The Dangers of Virtual Credit Cards

Many dentists have not realized the dangers posed by virtual credit cards.

Some insurance companies make payments to practices by creating virtual credit cards with credit balances and then providing the card numbers. The practice can then enter the virtual credit card number into their merchant terminal and receive payment.

Many dentists have reported that this arrangement was put in place without their consent and that opting out was not presented to them as an option.[1] Insurance companies favor virtual credit cards because they is more efficient for them than issuing checks or arranging ACH payments.

There are several disadvantages to allowing insurance companies to pay you with virtual credit cards. First, when you process the payment through your merchant terminal, it is treated like any other credit card payment, and a processing fee of a couple of percentage points gets applied. This cost can be particularly galling in a PPO arrangement where you are already receiving fees less than what you charge other patients. While most dentists will swallow merchant account fees to provide added convenience to patients making payments, I’m not sure that paying these fees for a huge insurance company’s convenience has the same appeal.

Second, many front desk staff struggle with how to enter payments from virtual credit cards correctly into practice management software. Is it a credit card payment or an insurance payment? Unless a practice has a clear policy (and perhaps a separate payment code for these payments), it is entirely possible that different staff members in the same practice will take different approaches to recording virtual credit card payments, causing a distortion in financial reporting.

Virtual Credit Cards and Embezzlement

And finally, there are many possibilities for a larcenous staff member to abuse this payment system.  The use of these cards is not limited to a specific merchant terminal, so it doesn’t take much imagination to conjure up abuse.

Even though individual insurance companies may not present this as an option, most states have passed laws preventing insurance companies from forcing you to accept payment via stored-value credit cards. If you are currently receiving payment in this manner, contact the insurance companies involved and opt out.