Neobank tackles problem of emergency medical debt

A challenger bank is offering supplemental health insurance and other health-related benefits to customers who are uninsured or underinsured.

Better Financial was inspired by a co-founder’s experience with the medical system after he suffered an injury. Saumik Tiwari had to go to the emergency room after getting pushed in a college rugby game in 2018, and he couldn’t pay the deductible for the visit and X-rays required to rule out a broken rib. His bill went to collections, which lowered his credit score.

Saumik and his brother, Kaushik, co-founder and CEO of Better, had previously started Truedime together in 2017, an insurance company for freelancers and international students. In 2019, the two turned their attention to building a challenger bank that would address medical debt.

“Focusing on medical debt and health care allows us to stand out,” says Better Financial CEO Kaushik Tiwari (left), shown here with his brother and company co-founder Saumik Tiwari.

The New York-based digital bank will offer three free services to customers who sign up for direct deposit and actively use their debit cards:

  • Up to $5,000 in accident insurance coverage per year, underwritten by AIG, that can offset the costs of ambulance rides, emergency treatments or hospitalization
  • Discounts on prescription medication that are paid for out of pocket through the prescription savings program RxSaver
  • Medical debt negotiation, handled by a chatbot and Better Financial staff.

These privileges, referred to as the Community Safety Net, will be funded by interchange revenue for now and only cover accidents, such as an injury caused by falling off a bike. But the founders plan to add paid coverage over time, such as group policies that cover illness or pets.

“It’s a differentiation strategy,” said Kaushik Tiwari. “Focusing on medical debt and health care allows us to stand out.”

There are 10,000 people on Better’s waitlist, and the app is also open to public sign-ups. Its target audience is people who are uninsured or underinsured, meaning they have high-deductible health plans and can’t afford to pay the deductible.

According to the Commonwealth Fund, a private foundation that promotes health care access, 43.4% of U.S. adults ages 19 to 64 were inadequately insured in the first half of 2020, meaning their out-of-pocket costs over the previous 12 months exceeded a certain amount or their deductible constitutes 5% or more of household income.

Better requires no minimum balances and doesn’t charge monthly fees for its checking account. If users disconnect their direct deposit or stop using their debit cards for a period of time, Better Financial will send reminders that their benefits are at risk of being cut off.

The Bancorp Bank, a $6.2 billion-asset financial institution in Wilmington, Del., provides banking and debit card services.

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