Getting carded: long before Bill Clinton held up a plastic card in a State of the Union address a decade ago to illustrate the idea of universal health coverage, these types of cards had become a growing emblem of health insurance. Now they are here

Risk & Insurance, June, 2004 by Russ Allen

A new "credit card" may be coming to a wallet near you soon--if it hasn't already. Plastic, swipable, magnetic-strip cards are about to become a much bigger symbol of health care benefits, because at last these cards can do more than just carry a number. Use of cards that, when swiped through a retail credit card machine, can confirm eligibility, adjudicate a claim, or pay for a service--or all of the above and more--is expanding rapidly.

Even before Bill Clinton held up a plastic card in a State of the Union address to illustrate the idea of universal health coverage, these types of cards had become a growing emblem of health insurance.

Now, with electronic data interchange function finally arriving in them, this plastic has become an opportunity for the insured to better track their benefits. It has also become an opportunity for insurers to reduce resources needed in claims processing, for health care practices to cut down dramatically on accounts receivable, and for employers to save by driving more employees to tax-advantaged benefit accounts.

The competition in the field of health care cards is fast and intense right now, with a variety of insurers, tech companies, and transactions networks claiming first, best, and only.

"We live in a card-oriented society," says Donna Porritt, senior vice president of marketing and sales for Evolution Benefits Inc., a technology company that is helping to lead the card race. Several hundred thousand individuals currently use cards developed by Evolution. But when its client, Humana, came to it two years ago wanting to eliminate double cards--one to identify the insured, the other to access the benefits cash account--the result was an extensive development process involving the technology company, the insurer, and the MasterCard network.

The result is the Humana Access card, the first in large-scale use to combine the ID and payment functions, operating over a open-access network, through use of standard swipe boxes ubiquitous at retail and service locations today.

The card is a proprietary adaptation of the so-called "Benny Card," a card that Evolution has provided for a number of years to mostly large corporations to permit employees to access their Flexible Savings Accounts.

The new card accesses Humana's member data for eligibility and substantiation and is set up on a merchant-code filter so that allowed expenses are paid from the individual's benefit account.

IMPROVED CASH FLOWS

"We've given our insureds something tangible and understandable with this card," says Beth Bierbower, vice president for product innovation at Humana. The card allows employees to reach into their FSA and lIRA accounts and use the funds, without the traditional step of having to turn in receipts and get refunds. Medical practices at the point of service get paid directly from the account, vastly improving cash flow.

At the moment, the system eliminates paper--providing real-time adjudication for the pharmacy benefit or for medical care requiring a cash-account transactions only. But if the health plan has a deductible or coinsurance feature, and the employee gets a statement that points to an amount still owing to the provider, the employee simply writes his or her card number on the bill and sends it back in payment to the provider.

Humana sees the card applicable to the benefits structure of about 10 percent (and climbing) of its more than three million members and dependants, who have cash accounts associated with their coverage.

About 30,000 of the combined cards were in use as of March 2004. Approximately 40,000 transactions took place with the cards last year, and Humana projects that number will double this year.

The employer can determine whether costs are applied against the flexible savings account or the HRA. The employee can go to www.humana.com to check the account balance and the charges against it. An e-mail system alerts employees of remaining balances near year end, and suggests adjustments to the amount put in the account for the coming year.

"Cards [like this] are a great idea because they help people keep track of their accounts so they don't lose money from a flexible savings account, so they know their benefit balance in a HRA and, soon, so they can watch their savings vehicle in an health seavings account," says Jay Savan, health and welfare practice leader at Towers Perrin.

With the ease of use of such card-based systems, employers offering them are reporting significant increases in selection and investment in flexible savings account programs. Companies, in turn, gain with savings on their FICA tax as a result of employee participation.

With account cards one of the fastest-growing benefits offered by employers, providers such as Evolution and Motivano, are also growing and bringing down the cost of card programs, especially for payments from flexible savings accounts.

A GIANT ENTERS THE RACE

First Data Corp, the huge electronic-commerce and payment-services company--which processes card transactions for 1,400 financial institutions worldwide--is also jumping into the fray.