2016 Virtual Credit Card Legislation

After two years, the Medical Association successfully saw passage in 2016 of its legislation to prevent physicians from unknowingly accepting virtual credit cards (VCC) and their hidden fees as a form of payment from health insurance companies and RCOs, even though the Medicaid RCO system has yet to officially launch.

Having heard from its members that VCCs were a growing concern, the Association went to work again to pass the VCC bill this year after narrowly losing it at the end of the 2015 session. The Medical Association worked diligently between legislative sessions to build support for the VCC bill and was successful in passing the bill this year.

The legislation – SB 291 by Sen. Quinton Ross (D-Montgomery) and Rep. Kyle South (R-Weaver) – ensures all health insurers and RCOs make physicians aware in their contracts of a physicians’ right to request payment via flat-fee “direct deposit” methods over VCCs, which charge a percentage-of-claims-based fee. The new law requires that all such physician requests for payment preference be honored.

Read Act 2016-320

Q: What is a VCC?

A: A virtual credit card (VCC) is a single-use credit card number. Physicians accepting VCCs are losing a percentage of their contracted rate for any claims paid via this method. The fees may be as high as 5 percent of the total payment amount and health insurers paying claims with VCCs often receive cash back (up to 1.75 percent) or other incentives. The bank or credit card company issuing the VCC is also paid for use of their card network. In other words, unknown to many physicians and their staff responsible for claims and billing, insurers and credit card companies are indirectly charging up to 5 percent of a claim for processing the transfer of money via VCC. In some practices, these fees may add up to substantial sums – and the charges are hidden.

Q: What does this legislation do?

A: The legislation requires health insurance companies and RCOs to place language into all their contracts with physicians outlining that a physician’s request to be paid with an ACH EFT (electronic funds transfer) must be honored. Under HIPAA, payments made via the Automated Clearing House may only be a nominal flat fee – for instance $0.34 instead of the 5 percent attached to some VCCs. The required language for all contracts, which must be in all caps, bolded 12-point font and offset from other language, reads as follows: “If a covered health care provider requests payment under a health insurance plan from a health insurer or its contracted vendor or a regional care organization be made using ACH electronic funds transfer, that request must be honored. Furthermore, such a request may not be used to delay or reject a transaction, or attempt to adversely affect the covered health provider.”

Q: Why is the language that an insurer or RCO cannot “attempt to adversely affect” a physician for requesting an ACH EFT payment over a VCC included?

A: That language protects a physician requesting an EFT payment from being penalized by the health insurer or RCO in some other manner, like denying or delaying payment simply because a physician requested an EFT.

Q: What you still need to do…

A: The Medical Association was successful in getting the law changed to ensure physicians are notified in their contracts of their right to be paid with ACH EFT payments over VCCs. Physicians and practices must individually decide whether or not they want to consent to the percentage-based fees associated with acceptance of VCCs. Additionally, because the Medical Association successfully included specific language be placed in each contract that the health insurer or RCO cannot delay or deny a transaction because of the choice of electronic funds transfer, each physician and practice should look for hidden “value-added” services. For instance, some ACH vendors have attempted to charge a higher fee for providing access to a 24-hour hotline. Under existing law, physicians are not required to enroll in such “value added” programs.

Q: Does this affect patients’ use of credit cards for payment?

A: No.