In today’s fast-paced world, debit cards provide an efficient payment method for consumers everywhere. Providers can automatically track purchases, and the cardholder can easily view and manage activity online. Additionally, debit cards are accepted all over the world.
For Third-Party Administrators (TPAs), account-linked debit cards can help control costs through more efficient benefits administration. Many TPA clients are savvy employers who incorporate them into their employee benefits offerings. This option allows companies to attract and retain a talented workforce through a robust benefits package. In addition, employees looking to make quick, convenient payments and file fewer claims may find it easier to use a debit card for out-of-pocket healthcare expenses.
Advantages of Employer-Sponsored Debit Cards
Benefits for TPAs
Issuing benefits funds on debit cards help TPAs in several important ways. These include less time and cost for administration, greater plan flexibility, and boosted life counts.
- Reduced administrative time and expense: Healthcare and benefits debit cards reduce claims filings and streamline the account administration process.
- Payment flexibility: Employer-sponsored debit cards can link to most types of benefits accounts, including Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), and Lifestyle Spending Accounts (LSAs).
- Plan enrollment incentive: Benefits debit cards encourage employees to enroll in employer-sponsored healthcare plans by making it easier to pay for eligible expenses.
Benefits for Employers
Above all else, companies want to attract talented people and keep them around. A robust benefits package goes a long way toward achieving this. In addition to the benefit accounts themselves, adding a convenient, secure account-linked debit card is a great way to enhance a benefits package.
Plus, an account-linked debit card promotes the safe, secure transfer of funds. Depending on the plan design, employers can electronically deposit money into employee accounts, eliminating the risk of lost or stolen checks.
Benefits for the Workforce
For employee participants, convenience is the number one benefit. Healthcare benefits debit cards can be used to pay for various eligible healthcare expenses. In addition, workers get immediate access to funds and can thereby avoid the time and effort of submitting claim forms and waiting for reimbursement. Employees can also track their card usage online to see how they spent their funds.
Employer-sponsored debit cards work well with these types of benefit accounts:
- FSAs: Employees can use their account-linked debit cards to pay for IRS-approved medical expenses. In addition, many retailers identify their FSA-approved items to help prevent the misuse of funds on non-approved expenses.
- HRAs: Using a benefits debit card to pay for pre-approved expenses eliminates the hassle of paying out-of-pocket and filing for reimbursement. It also avoids the problem of delaying or forgetting to submit reimbursement claims.
- HSAs: Benefits debit cards simplify accessing HSA account funds — an especially useful feature for account holders who roll over unused funds at the end of each year.
- LSAs: The lack of regulations for LSAs makes it easy for employers to include and restrict what expenses are eligible. Debit cards can easily support those inclusions and restrictions, so funds aren’t spent improperly on ineligible purchases.
IIAS Security Features
Many TPAs partner with a platform provider that offers Inventory Information Approval System (IIAS) technology on their debit cards. When a plan participant uses their employer-sponsored debit card at a merchant who uses IIAS, the system automatically:
- Verifies the eligibility of employee expenses and approves or denies the card swipe at the point of sale
- Verifies that employees are actively enrolled in the plan before approving a transaction
- Checks the employee’s account balance to ensure it has sufficient funds to pay for the transaction
These measures help to reduce fraud and ineligible expense use. It can also help cut down on claims filing, which results in fewer claims adjudication for TPAs.
Covering New Types of Expenses
As benefits debit card usage grows, employers have begun expanding the types of expenses their debit cards cover. For example, many employers now use debit cards to make workers’ comp payments. The ability to automatically reload the card cuts administrative time and enables workers to access their workers’ comp payments anytime, anywhere. Some employers in large cities also add a transit option that allows employees to pay for approved commuter expenses with their benefits debit cards.
As consumer-directed healthcare continues to grow, so does the need for employees to access funds to pay for their medical expenses quickly and conveniently. For various reasons, employer-sponsored debit cards offer a safe, secure solution that provides tremendous value to TPAs, employers, and employees.
DataPath has been an end-to-end card processor for benefits debit cards linked to tax-advantaged benefits accounts, Medicare set-aside programs, and different types of post-tax accounts.