Physician Organizations Urge IRS to Stop Penalizing Patients Who Bypass Insurance Middlemen


In response to the Internal Revenue Service (IRS) request for feedback on a proposal to allow employer-funded Health Reimbursement Arrangements (HRAs) to pay premiums for ACA-qualified individual health plans, physicians overwhelmingly asked the IRS to put patients first.

To the extent that the proposal increases patient options, “it is a step in the right direction,” writes the Association of American Physicians and Surgeons (AAPS), in the organization’s statement to the IRS. However, “the proposal leaves unanswered important questions about the use of HRAs for Direct Primary Care (DPC) and similar fixed periodic-fee agreements between patients and physicians.”

DPC is an increasingly popular model where patients cut out the insurance middlemen and pay a low monthly subscription fee (often between $40 and $100) to their doctor. The fee often covers all primary care services, certain laboratory tests, and at-cost pharmaceuticals that may cost 15 times more at the pharmacy. Current IRS guidance is improperly blocking patient use of HRA and Health Savings Account (HSA) funds for these innovative arrangements. Patients are even prohibited from contributing to their HSA if they pay a monthly fee to a DPC practice.

The Trump Administration’s “Reforming America’s Healthcare System through Choice and Competition” report recognizes that inserting middlemen in between patients and their physicians “has contributed to a system that produces high costs with uneven quality.”  DPC is a proven solution to achieve the report’s call to “reconnect patients more directly with those caring for them,” while lowering costs and increasing quality. AAPS urges the IRS to align its policies with the Administration’s goals by defining DPC as an eligible medical expense allowing patients to use HRA and HSA funds for this purpose.

Existing authority from Congress allows the IRS to resolve this problem in the upcoming final rule. The Docs 4 Patient Care Foundation submitted a legal argument that effectively lays the foundation for the government’s ability to cut through the red tape hindering cooperation between DPC and account-based solutions, like HRAs and HSAs, without any additional legislative action.

In addition, the vast majority of comments submitted to the IRS (over 90 percent of those posted as of 1/7/2019), many from individual physicians and patients and publicly available at, agreed that the agency should recognize DPC as qualified medical expense.

The AAPS letter concludes with a call for maximum flexibility and options: “Tying the provision of medical care to approved ‘coverage’ drives costs higher and too often impedes patients from meaningfully choosing where, when, and from whom they receive their care.” Bypassing the insurance-plan middlemen “should be encouraged, rather than be handcuffed.”

The Association of American Physicians and Surgeons (AAPS) is a national organization representing physicians in all specialties, founded in 1943. Its motto is “omnia pro aegroto,” or “all for the patient.”