The Affordable Care Act was meant to spark a major increase in electronic payments, yet progress has been slowed by confusion and lack of interest.

"There is a common perception that paper checks will always be there, so some are shrugging off the regulations and are saying they will do [electronic payments] someday," says Landon Gordon, a vice president at Comdata, a payments technology company.

Health care has been one of the last industries to adopt electronic payments and other technology, Gordon says. Government health care reform and the growth of electronic payment options in other industries are starting to change that.

The Affordable Care Act requires all commercial health plans to have the ability to settle claims reimbursements electronically—and payers must be able to facilitate an electronic funds transfer via Automated Clearing House if the provider requests that option, Gordon says. Also, payers must provide electronic remittance advice or face penalties.

However, few have adopted ACH, Gordon says, citing a cumbersome enrollment processes. Some payers are turning to "virtual credit cards," which reduce reimbursement processing costs and have an easier enrollment process — but present issues with compliance, Gordon says. About 10% of health care payments are currently electronic, with about 8% coming via virtual cards, "the fastest growing mode for health care payments," Gordon says.

Third party administrators and health plans need to make sure their chosen solutions are compliant with current and emerging health care payment regulations, Gordon says, adding virtual cards are also not always compliant with the Affordable Card Act's ACH requirement. "The provider can override the health plan and say, 'I want an ACH payment rather than a virtual card,'" he says. 

For example, ERISA—a law that protects retirement savings and sets minimum standards of conduct for parties that manage employee benefit plans—poses a challenge for virtual cards. ERISA requires all plans to hold assets in trust until the claim payment is extinguished, Gordon says. Employee and employer contributions, COBRA premiums and retiree premiums are kept separate from other assets under ERISA to shield the employee from the financial risk of his or her employer. ERISA violations risk six-figure fines and prison penalties.

With virtual cards, there is no clear guidance about the status of advanced funds between the time of card issuance and authorization, Gordon says, adding the Department of Labor could take the position that these "funds in transit" are considered plan assets when an employer uses salary reductions to fund the card payment. That could take the payment out of ERISA compliance.

"The benefit of ACH is the [Affordable Care Act] health care exchanges know how they are going to get paid," says Patricia Hewitt, director of debit advisory services at Mercator Advisory Group.

Other options provide less clarity, she says.

Comdata's Gordon recommends using a technology that offers a "post authorization funding option" that addresses compliance. Employers can initiate card transactions immediately, but delay funding until the virtual card payment has been authorized by the provider—giving employers more control over cash flow and ERISA compliance, Gordon says.

"Many in the industry think virtual cards are a short term play, but with vendors and payers charging for ACH delivery, virtual cards will become an established payment modality in healthcare," Gordon says.

A number of payment companies are targeting health care, aiming to benefit from the Affordable Care Act's push for digital payments by bundling electronic payments and access to claims information, as well as mobile financial management apps.

As functionality increases in these apps, the products bump up against payments regulations and become less convenient for payments companies.

"It depends on how cross functional you want these products to be," Hewitt says. "At what point does the cross-function become less effective?"

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