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Washington State lawmakers urge IRS to ease direct primary plan regulations


Lawmakers from the state of Washington are asking federal regulators to allow employers to offer direct primary care plans in conjunction with health savings account-qualified high-deductible health plans.

Currently, employers can pair direct primary care plans, which are usually paid on a per-member-per-month basis and provide the full range of primary and preventive care services, only with HDHPs that do not have HSAs because DPC plans are considered “health plans” under Section 223(c) of the Internal Revenue Code, which prohibits HSA account holders with HDHPs from having a second “health plan.”

But the lawmakers maintain these arrangements should be treated as “qualified medical expenses,” under IRS rules governing HSAs to comply with provisions of the Patient Protection and Affordable Care Act facilitating the creation of “direct primary care medical homes.”

In a June 17 letter sent to IRS Commissioner John Koskinen, Sens. Maria Cantwell and Patty Murray and Rep. Jim McDermott, all Democrats representing the state of Washington, sought a ruling that payments made for DPC plans be treated as “qualified medical expenses” under IRS rules.

“Direct primary care medical homes are not insurance,” states the letter, quoting from March 12, 2012, final regulations issued by the U.S. Department of Health and Human Services relating to the treatment of direct primary care medical homes in health insurance exchanges.

“We understand that Section 223(c) of the Internal Revenue Code does prohibit HSA holders from having a second health plan,” the letter states. “However, it appears that the IRS has not updated policy to inform employers that DPC medical homes, as noted in the ACA, are not health plans.”

“If you take a bronze plan, you can often pair that with a DPC plan on an exchange, and it would be perfectly compatible with the ACA mandates,” said Dr. Samir Qamar, CEO of MedLion, a privately held direct primary care provider based in Las Vegas, and a member of the Direct Primary Care Coalition, which is also lobbying Congress to enact changes to either the ACA or the U.S. tax code to allow employers to purchase DPC plans in conjunction with HSA-qualified HDHPs. However, under current IRS rules, HDHP plan members cannot also have an HSA under such pairing arrangements, he noted.

“The letter is seeking to make DPC plans exempt from insurance regulations,” Dr. Qamar said, because “direct primary care is not insurance.” Such a change would also allow employees to use HSA funds to pay for DPC plans on a pretax basis, he said.