TMA to IRS: Direct Primary Care, Health Care-Sharing Ministries Aren’t Insurance
By Joey Berlin


The Texas Medical Association is urging the IRS to reconsider a proposed rule that would classify direct primary care (DPC) arrangements and health care-sharing ministries (HSMs) as insurance.

The IRS proposed rule was issued in June as a result of President Donald Trump’s 2019 executive order, “Improving Price and Quality Transparency in American Health Care to Put Patients First.” Part of the order requested that the secretary of the U.S. Treasury “propose regulations to treat expenses related to certain types of arrangements, potentially including direct primary care arrangements and health care sharing ministries, as eligible medical expenses” for tax deduction purposes.

In a health care-sharing ministry, members who adhere to similar beliefs combine resources to share each other’s health care costs. But TMA’s letter noted how HSM services differ from those of insurance companies.

“Some may consider HSMs to be an innovative method to finance medical care expenses. However, no one (including HSMs) consider an HSM’s offering to be insurance. There is no guarantee of payment for medical services,” TMA wrote the IRS. “Furthermore, HSMs do not receive, adjudicate, and pay claims as insurance plans do. Considering that so many states have been able to agree on the fact that DPC and HSMs are not insurance, it is surprising that the IRS would make a contrary rule proposal in the context of tax deductions.”

In a preamble to the proposed rule, the IRS said the rule would have “no bearing” on whether an HSM is considered an insurance company, service, or organization. But TMA warned of a “slippery slope” if the rule were adopted, saying “patients could be misled into believing HSMs are insurance under state law.”

TMA later noted that Texas law explicitly states that HSMs aren’t insurance.

“HSMs present a radically different approach to financing health care,” TMA wrote. “While some people have found these organizations to be helpful, others have found their coverage to be too narrow, including inadequate annual and/or lifetime limits. … For the IRS to label HSMs as insurance may lead to more patients being harmed by this lack of coverage.”

TMA’s letter also noted that many states expressly say direct primary care (DPC) isn’t insurance, and said the IRS was engaging in “faulty logic to assume that DPC is an insurance plan or even a ‘gap’ plan similar to a Medigap policy.”

Texas law, TMA’s letter added, specifically says a physician who provides direct primary care “is not an insurer or health maintenance organization” and isn’t subject to Texas Department of Insurance regulation for that direct primary care.

Elsewhere in its comments, TMA agreed with the IRS’ proposal that funds in health reimbursement arrangements (HRAs) be available to pay for DPC fees, because those fees are medical care expenses. But as DPC is not insurance, TMA recommended that the IRS not classify the use of HRA funds as paying for insurance premiums.

The Texas Academy of Family Physicians and the Texas chapter of the American College of Physicians Services also signed on to TMA’s letter.

Last Updated On

August 19, 2020

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Joey Berlin

Associate Editor

(512) 370-1393

Joey Berlin is associate editor of Texas Medicine. His previous work includes stints as a reporter and editor for various newspapers and publishing companies, and he’s covered everything from hard news to sports to workers’ compensation. Joey grew up in the Kansas City area and attended the University of Kansas. He lives in Austin.

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