Work Comp Debit Cards: A 60-Second Seminar in Workers’ Compensation Claims Handling

Today’s blog addresses the confusion in the workers’ compensation community over the DWC Debit Card law. 

In 2018, Senator Richard Pam (D-Sacramento) introduced Senate Bill 880, creating LC § 4651(a)(3)(A), effective 01/01/2019.  Specifically, LC § 4651(a)(3)(A) authorized workers’ compensation claims administrators to voluntarily issue indemnity payments by debit card on a trial basis.  The trial period was to sunset on 01/01/2023 but was extended twice per AB 2148 and AB 489. It will now be sunset on 01/01/2025. 

As for the existing confusion there appears to be a misunderstanding about the debit card law itself.  This law has absolutely no bearing on direct deposit banking. Yet some claims administrators reference debit cards and direct deposits as if they were one and the same. Senator Pam’s legislation under SB 880 pertains only to debit cards.

Currently, workers’ compensation is just following the lead of various government agencies that already pay benefits by debit card. For example: Unemployment Insurance Benefits and State Disability Insurance Benefits currently use debit cards, as do Medicare and Medi-Cal supplemental insurance, CalFresh and the Supplemental Nutrition Assistance Program (SNAP).

Debit card programs have proven to be a safe means of providing benefits.  In addition, debit card payments are more secure than issuing paper checks.  It also saves on administrative time and mailing expense.  For the recipient, a debit card is exceptionally convenient to use where funds are automatically deposited into an account associated with the card.

There are, however, a few rules that must be followed if a workers’ compensation claims administrator wishes to participate in the debit card trial.  The primary rules are as follows:

1. Use of a debit card is voluntary where the injured worker must consent in writing prior to a card being used.
2. The card must allow injured workers reasonable access to in-network automatic teller machines.
3. An injured worker must be allowed if so desired to withdraw the entire balance on the card in one transaction without incurring a fee.
4. The card must allow use for point-of-sale purchases, without a fee.
5. Linking the debit card to any form of credit, including cash advances or loans against future payments, is prohibited.

The following fees against a debit card are allowed:

1. Foreign transaction fees for card use outside the country.
2. ATM fees for third and subsequent transactions per deposit.
3. Replacement cards, including expedited delivery charges.

In the unlikely event the debit card trial period should expire on 1/1/25 without being renewed or extended, it appears that debit cards may continue to be used.  A 2008 letter from then Administrative Director, Carrie Nevan to the corporate attorneys at InstaCard acknowledged that use of a debit card in workers’ compensation was allowed, providing a fee is not charged to access funds.

If your company is planning on converting over to debit cards to pay indemnity benefits, then simply follow the rules as explained in this blog.  For additional assistance or information, please feel free to reach out to the experts here at F+B.