Are the cards stacked against benefit utilization?

A brief diagnosis of the current state of healthcare payments.

Examine the contents of your purse or wallet and pull out every card you might use to pay for health care. You’ll likely pull out a medical benefits card if you’re insured. And maybe dental and vision benefits cards (if you wear glasses like the author). If you plan for your health care costs, you might also find a flexible spending account (FSA) card or a health savings account (HSA) card. Or a prescription drug benefits card and an over-the-counter (OTC) benefits card if you're a Medicare policyholder. And you very likely use your debit or credit card to cover out-of-pocket expenses. 

Question: How many different ways do Americans pay for health care? 
A whole lot. 

Besides weighing down our wallets and purses, the multitude of options makes an already complicated space (healthcare) even more complex.

Healthcare Payment Tools

The healthcare payments conversation often centers around medical billing and claims processing. This is for valid reasons—it’s convoluted and prime for innovation. 

There are fewer discussions on solutions for out-of-pocket spending, even though it accounted for 9% of total national health expenditures in 2020. And while analysts may categorize out-of-pocket spending differently, it’s just health care to the member. There is no dividing line to a member if they are using a flexible spending account or their over-the-counter benefit. 

Let’s discuss some of these different healthcare payment tools that members use.

Health spending accounts provide tax advantages to employers and individuals for designated expenses.

With health spending accounts, members can set pre-tax funds for designated expenses such as daycare or sunscreen. They’re often offered alongside a high deductible health plan (HDHP) as part of a consumer-directed health plan (CHDP). 

Table showing flexible spending account, health reimbursement arrangement, and health savings account with their definitions
Health spending accounts provide individuals with tax-advantaged accounts for designated expenses.

The tax advantages of health spending accounts introduce complexity.

They provide employers and consumers great tax benefits, but the use and offering of health spending accounts also introduces complexity. 

  • Consumer: To maximize their benefits, members must learn and master their legislated rules (e.g., eligible expenses and tax rules)
  • Benefit Platform: Health spending accounts introduce the complexities of banking (e.g., CIP process, reimbursement, money movement, and fraud activity).

Language Note: Several different types of organizations provide benefits and savings accounts on their technology platforms. For simplicity, we’ll refer to them as “benefit platforms.”

checklist of fsa, hra, and hsa, showing their different rules
FSAs, HRAs, and HSAs all have numerous rules guiding member usage.

Supplemental and fringe benefits help policyholders pay for designated expenses.

To help members and employees with expenses, plans and third-party administrators (TPAs) have added more benefits to their offering besides the traditional health, dental, and vision.

  • Supplemental Benefits. Medicare Advantage plans provide members with benefits for various health-related services and items, including prescription drugs and healthy groceries.
  • Fringe or Flex Benefits. The competitive market for talent has forced companies to re-examine their compensation and benefits offerings. Providing unique benefits can help employers remain competitive while promoting wellness for current employees. Here are some examples:
table showing what supplemental and fringe benefits cover
Supplemental and fringe (or flex) benefits provide individuals and employees with coverage outside of their traditional medical benefits.

Supplemental and fringe benefits introduce complexities of payments.

Providing supplemental and fringe benefits also has its complications. 

  • Consumer: For full utilization, members must understand and master the rules for each new fringe benefit.
  • Benefit Platform: Each benefit must be integrated with the employer, payroll, health plan, and card network. And it must have the appropriate controls set up. That’s a lot of behind-the-scenes work for a smooth transaction on the consumer end.

Note on the Two Categories: Based on traditional offerings, we've used the categories "supplemental" and "fringe" or "flex" benefits for simplicity. However, all plans can provide these benefits and these terms can be used interchangeably.

Healthcare Payment Tools: Pain Points

All of these healthcare payment tools introduce pain points for both those who provide the payment tools and those that use them.

Benefit Platforms Challenges

Today’s plans and TPAs lean on a hodgepodge of legacy solutions to provide these benefits on their platforms. Here are some of their pain points:

  • Multiple vendors. Many TPAs and plans have incorporated one-off solutions for new offerings. This reactive strategy has resulted in numerous vendors and unneeded complexity for the platform and the member. 
  • One-size-fits-all solutions. Most legacy solutions are not customizable, leading to struggles with TPA platform integration and challenges with customer issue resolution. 
  • Limited white-label options. Most legacy solutions offer limited white-label options. This is a lost opportunity for plans and TPAs to build brand affinity and adds a new name for members to remember. 
  • Lack of banking functionality. Health spending accounts introduce banking requirements, but most existing solutions fail to provide benefit providers with functionality or visibility for these tasks. This leads to inefficient third-party communication and challenging customer issue resolutions.

Member Challenges

Legacy solutions also impact the people who use them (health plan members). By filling up wallets with additional cards and brains with numerous rules to remember, benefits are harder to use. A recent sponsored Harris Poll uncovered that more than three in ten insured individuals with an FSA or HSA do not use all their benefits. Half weren't even sure what their benefits were. 

This confusion leads to members not fully using their benefits and losing access to their hard-earned funds.  In 2019, 44% of workers forfeited part or all of their FSA contributions. The average forfeiture was $339, and the median was $157. 

Anything that can be done to make benefits easier for members to access must be done. Improving benefits infrastructure is the right thing to do.

Learning from Fintech: Digital Wallet

Healthcare doesn’t need to look far for potential solutions. With the introduction of the digital wallet, fintech has revolutionized the industry and changed the contents of wallets and purses.

Fiserv’s Expectations and Experiences consumer trends survey found that almost seven in ten consumers (68%) had used a digital wallet in the past 12 months. The digital wallet is taking over the modern consumer’s wallet, and for good reason! 97% of Americans own a cell phone​​, and 85% own a smartphone. Digital wallets provide consumers with security and convenience for payments with the device they already carry in their pockets.

A healthcare-adapted version of a digital wallet could offer these same benefits and more to members and to benefit providers. By stacking benefits onto one payment tool, a health wallet could both streamline benefit management for benefit providers and simplify benefit utilization for members.

Not Transferable

As we’ve noted, there’s a whole lot of regulation in health care. Benefit platforms can’t just integrate Apple Pay and call it a day. To succeed, the health wallet must be designed with healthcare regulations in mind. 

The Health Wallet 

Let's define what the health wallet should be and do. The health wallet should:

  • Apply the advances of the digital wallet while accounting for healthcare needs. 
  • Provide benefit providers with the ability to stack all benefits and accounts on one platform. 
  • Allow members to use a singular app and card that appropriately draws funds for all their healthcare payments.

With the health wallet, members would say goodbye to multiple cards, and plans and TPAs would say hello to a software-defined benefits platform.

Let’s build the health wallet.

Fintech can do more than provide an app for sharing pizza costs with our friends. Let's leverage the advances of digital wallets to build a health wallet. By doing so, we can improve member benefit utilization and improve operational efficiency for health plans and TPAs.

Josh Hostetler

Josh leads content for First Dollar, a fintech company that builds infrastructure for health spending benefits. Before First Dollar, Josh led course creation at Aceable, taught First Grade, waited tables at Olive Garden, and wore many other hats. He misses the breadsticks.