A Debit Card For Your Health?

In tandem with the trend toward consumer driven health plans, employers are increasingly offering their employees an array of healthcare cash accounts, which allow employees to put aside pre-tax money to pay for healthcare expenses. Employees can use money from their flexible spending accounts (FSAs) or health savings accounts (HSAs) to pay for eligible expenses at physician and dental offices, pharmacies and vision service facilities. However, many small business owners have been slow to jump on the new healthcare bandwagon, citing lack of time and the hassle of processing paperwork as main reasons for not participating in these plans.

A Debit Card For Your Antibiotic?
A great, time-efficient supplement to these plans, for both employers and employees, is the benefits debit card. A benefits debit card works just like a “regular” debit card, except that instead of being linked to a checking account, the card is linked to funds that employees have set aside in their healthcare cash accounts. With a benefits debit card, employees can electronically access funds in their FSAs and HSAs to pay for eligible expenses in the same way they would use a “regular” debit card. The card works just like a stored value payment card, with the respective contribution amount loaded onto the card. By utilizing merchant category codes and other selective filters, the card essentially is “turned off” to not work at ineligible locations such as gas stations; yet programmed to work at such appropriate locations as pharmacies and doctor offices.

Cash Card Technology, Made Simple
Advanced debit card technology enables a “real-time” account balance: the debit card system electronically alerts earmarked accounts to fulfill the daily swipe totals on a real-time basis.
The employer’s third party administrator (TPA) has interlinked their administrative system with the debit card system to electronically approve those “consumer swipes” that meet their predetermined eligible criteria or formula of approved swipes. When the swipe occurs outside the pre-determined “swipe parameters, the TPA has a process to capture the data and either deny or approve the claim.

Benefits to the Benefits Card
Benefits debit cards eliminate the time-consuming paper-based healthcare expense reimbursement process that is traditionally associated with healthcare cash accounts. Benefits debit cards essentially eliminate the hassle of paying out-of-pocket, saving and submitting receipts, completing and mailing claim forms and waiting for reimbursement and cashing checks.

Workers Come On Board
Prior to the introduction of the first benefits debit card in 1999, enrollment in FSAs was stalled at an average of 10-12% with an average contribution amount of $880 annually. The introduction of benefit debit cards has resulted in significant year-after-year increases in enrollment. It has been shown that employee participation in healthcare cash accounts increases an average of 30 to 50 percent when these accounts are offered in conjunction with benefits debit cards, with some employers achieving over 100% increases in one year. Additionally, the amount of dollars contributed to these accounts also increases from year to year. This increase in contributions to healthcare cash accounts is especially valuable to employers, because for every dollar contributed to a pre-tax benefit account, the employer does not pay FICA taxes. Therefore, by offering benefits debit cards to their employees, the employer saves money.

Employers’ Cost
Employers can obtain a benefits debit card program through a TPA or claims processor. The TPAs deal directly with the “debit card” companies to make this service available to employers. The debit card software provider charges a cost per card to the TPA, with the cost decreasing as the number of cards increases. Some TPAs will carve out the debit card fee and either pass it along to the employer or subsidize the cost, which will typically range from .75 to $1.50 per debit card.

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