Hidden Credit Card Transaction Fees: How Virtual Credit Cards Affect Private Practices
In the healthcare industry, there are often hidden costs that can affect how much money private practices make. One such cost comes from Virtual Credit Cards (VCCs), which insurance companies use to pay providers. While VCCs are convenient for insurance companies, they can create extra fees for practices. Understanding these fees and finding ways to reduce them is important for keeping practices financially healthy.
What are Virtual Credit Cards?
Virtual Credit Cards are like digital versions of regular credit cards. They are created for specific transactions and used mainly for electronic payments. Insurance companies are using VCCs more and more to pay healthcare providers because they offer better security and faster payment processes.
The big issue with VCCs is the transaction fees that come with them. When an insurance company pays a provider using a VCC, the office usually has to pay a fee of 2% to 5% of the transaction amount. For busy offices, these fees can add up quickly and take a big chunk out of their earnings.
Imagine a practice receives $100,000 in payments through VCCs. They could end up paying up to $5,000 in fees. This is a lot of money, especially for smaller offices that don’t have a lot of extra cash.
How to Reduce or Avoid VCC Fees:
- Use Electronic Funds Transfer (EFT): HIPAA requires all health plans to offer EFT, which uses the Automated Clearinghouse (ACH) Network to transfer funds directly to the office’s bank account. EFT fees are much lower, around 34 cents per transaction, compared to the 5% fee with VCCs. Private practices should ask their insurers to use EFT instead.
- Be Careful with Contracts: Even though HIPAA says health plans must offer EFT, some may still push for VCCs. It’s important to read and understand any payment contracts before signing to avoid agreeing to expensive payment methods.
In New York, big insurance companies like Aetna, Cigna, and UnitedHealthcare often use VCCs to pay providers. However, providers can usually request to switch to EFT to save money. Outside of New York, companies like Humana, Anthem, and various Blue Cross Blue Shield entities also use VCCs.
Private practices should talk to their insurance companies about switching to EFT payments to reduce fees. Madison RCM can help offices manage and reduce the impact of VCC fees by reviewing current payment methods and finding cheaper options like EFT. They can also negotiate with insurance companies to lower or eliminate transaction fees.
VCCs used by insurance companies create hidden costs for practices due to transaction fees. By understanding how VCCs work and finding ways to avoid these fees, practices can improve their financial health. Madison RCM can help by optimizing payment methods, advocating for better terms, and educating practices, ultimately helping them save money and run more efficiently.
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