American Administration Services Company
Conn. October 8, 2003 - Evolution Benefits Inc., the company that markets the
Benny™ Card, announced today a positive result from its efforts to have the
Centers for Medicare & Medicaid Services (CMS), a unit of the Department of
Health & Human Services, exempt flexible spending account (FSA) debit card
transactions from the HIPAA electronic data interchange (EDI) requirements.
In a letter to Evolution Benefits dated October 2, 2003, CMS stated, "After a
thorough review of the situation, we have determined that a beneficiary's use of
the FSA debit card for payment of out-of-pocket expenses at a pharmacy or
provider's office that accepts MasterCard is comparable to a beneficiary's
payment to a health care provider using a conventional credit card and that
debit card transmissions are not subject to HIPAA EDI requirements. This is
because it is considered a transaction between the beneficiary and a provider,
not a health plan and provider."
Robert E. Patricelli, chairman and chief executive officer of Evolution
Benefits, explained that, "Requiring administrators who use debit cards in
connection with FSAs to comply with HIPPA EDI requirements would have added very
substantial administrative complexity and cost to a process that debit cards
were designed to simplify. We are grateful for the prompt and positive response
we received from CMS on this issue."
Evolution Benefits took the initiative to secure a ruling on this issue from CMS
because, according to Evolution Benefits general counsel Kitty Keane, "It was
important for our clients, and their clients, that this regulatory cloud be
removed before the new regulations became entirely effective. We prepared an
extensive brief and met with CMS officials to point out that benefit card
transactions such as these are completely different in nature from traditional
claims transactions. To apply the HIPPA EDI rules would have required all
administrators and card vendors to incur significant unnecessary expense without
any resulting benefit to the consumer."
"We recognize that this ruling helps all debit card providers - not just
Evolution Benefits - but we were happy to undertake this effort given its
importance to the entire industry and to employers across the country,"
concluded Ms. Keane.
EDI Rules Don't Apply to FSA, HRA Electronic Transactions
HIPAA's electronic data interchange
(EDI) requirements do not apply when a beneficiary uses a debit or credit card
to pay for a reimbursable expense under a flexible spending account (FSA) or
health reimbursement arrangement (HRA), the Centers for Medicare & Medicaid
said Oct. 6. The clarification was posted in the form of a question and answer
on CMS' website & a beneficiary's use of an FSA's or HRA's debit or credit
card for payment of out-of-pocket expenses at a pharmacy or provider's office,
that routinely accepts traditional credit card payments, is comparable to any
payment to a health care provider using a conventional credit card. "Debit and
credit card transmissions for these transactions are not subject to the HIPAA
EDI requirements, and are considered transactions between the beneficiary and
a provider, not a health plan and a provider," it said. Complete text of Q&A,
go to CMS' website,
http://questions.cms.hhs.gov , choose HIPAA in the category field and
enter the words "flexible spending account" in the search text field.
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