Employee benefit plan administration is increasingly trending away from the use of paper checks as a method of distributing benefit payments, experts say.
Paper checks are expensive to produce and process, compared to prepaid cards, which can save insurers time and money while allowing benefit recipients faster and more cost-efficient access to their payments, according to Claims magazine. They may also carry a higher fraud risk.
Given these advantages, some experts say the only reason the industry has not completed the transition to electronic payments is that recipients may not all have bank accounts, preventing them from doing so. Prepaid cards may present a solution to this dilemma, and are becoming more common, the news source reports. While they function much like debit cards associated with traditional bank accounts, they can be used by individuals without such accounts.
This makes them useful to more people and the ease of distribution can be an improvement for administrators. Several state governments are shifting to electronic payment distribution, with prepaid cards as the method of choice for employees without bank accounts, the news source notes, and the U.S. Treasury has indicated it will follow suit by March 2013.
