In 2016 the Medical Association passed 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 in Alabama now appears to be defunct. Now, the Centers for Medicare and Medicaid Services (CMS) has given notice that health plans cannot require physician practices or other health care organizations to accept payments made using so-called VCCs that are often accompanied by exorbitant service fees.
Once the Automated Clearing House (ACH) EFT standard went into effect in 2014, the Medical Association joined with other medical groups to advocate that CMS issue guidance spelling out physician rights regarding insurance company electronic payments, even passing legislation in Alabama. CMS has now posted the requested clarification of its EFT operating rules and standards on its HIPAA Administrative Simplification frequently asked questions webpage.
Unfortunately, not all private insurers followed the letter or spirit of the regulations and some insisted on making payments with VCCs, a 16-digit number emailed, faxed or mailed to a provider in order to make a one-time payment. In Alabama, all health insurers and RCOs must make physicians aware of 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.
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.
According to CMS: “A health plan cannot require a provider to accept virtual credit card payments. A provider has the right to request that a health plan use the electronic funds transfer (EFT) transaction. If a provider makes the request, the health plan must comply.”
Health insurance companies and RCOs 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.”
Although the Medical Association was successful in getting the law changed in Alabama 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 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.