How Debit Cards Will Juice Worksite Sales
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By giving employees the convenience of paperless purchasing, debit cards promise to spur worksite sales of spending accounts for an array of qualified benefits, including health care, public transportation and child care, experts say.
Debit cards will almost certainly be intrinsic to the success of high-deductible or consumer-driven health care plans, because these plans are founded on the new health care spending accounts established by Congress this year, executives in the debit card industry say.
With debit cards available from a variety of vendors, employees can pay for health care expenditures from their flexible spending accounts, health care spending accounts and health care reimbursement accounts.
The easy-payment power of these cards offers health plans, third-party administrators and employees an efficient way to manage benefit payments. These debit cards eliminate the need for employees to use checks, cash or personal credit or debit cards to pay for medical services, prescriptions or other qualified purchases such as childcare. Pharmacies, hospitals or other vendors swipe the cards through ordinary credit card terminals, and transactions are authorized and the purchase deducted from the benefit spending account in seconds.
Money stored in the employees FSA, HRA or HSA can be put in a variety of purses and disbursed within seconds according to various criteria designed to verify each expenditure as tax-qualified.
Typically, employees can store their spending account funds in various pockets, such as dental, vision care and supplementary medical benefits, to be debited as needed.
The cards generally are sold through third-party administrators or through health plans themselves, which attach the card to their administrative services.
Vendors in the field include Evolution Benefits LLC, Avon, Conn., which offers the Benny Card.
"The whole intent of the card is to get rid of paper," says Anne Carpenter, vice president of marketing for Evolution Benefits. "They no longer have to submit receipts to get reimbursed. And the information store on the card can be used to give the IRS proof that each expenditure was for a legitimate medical purpose."
Prescriptions represent 53% of all expenses in medical spending accounts serviced by the Benny Card, and Evolution has relationships with 6 of the top pharmacy benefit managers. When prescriptions are filled, co-pays are paid right in the pharmacy, where the purchase is authorized and tracked automatically.
With consumer-directed plans, where all expenditures are paid out of the employees health care spending account, the debit card keeps track of each prescription purchase, facilitating the verification of purchases as legitimate for IRS purposes. Employee claims readily can be matched electronically with data files from a health plan, producing a record that satisfies IRS documentation requirements, says Carpenter.
"Thats the future of debit cards: eliminating paper," she observes. "People arent interested in having to submit receipts, and plan administrators dont want to deal with paper."
The big advantage of offering the benefit debit cards is a huge increase in sales, industry executives believe. For example, Wells Fargo Health Benefits Services, a TPA, doubled its health care saving account business a year ago after it introduced the Benny Card, according to Carpenter.
More typically, offering a card can juice up a flexible benefits plan or an HRA with increases of 20% to 40%, say executives in the industry.
"Employers benefit because their employees are happy with the plans, and they also increase their FICA tax savings because it reduces employees taxable income," Carpenter points out.
HSAs, which were introduced this year, are still too new to be a big factor in the health care market. But employers that introduce these plans are most interested in tying them to debit cards, she says.
