MasterCard to Enable Item Level Authorization for Healthcare Transactions

MasterCard Worldwide announced Wednesday that it will introduce a new system enhancement and service designed to increase the use of Flexible Spending Accounts and other medical reimbursement plans by enabling third-party administrators to substantiate purchases in real time using item-level data collected at the point-of-sale. The service, which has a patent pending, is believed to be the first offering of its kind and provides a more streamlined solution for benefit administrators and merchants.

The new solution comes on the heels of a recent Internal Revenue Service ruling on substantiation of FSA and HRA transactions. MasterCard will now be able to provide valuable data to its issuers and partners that will assist with record-keeping and audit requirements resulting from the new IRS Guidance.

“MasterCard continues to enhance its position as a leader in the Healthcare benefits card category, and this announcement illustrates the role innovative prepaid solutions can play in fostering a more efficient and effective healthcare payment infrastructure,” said Scott Galit, senior vice president, global prepaid product development, MasterCard Worldwide. “This feature will dramatically improve the substantiation process for pre-tax benefit cards and spur growth in the market. Because data will be available for real-time decision making, it will substantially increase the number of successful transactions in supermarket and pharmacy settings.”

Currently, a significant percentage of eligible transactions are declined at the point-of-sale because they cannot be adequately substantiated in real-time. Having item-level data will allow third party administrators and issuers to substantiate over-the-counter medications, greatly increasing the number of successful transactions. Non-eligible items that are part of the total purchase will be identified and declined, which will then trigger a split-tender transaction. Item-level data will be generated by transferring Stock Keeping Unit (SKU), Universal Product Code (UPC), and National Drug Code (NDC) data with a transaction authorization message.