Insurers Paying You by Virtual Card? How to Avoid the Processing Fee

On this page 7 sections

1. Why Insurers and Dental Plans Send Virtual Card Payments to Providers
2. Payer Virtual Card Fees for Dental and Medical Practices: A $2,000 Claim Payment
3. EFT vs. Virtual Card for Insurance Claims: What CMS Guidance Says
4. How to Opt Out of Virtual Credit Card Payments From Insurance
5. If You Must Accept Them: Keying VCCs at the Lowest Rate
6. Reconciling Virtual Card Payments to ERAs and Claims
7. Next Steps for Your Practice

Key takeaways

• A payer's virtual card works like any other card payment: your practice pays processing fees on the full payment amount.
• HIPAA-covered health plans have obligations around standard EFT payments. Read the current CMS guidance and keep a copy before you ask payers to switch.
• Opting out works best when you name ACH/EFT as your payment method, put the request in writing and check that later payments actually arrive that way.
• If you have to accept a virtual card, key it once, in full, with complete data, and post the fee as a practice expense. Never bill it to the patient.

Many dental and medical offices now receive claim payments as a 16-digit card number on a fax, letter or portal page instead of a bank deposit. Insurance virtual credit card payments to providers look convenient, but your practice pays a card processing fee on every one of them. This guide covers five things:

• Why payers use virtual cards
• What one costs on a typical claim payment
• Where CMS guidance fits when you request ACH instead
• How to opt out
• How to keep costs and posting errors down when you can't opt out

Why Insurers and Dental Plans Send Virtual Card Payments to Providers

A virtual credit card (VCC) is a single-use card number issued for one payment. Insurers, dental benefit carriers and their third-party payment vendors use them for a few reasons:

• Lower cost for the payer. Sending a VCC costs the payer less than printing and mailing checks.
• Card program revenue. Organizations that pay through commercial card programs can earn rebates or revenue share from the card issuer. That money is funded by the fees the accepting merchant pays. In this case, that merchant is your practice.
• Default enrollment. Many practices never chose VCCs. A payer or its vendor enrolled them by default, and the opt-out instructions sit in the fine print of the remittance.

The payment usually arrives with the card number, expiration date and security code. It also includes an explanation of benefits (EOB) or remittance that lists the claims it covers. Your front desk keys the card into a terminal, and the money settles like any other card sale, minus fees.

Payer Virtual Card Fees for Dental and Medical Practices: A $2,000 Claim Payment

VCCs are typically commercial cards, and staff key them in instead of dipping or tapping a physical card. Both factors tend to make them cost more than a patient's in-person chip transaction. Our guide to card-present vs. card-not-present fees and rules explains why keyed transactions are priced differently.

Your actual cost depends on the card type, how the payment is entered and your pricing plan. The fee applies to the amount paid on the card, not the amount you billed. The illustrative example below uses hypothetical effective rates on a $2,000 payment to show how the fee adds up:

These numbers are illustrative only. Check your own statement for the rate you actually pay on commercial keyed transactions.

Over a year, the totals grow. Suppose an illustrative $20,000 a month arrived by VCC at an illustrative 3.5%. You would pay $700 a month, or $8,400 a year, just to receive money you had already earned. Because reimbursement rates are contracted, that fee comes straight out of your margin on the procedure.

To find your real number, pull a recent processing statement and look at how commercial or business card transactions are priced. If you can't tell, read what medical practices should really pay in card processing fees or ask your processor for a line-by-line breakdown.

EFT vs. Virtual Card for Insurance Claims: What CMS Guidance Says

HIPAA-covered health plans have obligations around standard electronic funds transfer (EFT) payments to providers. CMS has published guidance on how HIPAA's administrative simplification rules apply to EFT and virtual card payments. In general terms, that guidance addresses:

• Whether a provider can ask a health plan to pay by standard EFT instead of by card
• Whether a plan can make virtual cards the only payment option
• How providers should learn about their payment options and how to opt out of VCCs

The details matter, and guidance can be updated. Before you raise it with a payer, find the current version on the CMS website, read it in full and keep a copy in your opt-out file. Quoting the actual document carries more weight with a provider services representative than a general reference to "the rules."

A few caveats:

• Not every payer is a HIPAA health plan. Some workers' compensation and auto insurance carriers, for example, may fall outside HIPAA's definition, so the CMS guidance may not apply to them.
• Your contract still matters. Participation agreements can set payment terms. Review yours before you call.
• This is general information, not legal advice. If a payer pushes back, a health care attorney or your state dental or medical association can help you confirm your rights.

Here's how the two payment methods compare:

How to Opt Out of Virtual Credit Card Payments From Insurance

A common reason opt-outs fail is that the practice asks to "stop virtual cards" and the payer switches to paper checks instead. Tell the payer exactly which payment method you want.

1. Identify the senders. Review recent EOBs and card notices, and list every payer and payment vendor sending VCCs. Many cards come from a third-party vendor, not the insurer itself. The vendor's name and phone number usually appear on the card notice.
2. Call provider services or the vendor. Ask to change your payment method to EFT/ACH. Request the EFT enrollment form, and ask whether any fees apply to the standard EFT option.
3. Enroll in ERA too. Ask for electronic remittance advice (the 835 file) to be sent to your clearinghouse so deposits match claims automatically.
4. Put it in writing. Follow up by email or through the payer's portal. Log the date, the representative's name and the reference number.
5. Question fee-based ACH. Some vendors offer ACH only with a percentage fee or a paid service tier. If that happens, ask whether the plan offers a standard EFT option without that fee, and get the answer in writing. Have the current CMS guidance and your contract at hand for that conversation.
6. Watch the next payments. Check the first few remittances after the change. Some vendors re-enroll practices in VCCs or switch them back after a system update.
7. Escalate if needed. If a payer refuses to switch, ask for provider relations or a supervisor. Then talk with your state dental or medical association or a health care attorney about next steps, including whether to raise the issue with CMS.

Front-desk tip: Keep a one-page tracker that lists each payer, its payment vendor, the opt-out date, the reference number and the current payment method. When a VCC shows up from a payer marked "ACH," you'll know to call that day.

Dental offices often deal with several benefit carriers and vendors at once, so the tracker matters even more there. Assign one person to own it.

If You Must Accept Them: Keying VCCs at the Lowest Rate

You may still need to accept a card while an opt-out is processing, or when a payer falls outside HIPAA. When you do, handle it carefully:

• Use a virtual terminal. A browser-based virtual terminal for keyed payments lets billing staff enter card details without passing a countertop device around the office. If you're new to them, start with what a virtual terminal is and how it works.
• Enter every field. Include the card number, expiration date, security code and billing ZIP from the notice. Put the claim or payment reference in the invoice field. Missing data can raise costs and cause declines.
• Ask about Level 2 and Level 3 data. Commercial cards may qualify for lower interchange when you pass additional transaction data, such as tax and invoice details. Ask your processor whether your setup supports it.
• Process the exact amount, once. Many VCCs are authorized only for the payment amount. Never split a payment into multiple transactions, because splitting violates card network rules.
• Run it promptly. Virtual cards often expire quickly, so key them as soon as they arrive.
• Don't pass the fee to the patient. The processing fee is your cost, not part of the patient's balance. Your payer contracts may also restrict adding fees to a payer's payment, so check them. If you want to recover card costs on patient payments, read whether doctors and dentists can charge credit card fees and confirm with your processor and a qualified advisor.

Review your pricing plan as well. Interchange-plus pricing shows exactly what commercial card transactions cost you, which makes VCC fees easier to track and question.

Reconciling Virtual Card Payments to ERAs and Claims

An EFT comes with a matching ERA. A VCC deposit doesn't carry claim details that way, so posting mistakes are more common. Use a consistent routine:

1. Post the gross payment to the claims. Apply the full amount the payer paid to each claim on the EOB, not the net deposit.
2. Record the fee separately. Post the processing fee to a bank or merchant fee expense account. Never write it off against the patient's balance or the claim.
3. Match deposits to remittances. Tie each card transaction to its EOB using the reference you keyed in the invoice field. Settlement may batch several cards into one deposit.
4. Flag VCC payers in your software. A note on the payer record reminds staff to start an opt-out call.
5. Reconcile weekly. Compare card settlements, EOBs and bank deposits so short payments or missed cards surface early.

If your practice runs Dentrix, Eaglesoft or Open Dental, see our guide to integrating payments with dental practice management software to cut down on double entry.

Next Steps for Your Practice

1. List which payers pay you by card and what each one costs you.
2. Request standard EFT with ERA, in writing, from every HIPAA-covered plan on the list. Keep a copy of the current CMS guidance on hand when you do.
3. For any cards you still receive, key them correctly and post the fees cleanly.

MannyPay works with medical practices on virtual terminals and card terminals. To see how your commercial card transactions are priced, request a free processing quote. A MannyPay specialist will respond within one business day.

ME

About the author

MannyPay Editorial Team

Beyond the Swipe's editorial desk researches the publication's guides and news and cites its sources in every article. Articles reviewed by a named MannyPay editor carry that editor's byline.

This article is for general educational purposes and is not legal, tax or financial advice. Card network rules and state laws change; confirm current requirements for your business.