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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.

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.


"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 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.


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.

Earlier this year, it announced its own Multipurpose Health Care Card. The card will support real-time eligibility, record keeping, and claims administration--and authorization--and authorization--for flexible savings accounts, HRA, or combined accounts. The program will give payers the ability to limit use of the card at drug stores and pharmacies for allowable prescription drug purchases, according to First Data.

"This card system will substantially lower total real costs for insurance transactions," says Beverly Kennedy, president of health care at First Data. "And our goal for the plastic is that it be able to access all types of benefit-account purses."

Although First Data has the Multi-purpose Health Care Card in production with only one customer, Kennedy says that it has letters of intent with some large payers that should result in small rollouts this summer and complete conversion to the card program of major accounts by next year. "We are in the unusual position," says Kennedy, "of having both the acquiring side, that is the swipe machines themselves, and the issuing side to make sure funds are there."

UnitedHealth Group is also putting significant resources into swipable cards and, as a first step, has issued one with an eligibility stripe. About one-third of the 18 million people insured under United are now using this medical ID card, which validates the benefit and the co-payment over the MasterCard network. The system uses proprietary technology to transmit HIPAA-compliant information back to the provider, eliminating the need to make telephonic or Internet inquires. United expects to have the cards issued to 100 percent of its book of business by early next year, and is currently training in-network physician practices in its use.

United will issue a second, separate card for payments from cash benefit accounts, using the same network. The insurer has already rolled out about 10,000 of these multipurse access cards, restricted to certain merchant codes to assure use for medical and pharmacy purposes only. They plan to combine the two cards at some future point.

"We are finding cards to be an extremely low-cost way to improve the patient experience," says Nick Santoro, CEO, UnitedHealth Consumer & Financial Services.

The insured individual will be able to track transactions at Echoing the general hope for consumer-directed, cash-account benefits, Mark Lindsay, vice president of public communications for UnitedHealth Group says, "We believe that if people have more information, they will be able to make better decisions and take more ownership for their dollars."


The industry seems to agree that plastic health-insurance cards ought to do more than just serve as an object with data for your doctor's office to photocopy to get your insurance numbers. And for growing millions, they already are.

"The technology is maturing and people are getting energized around it because the IRS has blessed it with recent legislation," says Savan. "Lots of companies are getting into the business." Indeed, Visa has now followed MasterCard into this market.

"They look so simple and familiar on the surface," says Porritt. "But it's what goes on behind these cards that's harder to deliver," including a process that identifies transactions that meet IRS rules for automatic substantiation, which greatly reduces the number of claims that must be manually reviewed. "But a lot of fun things can be done with these cards in future," she says.

In addition, health savings account-based, health care plans are the first to be automatically assumed to be card powered. And, they may add new twists to card use. Though regulations are not firm yet, these plans may remove the need for adjudication; plus, they must accommodate the portability of the account.

While studying this account type, companies are also investigating how to make the cards more sophisticated, possibly though smart-card chips, extra magnetic stripes, or other innovations.

With the use of a password, the cards could offer health and pharmacy history back to the point of service.

Enthusiastic acceptance by consumers appears to have already made the cards inevitable. "As we were introducing these, an employee would pull one out at a meeting and it would get passed around and everyone would want to know what it was," says Mary Sellers, a corporate spokeswoman at Humana. "I showed mine to my doctor, and he wanted to know how he could get one."

Adds, Bierbower, "Our clients come back to us and say, 'We love it, our employees love it, my spouse loves it!'"

RELATED ARTICLE: Health care insurers flirt with lending.

Imagine you're on e consumer-directed health plan, you've used up the $1,000 in your medical-account fund, and you're now faced with paying $1,000 for an MRI scan (out of pocket, against your deductible). And as if that wasn't enough, you don't have the cash on hand to pay it.

But, you're holding in your hand a credit card from your insurance company. (And perhaps it's the only credit card you have.) Wouldn't it be tempting to charge your MRI on that card?

An uncharted land currently stands tantalizingly before medical insurers. With the advent of swipable cards, would they, should they, could they get into the consumer-credit business?

Or could they at least allow their cards to default to a regular credit card function after exhausting a medical account?

The question is early and largely unexplored. Would there be conflict of interest issues? Could the terms be set up in a way that would make the card an attractive enough benefit to justify the costs?

"If it's Humana on the card, paying the claims, it might as well be Humana that's making the loans," says Jay Savan, a health and welfare practice leader at Towers Perrin.

Many large insurers are circumspect in sharing their plans or discussions on the topic.

United Health Consumer & Financial Services' CEO Nick Santoro says, "It's not our intent to extend credit. But we've discussed it and understand that there is a potential need out there, and that it's being discussed in the marketplace."

Humana is more forthcoming. "I think you will see some carriers investigating this opportunity, especially for people who face a high deductible," says Bierbower. "Humana has looked at various options. It only requires a contractual relationship with a financial institution, licensed for consumer credit."

How would such a benefit affect the price of the premium? And would the perk be enticing enough to win over new subscribers? Though much remains unknown, players in the market are already working to answer these questions.

For the moment, though, the notion of medical insurers lending to their beneficiaries as e line of business, or even just passing the lending through on their own card to a financial institution is "an appropriately muddy area," says Donna Porritt, senior vice president of marketing and sales for Evolution Benefits Inc.

--Russ Allen

RUSS ALLEN writes about health care for Risk & Insurance. He can be reached at
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Title Annotation:Technology
Author:Allen, Russ
Publication:Risk & Insurance
Geographic Code:1USA
Date:Jun 1, 2004
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