MasterCard Launches Real-Time Substantiation for Health-Benefit Cards

Looking to increase the number of debit cards tied to flexible-spending accounts and other tax-advantaged health-care plans, MasterCard Worldwide has introduced a system that the Purchase, N.Y.-based bank card network says collects item-level detail and provides real-time substantiation at the point of sale. Substantiation, required by Internal Revenue Service rules to prove that purchases are covered by health plans, has been a lingering problem for health-benefit card programs. Indeed, MasterCard says “a significant percentage of eligible transactions” are rejected owing to a lack of sufficient real-time substantiation. A recent report from Boston-based researcher Celent LLC estimates that processors are able to capture enough data to substantiate more than 70% of transactions, though it says substantiation rates vary by card provider and says the proof of coverage remains an issue for card programs tied to health-care plans (Digital Transactions News, May 19). MasterCard says its new program, on which it has filed for a patent, will capture specific details on each item presented for payment. “This feature will dramatically improve the substantiation process for pretax benefit cards and spur growth in the market,” said Scott Galit, senior vice president for global prepaid product development at MasterCard, in a statement. “Because data will be available for real-time decision making, it will substantially increase the number of successful transactions in supermarket and pharmacy settings.” Specifically, MasterCard says item-level detail will flow as a result of stock-keeping unit (SKU), universal product code (UPC), and National Drug Code (NDC) information flowing along with authorization messages. Items not eligible for coverage will be declined, triggering a so-called split-tender transaction. The system, MasterCard says, allows plan administrators to avoid keeping track of merchants’ various SKU codes and cuts down on so-called false declines, since needed information is carried with the transaction. Merchants that submit SKU, UPC, and NDC data to MasterCard should see higher approval rates, the network says. Similarly, it says cardholders should see lower decline rates and “may no longer be required to submit cumbersome paperwork.” Celent estimates some 6 million debit cards tied to FSA accounts will be issued this year, up 50% from 2005. Banks have also begun issuing the plastic, which are signature-based debit cards, to allow cardholders to tap other employer-offered health-benefit plans, such as health-reimbursement accounts (HRAs).