As over 21 million patients in the US turn to the direct primary care (DPC) healthcare model for their primary care services, there are still concerns about how the membership fee is seen by policy makers. A movement toward alleviating the restrictions on the membership fee and its impact on health savings accounts (HSAs) as well as federal income tax deductions is gaining steam in 2021.
In May 2020, the DPC Coalition and American Academy of Family Physicians (AAFP) in collaboration with Milliman and the Society of Actuaries published a comprehensive evaluation of DPC as a growing healthcare delivery model. The report shows that enrollment in a DPC practice is associated with a reduction in overall member demand for healthcare services outside of primary care. In addition, the evaluation revealed that DPC is affordable for patients.
Other findings from the report include:
- DPC members had 19.90% lower claim costs for employers on an unadjusted basis and 12.64% lower claim costs on a risk-adjusted basis during the two-year period.
- DPC members experienced approximately 40% fewer ER visits that those in traditional plans.
- DPC members experienced a 53.6% reduction in ER claims cost.
- DPC members experienced 25.54% lower hospital admissions on an unadjusted basis, a number that validates previous research trends showing a reduction in the use of hospitalization and more complex specialty care by DPC members.
- 99% of all DPC practices surveyed were doing virtual consults via text/phone as a part of the membership fee (two years prior to COVID-19).
- 88% said they provided “telemedicine” benefits (meaning expanded video or additional digital communications assets).
- The average adult monthly DPC Fee is $73.92
- The median age for DPC patient was 31.8 years old, v. 36.1 for traditional insured (PPO). The survey finds the member mix did not vary materially between the DPC option and traditional option.
Enabling DPC patients to further optimize their financial investment in primary care has been the focus of proposed regulations that will change policy regarding the membership fees. Currently, to qualify for an HSA, an individual must be covered by a high deductible insurance plan. The challenge has been that the membership fee has been identified on a federal level as an insurance premium and so DPC patients have not been able to use their HSA funds with a DPC membership. However, 32 states currently consider DPC as a medical service rather than as a health plan and so exempt it from insurance regulation.
Under an Internal Revenue Service (IRS) proposed rule, “in the limited circumstances in which an individual is covered by a direct primary care arrangement that does not provide coverage under a health plan or insurance (for example, the arrangement solely provides for an anticipated course of specified treatments of an identified condition) or solely provides for disregarded coverage or preventive care (for example, it solely provides for an annual physical examination), the individual would not be precluded from contributing to an HSA solely due to participation in the direct primary care arrangement.”
Another challenge has been with patients being able to deduct their DPC membership fees as healthcare expenses. Section 213 of the Internal Revenue Code allows an itemized deduction for medical care expenses when those expenses exceed 7.5% of the individual’s adjusted gross income. Proposed IRS regulations for DPC policy updates respond to Executive Order 13877 directing the Secretary of the Treasury, to the extent consistent with law, to “propose regulations to treat expenses related to certain types of arrangements, potentially including direct primary care arrangements and healthcare sharing ministries, as eligible medical expenses under Section 213(d)” of the Code.