a lot of people thought we were crazy, thinking that we could change health care in America by empowering people to connect health and wealth. But we really believed in that mission. We always did. Even though we had ups and downs, we would always think about Remarkable Purple Service. I remember one time when we got our first customer, someone said, "When do you answer the phones?" I looked down at these pagers on my hip. I was in my scrubs.
I said, "We're going to answer the phones whenever people need us." And so that started this culture of Remarkable Purple Service, knowing that whenever people needed us, we would be there for them.
So I think I first met Steve back in 2000. He was still practicing medicine in Tucson, Arizona. And then in 2002, we really started working in earnest on health savings accounts. And we were just fortunate to be able to have that legislation introduced at the end of 2002 and have it signed into law one year later and the impact that that's had on so many families. Come back now, 20 years later, and join HealthEquity as an executive and to lead the government affairs program and to create a new opportunity for more Americans to have tax-advantaged accounts to save for health care is just an awesome opportunity. I'm really excited about it.
To be a part of the advocacy in government affairs now, public policy, was pretty incredible. Never thought that I ever would want to leave product compliance. Started hearing about something we can do to advance our agenda. HSAs hadn't changed since they were enacted. There's a huge population of disadvantaged out there that we could actually support by advancing our priorities. So I'm very excited to be a part of that. I can't wait till we get across the finish line. I'm very happy to be doing this with you.
When I first met Steve Neeleman, like a lot of people who meet Steve, I was captivated by his energy for the mission of connecting health and wealth. And then visiting the then small HealthEquity team at its original office, you could see that wasn't just Steve. It was a team of people who were super energized about doing this. And later on, I joined the company and then came full circle when we collectively acquired WageWorks, a company my wife and I had founded back in 1999, 2000. Just been an incredible opportunity to pursue a mission that matters.
Joining HealthEquity as part of the Further acquisition back in November. What really excites me is just the alignment of the mission that Further had and the mission of HealthEquity.
Coming to HealthEquity via acquisition, some of the things that I'm most excited about for the future are just to be able to work more closely with the HealthEquity teams and deeper integration and collaboration. Really excited for that.
Steve called me nearly two decades ago, inviting me to be part of this mission. I'll never forget the passion in his voice for the mission. Connecting health and wealth for millions of Americans matters to me. It turns out it matters the same for a lot of others as well.
What's really remarkable to me is what started out as just a vision that somebody had in their garage has grown into an empire, an entire army of people that are activating thousands of employers through nearly 200 partnerships to bring better health care options and independence to millions of employees across the nation.
Our success or failure is 100% tied to how our partnerships go.
Partnerships are extremely important to us as we realize we can't do it all. We look to companies like HealthEquity and others to provide that expertise. But we also want them to share in our values.
We really felt that HealthEquity would be the best partner for us. Our experience in how they've managed projects and the team that would have been partnering with us.
Between HealthEquity and WageWorks, which is kind of when we jumped on with the commuter benefit as well, it really allowed us to find a partner that did really well.
Yeah, it's been great. Great to work with you guys.
We've spent the last few years at HealthEquity bringing an incredibly talented team together. And we talk about bringing technology together and integration and all of that. But the biggest piece is bringing the team together.
Yeah, I've been here at HealthEquity for 16 years now. I have to tell you that from day one, the secret to HealthEquity's success of being remarkable has always been our people.
Ever since I started at HealthEquity, I knew that the culture and the purpose of what we do to change health care in this country and to help people save and spend was a really important thing.
I honestly feel like I don't know any team members at HealthEquity who don't care about the members. We all care. We all are willing to help because we want people's lives to be better.
We are so grateful for our 120,000 employer clients and hundreds of health plan and other partners for helping us become the number one HSA provider in the country. But it's more important than that. Thank you for helping us connect health and wealth for millions of Americans. We know there are still millions of American families that have not had this opportunity. We will continue with you on this journey.
I think being on a budget is fun. And seeing that you're saving money is really fun. He's on my back all day, every day. He takes all of our monthly spending and divides it by how many days are in the month. And then that's our daily budget. It's a complicated algorithm. Yeah. We're $80 under budget this month. We can celebrate. I was first introduced to HealthEquity from my mom. Initially, she got me all excited about IRAs and Roth IRAs. She then introduced me to HSAs. And I thought that was even cooler than the Roth IRAs. One thing I really liked about the HSA was that the money that I put in was tax-free. But also the money that I gained from the investment was tax-free when I took it out.
That was really important to me because we were going to use that money pretty soon for the birth of our first child. Every year, we just maxed out our HSA until we had enough. Then we felt comfortable to have our child. It was fun to put money into the HSA. It was fun to see the investments grow. Gave us more flexibility and comfort in buying the things that we needed for our children. Once that was set aside, we could relax more and be excited to have a baby and bring her home. We weren't as worried about the financial side of it. We have 2 girls, 3 and 1. Their names are Lennon and Gigi. Which one do you like more? I love giving them their first experience at something.
I just made an igloo for my daughter in the backyard. With all the snow this year, we've got a track in the backyard where we sled. I've been teaching her how to snowboard this year, which has been really fun. The one-year-old's just learning how to walk. So she's safe for now. When I am saving money and putting it in a place, the first place I think about is putting that money into the HSA. I like riding my bike because it's fun. I like rock climbing because it's fun. I think, weirdly enough, budgeting and saving for retirement is fun when you find these little tricks to make it fun.
6, take 1, Mark. My name's Shaylee. Go for it. Faced a lot of pretty amazing phone calls in my career at HealthEquity.
I had a mom call in at 11:30 P.M. whose son had just been in a car accident. She wasn't able to get a hold of her insurance company. But she had an HSA, which meant that I was able to tell her that she would be able to use funds from next year to pay off the expense that she was incurring with her son and that she would be able to she wouldn't have to be stressed about trying to find that money in their budget because they didn't have it. And they weren't going to have it. I had just found out I was 20 weeks pregnant. And I had just found out that my little boy was going to be born with club feet. And I didn't want to work that day. But I decided to.
I think it was one of my first phone calls. It was a dad that had a daughter pass. He was closing her account. He just said, "Just be grateful for the time that you have with the people you love." It really just changed my perspective that day. We were able to just help each other out in this situation.
She called me and told me that she had about 24 hours to live. The only thing she wanted to do was to take care of all of this stuff so her children wouldn't have to deal with it after she passed. I had the privilege to be able to do that for her, to give her a little bit more peace before her time came. Any more, and I'd be crying, guys. Sorry.
Working with the people at HealthEquity has been the best job that I could ever hope for. I hope I never work anywhere else because it's fantastic. I love helping members navigate through those really hard, challenging times.
Being able to support our members, to improve their lives, to meet them at this intersection of health and wealth and help them through their crisis, I love it. As a parent of a child with autism, I often feel alone. You're in therapy all the time. Or you're on the phone advocating with doctor's offices or insurances. And it can become hard to relate to friends because they're talking about soccer practice and dance rehearsals and their easy vacation that they just took. And we don't really know that life. Autism, for us, has not only been very stressful, but it's also been an incredible financial strain on our family. I feel like our bank account is always somewhere around zero. Feeling inadequate because I can't pay for this treatment that I want. I can't pay to take my son to this specialist.
It's kind of always been, "Where is the money coming from? How are we going to pay for this?" But it's been really great to have the HealthEquity HSA. The amount is just automatically deducted out of my paycheck. My employer contributes to that amount. It carries over every year. We wouldn't be able to see those specialty health care providers and pay for those supplements and those alternative approaches if it wasn't for the HealthEquity HSA. It just gives us that flexibility to get him the care that has shown to be beneficial. He's not so tense, so anxious all the time that we can actually have more of those moments where he's smiling at me and we're laughing. Those are just gold. I think he's here to be a connector. He's here to shine light. He's here to love.
I think he can teach the world so much. Our HealthEquity HSA has been a nice system and removal of something for me that I have to worry about. I, frankly, don't know what I would do without it.
Hello, everyone. I think we're about ready to get started for the main event. We have Steve Neeleman, come on up. Jon Kessler. Where did Jim Lucania go?
I just saw him here. Oh, great.
He's on his way?
Great.
He's coming?
This is my chance.
Oh, we get chairs.
You get chairs. You get to sit and relax.
Someone asked an interim question. I'm going to ask about two or three questions about that.
About what? Okay. We're going to turn this over to the audience here and see if they have any questions for Steve Neeleman, Jon Kessler, and Jim Lucania. And we've got Greg and George up first. Greg.
Okay. Ha. I have the mic. Are they going to cut me off? Can I ask 20 questions in one sentence? Jon, can you—Jon, can you and Jim, I know you'll opine on this. When you go beyond what you've mapped out in terms of enhanced rates, 10% per year for the next couple of years, play the tape to the end. What is it going to look like? What is HealthEquity going to look like in five to seven years in terms of percentage of enhanced rates versus depository partners? And the other piece of it that I've been thinking about, and you guys know about this, is one of the reasons I've liked the traditional depository arrangements is because of the FDIC umbrella insurance policy that you have over—you're not taking—the account holder doesn't have credit risk.
So I worry about that when I think about your enhanced yield product. So those are the two questions in one. Sure. So I think as we talked about in the presentation, so sort of 80%-85%, think of the organic dollars are going into the enhanced rate product. That's how we got up to 30% for this past fiscal year. So that will continue. So at some point in the future, if we get to sort of 80/20 but that's quite a number of years quite a number of years out. But if we stay on this trajectory, that's where it will be. The sort of dollars in the bank rate product will probably continue to grow a little bit too if we can keep growing assets. So it's not like we're ripping cash out of the FDIC deposit. But we've made that trade-off, right?
We're trading the FDIC insurance for our ability to risk manage and portfolio manage our stable of insurance partners.
May I take the risk and compliance question?
Yeah, sure.
Greg, I think let me first say, this is something that, at this point, generally, as a board, we've made changes in our composition and so forth to assure that your representatives are providing appropriate oversight. That's translated into management. Generally, the way we've approached the point you're making is that we start with the guidelines that the Department of Labor uses in terms of whom it will permit to offer similar products in the pension environment. Then we kick it up a notch. The way we kick it up a notch is twofold. First of all, we kick it up a couple notches in terms of ratings and so forth that we will accept.
But secondly, importantly, we don't want to be a significant component of anyone's balance sheet. That's really where things can get problematic from my perspective. And we don't want to be the source of risk, if that makes any sense. And so what that does in practice is it takes, for example, all of the various annuity providers today that are private equity-backed or the like. Apollo has a theme, et cetera. It kind of takes those off of our board at this point. And what Cordell and Abhinav have been doing, we try never to mention Cordell because we're always worried about recruitment. But he's back there quietly sitting in the back. What they've done, I think, very well over the growth of this program is they've provided us a pretty clear view of what the premium is relative to quality.
And look, at some level, we've just chosen to focus on quality. And we've been fortunate to have market response. But it's something we want to be aware of. We don't want our members to be taking undue risk. But we also – this is, it was interesting. The Further acquisition that we did was essentially using this program exclusively, except the insurer was a state-regulated sub of the parent. So from a credit quality perspective, not ideal. And we learned a lot about how you manage that, how you manage it with the clients, and so forth. And it's been so far quite successful. So I think if Abhinav were here up on this stage, he would also give you a lengthy treatise on the stability, particularly to things like deposit events that we saw last March of these kinds of insurers relative to participants in the banking system.
But as you say, at the end of the day, you have the federal government backing you there. So that's the approach we've taken. We think it's the right approach. We will keep monitoring it. And you should feel confident that it's something that your representatives on our board monitor extremely carefully. George is next.
I've got one for Jon and Steve here. Wow, this mic seems loud. So you guys have mapped out a great what I would call 3- to 5-year roadmap. When I think about the company, I think you guys have a third market share. What is your core offering? You guys did the WageWorks transaction, which moved you into other consumer-directed benefits. Jon and Steve, what I want to think about, and this kind of dovetails on Greg's question, is what's next? What is the next natural adjacency? Or what is the next sizable market that you guys go after? You talked a little bit about the price transparency tool that you're building into the app. Benefits navigation might seem like an appropriate end market given where you guys overlap right now.
As investors look out over the next several years, if we think about where you might largely deploy capital outside of the core businesses that you guys are already involved in, I guess, can you talk about what looks attractive from a greenfield perspective or from an M&A opportunity perspective?
Why don't I start? How does this work? Does it like when it knows somehow it knows I'm going to talk, and then it is this AI? What's going on? Or just I? It's working. Let me start. And then I want you to kind of I think you'll I'm going to give the typical Jarvis side of this. And then Steve's going to give the Iron Man side of it, OK? I think if you get nothing else out of today's event, you should understand that something that knits together both everything we've talked about plus Jim's commitments in terms of which are our commitments in terms of increasingly focusing on what am I supposed to call non-GAAP business? Non-GAAP net income per share. You're welcome, Michael, et cetera, is that over this period of time, we see the returns to deployment of capital in two areas.
The first, as we've said before, is portfolio-type transactions. The second is to largely internally developed innovation. We'd rather spend money working with our clients on their needs right now than thinking about kind of horizontal transactions. One big reason for that and the two examples you offer, George, are perfect examples. Our conclusion is, I'm sure this is not going to make friends with everyone, maybe everyone in this room. I think generative AI is going to eat large chunks of particularly consumer-facing software applications and particularly those that kind of work through these sort of businessy channels. To be more precise, I think generative AI is going to eat transparency. I think generative AI is going to eat navigation.
And so when you look at what we're doing, what we're trying to do to some extent is say, well, the good news is we're not in those businesses. So how can we get ahead of that, solve 90% of the problem with 10 or get 90% of the opportunity at 10% of the effort and 20% of the cost for our clients? And some of that will be done as we're doing. I mean, a lot of that will be done with partners who are similarly not invested in what I might call the legacy infrastructure of those businesses. So that's all my Jarvis Debbie Downer way to say we are going to deploy capital over this period principally to growing at the edges of the businesses we're in. That doesn't mean there won't be new revenue streams, et cetera, et cetera, right?
But it does mean they're going to be very adjacent. And they're going to be primarily developed through the creation of new businesses rather than kind of we go buy something, and now we're in something else. But I think what Steve can hit a little bit better than I can, certainly more inspirationally than I can, is where the real interest is and where that interest kind of collides with what our passion is and so forth. So let's go there.
Sure. Thanks, George. And thank you all again. When I think we're cruising towards spending $3 trillion a year on health care in this country, $3 trillion a year. And when you look at all of the estimates, people think that probably between a third and a half of that doesn't need to be spent, right? Either because of fraud, waste, and abuse or because an ounce of prevention should be worth a pound of cure. And we're not getting people to do their colonoscopies and get a polypectomy, which, by the way, former practicing general surgeon, all colon cancers start with a polyp. News flash. Polyps can be removed in about five minutes. Colon cancers and metastatic colon cancers and the sequelae that come from that is a big, expensive problem.
So if that's in the half of $3 trillion a year by helping people just reminding them, go get your colonoscopy. You're 45 years old. I'm 55. Time for another one. Just reminding people. Or get your hemoglobin A1C under control. That's one of the ways we can drive this down. And we talked a little bit about that earlier. So, George, I think the answer is kind of beautiful in its simplicity. It's just do more of the same. It's empower health care consumers, right? And we've been empowering them for many years by helping them understand the benefits of a tax-advantaged account. And then we started empowering them more and teaching them how to invest. And then this remarkable thing happened.
Once they realized that even though HealthEquity makes less money on investments you all know that in this room significantly less when they start to invest that next marginal dollar they start to put more money into their HSA because they realize this isn't an FSA, right? This is persistent. It's personally owned. And it's portable into retirement, to my next job. And then they start putting more money in it. It creates this virtuous kind of cycle that just keeps going. And so now it's like, OK, we kind of got that going. Not for everyone, but for a good portion of our population, they're starting to invest. They're starting to understand it. They're putting more money in. Now let's help them spend money better. Let's help them understand their benefits.
Let's help them understand that their employers are offering them incentive dollars into their HSAs or in other accounts just to do stuff that will save and improve their life. And yet they don't do it. It's crazy. I was talking to one of the experts, I think, in the wellness world. He says that most wellness programs have less than 10% adoption. Our CDH Change program at HealthEquity that we mentioned earlier today, 58% of HealthEquity teammates, not perfect, get some money through the CDH Change program. It's over 10 times what most wellness programs have. How do we expand that out to the world? I want to read just one quick thing, as I do often to our product and technology teams.
We are a leader and an innovator in the high-growth category of technology-enabled service platforms that empower consumers to make health care saving and spending decisions. Our platform provides an ecosystem where consumers can access their tax-advantaged health care savings, compare treatment options and pricing, evaluate and pay health care bills, receive personalized benefit and clinical information, earn wellness incentives, and make educated investment choices to grow their tax-advantaged health care savings. That was written 10 years ago.
That's the first lineup. Tell them what it is.
The first two sentences in the box in our prospectus, S-1, written June 10th, filed June 10th when we started going out in our Test Waters meetings. Do more of it. But now the beauty of it is that we did the proverbial kind of cobra or whatever swallowing the chicken. And we had this digestive process over the last 5 years with a bunch of acquisitions and COVID and all that stuff layered on top of it. But now I'm telling you, as someone that's been here for 20 years, I believe in my heart and soul that when Eli Rosner, where are you, man? Is he in the house? When that guy back there says that, "Steve, we're not going to be spending 80% or 90% of our technology spend on integration anymore. We're going to flip the script.
We're going to spend 10% or 20% or 30% on kind of maintenance and dealing with more of the maintenance stuff. We're going to be spending a bigger chunk on actually doing what we said 10 years ago in those first two lines." Those are two sentences in our S-1. I believe it. That's why I'm still here. That's why I'm still here, because I believe it in my heart. I believe it in my soul. And when we say we save and improve lives by empowering health care consumers, that's what keeps me coming to work every day. Or I'd go do something else.
Next question is Stan.
Hi. Stan Berenshteyn, Wells Fargo. Couple of questions, business strategy. First, so you're marrying bidirectional data with your digital wallet. You have an opportunity to steer members toward qualified services, products, clearly a value add for members. Is there a value add opportunity for you to monetize that steerage?
We already do. Well, everything you saw on that topic is live in production today and contributing to what is today reported I guess, actually, now it contributes maybe it always has to the service line. So the short answer is yes. The slightly longer answer is that what we have an opportunity to do is two things. First of all, increase utilization, which is a lot of what was being talked about here. And I think, secondly, diversify what's being offered to whom and when. So are we going to sell does it pay? People say, "Why don't you have a data business where you go sell stuff to" it doesn't pay. It's not enough money in it for the in Yiddish, the tsuris involved. But by the way, did anyone catch Steve Lindsay speaking Yiddish earlier today? That was funny. With Eli on the other side?
Well done. But there's an opportunity to diversify the sources available. So, I'm going to use an example. There's a company. I was in the shower this morning. And I'm listening to CNBC. And they have to go to commercial. And they go to commercial. And the company that I'm not going to name because we are talking to this company but is a company that is in, let me say, the eyewear business. And it's the middle of, what is it, February. And they're talking about, oh, you can spend your FSA and HSA dollars, right? What tells me is their tools for utilizing the channel of FSA, HSA, et cetera are pretty poor. We can provide better ones. We can bring those kind of people onto our platform and continue to benefit from that.
The short answer was yes. The longer answer is yes. Do I think we should be building a business based on steering people to A over B over C? Not necessarily. But I think we can build a meaningful component to the business based on the idea that there are an increasing number of paid applications that want access to consumers as they're thinking about health care and where they can bring value. We can help them do that and, at the same time, help our members and, at the same time, help our clients by making what they have to do more affordable.
That's helpful. Maybe just a quick follow-up. On the client side, so you have the benchmarking tool. Maybe I missed this. But is this an optional add-on that you're monetizing? Or is it just a differentiation that you're just pushing out to everybody?
I want you to stay tuned on that because the answer, to some extent, is both. We do want to get this in the hands of particularly as it really gets going, we do want to get it in the hands of some of our clients who have been very good to us in terms of providing feedback in its development very quickly. And we'll obviously do that at no cost. But we do believe that and again, sort of think about all this is we would not be the first company to say, hey, there might be an analytics business in what we do.
I think if you look closely at both our people ads recently and over the next few months and also look at the products, what you'll see is that we do have a view that there is an analytics opportunity both for our clients but also there are other parties. Think about some of these brokers and the like. And I'm using the word broker. But let's just say consultants, broadly speaking, in the benefits environment who are basically blind as to what the consumer experience financially with all of their health benefits designs actually is. We can help them see. So I think there is some opportunity there in terms of what you might think of as analytics. And you'll probably be hearing more about that from us. Over here, Mark, is next.
Thanks a lot for doing this today. Obviously, really impressive in terms of the growth over the last 22 years across the organization. I'm wondering if you can talk a little bit about you've obviously gone through your own development. You continue to gain share within the space. I'm wondering if you can talk a little bit about how you think the competition is going to evolve over the next 3-5 years? How should we think about that in terms of who are going to be the major players? Could there be some new entrants that could come in that could disrupt things? Or how exactly are you thinking about that? And to what extent you've got all sorts of initiatives in place to not only continue your market share gains but maybe even accelerate them? But do you see anything that might change that trajectory?
You want to give your thoughts?
Yeah. Thanks, Mark. I think that, look, we've certainly seen these waves of competitors come. They'll keep coming, right? I mean, we tend to be a little productively paranoid around here. That's why we don't do these more than once every three years because oh, once every five years. Well, we've done three in 10, right? You said three in 10?
Had 1 in 5 and 10.
OK, 1, 5, and 10. So this is our third. And you're right. Every 5 years.
Don't get your hopes up.
Don't get your hopes up. But opening the kimono is, I think, important in some respects. But it also makes us all a little nervous, right, because everyone's looking at us. How can we do that? And so the waves, just to remind everyone, start out being banks. We were competing against banks. When you look at that Devenir report, you'll note that the banks have left the space largely. Not all of them, but a lot have. And you've gotten into more of these companies that are more kind of middle-type companies, TPAs, and stuff like that. But we certainly have the three big-name competitors. And so we're going to always have to be on our game when you've got a Fidelity coming in and trying to link it to their 401(k) offering. Jim and I were talking about this yesterday. They make a big deal about it.
But we think, really, it's how do we kind of really drive this through that this is a health benefit. And that's who we're selling to. United's going to be united in what Brad Bennion calls their walled garden, right? They've, for years, tried to sell to other health plans. And most health plans don't like that. They can buy a health plan. And that becomes a competitive issue for us. And so we've got to keep our eye on that. And then we've got these technology folks that have come in and said, look, we can help you, Health Plan, do all of what HealthEquity is doing for you. But you can somehow keep either the economics or you can keep the consumer engagement better and all that stuff.
As we pointed out earlier today with some of our Blues partners and things like that, it hasn't gone so well for them. We have other health plans that have come back to us even in the last few months and said, look, we made this decision to try and do it ourselves several years ago. It's not working out so well. The other benefit from that perspective is not only that they can just outsource this to us and we take care of it is that now they're in these competitive RFPs when a big kind of a Willis Towers Watson, or Mercer or somebody comes in and bids it out. They say to a health plan so just to give a competitive set, we're bidding to a large logo, how many HSAs do you have?
Even a big health plan, if they were doing it themselves, might have 300,000, 400,000 HSAs. They're like, HealthEquity added twice that last year. They're doing it in scale. So look, we will never, ever say, under this guy's watch or as long as I'm around or mission accomplished because these folks are coming at us. We know that. But I do think, Mark, that if we can continue to do what we've said before it's kind of a battle cry, connect health and wealth better than anyone else in the industry, we can ward them off.
Now, I will turn to Jon because Jon's a prolific studier of the industry on who he thinks would be the next kind of emerging foe other than just recycling through banks trying to get back into it, benefit enrollment companies trying to get back into it, technology companies trying to DIY it with health plans. But Jon, any other thoughts? Who do you think? I mean.
Amazon? I mean, are they?
I don't know. I think two things. First of all, what's really remarkable is if you look at the top 20 providers today, 19 of them were in this business when I arrived at HealthEquity, OK? And that includes all of the largest ones. The names may have changed. It might be a different owner, right? But it's the same organizations. And there are a number of reasons for that, mostly that boil down to that distribution is complex. And the regulatory environment is complex. It turns out you can spend $60 million and actually create an equivalent of it's incredible, by the way. You could spend $60 million and create an LLM that will be competitive with ChatGPT 3.5. You cannot spend $60 million and create an HSA-competitive company, which is, I mean, the first statistic I didn't know until very recently. And then I saw it.
But the second, I've known for a long time. That having been said, I think to understand our strategy with regard to our competitors, we fundamentally take the view that scale and a level of capital intensity are our friends. So when Nikki Brown, who works on Steve's advocacy team and goes out and works with the regulators on more kind of regulatory issues, when Nikki's talking to regulators, her shtick isn't, oh, regulation's bad. It hurts our business, whatever. It's, what do you want to do? Let's show you how we can do it. Well, the reason we do it that way is not just to be nice people. But it's because as long as we can do it, regulation doesn't hurt us. It helps us because we have the scale to deal with it. The Fiduciary Rule is coming back. The Fiduciary Rule doesn't hurt us.
It helps us relative to many of our competitors because they don't want to be involved with it, right? HIPAA helps us. The movement to AI and the development of data hubs and all of the issues around those, both technology scale, help us. They don't hurt us. Now, do I believe that, ultimately, our largest competitors I think about United and Fidelity, they have the capacity to do the same things we do? They certainly have more money, right? Do I think that, ultimately, their strategic interest is in doing precisely that? Not really. It could be. And even if it was, great, right? Let's be winners together. That's fine, right? So if I had to simplify what our competitive strategy is, ultimately, we want to do. It turns out that empowering consumers of health care is complex and somewhat capital intensive.
That is great for a market share leader that wants to continue to grow its market share. It happens to also conveniently enough align with our mission as well as what our clients and our members actually want us to do. That's the way I think about it.
Next question is Greg.
I got a follow-up. They cut off your mic for that comment. Thank you. They've learned. So capital management, in your previous answer, you said you wanted to for dollars, you wanted to invest in portfolio acquisitions. You also said you wanted to invest in new capabilities for existing customers. Yet if we look at your financial projections and adjusted net income per share, non-GAAP, we come up with some free cash flow numbers over the next couple of years that look pretty promising. In your balance sheet, your cash piece on your balance sheet's going to grow. And yet you don't need all that cash. So can you remind us of your views on deleveraging, paying down debt, and/or two, what are you going to use with the excess cash that's sitting on your balance sheet that you don't need?
Yeah, yeah. I think no new news to report here versus what we talked about a couple months back. So yes. But don't forget the acquisition. The before-mentioned acquisition has not happened yet. So we will be leveraging, then deleveraging, then generating significant amounts of free cash flow. So I think the short answer is sort of stay tuned in that area. But yes, of course, as we talked about in our presentation in San Francisco, we see a spectrum of uses of excess capital. We'll fund the business. We will pursue accretive acquisitions. And yet paying down low-interest-rate debt is pretty low on the priority list once our leverage is sort of back below 2x, 1.5x. And then there's one remaining use for the capital, which is returning it.
I think there's a little time before we're going to have that discussion just given the transaction ahead of us.
Stephanie's next.
Thank you. Thank you. You talked about how all the top names haven't really changed, Jon, of the different large folks running HSA portfolios. It's pretty uncommon for not just health tech, but let's just look at all IT services and tech industries for there to be a Big Four competitors plus a top 10. Do you think this is a unique industry and that that is going to continue to persist? Or are we going to have some sort of mass consolidation coming at some point in order to go and change that dynamic?
I'll give an uncharacteristically short answer. I think it's an industry where you have, on the one hand, low barriers to "entry" and high barriers to success. So the result is you have this long tail of people with very small numbers of accounts who have no capacity to grow beyond that. And at the same time, as I suggested earlier in my comments, scale's going to reward folks who have the capacity to either have something in one form or another to invest in differentiation, whether that differentiation is distribution or product, what have you. So I'm not surprised by that structure. I suspect we're going to continue to consolidate at a modest pace over the course of the next five years or so. And then we'll see.
Maybe just to add, Jon, I think people always say that health care and banking is local, right? And I think it mirrors a little bit the league table of the banks in this country and health care organizations in this country, a little bit. I mean, it's kind of the intersection of health care and banking where we live. And that's one of the reasons why we focus so much on having these fantastic partnerships in, I think, over 30, maybe significantly higher than that, states where the Blue plans are. We have these wonderfully vertically integrated systems that we help them compete against the national Aetnas and Uniteds and Cignas and things like that of the world. And then we have this fantastic coopetition where we actually get data exchange from United and Aetna and Cigna and Kaiser and things like that.
I appreciate the question if you compare it to other industries. But if you compare it to the industries in which we kind of live, health care and banking, I think the league table looks pretty similar, three or four bigs and then a lot of important regional players that are serving a lot of Americans. Is that fair or not?
I just think you don't want to get caught in the middle. That's all. You don't want to be, with apologies to some folks in this room, being a regional money center is going to be really hard. And being number 5 or maybe 4, certainly 6, 7, or 8 in this business is going to be hard.
You want to go get in that fresh powder, man? There's like 20 inches up there sitting there, waiting, begging for you.
While you're thinking about the questions, just so you know, Draper isn't known for its Uber abilities. So if you're thinking about taking an Uber or a Lyft or something like that, you might want to give yourself a few extra minutes for them to get here. Any other questions? We'll be around. Happy to answer any other questions. But thank you, Jon, Steve, Jim. Thank you very much. Thank you all for coming. We appreciate you taking time to be with us. Enjoy the space and the immersion exhibit as well. Thanks.