Advocates for alternative health-care arrangements Wednesday tried to convince IRS officials that the tax collection agency has regulatory authority to allow their plans to be used in conjunction with health savings accounts.
In June the Internal Revenue Service released a proposed regulation in response to President Donald Trump’s 2019 executive order specifying that increasingly popular direct primary care (DPC) arrangements and health-care sharing ministry (HCSM) memberships can be deducted as medical care. The proposal also would clarify that health reimbursement arrangements funded by employers can be used to reimburse employees for those types of alternative health coverage.
The IRS proposal raised alarm bells with direct primary care practices because it would make it clear that under tax law their members can’t also make tax-deductible contributions to health savings accounts, which are coupled with high-deductible health plans and used by about 23 million people. But the IRS may be limited in what it can do through regulations because the changes being sought by direct primary care supporters likely would require Congress to change the law.
“I just want to remind folks” that the proposed rule is about whether expenses for direct primary care arrangements and health-care sharing ministry memberships are deductible as medical expenses, Stephen Tackney, IRS deputy associate chief, said at the hearing.
In the sharing ministries, health-care costs are shared among members who have common ethical or religious beliefs.
In direct primary care arrangements, patients pay monthly fees as low as $70 for access to basic medical care, such as checkups, without billing insurance. Members also generally have traditional health insurance to cover high-cost care like hospitalization.
Direct primary care arrangements encourage long-term relationships with primary care providers, address behavioral health needs, and can lower costs by reducing emergency and hospitalization, Katy Johnson, senior counsel for health policy with the American Benefits Council, testified.
However, “a significant impediment” to the use of direct primary care arrangements remains because current regulations make people with them ineligible to contribute to a health savings account, Johnson said.
In 2019 more than 183 million Americans had employer-sponsored coverage, and
59% of employers with more than 500 employees offer high-deductible health plans, which require enrollees to meet high annual deductibles before they can be reimbursed for care, Johnson said. A number of those employers only offer high deductible health plans (HDHPs) and health savings accounts, she said.
“Given the significant number of Americans enrolled in HSA-eligible HDHPs, in order for DPC arrangements to be a meaningful option for employees and employers, the HSA barrier needs to be removed,” Johnson said.
Debbie Harrison, director of regulatory and compliance with the Business Group on Health, suggested the IRS adopt “a more flexible definition of preventative care.” HSA enrollees can get preventative care without running afoul of statutory requirements that high deductibles be met before any services can be covered.
Several speakers also recommended that direct primary care plans be expanded to include services provided by nurse practitioners, physician assistants, and specialists.
The final rule should be expanded “to keep the door open for other health-care providers, such as specialists, to experiment with direct pay models,” employee benefits consultant Joel Allumbaugh said. Allumbaugh testified on behalf of Opportunity Solutions Project, an advocacy group that supports free enterprise and “work over welfare.”