Rulings pave way for next-gen administration of consumer-directed health plans.
Driven by favorable regulatory rulings, health insurers are offering debit and "smart card" options to consumer-directed healthcare plan participants. In May and September, respectively, IRS rulings authorized the use of debit and credit cards by FSA (flexible spending account) and HRA (health reimbursement arrangements) participants to obtain reimbursement, and allowed payment for over-the-counter drugs with pre-tax dollars through FSAs.
"IRS approval has certainly opened up avenues for debit and credit card vendors," says Greg LeGrow, a research manager at First Consulting (Boston). "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 funds. The HumanaAccess MasterCard, issued by BANKFIRST and powered by Evolution's "Benny" Card technology, allows members to access funds in an FSA or HRA by swiping their card at the provider's office or pharmacy, according to a Humana statement. Funds get deducted directly from the member's account, eliminating the need to pay at the point-of-service, or submit forms and wait for a check.
Hartford, Conn.-based Aetna ($40 billion in assets) internally 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 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, says Carollynne Weidler, head of the carrier's FSA team. "If the balance is sufficient to cover the charge, the amount is automatically deducted from [the participant's] account, lumped together with the pharmacy insurance plan payment and electronically sent to the pharmacist," 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, from an IRS point of view, Weidler says. "From the data that our pharmacy system collects-member name, prescription, whether the drug is medically necessary, etc.-we can do real-time substantiation of the expense."
The collaborative launch of a "smart card" program by plan administrator Definity Health and Cardtronic (both of Minneapolis) represents "a next step beyond debit and credit card capabilities," says First Consulting's LeGrow. "Member cards are currently generic, but as benefits become more flexible, there can be different deductibles and co-pays for different services," he comments. "Smart cards will be able to capture and hold all that data, 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, so there's no need to issue a new one."
EDITOR'S NOTE: This article originally appeared in Insurance & Technology magazine, a sister publication of BS&T.