Two Louisville companies, Republic Bancorp Inc. and the health insurer Humana Inc., have teamed up to offer an interest-free credit card that can help consumers cover out-of-pocket health costs.
The parent of Republic Bank and Trust Co. will begin testing its HumanaAdvance Visa card this month with employees of five Midwest companies, including Republic Bancorp.
The card is believed to be the first of its kind, and the selling point to consumers is that it would give them an alternative to cash or conventional credit cards when covering deductibles, co-payments, and other health-related expenses that are not covered by insurance.
For the $3 billion-asset Republic, the card has the potential to generate fee income. Though cardholders will not be charged interest, Republic and Humana will split the interchange fees generated by the transactions. Also, the card will carry an annual fee of $96, to be split by the employee and the employer.
Republic and Humana are introducing the card at a time when more and more consumers are signing up for health plans with high deductibles to keep their monthly premiums low.
The card could be particularly attractive to employees who have opened health savings accounts, observers said. Though HSAs were established for consumers with high-deductible plans, some people may not have enough yet in their accounts to cover unexpected medical expenses not covered by insurance, according to observers.
Beth Bierbower, Humana's vice president of product innovation, said that it is "positioning this as a peace-of-mind protection when people have unexpected expenses that they haven't budgeted for, or when they've exhausted their accounts, or when they haven't accumulated sufficient funds."
Credit lines run between $500 to $5,000 — higher-salaried employees getting bigger lines — and payments are deducted from an employee's paycheck. "That reduces the risk for the bank," she said.
Steve Trager, Republic's president and chief executive, said the only underwriting criterion is that the employee has worked for the company for at least nine months.
"We are very comfortable that that employee can pay us back, so long as that employee has been there and is going to be there," he said. "And obviously, if you have an employee that's been there for nine months, that's a predictor on their continued employment."
Ms. Bierbower said that Humana, the fourth-largest health insurer in the country, according to Fortune magazine, decided to work with Republic Bancorp because it was an early adopter of HSAs. Eventually, Humana and Republic hope to roll out the program nationally, she said.
Ken Paterson, the director of the credit advisory service for Mercator Advisory Group of Waltham, Mass, said the HumanaAdvance card could help solve the "structural problems of high-deductible health plans."
In order to "have an HSA, you have to be enrolled in a high-deductible health plan," Mr. Paterson said. "Your premium is lower, but if you do have a claim, there's going to be a high deductible. If you're a low-paid employee, and you have a need to use the plan, you may not have the funds to pay your deductible expense. So there are various programs out there to try to fill the gap for people on the low end of the scale."
Nancy Atkinson, senior analyst at Aite Group LLC in Boston, said one concern she has with the card is that the credit lines are skewed in favor of higher-salaried employees.
Workers who qualify for a line of only $500 "might need more money than those who qualify for the $5,000," Ms. Atkinson said. Typical high-deductible health insurance policies run about $3,000.
