Action Alert: Make HRAs and HSAs DPC-Compatible

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Earlier this fall the Internal Revenue Service, along with the Department of Health and Human Services and Department of Labor issued proposed rules that would increase the flexibility of Health Reimbursement Arrangements. 

Specifically, the rule would allow employees to use pre-tax employer funds to pay the premiums for individual plans and in some cases other types of benefits. This would help give individuals some additional control over their choice of coverage as well as the potential for keeping their plan when they change jobs.

A brief overview of the proposal is available at:
https://www.peoplekeep.com/blog/new-regulations-expand-personalized-benefits-with-more-hra-options

And a more detailed review here:
https://www.healthaffairs.org/do/10.1377/hblog20181026.832732/full/

Unfortunately, the proposed rule does not address the crucial question of whether HRA funds can be used for fixed-fee direct payment arrangements like those often found in Direct Primary Care practices. It is past time for the IRS to clarify this issue for both HRAs and Health Savings Accounts. While there is imperfect legislation stalled in Congress intended to help, the IRS can immediately address this under existing authority.

Here’s how you can help!

The IRS is accepting comments on the HRA proposed rule. Comments are due by 5pm Eastern on December 28 but don’t wait till then to take action.

Step 1: Copy the below template comment

Dear Commissioner Rettig,

Thank you for this opportunity to comment on the proposed rule, REG-136724-17, intended to expand the ways employees can utilize Health Reimbursement Arrangement funds. 

Giving consumers more options is greatly needed and the additional tools for this purpose outlined in the proposal are good steps in the right direction.

However, there is a flaw with the rule that the IRS needs to address before issuing the final new regulations. The IRS should clarify that patients can use HRA funds for medical care provided through a periodic fixed-fee agreement with their physician. Increasingly popular Direct Primary Care (DPC) practices are one example of this type of arrangement, where patients directly contract for care with their doctor. 

When periodic fixed-fee arrangements between a patient and doctor are “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body,” they meet the definition of medical care defined in 213(d) of IRS Code. It is time for the IRS to clearly state this so that patients can use not only HRA funds for DPC and similar arrangements, but use their own Health Savings Account (HSA) dollars for these medical expenses as well. 

While clarifying that patients paying physicians directly for medical care through a periodic fee agreement is a qualified medical expense defined by 213(d), the IRS also needs to state that such direct patient-physician relationships are neither a “plan” nor “coverage.”  Twenty-five states already recognize that DPC arrangements are not a type of insurance, and it is time for the IRS to align to this policy as well. Failing to do so will likely continue to block consumer use of HRAs for DPC as well as perpetuate the inability of HSA account holders to either use their HSA funds for DPC or contribute to their HSA while paying for care through a DPC arrangement.

In the recent “Reforming America’s Healthcare System Through Choice and Competition” report, resulting from Executive Order 13813, the administration recognizes that middlemen in between patients and their physicians, “has contributed to a system that produces high costs with uneven quality.” To help reconnect patients more directly with those caring for them, the report urges federal agencies to, “administratively expand consumers’ abilities to benefit from HSAs” and HRAs.  In addition, the report specifically recommends, “enabling consumers with HSAs to enter into provider-consumer fixed-fee arrangements, including direct primary-care arrangements.”

Issuing the above clarifications related to HRAs, HSAs, and direct payment are crucial steps the IRS can take to help further the Administration’s goals outlined in the report as directed by the Executive Order. Thank you for considering these changes and working to implement them as soon as possible for the benefit of patients and those who care for them.

Step 2: Visit the comment submission form, paste in the comments, modify them to your satisfaction, and submit. 

The comment submission form is located at:
https://www.regulations.gov/comment?D=IRS-2018-0028-0001

Thank you for speaking out! Your voice makes a difference.

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