Spending Accounts May Lower Private Practice Debt

More employers are linking debit cards and automatic reimbursement services to their health care flexible spending accounts (FSA), according to human resources consulting firm Mercer.

The trend could help health care providers in private practice curb rising bad debt trends. But it is seen as having little impact on the debt of hospitals and ambulatory surgical centers, experts say. “It probably won’t make a dramatic difference,” said Alexander Domaszewicz, a principal with Mercer, a subsidiary of Marsh & McLennan Companies.

FSAs allow employees to set aside money from their paycheck on a pre-tax basis for medical expenses not covered by insurance such as co-pays, deductibles, eyeglasses and over-the-counter drugs. Federal law requires FSAs to be linked to an insurance plan.

Fewer than 30 percent of U.S. employees contribute to FSAs, according to Mercer. Many experts say it’s because federal law requires that funds unclaimed within the allotted time be forfeited. However, the number of people using FSAs and the amount they are setting aside is trending upwards, Domaszewicz said. So are the number of employers offering debit card access to FSAs or automatic reimbursement from employees’ FSAs when their health care provider files a claim, he said. 

Users can swipe their debit cards at the point of service, immediately accessing the maximum amount of money they’ve set aside in their FSA accounts, rather than paying for a service or medicine and submitting a claim, Domaszewicz said. Similarly, the automatic reimbursement option allows for a payment from an employee’s FSA when a qualified healthcare provider submits a claim, eliminating the need for the patient to do so. 

Consumers like the convenience and reassurance debit cards and automatic reimbursements provide. And health care providers benefit from having fewer outstanding account receivables.

“Debit cards give people a sense that things will be paid and that they can more easily access their money,” Domaszewicz said. “If you add a debit card (to FSA benefits) it increases participation and the amount of money people put into an FSA.” 

Still, healthcare industry experts say hospitals aren’t likely to realize similar benefits in bad debt reduction that private practices may, primarily because most bad debt expense at U.S. hospitals comes from treating uninsured patients seeking emergency treatment. And contributions to FSAs, which averaged about $1,450 per employee, generally aren’t enough to cover known medical expenses and emergencies. 

“The services hospitals are providing tend to cost more,” said Michael Klozotsky, healthcare analyst for Kaulkin Media’s Analyst Group. He added, “An FSA is not going to help if your appendix burst and you had no idea it would happen.”