Health savings account provider ConnectYourCare says its payment processing deal last week with First Data Corp. removes an obstacle to the business' growth, and two bank-linked processors have addressed this concern as well.
Metavante Corp., the processing company owned by Marshall & Ilsley Corp. in Milwaukee, announced Wednesday that it had closed its purchase of AdminiSource Corp., a Carrollton, Tex., company that cuts checks on behalf of its customers to pay health-care providers, produces statements and explanation-of-benefits reports, and provides claims reconciliation and adjudication services.
And last summer PFPC Inc., the securities servicing arm of PNC Financial Services Group Inc., enhanced its HSA product with a capability for paying medical bills online directly from the account Web site. The site is integrated with the underwriter's or corporate sponsor's Web site, said James S. Gandolfo, a senior director and the vice president of global business development at PFPC. The company sells its HSAs on a wholesale basis to insurers and large companies that self-insure.
Improvement of payment processing technology is vital to the growth of the health savings account business, industry observers say.
DiamondCluster International Inc., a Chicago management consultant, and Goldman, Sachs & Co. released a study in January that found payment and claims processing was a primary concern for employers sponsoring health savings accounts. The growth of the HSA industry depends on the rate at which new processing technology is adopted, the companies said.
First Data's technology will make it easier for plan members to pay medical claims, said Terry Hunter, the chief executive officer of ConnectYourCare in Baltimore. The processing agreement will enable ConnectYourCare's health savings account members to use a single debit card to gain access to funds from their flexible spending, health savings, or health reimbursement accounts.
Previously, HSA members had to use a separate card for each account. "We thought it was sloppy and not very efficient," Mr. Hunter said.
Though many health savings accounts let participants use debit cards to pay out-of-pocket medical expenses, technological advances may let them make electronic payments directly from their accounts to doctors and other medical providers. Ideally, claims would be adjudicated immediately at the point of sale, Mr. Hunter said.
But a direct payment system would require aggregating and integrating transaction data from various parties, including health-care providers, as well as processing medical co-payments, deductibles, and insurance claims.
Employers in the DiamondCluster-Goldman Sachs study rated real-time claims adjudication the most important component of a consumer-directed health plan offering. But 55% said their providers did not offer such a service.
The study was based on a survey of 150 U.S. corporate managers with responsibility for health care. About 65% of the participating employers had 500 to 5,000 employees, and 56% had revenues of $25 million to $500 million.
Debit card links to HSAs are a rapidly growing phenomenon, according to the TowerGroup unit of MasterCard International, which estimated that 95% of HSAs will be linked to a card by 2010, up from about 14% at the end of 2004 and 3% in 2002.
TowerGroup has also predicted rapid growth in the HSA market, estimating that there will be 6.2 million health savings accounts in 2010, compared with the 1.88 million it forecast for the end of 2005.
Health payment processors stand to earn $2.3 billion in fees from HSAs by 2010, DiamondCluster said in August. But the lack of integration between processors and banks is hampering market growth, it said.
"The lack of integration in these early efforts leads to serious service challenges and inefficient new processes," said Aamer Baig, a partner at DiamondCluster.
Though some companies function as intermediaries that do not develop their own payment processes, working with First Data will enable ConnectYourCare to "go right to the processor and get the technologies they're coming out with," Mr. Hunter said. "Whatever capability they release, we have immediately."
First Data's HSA card includes an optional credit line capability. Its relationships in the banking and financial services sector set First Data apart from other payment processors, Mr. Hunter said.
"We expect financial institutions will be significant players in trying to influence, if not drive, the movement of data in the health-care system," he said. "There is a lot of protected data that needs to be moved, and the banking industry has the scale, technology, and security provisions to be able to handle those transactions."
