BY MARK HALL
M
ore than 1,000 benefits and compensation professionals descended on Orlando, Fla. for the 2006 Prepaid Card Expo. The three-day expo brought together leading players from the Consumer-Directed Health Care market, payroll and corporate incentive to talk about the issues relevant to each of these markets. Following are some highlights from the event. Network branded prepaid card products are revolutionizing the payments industry and, during the next few years, will dramatically change the way payments are made across many industries. At the corporate level, human resource departments and benefit managers will see the biggest change, as prepaid card products revolutionize the way consumers/employees pay for and manage their health care benefits, receive their paycheck and participate in corporatedriven incentive programs.
“HR departments will soon find themselves at the nexus of the prepaid card revolution, as these products will touch every area within the employee benefit and compensation arena from health care, to payroll, to corporate incentive and commission payments,” said Jonathan Weiner, president of Prepaid Services Group. The health care industry is shifting toward CDHC with the growth of HSAs, HRAs and FSAs. According to recent statistics from consulting firm BearingPoint, nearly 40 million people (affecting 70 million lives) will be enrolled in some form of CDHC account by 2012. By 2010 nearly 24 percent of insured indiWeiner viduals in America will be covered by some form of CDHC insurance program. In dollars, it represents a shift of nearly $600 million up to $1 trillion dollars formerly paid to and managed by insurance companies, now being deposited to and managed by individual HSAs. What does this mean for employers? Through CDHC programs, employers and employees will have more options to help them manage rising health care costs more effectively. Already employees are becoming more responsible for how they pay for health
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care. As a result, benefits managers and HR departments have an increased responsibility to understand these programs and educate employees on how they can most effectively manage their health benefits needs and funding. Similar changes are happening in payroll, particularly for un-banked or under-banked employees. New payroll and general-purpose prepaid debit card products are increasingly being used as a way to empower employees with the basic financial services they need. Along with fostering company loyalty, corporations also benefit from reduced payroll costs as employees move from paper-printed checks to direct deposit. One of the largest providers of basic payroll cards is ADP, which pays one-in-six private sector employees in the United States through outsourced payroll services. While ADP and similar companies offer basic corporate branded payroll cards, some corporations are seeing increased value in offering specialized affinity cards like the Baby Phat Rushcard. Developed by hip hop entrepreneur Russell Simmons, the
Baby Phat Rushcard offers more functionality than most basic payroll cards—the ability to direct deposit paycheck, load additional cash and money orders onto the card at retail locations nationally, pay bills online, check balances 24/7, and breakdown spending by category to help employees better understand and manage their spending habits. At the same time unbanked employees gain the added value of a name brand they trust, valuing the product not just for its functionality, but as a perk of employment through a given company. “Poor people, people who don’t have bank accounts, don’t need to be told or reminded of their struggle,” said Simmons, in his recent keynote at the Expo. “They want a product that makes them feel good about themselves and their finances. They want to feel that they are in control of their lives and are getting somewhere. At Rushcard, we believe in giving consumers access not just to their money, but to the American Dream.” Simmons Finally, prepaid card products are just one of an arsenal of tools
DEBIT CARD ACCOUNTS PREFERRED
Employers favor debit card accounts because they eliminate the time and expense of cutting payroll checks. With the electronic transfers of funds, the money is available immediately on payday—which makes the employee happy. Ethos, an exhibitor at the Prepaid Expo, recently introduced its Visa Debit Card Account from Affinity Card Systems, Inc. It’s a secure, more cost effective method of managing money for employers since it eliminates the average payroll processing cost of $2-4 dollars per check and puts an end to stolen checks and stop payment fees. The card also helps employees save money by doing away with check cashing fees. According to the Office of the Comptroller of the Currency, part of the U.S. Treasury Department, a typical un-banked consumer making basic transactions pays $270 a year at a check cashing service to cash two $400 paychecks a month and to pay five monthly bills using money orders. Prepaid cards also are a benefit to consumer-directed health care. “What is most important to understand,” said Tony DiBarnaba, president of Benefits Resource Inc. “is that for CDHC plans to succeed, prepaid debit cards must integrate into a secure and transparent system that is part of a customer-focused, service-oriented solution that easily integrates into the daily lives of users.” Benefit Resource Inc. unveiled its new Beniversal MasterCard at the Expo. “The Beniversal card incorporates recent advances in prepaid debit card technology and announces a new era in consumer convenience for CDHC plans,” said DiBarnaba. The Beniversal card is linked to online client services, including a secure feature at the Benefit Resource Web site which allows consumers to track and manage pre-tax accounts. Users gain a true picture of costs, which helps them plan future spending. Such detailed reporting capabilities, along with online and human support resources, are essential to longterm consumer satisfaction with CDH plans, DiBarnaba said.
employers can use to motivate employees along with travel rewards, merchandise programs, etc. HR people need to see how prepaid cards can be used to motivate employee to determine if they are more effective than other products. Rim Hospitality, a Calif.-based hotel property management company with 20 plus Western state properties representing more than 1,500 employees and hotel brands including Hilton, Marriott, Sheraton and Radisson, recently implemented a comprehensive safety incentive program to reduce accidents and subsequent claim losses. Instead of using cash, store gift cards and other prizes to incentivize their employees, Rim used the Best Present Prepaid MasterCard from Springbok Services, which they felt employees could use wherever they chose to spend their incentive/rewards money. Once they set incentive program parameters, secured employee buy-in to the program, and then implemented it among their employees the results were remarkable. In two years, they reduced worker’s compensation claims 29 percent, their medical/indemnity claims ratio improved dramatically, and they realized a $634,000 increase in savings to their bottom line, with a cost of only $185,000 for the overall program. Using Springbok’s prepaid MasterCard was a key component to the overall success of the program and motivating employees to change their behavior, reduce insurance costs and minimize lost time at work, while maintaining higher service levels. Just as branded prepaid card products are revolutionizing multiple facets of the work environment, they are also creating new opportunities for cost savings, worker enhancement and job satisfaction, as well as employee autonomy in the way they choose to manage their health benefits, receive their paycheck each month and spend their incentive funds. The role of HR departments and benefits managers during the coming years will increasingly be to not only find the right programs and opportunities which best service the needs of their overall corporate structure and the employees they represent and service, but also as a knowledge center both for corporate direction and use of the products, and providing employees the resources they need to best take advantage of these types of programs and services.
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