A Debit Card Cautionary Tale

[Editor's Note: today's post is by guest author R. Michelle Green, the Principal for her company, Client Solutions. She is a combination geek girl, personal organizer, and career coach. Michelle helps others improve their use of technology in their personal or professional life. Today, she tackles what I believe will become a huge identity-theft problem. As employers lower their administrative costs by outsourcing payment systems that include debit-card transactions, the result is a more complicated, patchwork mix of companies where it is not easily clear who is responsible when bad things happen.]

By R. Michelle Green

At a business conference I attended, the topic turned to health care insurance administration. Some of the attendees now have new debit cards they didn’t ask for. Their employers gave them debit cards for their health care expenses (to access their Flexible Spending Accounts). Instead of having to submit receipts, employees offer the card at the point of sale. If s/he tries to charge more than allowed, or tries to charge things that are not acceptable, the card is rejected. Easily fits into the distributor’s payment systems (cash credit debit), no paperwork for the employee, less evaluative work for the FSA provider. Everyone wins, right?

Not everyone.

Meet Caren (not her real name, of course). She offered her new debit card -- her's is called a United Healthcare Consumer Accounts Card -- for prescription meds in January last year. However, the purchase was rejected by the pharmacy. She assumed it was a glitch, and paid for it herself. While this eventually happened every time, she doesn’t have medical charges every day, so it took a while to recognize that the card never worked. For reasons not relevant here, she did not pursue this with the provider until the fall, only to discover that all her money had been used up on health care charges she didn’t make.

She spoke with United Healthcare using the phone number on her Consumer Accounts Card. She submitted all her information in writing as they requested. They produced a sheet showing that her charges mostly matched (about 70%) identical charges paid 1-2 business days after hers. Though they did not accuse her of fraud, they did say the case was closed and did not merit an appeal. When she approached her human resources provider, he said, well at least she got the tax break. (!) She didn’t get a tax break, she got a salary reduction! She was deprived of access to her own money, set aside from her salary. The debit card agreement online says that she should call the bank operating the card, but that hasn’t proven productive either.

Had a second card been issued to someone else, we wondered? Not to her (or to the bank’s) knowledge. Did the drugstore have signatures on the other charges ostensibly hers? The other charges were mail order charges through Medco, so no receipts or signatures. She has no account with Medco. The pharmacy is not interested in pursuing this, they’ve been paid (perhaps twice!). Medco won’t address it, as she is not a client. The debit card provider only knows the money is spent. The FSA account holder is satisfied that it was spent for the right things. Only Caren is out of pocket and disadvantaged. Doubly so – this was so traumatic that she did not enroll in FSA this year. That makes her ineligible for the associated tax benefit in 2012.

Turns out our blog host is interested in the way financial systems are evolving, and found this issue particularly interesting. There are a lot more parties in the mix than you might at first think. Caren has an employer small enough that it purchases human resources expertise from a national firm. So there’s Caren, Small Firm, and Big HR Firm. Big HR Firm takes the money from her account and sends it somewhere based on their agreement with United Healthcare. Her debit card is managed by United Healthcare, and Optum Health Bank administers that card for them. Optum Health Bank has a subsidiary, Optum Financial, that handles the flow of money from the holding account to the point of sale. And what about the pharmacy: could their processes have been compromised as well?

I read a lot about fraud and scams, and wondered if this could be the tip of a software theft operation, selecting certain customers, and duplicating certain customers’ receipts, at just low enough rates that they are not perceived. (Good movie, eh? But Occam’s Razor says: not likely.) But who is the person with enough clout to investigate this, particularly if no one person or entity loses big bucks?

Today she tweeted that she had heard from Big HR Firm – there’s nothing they can do. So who’s responsible? Several corporations are in play; doesn’t each have a responsibility to Caren? Who can help her?

Comments

[Laurie]

Exactly the same thing happened with me only with physician office co-pays. The debit card never worked at the office location but the amount was deducted after I paid out of pocket, hence dr was paid twice but posted once.. I discovered the only practical use for my FAA card was through drugstore.com or submitting hard copy claims after the fact with EOBs and statements. Each year the process becomes more electronic and less beneficial..

[Sheika Babin]

How much money is involved? Caren should contact the Attorney General. The company who enrolled their employees into this program, ethically is responsible for the program practices. The plan discribed doesn't add up? If my own company isn't willing to investigate, and I suffer a loss in compensation as a result the executives of the company this incident must be escallated. My end result would be to contact the attorney general - of course if Caren did not maintain a proper paper trail with copies of all transactions her credability might be in question.

[George]

My advice to Caren (and any consumer that has a similar experience):

1. Read all applicable FSA policies and agreement documents. Unfortunately, there are several. Ask your HR department for copies of all policies (or online links to all policies).

2. File a police report with local law enforcement. Somebody spent Caren's money without authorization after she paid out-of-pocket.

3. Demand that the pharmacy provide additional documentation, since it was paid twice.

4. Use a different pharmacy. If the duplicate charge problem stops, it is reasonable to assume a problem at the first pharmacy, and file a police report accordingly.

5. File a fraud complaint with the U.S. Federal Trade Commission (FTC) including any relevant documents (and non-action by Small Firm, Big HR Firm, US Healthcare, and Optum Bank). This will help the FTC track any emerging fraud trends with health care debit cards. A link is on the Resources page in this blog.

6. If still no corrective action, contact your elected Federal and State officials and ask for their help. It's part of their job.

George
Editor
http://ivebeenmugged.typepad.com

[R. Michelle Green]

Hi Laurie -- Thanks for commenting!

I have also been wondering if I need to go back to submitting paper requests for reimbursement. It would be a shame if administrative ease trumped customer care....

Michelle

[R. Michelle Green]

Hi Sheika -- Thanks for commenting on my post!

I hope Caren has a chance to read your comments and George's. When the preferred or recommended channels for customer service aren't productive, it's important not to give up.

Michelle

[George]

Readers:

The conversation about suggestions for Caren is happening both on this blog and on Twitter. Those that follow this blog on Twitter probably know already. If you don't use Twitter, a few of the recent tweets:

@IveBeenMugged - @PrivacyProf @KellyStremel @ITRCSD @HemanshuNigam - any suggestions about what Caren should do?

@PrivacyProf - She should contact her state Attorney General; good ones will pursue an investigation

@ITRCSD - We run into this problem all of the time and that is the wall we get

@PrivacyProf - Some AG offices very good about pursuing such situations. E.g., Iowa's AG

@rapier57 (reply to @ITRCSD) Tip of fraud iceberg, I bet. Student financial aid open to similar issue.

[Jim Hayes]

All FSA card transactions can be disputed within a certain period of time (60 days with the FSA card vendor we work with). It is important for participants to monitor their account just like a credit card or bank account so they catch potential problems/fraud early on. The card agreement will outline the dispute time frame.

All that being said, the root cause of the problem, fraud or error, should be clear by asking the right questions. I am willing to help this employee figure out what happened and apply pressure to get someone to care (at the TPA, card vendor, or merchant level) if they want to contact me.. I can't promise to get funds back this late in the year but it is worth a shot.

There is little actual fraud that occurs with FSAs in terms of using somone else's FSA card to pay for someone else's expenses but it can occur. Typically the issue is an error in terms of billing.