Virtual Credit Card Insurance Payments
Waneta
In some cases, insurance companies contract with an outside party to pay their providers via a virtual credit card. Insurance companies do this because they make a bit of money off of the credit card processing fees that are incurred and paid by YOU. Essentially the insurance company is saying, "we would like to pay you 3% to 5% less for your work, OK?" when asking a user to accept this form of payment. This is the amount of the transaction fee that your credit card company is going to charge a user to process this payment. It saves the insurance company some money (they don't have to mail a check), but is literally at your expense.
Below are some of the most common Virtual Credit Card Payment systems used by insurance companies and links to their website where instructions about switching to a different payment type are available. If you receive virtual credit cards from these vendors, you can request that they send you either a paper check or direct deposit. Be aware that in some cases, them setting up direct deposit may incur a fee. However, the convenience of direct deposit and e-delivery of the ERA file may be worth the fee that they are charging, which seems to be around 2%. It might help to complain to the insurance company's provider relations department about these practices: You should not have to 'pay' to get paid for your services.
When used correctly and accepted voluntarily, virtual credit cards can add value to the supplier/buyer relationship. Cash flow businesses that have credit card acceptance costs built into their pricing structures appreciate the (generally) faster turnaround time on payments versus the potential lag times seen in other traditional payment types. This is true for insurance claims as well. However, the story quickly changes when the payment becomes forced on a business that already has challenging profit margins.
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However, virtual credit card payments come with hidden costs. These work against the financial health of your dental practice. Virtual credit cards are bad for your dental practice because:
Yes, vcard fees reduce your profits. Rates are often higher for virtual credit cards than for in-person cards. While a merchant such as Visa might charge about a 2.7% fee for in-person payment, a virtual card merchant fee will likely be higher. Some charge as high as 3.5% plus $0.15 per transaction, according to payment processing company, Nadapayments.
Virtual credit card payments add another step to the posting process. Instead of simply posting an insurance payment to a claim and ledger, your staff now has to post that payment, then run the card through the terminal.
The process of reconciling many types of payments can be time-consuming and confusing. Some dental software programs can't even add virtual credit card payments to your other insurance payments. They don't have the capability. So, virtual credit card payments are added to your patient credit card payments.
As a result, your collection totals by payment type are skewed. Your patient payments will seem higher than insurance payments. This can cause accounting problems. It doesn't reflect where your income is coming from.
By streamlining your payment types, you will get paid faster, and avoid errors that will cause payment delays. You will also have clearer information about where any and all revenue is coming from.
Streamlined cash flow is just one of many benefits of using revenue cycle management services at DCS. To learn more about our billing services and how they can benefit your practice, schedule a call with one of our billing experts.
This article was originally published in December 2021, and was updated in January 2023.
Healthcare virtual credit cards provide an easy and immediate solution to simplify payments and turn a traditional cost center into an additional revenue stream. The solution brings supplier payments on a single automated platform.
The CommerceHealthcare AP Card enables health systems, hospitals and physician practices to leverage automated, electronic payments and earn revenue through a virtual credit card. This flexible payment management program works with your existing accounting system while also creating a new revenue stream and reducing operating costs. By converting paper-based payments, like checks, to virtual card payments, healthcare providers gain operational efficiencies, detailed reporting, and reduced expenses.
It has been well documented that patients increasingly want more convenient, personalized healthcare. They are looking to health systems, hospitals and physician practices to offer choice and make greater use of popular consumer technologies.
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Payments to healthcare providers via virtual credit cards (VCCs) from insurance companies and third party administrators (TPAs) are not only a costly option, but also come with risks. Further, lobbyists for the insurance industry were effective in having the federal government remove from an oversight website the statement that insurance carriers are disallowed from charging a fee to healthcare providers when these companies pay doctors for their clinical services.
An August 14, 2023, investigative report from ProPublica 1 brought this apparent collusion between the insurance industry and US government to light. Charging healthcare providers, a VCC processing fee, usually between 3-5%, these companies take an additional financial bite. Under the 2014 Patient Protection and Affordable Care Act (PPACA) the maximal charge for electronic fund transfer (ETF) is $0.034 (less than four cents).
Most insurance companies and TPAs are covered entities under the Health Insurance Portability and Accountability Act (HIPAA). As such, The PPACA required as of January 1, 2014, all HIPAA covered health plans offer to healthcare providers an electronic payment option via the newly mandated Healthcare EFT Standard. 2 (In the above reference is also a sample letter for provider-to-health plan, for request payment via EFT.)
Some of these insurers and TPAs (usually administrators for state Medicaid and Medicare) play hardball with doctors, hospitals, and clinics, which are often already taking a fiscal hit of 20-40% as preferred providers or credentialed providers. Requests to be paid by check or EFT 3 are frequently ignored. Under the PPACA such obfuscation is seemingly unlawful, but infrequently enforced.
The American Dental Association (ADA) has been aware of such abuses by elements of the insurance industry and TPAs for several years and has issued advisories to assist providers. 4 Similarly, the American Medical Association (AMA) has disseminated their own recommendations and cautionary advice. 5
Too many healthcare providers are already economically pinched to the bone by increasing overhead costs for supplies, equipment, and skilled labor. Insurance fee schedules have remained virtually stagnant for years despite ongoing inflation. As a result, most are forced to pass costs directly to healthcare consumers.
With Medicaid, providers are generally not allowed to pass fees to patients, except in a limited number of states and under restrictive circumstances. As such, once overhead costs surpass income generated, providers usually limit or discontinue care to this vulnerable population.
Moreover, a VCC may be used similar to any credit card in making online purchases. This opens the possibility of employee embezzlement, which may go undetected for years. Anyone with a credit card reader and access to the VCC 16-digit number may also feasibly misappropriate these funds.
While such is certainly costly to a solo practitioner, it could be even more damaging to a large group practice or a dental support organization (DSO). A single act of a lone employee agreeing to process a VCC could obligate the entire practice and all affiliated offices, to an onerous 3-5% intercharge fee agreement.
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