Easy Money

For consumers, insurance and paperwork seemingly go hand in hand, especially when it comes to flexible spending accounts (FSAs). This stigma prevents consumers from obtaining all of the benefits available to them, and it hinders insurers from cross-selling products.

Hartford Life (Hartford; $210.1 billion in assets), a division of The Hartford Financial Services Group, made a move to change that with Flex Convenience, an FSA program made available through partner Medical Group Insurance Services (MGIS; Salt Lake City). The program offers The Hartford's group life, accident and disability insurance customers the use of debit cards to manage their FSAs without mounds of paperwork.

"We've taken FSAs to a different level with debit card technology," says Rob Berman, director of product management, Group Benefits Division, Hartford Life. "With consumers facing increasing healthcare costs, we are providing a way to really help pay for some of those."

This high level of convenience is maintained by MGIS through a technology network supported by MediBank (MBI; Waltham, Mass.). MGIS uses its Admin-System proprietary software to administer Flex Convenience. Once a merchant swipes the debit card, the transaction passes though the MasterCard (Purchase, N.Y.) or Visa (San Francisco) network to MBI, where the transaction is processed and authenticated to verify eligibility and availability of funds; each card is pre-programmed to identify qualified merchants.

Once the transaction is approved and the user's account is debited, data is transmitted to MGIS for further verification. Security is maintained on multiple levels: Data is encrypted at the point of sale and transactions are processed through a secure network and stored in a password-protected database. Any transaction information is accessed through a secured log-in with multiple authentications.

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Since rolling out the program, The Hartford has doubled FSA participation, from 15 percent to 30 percent, according to Berman. Additionally, typical contributions, which were around $1,000 per participant, have gone up 30 percent to $1,300. "Some people in our sales organization who did not participate in the pilot asked if they could sell this product to some of their clients," Berman relates. "So we were having people come to us when they heard this was available."

The challenge is educating employers and employees, Berman notes, but the benefits of the debit card program are clear. In addition to lowering processing costs, "It has positioned us in the marketplace so that people understand that we offer a full suite of products," he says. "And it is a way for the consumer to put away money pre-tax, allowing us to increase the amount of coverage that employees are buying on voluntary products. With this cost savings, they can shift those dollars over to spending on benefits that will help them and their family."