Several payment processors are jockeying for position in the consumer-directed-health-care market, hoping to get their services in front of insurers and benefit-plan administrators now in preparation for the fall open enrollment period.
Metavante Corp., Total System Services Inc., First Data Corp., and Fiserv Inc. have announced new products or partnerships in recent weeks, and all four were sponsors of a conference last week in San Diego organized by America's Health Insurance Plans, a trade group.
The biggest opportunity for banks is health savings accounts, which were authorized in December 2003 under the Medicare Prescription Drug Improvement and Modernization Act, and which financial institutions began offering in 2004. These tax-advantaged deposit accounts, known as HSAs, differ from more established alternatives - such as flexible spending accounts and health reimbursement arrangements - because the funds are held in a bank account rather than an employer's or insurer's account.
Such accounts are not widely used today, but they are growing rapidly. Forrester Research Inc. of Cambridge, Mass., estimates that 6 million Americans participate in consumer-directed health plans and that the number will double to 12 million next year.
Metavante, the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp., has made a flurry of announcements in recent weeks about new features and uses of its MBI Benefits Card, which it acquired last summer.
Metavante says MBI is the most widely used, nationally accepted benefits debit card, with more than 1.8 million cards in use by employees of 19,000 companies.
John M. Reynolds, who was named the president of Metavante's health-care payment solutions division in February, said the multi-purse and auto-substantiation features of these cards, which enable people to use a single card to access multiple accounts, will help drive consumer acceptance of these health plans.
"Multi-purse technology is all about making it simple, so the individual employee or participant doesn't have to figure it out," Mr. Reynolds said. "The plans are very complicated; most people are not going to be able to determine very easily what is and what is not a qualified expense."
For example, Metavante announced before the AHIP conference that its processing system can now provide real-time card authorization at the individual and family level for HRA accounts. The feature enables qualified transactions to be divided among various benefit accounts as consumers reach their HRA maximums.
Mr. Reynolds said HRAs are particularly complex, because "you may have families that have multiple deductibles, depending on who the dependent is."
HRAs are typically used by individuals to help cover their deductibles and co-payments on expenses covered by their insurance plans; FSAs are typically for vision, dental expenses, and other procedures that health plans tend to exclude. Mr. Reynolds said employers often offer both.
But the health payments system of tomorrow is still very much a construction zone, with individual service providers still connecting to the evolving payment networks. In one recent example, Metavante said last month that it had signed an agreement with Value Eyecare Network Inc. of Ronkonkoma, N.Y., to provide automated substantiation of FSA-eligible purchases when MBI card users buy prescription eyeglasses and other products through Value Eyecare's Web site, 39dollarglasses.com.
Other processors are in hot pursuit of the same business.
First Data, of Denver, announced last week that its First Data Healthcare Services unit had begun providing processing services to PayFlex Systems USA Inc. of Omaha, a health-care spending account administrator that serves 2,000 employers with several million employees.
First Data, the nation's largest payment processor, said the services it provides to PayFlex include auto-substantiation; single-card access to spending accounts, including real-time pharmacy benefit management, co-pay and over-the-counter substantiation; complex purse prioritization and integration; and an optional line of credit account.
Robyn Bartlett-Andersen, a product development vice president at First Data Healthcare Services, would not say how many cards the company has sent to consumers, but she said it plans by yearend to match its leading competitors. First Data has offered multi-purse systems for more than three years.
In addition to the real-time substantiation feature, First Data also offers what Ms. Bartlett-Andersen described as a "bridge product" to estimate a patient's out-of-pocket payment, using the various purses linked to a card, and based on the patient's co-payments and progress toward meeting deductibles. She said the company plans to test a service this fall that offers real-time adjudication of claims while a patient is still at the doctor's office.
The financial technology company Fiserv is taking a somewhat different tack, focusing primarily on the deposit and transaction processing systems that 500 of its community bank customers use.
James W. Sizemore, a senior vice president and the chief information officer of Fiserv's Information Technology Inc. unit, said the Brookfield, Wis., vendor is also working with a partner to develop multi-purse features. Fiserv also owns a small stake in FSV Payment Systems Inc. of Houston, which in October began offering an "infinite purse" card that can be used to access multiple types of medical and government benefits accounts.
In some cases, the processors are landing big processing contracts to work directly with insurers.
Fiserv announced in April that it had won a contract to provide processing services to Blue Healthcare Bank, a start-up industrial bank being organized by the Blue Cross Blue Shield Association and 32 of its 38 state and regional Blue Cross health plans to hold consumers' health savings account deposits.
Also in April, Total System Services said that its TSYS Prepaid unit had signed a contract to provide multi-purse payment cards for Exante Financial Services, a Minnetonka, Minn., unit of UnitedHealth Group. Exante is to link the cards to health savings accounts, flexible spending accounts, and a separate line of credit that Exante will fund.
TSYS, which is based in Columbus, Ga., and is 81% owned by Synovus Financial Corp., began processing for FSAs in 1999 and for HSAs in mid-2005.
Katy Henrickson, a senior analyst at Forrester Research, said the efforts now under way could reshape the consumer-directed health care by creating a new network of health-care providers and financial companies.
"That will really change the game in the CDHC space," she said. In the past, a single insurer would contract with a single bank to provide certain kinds of payment services.
But Ms. Henrickson said she doubts that the insurers and processors will take the payments business away from banks. "I don't think health insurers want to be banks, and I don't think banks want to be health insurers," she said.
As consumers take greater control of their health finances, they will want the flexibility to change them as they see fit, she said, for example, if "I want to change my health plan or I want to change my bank, but I don't want to change the other thing."
