Health-Care Card Usage Skyrockets

March 26, 2004 ( - Spending on prepaid health care cards is expected to go up this year - way up to $855 million, according to a newsletter that tracks the consumer payments industry.

That’s three times what it was last year, according to The Nilson Report, the Associated Press reported. Usage is also skyrocketing: There are about 1.2 million prepaid health care card accounts this year, up from 425,000 last year, and the current usage level is expected to keep heading north.

Flexible spending account (FSA) and health reimbursement arrangement (HRA) cards should top 9 million and generate $11 billion in spending in five years. Prepaid cards tied to Health Savings Accounts (HSA) – which allow consumers to save pre-tax dollars for medical bills – used by small business employees and the self-employed could add another 2 million card accounts and $2 billion in spending, according to Nilson.

“The continued erosion of medical benefits made available by employers will fuel the growth of prepaid MasterCard and Visa health care cards,” the Nilson report said.

The cards, which work much like debit cards, are linked to employees’ FSAs, where pre-tax money is set aside from their salary to pay for medical expenses that their insurance doesn’t cover. They can also be tied to employer-funded HRAs.