How to resolve card transactions...

First, let’s understand the IRS rules…

The Internal Revenue Service (IRS) regulations and other guidance applicable to healthcare benefit cards mandate that each and every electronic payment card payment must be adjudicated and properly substantiated and that only those transactions that fit squarely into very limited “auto adjudication” categories need no additional paper substantiation because they are self-substantiating by their very nature. Below you will find the three categories that allow for “auto adjudication”. If the transaction does not meet the criteria listed below, participants will be required (due to IRS rules) to submit documentation to validate the transaction was eligible under the plan. Click here to view a white paper from Alston & Bird LLP regarding the IRS Debit Card Substantiation Rules.

 

Inventory Information Approval System

This Inventory Information Approval System (“IIAS”) System was added by Notice 2006-69. Under the IIAS, no additional substantiation is required if the retail merchant compares the item or items to a pre-determined list of covered expenses and restricts use of the card only to those items that fall on that list. Many plan sponsors and administrators are already using health care vendors to verify the transaction at the point of sale by comparing the item(s) to a pre-determined list; Notice 2006-69 simply confirms that this approach is permissible, and opens the door for use of the Card at non-health care merchants. To read more, please click here.

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Co-Payment Matching

If the claim for a particular service matches a co-payment imposed for that service under your employers health plan in which the participant or dependent is participating, no substantiation other than the information in the electronic swipe is needed. For example, if your health plan in which the participant or dependent participate imposes a $15 co-pay for all physician office visits and there is a $15 payment to a physician, the plan may assume that such payment is for the co-payment under the health plan and thus no additional substantiation is required. The rule applies equally to pharmacy co-payments imposed by the plan. To read more, please click here.

Recurring previously approved claims

In situations where a claim has been previously approved, a subsequent electronic claim that is the same as the previously approved claim as to a) amount, b) provider, and c) time period (e.g., for prescription drug refills that occur on a regular basis at the same provider for the same amount) will not require additional substantiation. A recurring claim must be accompanied with paper substantiation if the subsequent claim is different as to any of the elements, e.g. provider. Practically speaking, very few claims will satisfy this auto-adjudication parameter. To read more, please click here.

Transaction Adjudication (Manual vs. Automatic)

Transaction adjudication is a decision making process that determines whether EZCard transactions meet plan criteria or not. It can be done automatically by the system or manually by the employer.  

 

Manual transaction adjudication typically involves the following:

  • A card transaction cannot be auto adjudicated and is given a pending status
  • The employer requests a receipt from the cardholder
  • Based on the cardholder response, the employer uses the transaction adjudication page to mark the transaction as approved, ineligible, insufficient documentation, or resolved by a compensating action.
  • If there is no response, the system can automatically inactivate the card. If the cardholder needs to reimburse the account for the transaction, it can be done manually, or automatically with ineligible POS transaction offsetting.

Automatic transaction adjudication can occur in several ways:

  • The transaction occurs at an IIAS vendor, a real time auto-adjudication vendor, or a WCA authorized transit vendor. It is automatically adjudicated at the point of sale, assuming the cardholder’s plan has been set up for real time transactions and the cardholder has sufficient balance, is active, etc.
  • The transaction occurs at an MCC allowed by one of the cardholder’s plans; it matches an auto review parameter, such as copay amount or recurring expense; and it is within the MCC’s transaction and cumulative total limits. It is automatically adjudicated during force post, after the card transaction authorization.
  • The transaction is not authorized in real time, does not meet any auto review parameters, and is put in a pending state. But the plan uses Third Party Substantiation (TPS), and the transaction is matched with a TPS claim. The transaction is automatically adjudicated after force post.

In all cases, once automatic adjudication has occurred, no further administrator action is required. The PreTaxAccount system marks the transaction as approved.

Card Authorization Rules

Authorization determines whether a card transaction is approved or denied at the point of sale. Depending on administrator settings and the merchant, some card transactions can be automatically substantiated at the time of authorization. The others are either automatically substantiated or manually adjudicated by the administrator after authorization.

Cardholders can use their WCA Operations benefits card in a variety of ways, including at a merchant terminal, online, or over the phone. Once the card is submitted, the card payment processor (American Express, MasterCard, VISA), initiates authorization to determine whether to approve or deny the purchase, usually while the customer waits.
The card payment processor performs its own authorization checks before transmitting the authorization request to WCA Operations. WCA Operations only has a few seconds to decide whether to authorize or deny the transaction. Once WCA Operations authorizes the transaction, WCA Operations is obligated to reimburse the merchant for it.

 Some of the tests WCA Operations performs when authorizing a transaction include:

  • Card is valid and active
  • Employee is active
  • Plan is active
  • Balance is sufficient
  • MCC is allowed

If the administrator is using IIAS and the merchant is an IIAS merchant, the card transaction can be automatically substantiated at the time of authorization. Otherwise, automatic substantiation criteria are applied to the transaction after it is authorized. If the transaction can be automatically substantiated, no further administrator action is required. If it cannot, the administrator must manually adjudicate the transaction, usually based on the cardholder submitting a receipt. 

 This two-step process of point of sale authorization and post-sale adjudication provides an optimum balance between cardholder convenience and accountability.

Card transaction denials

For card transaction pre-authorizations, WCA uses the plan priority order to return the failure reason for the first priority account which matches the merchant category code associated with the transaction.

For example, consider a participant with a DCA and an FSA, with the DCA prioritized first, and fully-depleted FSA funds. If the participant swipes their card at the pharmacy, the transaction previously would have returned an ‘MCC not allowed’ denial error, due to the DCA’s higher priority over the FSA. However, the card swipe was actually denied due to the low funds in the FSA.

With this logic, the system bypasses the DCA denial reason and displays ‘insufficient funds’ as the denial error, because FSA is the highest priority account which includes the MCC associated with the pharmacy card swipe. The DCA does not include the pharmacy MCC.

The table below shows the error messages most commonly returned when a POS authorization is declined, as well as the reasons why the error may have occurred.