Driven on by favorable regulatory rulings, health insurers are offering debit and smart card options to consumer-directed healthcare plan members.
IRS rulings in May and September, respectively, have authorized the use of debit and credit cards by flexible spending account (FSA) and health reimbursement arrangements (HRA). "IRS approval has certainly opened up avenues for debit and credit card vendors," comments Greg LeGrow, a Boston-based research manager with First Consulting. "Demand for products has skyrocketed."
Humana Inc. (Louisville, $4.3 billion in assets) is working with vendor Evolution Benefits (Avon, Conn.), MasterCard International (Purchase, N.Y.) and BANKFIRST (Sioux Falls, S.D.) to develop a combination health plan ID and payment card to access account funds. The HumanaAccess MasterCard, issued by BANKFIRST and powered by Evolution's "Benny" Card technology, allows members to access funds set aside in an FSA or HRA by swiping their card at the provider's office or pharmacy, according to a Humana statement. Funds are deducted directly from the member's account, eliminating the need to submit forms and wait for a reimbursement check.
Hartford-based Aetna ($40 billion in assets) has developed a point-of-sale "Autodebit" card for use by FSA participants in the payment of their portion of eligible pharmacy expenses. Scheduled for a Jan. 1, 2004, rollout, the card can draw pre-tax funds from a plan participant's FSA when an Aetna-affiliated pharmacist connects to Aetna's pharmacy system, according to Carollynne Weidler, head of the carrier's FSA team. "If the balance is sufficient, the amount is deducted from [the participant's] account," she explains.
In addition to easing the transaction for both participant and pharmacist, the interface with the pharmacy enables the collection of data required to substantiate the expense, for IRS compliance, Weidler says.
The collaborative launch of a smart card program by Cardtronic and plan administrator Definity Health (both of Minneapolis) represents "a next step beyond debit and credit cards," says First Consulting's LeGrow. "Member cards are currently generic, but as benefits become more flexible, there can be different deductibles and co-pays," he comments. "Smart cards will be able to capture and hold all that information, specific to the card holder. And even when benefits change-say when rolling over to a new benefits period-the new information can simply be downloaded to the card."
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio