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Benny Card USA
Mark Brohan
Evolution Benefits wants to be a national player in debit cards linked to health-care plans like
flexible-spending accounts. The 5-year-old company has come far, but does it have the right
strategy to succeed in a market where giants have failed?
To succeed long-term in the health-care card and payments-processing market, players must put more than
just their financial skin in the game.
Companies need to identify a promising niche, build a management team that thoroughly understands
both cards and trends such as consumer-driven health care, and market to payers and providers on local and
regional levels.
The market is littered with the failed business plans and unrealistic expectations of even giant companies
such as American Express Travel Related Services Co., which in the early 1990s launched Quattro, a muchhyped health-care card program that failed to catch the interest of major employers and managed-care
companies.
But Evolution Benefits Inc. is one company that’s thus far bucking the trend that card companies can’t
sell a national card program to the fragmented health-care market. The 5-year-old Avon, Conn., company
was founded by former Value Health Chief Executive Robert E. Patricelli to provide card payment and
processing services to third-party administrators, insurance companies, and others.
Building Share
Since 2000, privately held Evolution Benefits has raised more than $30 million from Patricelli and investment
firms such as Conning Capital Partners, Pfizer Inc., and Sprout Group, to prepare for the day when debit card
programs tied to flexible-spending, health-savings, and health-spending accounts could help employers and
employees better manage their out-of-pocket medical expenses.
After five years of signing up more than 30 health-care payers and third-party administrators—including
Harvard Pilgrim Health Inc., Pacific Source Health Plans, and six regional Blue Cross and Blue Shield plans;
implementing a card processing program with WildCard Systems Inc., a Sunrise, Fla., stored-value card
payments processor; and forging card-issuing alliances with Bankfirst Corp. and Wells Fargo & Co.,
Evolution Benefits is beginning to build market share.
The company has issued more than 650,000 of its Benny cards to employees at more than 1,700
companies. So far this year, those employees have used their Benny cards to make more than 1 million total
debit card transactions valued at more than $67 million.
The health-care debit card market so far is small—only about 2.5 million total cards, according to market
forecasts from Visa U.S.A and BearingPoint Inc. But Evolution Benefits could issue as many as 900,000 cards
within 18 months and several million cards over the next few years as more companies begin to offer their
workforces new programs to pay for medical expenses from flexible-spending and other forms of healthsavings accounts.
“There will be wider market adoption of health-savings accounts, which in turn will increase the use and
value of stored-value cards such as the Benny benefits debit card,” says Anne Carpenter, vice president of
marketing of Evolution Benefits. “The market is gaining more critical mass.”
The number of companies providing stored-value and credit card services to the health-care market is
small but will be expanding. In May, Metavante Corp., the financial technology subsidiary of Marshall &
Ilsley Corp., acquired Med-i-Bank Inc., which provides electronic payment services, including debit cards,
for employee benefit and consumer-directed health care accounts. Metavante bought Med-i-Bank for about
$145 million and, as part of the deal, picked up a book of business that includes approximately 200 thirdparty administrators (TPAs) and health plans that service over 15,500 employers and approximately 1.3
million employee accounts.
Other companies with big ambitions for the health-care debit card market include WageWorks Inc., a
service provider for consumer-driven spending accounts, and various banks, bank card organizations, and
insurance companies. The Blue Cross and Blue Shield Association in February adopted a debit card strategy
in anticipation that many regional plans will collaborate with banks to issue Blue Cross and Blue Shieldbugged debit cards in the coming months. “Blues plans across the country are developing new products that
allow consumers to take greater control of their health-care decisions,” says BCBSA Chief Executive Scott
Serota. “Debit cards will complement these efforts.”
With rising competition, Evolution Benefits is forging alliances with financial institutions such as Mellon
Financial Corp. and HSA Bank, a division of Webster Bank and a subsidiary of Webster Financial Corp.;
rolling out a new technology platform; and extending its relationships with drugstore and eyewear
companies.
Debit Comes of Age
Evolution Benefits claims it can produce electronic substantiation of claims to meet Internal Revenue
Service requirements in more than 80% of transactions, a rate it says is the highest in the industry. That
service is part of a major new initiative with 1-800 Contacts Inc. Under the agreement, 1-800 Contacts will
accept the Benny debit card. The card, cobranded with MasterCard and Visa, will tap flexible-spending and
health-reimbursement accounts set up by corporate employees, which the employees have funded with pretax dollars.
Sandy, Utah-based 1-800 Contacts sells more than 150,000 replacement contact lenses a day by phone,
fax ,and the Internet, and says it has the world’s largest inventory of lenses. Evolution Benefits says contact-
lens transactions average $165. As a result, vision as a category represents 5% of flexible spending account
(FSA) transactions but 15% of FSA dollars. The company says all transactions for 1-800 Contacts will be
electronically substantiated.
“The difference between our company and other card-administration vendors is that we specifically know
benefits and health care and we bring that expertise to our card programs,” Carpenter says. “We were founded
as a company devoted to innovative payment services for benefits and health care for employers and their
employees.” As a privately held company, Evolution Benefits won’t reveal its revenues or profits.
In addition to 1-800 Contacts, Evolution Benefits has a similar arrangement with Drugstore.com, an
online pharmacy and health and beauty retailer, and is extending its marketing relationships with a broader
network of technology companies that develop software for third-party administrators and corporate human
resources programs. In May, Evolution Benefits announced that Ceridian Corp., a human resources
application- development company, will begin offering a Visa-branded Benny card to its FSA customers.
Ceridian, which has a base of more than 100,000 clients worldwide, will include the Benny card as part of
a rollout of an integrated benefits-administration technology platform. “We are seeing the coming of age of
debit cards as the payment vehicle of choice for account-based products in consumer-directed benefits,” says
Patricelli.
For its services, Evolution Benefits charges TPAs and others a set-up fee of about $3,000 per program
and a cardholder service fee of $1 to $1.50 per month per plan participant. As a privately held company,
Evolution Benefits won’t reveal its revenues, but it does expect to achieve profitability later this year,
Carpenter says.
Think Local
The company also is investing heavily in new technology. In 2004, it spent nine months developing and
implementing a technology platform that incorporates disparate applications into a single code base, merges
three data stores into a centralized database, provides a more flexible reporting solution, and creates a
platform to better handle future product enhancements. In August 2004, the company also hired Richard
Bucchi, formerly with American Payment Systems in Wallingford, Conn., to be its new senior vice president
and chief information officer.
With better technology—which Evolution Benefits says reduces manual claims by 70% and includes
real-time eligibility substantiation in the card authorization process—and with contracts with more than 12
health plans and 40 TPA firms representing more than 4 million potential flexible benefits accounts,
Carpenter says the company is well on its way to building national market share.
But some industry observers argue that companies such as Evolution Benefits still must think regional
markets first and concentrate on signing up local payers—and especially providers. “Health care is local,
local, and local, and providers don’t care about new technology from a national player unless it improves the
claims processing and eligibility verification for at least 50% of their patients,” says Pat Kennedy, president
of PJ Consulting, a health-care payments systems consulting firm. “Debit cards tied to savings accounts will
generate opportunities, but the opportunity is next year and a lot of players want to participate. If I were
them, I would take one state at a time, do a deal with the regional Blues plan, and think local.”
Carpenter responds that Evolution Benefits’ card technology and existing relationships with various
regional Blues plans result in faster payment to local providers and will help the company grow nationally.
“We were the first to electronically substantiate pharmacy transactions at the point of service through direct
links to pharmacy benefits managers and the first to offer multi-account coordination on one card,”
Carpenter says. “Innovations such as these will keep us moving forward and growing.”
Health-Care Transaction Processors Turn to Web-Based Services for
Growth
When it comes to providing basic batch electronic data interchange messaging services, most health-care
transaction-processing companies have long since been there and done that.
To grow and, more important, establish more local and regional market share, health-care transaction
processors are scurrying to offer more value-added services to payers, providers, and employers. Processing
debit card transactions tied to new flavors of health-savings accounts offers one avenue for growth, but the
biggest opportunity may lie in delivering Web-based services that give payers and providers more secure
access to patient payment and medical information in formats that comply with the Health Insurance
Portability and Accountability Act of 1996.
In the works at transaction-processing companies such as WebMD Business Services, a unit of WebMD
Corp. and the nation’s largest claims clearinghouse, and health-insurance companies such as Blue Cross and
Blue Shield of Alabama, Blue Cross Blue Shield of Michigan, and BlueCross BlueShield of Tennessee, are
new Web-based networking initiatives that deliver more comprehensive, secure, and HIPPA-compliant
transactions to providers.
For instance, rather than just delivering back a basic eligibility verification to a provider, new valueadded services may include a message with the patient’s drug history attached.
Industry analysts and others say HIPAA is responsible for bringing about universal transactionprocessing standards, which in turn are helping to drive the development—and acceptance—of new Webbased services. In April Blue Cross Blue Shield of Michigan rolled out web-DENIS, an Internet portal that
carries more than 100,000 daily payment-related messages between Blue Cross-affiliated providers and the
payer.
So far about 20,000 providers are using Web-DENIS to check insurance eligibility. Later on, the portal will
also let medical and dental providers submit claims online and give Blue Cross of Michigan plan members
Internet access to benefits, claims, and payment information.
“What’s driving health-care transaction processing now is the automation of more transactions
surrounding the claim,” says Pat Kennedy, president of PJ Consulting, a health-care payments-systems
consulting firm. “Payers are looking to move back more transactions, such as drug histories and other
information, to providers in secure and HIPAA-compliant transaction sets.”