A Black woman’s startup that specializes in health care payments raised $6.2 million in venture capital funds last year.
Ami Kumordzie is a John Hopkins- and Standord-educated biochemical engineer and businesswoman who founded Sika Health.
By using Sika, patients can “hack”’ their health savings accounts to buy wellness products — everything from vitamins to fitness equipment — tax-free.
What Sika Does
A Flexible Spending Account (FSA) or Health Savings Account (HSA) allow people to contribute pre-tax dollars that they can spend on medical expenses. But many people don’t understand how to spend the money from these accounts to reduce expenses.
An HSA is a long-term saving structure that grants an employee the opportunity to save money that can be later used to help them pay medical expenses – essentially, it is a personalized health investment. On the other hand, an FSA is an employer-controlled, tax-free savings account for out-of-pocket or dependent care costs such as prescriptions and devices. It is ideal for those who make frequent trips to the hospital or pharmacy.
Kumordzie realized this when her mother lost her job during the pandemic. Her mother had an FSA with $2,000 that would expire at year-end. Her mother didn’t know that there was a wide range of products she could spend it on, plus the process seemed complicated.
People like Kumordzie’s mother don’t know what products qualify for payment through these accounts; and often times they first need a doctor’s approval.
Annually, an estimated $25 billion in FSA and HSA funds goes unused, and about $8 billion in FSA funds expire annually, according to research firm Aite-Novarica Group.
Money.com reported that about 40 percent of FSA holders lose some of their contributions because they need to use their benefits before a particular deadline. Consumers with high-deductible health insurance plans are HSA holders, and sometimes they have unused money rolled over to the following year.
According to Finance Zacks, the average financial institution offers an HSA with a yearly contribution of $3,500 for individual coverage or $7,000 for family health expenses. As for HSA holders who are 55 or older, the maximum contributions are $4,500 for an individual and $8000 for a family.
FSA contributions are limited to about $2,700 a year, but, depending on the employer, it could be a lower amount.
Kumordzie helped her mother spend the money so she didn’t lose it entirely, and this sparked the idea for Sika, a fintech marketplace that allows customers to pay for qualified products at the point-of-sale using FSA and HSA funds.
Sika has attracted companies that sell health-related products but have trouble reaching customers’ FSA and HSA dollars because of the multitude of pain points associated with the process.
“There’s a real opportunity through FSAs and HSAs to encourage consumer-directed healthcare spending and healthier behavior,” Kumordzie told TechCrunch. “That’s really the missing link, frankly. I think in our healthcare system, people have come to associate healthcare with something they’d pay for after the fact, rather than something to invest in proactively.”
On Jan 24, 2022, Kumordzie’s Sika Health, in its first and only seed round, secured a total of $6.2 million in funding with only eight VC investors, Crunchbase reported.
Although it is not public how much each investor gave Sika Health, San Francisco-based Forerunner Ventures is reported to be the leading investor. Forerunner Ventures is a VC with a reputation for investing in early-stage projects to understand the mindset of the modern consumer.
The fintech application was founded in August 2021, according to Kumordzie’s LinkedIn profile.
Her mission when she started Sika Health was to empower families by helping them understand how one’s savings work and how to use them.
“[M]ost people struggle to understand or spend their HSA or FSA accounts because of the complex regulations involved,” Ghanian-born, New York-based Kumordzie wrote on LinkedIn. “The work it takes to hoard receipts, request reimbursements, or keep track of the ever-changing list of what’s eligible…. not to mention getting a doctor’s note just to make certain purchases… a ‘Letter of Medical what-now?'”
Before Kumordzie started her own fintech business, she had a decade-long career in marketing, healthcare, and consulting.