Covantage Teams with PayFlex Systems USA to Offer Health Care Debit Card for Flexible Spending Accounts.

Business Editors & Health/Medical Writers

AUSTIN, Texas--(BUSINESS WIRE)--Oct. 7, 2002

Covantage:

-- Flexible Spending Accounts and Debit Cards offer enhanced convenience and time savings

-- Help consumers better track their health care expenses

-- Reflect growing trend toward consumer-driven health care

Covantage, a provider of benefits administration services to national employers, announced it has partnered with PayFlex Systems USA, Inc., to develop and offer a stored-value, health care debit card for use with flexible spending accounts (FSAs).

PayFlex Systems USA, an Omaha, Neb.-based employer services provider that specializes in FSA administration, will handle claims administration and billing. The health care debit cards will be available Jan. 1, 2003.

"Covantage and PayFlex Systems USA share a commitment to provide convenient, time-saving health care services for consumers," said Barbara Lapwing, general manager of Covantage. "Health care debit cards and flexible spending accounts help bring everyone one step closer to automated, self-service benefits administration and help support more consumer-directed health care purchasing decisions. We believe this collaborative approach to bring new health care services to market will enhance Covantage's position in the marketplace and provide employers with full-service benefits administration."

"Flexible spending accounts, together with health care debit cards, will offer significant benefits to both employers and employees," said Mark Denniston Huber, chief executive officer of PayFlex Systems USA. "For employers, a well-designed FSA program is a desirable employee benefit that can act as a valuable employee-retention piece. It also saves employers money by reducing overall payroll taxes. Employees can realize tax-saving benefits with FSAs and will appreciate the ease-of-use and convenience of the debit card technology."

The debit card works off the Cirrus(R) network so that fees for eligible medical expenses are immediately deducted from the employee's FSA, eliminating the hassle of filing a paper claim for reimbursement and waiting for the subsequent reimbursement. Employees can obtain account information online or via a toll-free customer service telephone number.

Flexible Spending Accounts have been used since the 1970s. Under Section 125 of the Internal Revenue Code (IRC), employees can set aside a limited amount of pre-tax dollars for medical and dependent care-related expenses. Traditionally, employees who have qualified medical or dependent-care expenses are required to pay for health care services upfront, submit a claim to their employers and wait for reimbursement. The debit card eliminates the wait and hassle.

Technical support for the debit cards will be provided by Med-i-Bank Inc. (MBI), a Waltham, Mass.-based provider of debit card technology for FSA administration. MBI introduced the first FSA debit card program in 1998 and currently works with more than 100 FSA providers.

About PayFlex Systems USA:

PayFlex Systems USA, Inc., headquartered in Omaha, NE, is an employer services provider specializing in FSA administration. In addition to FSA administration, PayFlex Systems also offers payroll processing services and COBRA administration services that ensure that all government COBRA and HIPAA requirements concerning employee insurance rights are met. For more information, visit www.payflex.com or call 800/284-4885.

About MBI:

MBI is a leading provider of debit card solutions designed to make pre-tax benefit administration easier, more convenient and more attractive to end users. In 1998, MBI introduced Flex Convenience(R), the first debit card system designed to revolutionize employee benefit administration. MBI works closely with administrators, insurance consultants and technology partners to develop new features, capabilities and services that add value to employee benefits. MBI is a privately-held company based in Waltham, MA. For more information, please visit www.medibank.com or call 800/852-6334.

About Covantage:

Founded in 1990 by PacifiCare Health Systems (Nasdaq:PHSY), Covantage (formerly HMO National Network) delivers state-of-the-art benefit administration services to national employers. Located in Austin, TX, Covantage is an independent administrative services vendor managing approximately 350 carrier relationships nationwide. Core competencies include customized automated enrollment applications, premium billing administration, online and IVR (interactive voice response) enrollment capabilities, eligibility database management and customer support. Currently, Covantage manages in excess of $276 million in annual premiums and administers benefit offerings on behalf of more than 300,000 members. For more information, please visit www.covantage.com or call 512/349-5500.