Employers looking for a way to improve their population’s primary care experience, take note: The IRS has released proposed regulations that would allow you to reimburse an employee's membership fee for a Direct Primary Care (DPC) arrangement if the employee has a health reimbursement account (HRA). For background about DPC and how it works, check out this article. Employers we’ve worked with have considered DPC as a strategy to address a number of different healthcare challenges – for example, the limited availability of care in a geographic location; a population with a high incidence of chronic conditions; and affordability issues for a low-wage workforce.
HRA vs. HSA coordination with DPC
Today, most employers that have embraced this strategy pay the DPC fee on behalf of employees enrolled in a medical plan that is not HSA-eligible. While allowing fees to be reimbursed through an HRA is certainly a step forward for DPC, it’s important to note that HRAs are not that common, having been eclipsed by HSA-eligible plans and accounts over the past decade. According to Mercer’s National Survey, only 11% of large employers (500 or more employees) offer HRA plans and only 8% of their covered employees are enrolled in them. By contrast, 67% offer HSA-eligible plans and enrollment now stands at 31% -- a number that grows every year. Yet, under the proposed regulations, employees with HSAs still can’t have access to DPC without running afoul of rules governing high-deductible health plans. They can't contribute to an HSA account if they are in DPC, or use the funds in their HSAs to pay for DPC.
But this may change. There’s a strong DPC lobby in Washington DC working to include bipartisan legislation -- the "Primary Care Enhancement Act" (S. 2999/H.R. 3708) -- in the next COVID-19 package, which would allow the coordination of DPC and high-deductible health plans.
Future Considerations for DPC
In addition to more favorable regulations, there are other factors that are helping DPC gain ground – along with some challenges to overcome.
The cost equation. The DPC model covers all primary care for a flat membership fee, often around $70-90/month (or $840-$1,080 annually). The higher deductibles go, the more attractive DPC will become. Currently, median PPO deductibles are $2,000 for an individual and $4,000 for a family among small employers (10-499 employees), and $750 and $1,500, respectively, among large employers. Of course, they are even higher in HSA plans: $3,000/$6,000 among small employers and $2,000/$4,000 among large employers.
The growing role of virtual care. As discussed in a recent post, virtual care and telemedicine are reshaping the provider landscape. DPC practices have been out in front in leveraging and encouraging digital and virtual communication options. It is not uncommon for members to have access to their physician’s personal cell phone and email, as well as more advanced care coordination technology.
Provider preferences may drive DPC growth. Given the growing shortage of providers and the accelerating movement toward freelance/contractor employment, we may see more providers and physician groups choosing DPC for more flexibility, more control over their work-load, and greater ownership over their patient relationships. According to this map there are currently 1,284 DPC practices in the U.S.
Keeping track of quality. One drawback of the DPC arrangement for employers is that they don’t receive medical claims or other data on their members’ encounters with DPC providers. This limits reporting to support quality metrics which is the opposite direction of making quality data more readily available so consumers can make informed decisions on where to seek care.
Healthcare affordability concerns among Americans are real. DPC offers a way for people to choose not only their physician, but how they pay for services – and ultimately, how they utilize care. Offering a highly consumerism-oriented approach, DPC is a strategy to keep an eye on. We certainly are.
