THE HSA AND DPC PARADOX:
Could 2020 be the Year an Unstoppable Force Meets an Immovable Object?
T H E H S A A N D D P C PA R A D O X
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K E V I N B R A DY, E S Q & J O H N S H E A R E R , J D , M H A
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By Kevin Brady, Esq. & John Shearer, JD, MHA
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ere at Phia, we are not Physicists, Philosophers, nor Physicians. Fortunately for you, that fact hasn’t stopped us from questioning two of life’s great paradoxes. The first question often heard pondered aloud: what would happen if an unstoppable force met an immovable object? The second: what would happen if patients could use their Health Savings Account (HSA) funds to pay for Direct Primary Care (DPC)? Health Savings Accounts are an increasingly popular option that allows individuals to contribute funds to their HSA on a pre-tax basis, thereby reducing their taxable income. HSA contributions can then be used to cover “qualified medical expenses,” as defined in Internal Revenue Code § 213(d). DPC, on the other hand, is a form of capitated health care where individuals, or sometimes employers or health plans, pay a periodic fee (typically monthly) to a provider for access to designated services without fee-for-service billing. A DPC program increases the accessibility of healthcare by making the delivery of services simpler for both the patient and the provider while also eliminating the administrative burdens associated with fee-for-service arrangements. DPC has become an especially attractive option for individuals and employers as healthcare costs
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continue to rise with unpredictable fluctuations in pricing. Independent of one another, HSAs and DPC have become unstoppable forces in the health care industry. Unwittingly, these unstoppable forces when brought together, somehow create an immovable object. Rooted firmly in the pathway of the potentially exponential growth of both HSAs and DPC are the IRS regulations restricting the use of HSAs in conjunction with DPC programs. Under the IRS rules, an individual with an HSA-eligible High Deductible Health Plan (HDHP) is not only (generally) unable to use their HSA funds to pay for DPC as a qualified medical expense, but they also risk forfeiting their HSA eligibility if they participate in a DPC program. While the current guidance to determine whether periodic fee payments equate to a qualified medical expense is sparse, it is generally accepted that these fees would not meet the definition under IRC § 213(d). Currently, in order to offer DPC in a compliant manner, the service must be provided within a group health plan coupled with co-pays and related fee-for-service arrangements. To do otherwise would likely create an “other” plan (e.g. disqualifying coverage) thereby threatening an individual’s HSA-eligible status as they would no longer be covered by only a qualified HDHP. This current dichotomy is clearly counterintuitive given the spirit of DPC. ShopHealth | Vol. 2 | Issue 3
