New Program Links Any Credit, Debit Card to Funds in FSA Accounts

A Conshohocken, Pa.-based processor has begun marketing a service that allows employees covered by flexible-spending health-care plans to use any payment or loyalty card they have to access benefits. Finpago Inc. announced this week an agreement with health-benefits administrator WageWorks Inc., San Mateo, Calif., to launch its FSAok AnyCard program for eligible employees with more than 1,000 organizations that use WageWorks. Finpago, which is looking to attract more administrators, says pharmacies, grocers, and mass merchandisers with “thousands” of outlets have signed up for its program, though a company executive, responding by e-mail to inquiries from Digital Transactions News, would not name any. Participating retailers will begin displaying an FSAok logo later this year, the company says. “We are responding to significant market interest and plan to make announcements of additional FSAok business partner retailers and benefit administrators during the remainder of the year and throughout 2007,” says Greg Beasley, senior vice president of sales and marketing for Finpago. Beasley adds that card registration will roll out over the course of coming months, so there is no figure yet for number of enrolled cards. FSAok AnyCard works by allowing consumers with flexible-spending accounts (FSAs) to register with the program any card they normally use when shopping, using the benefits adminstrator's Web site. Once registered, the card can be used to access funds in the account for eligible purchases at any merchant that has signed up for the program. Finpago tracks data on eligible purchases and supplies electronic receipts and claims to the administrator. Cardholders, Finpago says, can shop in stores as they usually do and need not worry about what their FSA plans cover and what they don't. “The average household with an FSA account uses it for less than half of eligible purchases,” Finpago said when announcing its program. “Many miss eligible items, such as [over-the-counter] medicines or prescription co-pays, simply because they aren't sure what their plan permits, or the claim process is too much trouble.” FSA accounts, which employers fund on employees' behalf with pre-tax compensation, are becoming increasingly popular vehicles for prepaid debit cards. Researcher Celent LLC estimates 6 million signature-based debit cards tied to FSA accounts will be issued this year, up 50% from 2005. Banks have also begun issuing the plastic to allow cardholders to tap other employer-funded health-benefit plans, such as health-reimbursement accounts. Finpago's program, however, appears to be the first to link existing cards in consumers' wallets to these accounts. One lingering problem for debit card programs tied to FSAs is the need for so-called electronic substantiation, or proof acceptable to the Internal Revenue Service that purchases are indeed eligible under its regulations. Celent estimates processors are able to capture enough data to substantiate more than 70% of transactions, though substantiation rates vary by card provider. To address this issue, MasterCard Worldwide in August introduced a new service to provide what it calls real-time substantiation for FSA cards (Digital Transactions News, Aug. 9). Finpago's Beasley says the processor supplies to benefits administrators “substantiation data” that meet IRS standards. The administrator, says Beasley, “performs the substantiation according to their own business rules.”