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How To Evaluate A Health Care Debit Card Plan From Your Employer

A blog post on Tuesday described Caren's experience with her United Healthcare Consumer Accounts Card, a specialized debit card her employer provided for Flexible Spending Account (FSA) expenses. That blog post highlighted what can go wrong with a health care debit card.

I wanted to take a closer look at the card agreement, and see what broader issues might apply in general. Today's blog post includes my findings about several items employees should be aware of when considering a health care debit card plan. I am not an attorney, so this is not legal advice -- just my observations and opinions as a consumer -- like you tyring to navigate a complex world. If you need legal advice, hire an attorney.

First, healthcare debit cards are similar to traditional debit cards, but with several important differences. Employees must understand how they work and when fees apply, just as you would with a traditional debit card with your bank checking account. So, it is important to closely read all appliable agreements, terms, or policies y to know your rights and responsibilities -- especially when bad things happen.

The introduction to the United Healthcare Consumer Accounts Card agreement (Adobe PDF; which is also available here) lists some important warnings:

"At the register or cashier: This is not a credit card, but you will need to choose “credit” when making purchases... At the pharmacy, supermarket or other retail store: Pay for eligible over-the-counter (OTC) supplies and materials. Please note: The card will be rejected if purchasing OTC medicines, even when prescribed..."

Select "credit" at the point-of-sale even though the card says "Debit" on its face? Prescribed OTC medicine will still be rejected? These exceptions sound like a recipe for employee confusion and rejected purchases. While the agreement states that it is a MasterCard Debit, I wonder if the bank tweaked a traditional credit-card payment solution for health care purchases and rushed it to market without removing all the bugs first.

What comes to mind is that old saying: never buy the first year of a new car production (and wait until the manufacturer gets all of the bugs out). Seems to apply to payment solutions, too.

Section #2 of the same agreement states:

"When you use the Card, you represent and warrant that you will not submit, and have not previously submitted, a claim for reimbursement for the same expenses under any other plan or program. You agree to save all invoices or receipts that are provided to you by merchants and service providers when you use the Card. You agree to provide a copy of any such receipt to us or United Healthcare, promptly on request. If you fail to submit a receipt when it is requested, under IRS rules, the amount in question may not be excluded from your gross income for federal tax purposes or may otherwise result in financial penalties to you. Your use of the Card is subject to the terms and conditions of the Plan, as well as the terms and conditions of this Agreement..."

So, employees must still save all purchase receipts. The health care debit card doesn't eliminate all paperwork. The last sentence in the above clause is important because it highlights the fact that several policies apply. It would be helpful if this agreement listed all applicable policies. My estimate is that at least five different policies apply:

  1. Consumer Accounts Card Agreement,
  2. United Healthcare HIPAA Privacy Policy,
  3. Any additional policies at,
  4. Employee handbook or manual,
  5. Optum Bank policy

Employees should not have to guess which policies apply. It would be best for employees if a single, consolidated policy applied, but unfortunately American business does not operate that way today.

Let's return to the Consumer Accounts Card agreement, which also states:

"You agree that you will only use the Card to pay for eligible expenses under the Plan... if you use the Card for anything other than an eligible expense, you will be liable for any taxes, penalties and other expenses payable under applicable law and any expenses we, United Healthcare or your employer may incur as a result of such impermissible use. Upon demand, you agree to reimburse us, United Healthcare or your employer, as the case may be, for any such use for non-eligible expenses..."

While employees may think that ineligible FSA expenses are automatically blocked at the point-of-sale, the agreement governs what really happens. The Consumer Accounts Card payment process may indeed block some ineligible purchases, but United Healthcare and the bank seem to have left themselves a convenient loophole where employees are still liable. It would be helpful if the agreement stated what those amounts of taxes, penalties, and other expenses could be. It seems risky to use a debit card when you don't know the exact amount of fees that might apply.

Second, employees should be aware of their responsibilities to avoid liability. The "Consumer Liability" portion of the agreement states:

"Tell us AT ONCE if you believe your Card has been lost or stolen. Telephoning is the best way of keeping your possible losses down. If you tell us within 4 business days, you can lose no more than $0 if someone used your Card without your permission. (If you believe your Card has been lost or stolen, and you tell us within 4 business days after you learn of the loss or theft, you can lose no more than $0 if someone used your Card without your permission.)"

This four-day time period seems unreasonably short. My bank allows 60 days from my statement to dispute a charge on that statement. Does United Healthcare expect employees to check their online FSA account every four days? The next portion of the agreement states what happens when employees provide notice after the four-day window:

"If you do NOT tell us within 4 business days after you learn of the loss or theft of your Card, and we can prove we could have stopped someone from using your Card without your permission if you had told us, you could lose as much as $50."

OptumHealth Financial Services logo Now, the liability sounds more like the liability with a traditional credit card: $50. What I find troubling about this clause is that it assumes traditional theft or loss. This blog has documented numerous examples of identity thieves plant skimming devices inside point-of-sale terminals at gas stations, supermarkets, and other retail stores to steal consumers' data to clone debit cards. Since employees are forced to use health care debit cards at retail stores, a more relevant agreement would provide tips about what to do if they believe their card has been cloned. Perhaps the site explains this, but I don't have a account.

The agreement also states (emphasis added by me):

"... if the statement you receive from the Plan administrator shows transfers that you did not make, tell us at once. If you do not tell us within 90 days after the statement was mailed to you, you could lose as much as $50 if we can prove that we could have stopped someone from taking the money if you had told us in time."

Again, that sounds like traditional credit card liability (e.g., $50), but at least the window for notice is longer at 90 days. Why lead with the four day clause? It seems unnecessary. In Caren's case, it seems that United Healthcare is enforcing the 90-day clause. What I find troublesome about the above clause is that it assumes paper statements sent via postal mail. In reality, employees' statements are available online. Nothing is sent via postal mail. So, why write the agreement assuming this? It sounds like the card agreement was rushed to market without all the bugs removed.

Another portion of the agreement states:

"ALL QUESTIONS ABOUT TRANSACTIONS MADE WITH YOUR CARD MUST BE DIRECTED TO THE BANK, AND NOT TO YOUR EMPLOYER OR PLAN ADMINISTRATOR. The Bank is responsible for issuing the Card and for resolving any errors in transactions made with your Card. The transactions will appear only on the statements provided to you by the Plan administrator."

It would be helpful if the agreement listed the bank's phone and postal address information. I couldn't find it in the agreement. The agreement lists United Healthcare's phone and postal address information. In my experience, well-written agreements provide both phone and postal address information with any instructions where consumers should give notice. Perhaps, the other policies provide this information, but I don't have a account.

SO, let's see if I got this correct. The agreement directs employees to contact United Healthcare for transfers the employee didn't make, but contact the bank about statement "errors."What's the difference? How are employees to tell? This sounds confusing.

It troubles me that the above clause mentions "errors" and doesn't mention "fraud." I would expect any bank to aggressively investigate suspected fraud. The fact that Optum Bank's flow of funds page still presents a 2008 copyright does not give me much confidence in the bank:

Optum Financial flow of funds image from website

If something this simple still says 2008, what else has this bank missed? Or, should consumers conclude that the Optum web site hasn't been updated in four years? Or is this flow-of-funds information that is four-years old and/or obsolete? I would expect more timely and current information from any bank -- especially one processing my extremely sensitive health care information.

The "Fees" section of the agreement states:

"OptumHealth Bank does not charge usage fees for this card."

No fees are good, because banks can apply a wide variety of fees to debit-card accounts.However, it means that employees should monitor any changes in the card agreement. Things might change with new fees introduced. So, employees should read any updates to the card agreements or policies with their health care debit cards.

Now, let's return to Caren's story. The fact that Caren never used the Medco online pharmacy should be a huge "red flag" to Optum Bank, Large HR Firm, and United Healthcare. It suggests that Caren's payment information was stolen. The payment data on Caren's Consumer Accounts Card could have been stolen via a skimming device, which identity thieves plant inside point-of-sale terminals at retail stores and gas stations -- not just at bank ATM machines.

If Caren's Consumer Accounts Card was not cloned via skimming device theft, then a couple other options are possible. The pharmacy may have re-submitted the purchases it originally rejected -- and if so, it should have notified Caren, and reimbursed her for the purchases she paid out-of-pocket. Caren could test this by using a different pharmacy. If the duplicate charges don't happen at the second pharmacy, then it is reasonable to assume a problem at the first pharmacy. If the duplicate charges continue, then it seems safe to assume that her debit payment data was stolen.

Insider identity theft is always a possibility. It's harder for employees to spot, but it does happen.

What should employees do if your employer offers a specialized debit card for healthcare expenses? I suggest the following steps:

  • Read all applicable policies to know your rights and responsibilities -- especially before registering for a FSA with your employer. Your employer may have negotiated a really good deal for its employees, or not. Don't blindly assume so; read the fine print in the agreement first. Part of evaluating if it's a good deal is looking for certain clauses in the agreement -- like the ones listed above. If you have difficulty reading contracts, get help from a trusted friend, family member, or attorney if you can afford one.
  • Use the Internet to find reviews written by employees about their health care debit card plan. Places I like to look include Consumer Reports, The Consumerist, and Epinions.
  • File a police report with local law enforcement. (In Caren's case, somebody spent money from her FSA account without her authorization. That is theft.) Insist on law enforcement accepting the report. Make several copies. Attached the police report to any complaints filed with your employer, the FSA healthcare administrator, and the bank,
  • 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,
  • If you feel that you aren't getting the services promised by the bank which processes your health care debit card transactions, learn about how to file a complaint against your bank.
  • File a fraud complaint with the U.S. Federal Trade Commission (FTC) including any relevant documents (and non-action by employer, HR Firm, health care firm, and bank). This will help the FTC track any emerging theft trends with health care debit cards.
  • If there is no action by the employer, HR Firm, healthcare firm, and/or bank), write a letter to your federal or state elected officials asking for help. It's part of their jobs -- to help their constituents.

Is the United Healthcare Consumer Accounts Card a good deal? Only you can decide for yourself, as everyone's needs are different. Hopefully, I have highlighted the things consumers should look for in any health care card agreement, so you can make an informed decision.

If you use a specialized debit card for health care expenses, what has been your experience?


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