Players in the healthcare industry continue to identify ways to use technological innovations to decrease overhead expenditures and increase bottom lines. AI software to automatize EHR documentation in place of human input, mobile apps and portals to grant patients immediate access to their medical records, and blockchain technology to accelerate claims adjudication are some examples. In particular, commercial health insurers have employed various cost containment measures to minimize non-claim expenses. One measure involves the use of virtual credit cards, or VCCs, in lieu of traditional payment methods to reimburse providers for services rendered to plan enrollees. A VCC is linked to the payer source’s credit card account but generates a new 16-digit single-use number each time the physical card’s 16-digit number is used. Payers send providers the number with instructions to access and process these payments electronically.

Very innovative and efficient, right? Insurers eliminate the administrative costs of sending paper checks through snail-mail and providers get paid faster. The American Medical Association (AMA) and Medical Group Management Association (MGMA) aren’t all that impressed with VCC payments and here’s why: the transaction fees are as high as 5% so theoretically the administrative costs shift from the payer to the provider. Providers argue these transaction fees make their reimbursement amounts less than the negotiated rate and worse—according to the AMA and MGMA—they are not allowed to opt-out. As a result, the AMA and MGMA are advocating for laws that prohibit insurance companies from using VCC as their sole payment method and three states—Alabama, Connecticut, and Georgia—have heeded the associations’ demands thus far.

In 2016, Alabama enacted VCC legislation mandating health insurers explicitly include language in the payer-provider billing contract indicating the provider’s request to receive ACH payments will be honored, essentially creating an opt-out provision. Alabama’s definition of “provider” includes licensed physicians, dentists, optometrists, other licensed care professionals, and health care facilities.

Connecticut enacted similar legislation in 2018 but only for dentists (the rationale is unclear but perhaps it’s because the state’s Dental Association pushed this rulemaking). Connecticut’s statute requires insurers or any “entity that delivers, issues for delivery, renews, amends, or continues an individual or group health insurance policy” to allow dentists to refuse VCC payments.

Georgia also enacted legislation in 2018 and like Alabama it applies to physicians, dentists, optometrists, and health care facilities, but more broadly includes podiatrists, pharmacists, psychologists, registered opticians, LPCs, PTs, and chiropractors as well. Georgia’s statute states health insurers cannot limit provider reimbursement options to credit cards, including VCC. Georgia further requires insurers to disclose the transaction fees for VCC and EFT payments.

Key takeaways:

• There is no outright ban for payer-to-provider reimbursement through virtual credit cards
• Commercial health insurers operating in Alabama, Georgia, and Connecticut must give providers (in CT, dentists only) the option to choose their preferred method to receive payments
• If, after receiving adequate disclosure, the providers still choose to be paid with virtual credit cards insurance companies have at least fulfilled their obligation
• The AMA and MGMA continue to advocate for VCC restrictions so other states may enact similar legislation

For additional information on this topic check out these links:

Medical Association of the State of Alabama: 2016 Virtual Credit Card Legislation

ADA News: Connecticut Law Lets Dentists Refuse Virtual Credit Cards

ADA News: Georgia Law Lets Providers Choose Reimbursement Method

AMA: The Effect of Health Plan Virtual Credit Card Payments on Physician Practices